STREET DOGS

From an article published at ofdollarsanddata.com:

What about buying near record highs? The S&P 500 has periods of what I call “fits and starts”, or lacklustre growth and then explosive growth … let’s consider the real monthly returns (including dividends) of the S&P 500 from 1880 to 2016.

Of the 1,644 monthly returns in the data, 356 were record highs, which represents about 22% of all months.

Despite these fits and starts, there is an interesting relationship between record in the stock market.

Once you have hit a record high, the very next month you are likely to hit another record high. To be exact, of the 356 market peaks, about 67% of them were followed by another market peak in the next month and about 90% of them were followed by another market peak within the next four months.

Buying at a record high doesn’t feel right because of the history of market crashes that have followed in many cases. [But] I am here to tell you that you should just keep buying.

This will only work for a limited time, but missing the upside could be more devastating to your portfolio than experiencing the downside. … and from Yahoo! Finance:

Bull markets make new highs almost by definition. Selling [at] the record high set in 1982 would have got investors out ahead of the longest market rally in US history. Dumping stocks when they hit the big round numbers, the Dow at 10,000 or the JSE all share at 30,000, wouldn’t have been the smart thing to do either. Even dumping in 2007 hasn’t turned out to be such a smart thing to do.

History also shows that market crashes don’t come immediately on the heels of new highs. The drops in 1929, 1987, 2000 and 2007 all came months after market peaks.