How to invest when the market is at an all time high?

August 22, 2024

How to invest when the market is at an all time high? 

The S&P 500 has risen 50% so far during the Biden administration. The S&P 500 is up 65% in the last four years. Today, as the Democratic party looks to make history by nominating for the president a woman with high chances of becoming the first woman president of the United States, the stock market finds itself at an all time high. 

What is the best investment move at this time? 

We don't know, but have a few suggestions. For long term investments such as your 401k, stay invested and do nothing differently. Keep buying, keep investing. Buy into the stock market regularly every month. Go for dollar cost averaging because no one can time the market. The long term bet is that there will be ups and downs, but that the stock market will continue increasing in value over time along with inflation. 

Diversify your investments. For that portion going into stocks, put most on on a low fee exchange traded fund (ETF) that matches the S&P 500 such as the Vanguard S&P 500 ETF (VOO). Put some on a low cost international ETF such as the Vanguard Total International Stock Excluding US ETF (VXUS). 

For short term investment accounts (your play money account, if any), consider going into cash for now. Wait for the market to come down; wait for value investing opportunities. Learn from Warren Buffett who's been stashing cash away waiting for better opportunities. The opportunities will come soon. They actually come out almost every day for one reason or another. For example, a few weeks ago, Nike reached over 60% off from its peak. We advised to buy some just to see what would happen. Well, it has gained almost 18% since then. 

Buy low. Sell high. Don't lose money. Those are the three keys to making money. The market is at an all time high. Buying low is hard these days. Selling higher will be hard and losing money is very likely if you buy at today's prices. It is almost impossible to buy low when the market is so hot and potentially over valued. Wait for the AI bubble to lose some air, and come back into the market. There will also be opportunities to short some stocks soon. NVIDIA, for example, is once again approaching unsustainable bubble territory valuation. Once shares get to $140 again, it will be time to start short selling NVIDIA again. 

In sum, patience is a virtue. Stay committed to long term investing, leveraging dollar cost average. There will be impossible to time ups and downs. In the long run, expectations are that the market will continue climbing up gradually beating, or at least keeping up with, inflation. 

Putting money under the mattress is not a good option in the long run because inflation will eat the value of that money and you will miss out on market appreciation. Even the Bible advises against burying your talents instead of investing them. In the short term, however, hoarding and saving cash waiting for  good values is the way to go. Prices are inflated and too high now. 

To everyone's surprise, the Democrats' "open border" economy has proven to be a remarkable success for the stock market. The recession that every dam expert was convinced would be inevitable in 2023 never materialized. It will come one of these days, but is not here yet. 

The AI boom made the stock market great again. That is good for current investments, but makes it hard to find new ones at good prices. Patience is a virtue. Grow it today so that you can harvest better deals tomorrow. Sooner or later, good opportunities will materialize. Don't be a victim of the fear of missing out. The current AI-driven valuations are bubblicious and will come down. A market correction (20% drop) in technology stocks and the overall market will come sooner or later. Be patient. 

The more you know, the better you suffer. Life is pain. Intelligent life is pain management. The solution to life is death, but wisdom is knowing which problems to solve and which ones to ignore. Live well. Enjoy. Die better. 

www.creatix.one