When *NSYNC sang “Bye Bye Bye” in 2000, we can only assume the boy band wasn’t giving out investment advice. Because waving goodbye to your stocks, especially when the market hits an all-time high, could tear up your heart and even your portfolio.
Investors may have been better off if Justin, Joey, and the rest of the band changed the chorus to “Buy, Buy, Buy.” That may sound strange at first. After all, if stocks have already climbed this far, isn't a pullback just around the corner? Yet past history suggests to us that all-time highs weren’t warning signs to flee the market; they were often milestones on the way to sometimes even higher levels.
The phrase “all-time high” feels like it should carry the same weight as a Guinness World Record. Here’s the thing, though. All-time highs are a normal part of a healthy market, not a rare event or even a “warning signal” that an about-face is coming.
By June 2026 (the year’s halfway point), the S&P 500 had already hit 24 new all-time highs.1 For reference, as of August 31, 2025, the market had hit an all-time high more than 1,325 times since 1950, averaging about 17 per year.2
More important is what historically came after an all-time high. In that same time span of January 1, 1950 to August 31, 2025, within one year of a market high a correction of 10% or more has occurred only 9% of the time.2 Over a three-year period, it occurred less than 2% of the time. As the time horizon extended further, the market corrections became even rarer. The S&P 500 never dropped more than 10% from a market high across a five-year period.2
In fact, from January 1, 1950 to December 31, 2024 average total returns in the year following an all-time high have been 12.7%, just a hair higher than the average return for other 12-month periods.3
Combining these data points, we can deduce that markets have historically performed nearly the same after reaching an all-time high as they have during any other period.
Surprising? Actually, to us it makes perfect sense.
If markets have historically risen over time, they should regularly reach new highs. In fact, if the market wasn't periodically making new highs, that would suggest something is fundamentally wrong.
So, despite how it might feel, an all-time high isn’t evidence that the markets have peaked and will start trending back down. Instead, they’re doing exactly what long-term investors hope they’ll do—keep growing over the long run.
To successfully execute a “time the market” playbook, you must know:
(That is, in addition to selecting the right stocks, manager, etc.).
It’s difficult to get one right, let alone both. You’d be better off guessing my phone number—or even just the area code—than timing the market correctly. And even if you tried, you’d join the countless trained investment professionals who dedicate their careers to market timing and still don’t get it right.
It’s not hard to see why this is so difficult. Market declines don’t exactly send out invitations that they're going to plunge next Friday at 12:27PM, and then recover 4 days later around 9:32AM. These movements happen at random and for any number of reasons. By the time you jump out and then feel comfortable jumping back in, much of the recovery may have already occurred.
This inability to time markets with accuracy is one of the main reasons long-term investors prioritize consistent market participation over trying to pinpoint the perfect moments.
Regularly moving money in and out of the stock market can also be an expensive hobby. Remember, selling an investment for a profit can create a capital gain. Those capital gains are taxed at very different rates depending on how long you held the investment before selling.
If the investment is held for more than one year before being sold, the gains are taxed at a long-term capital gains tax rate capped at 20%. If the investment is held for less than one year (a more likely active investment scenario), the gains are taxed at your ordinary income tax rate. Often, the long-term capital gains tax rate is lower.
In addition to potential tax burdens, fees and costs can add up as well. Trading commissions, advisory or management fees, and higher expense ratios can meaningfully reduce returns over time.
Not only do the investments need to perform well enough to beat the benchmark (such as the S&P 500), but they must outperform by more than what their fees and combined costs are worth.
Even if you’re successful pulling in and out of the market, your taxes and costs diminish your earnings. It’s possible, after all is said and done, that after costs, you’ve made less than if you had stayed invested consistently.
There’s one important factor that makes time in the market so effective: Compounding.
Every year your money remains invested gives it another opportunity to generate returns. Those returns then have the ability to generate returns of their own, and so on. The longer your money stays invested, the more amplified each dollar can become.
For example, say you put $100 in an investment account, and it earns 6% in the first year, bringing your total to $106. In year two, the account earns 10%. But this time, earnings are generated on both the principal amount ($100) plus last year’s earnings ($6). Now, the account has grown to $116.60. It might not sound like much, but when it’s applied to thousands of dollars invested across decades, the impact can be significant.
It also means that small delays can cost you big earnings when considered across a long timeline. Investing early and doing so consistently is the easiest way to let compounding work its magic.
Importantly, compounding is an effective tool whether your first investment occurs at an all-time high, during a correction, or on an average day of market performance. Whenever your initial contribution occurs, what matters more is how long that money stays invested afterward.
Let’s just assume for a moment you followed a “wait for a better opportunity” investment approach. The market reaches its new all-time high, and you sell your investments.
Now you wait.
Maybe a market correction comes… and maybe it doesn’t. From the historical data discussed earlier, a correction isn’t imminent. In fact, it’s unlikely.
What is likely to happen, however, is a missed opportunity to earn.
A study of market performance between 1926 and 2024 (nearly 100 years) found that staying invested in stocks consistently, across all market cycles and conditions, yielded more than 10x returns over switching to cash after an all-time high.4
If you had invested $100 in 1926 and kept it in the market, it’d be worth $103,294 in 2024. If you had switched to cash following a previous month-end all-time high, it may have only been worth just $9,922.4
If you’re struggling to stick with a long-term strategy or feel compelled to pull out when market milestones occur, ETFs can help.
An ETF provides investors with exposure to dozens, hundreds, or even thousands of underlying securities through a single investment. Rather than focusing too closely on one company’s stock value or movements, an ETF keeps you diversified in a broader collection of businesses, sectors, and/or markets.
Many ETFs rebalance automatically and adjust holdings according to predetermined rules established by an experienced investment professional. Because you aren’t involved in how underlying assets are traded, much of the emotional decision-making is removed from the investment process. Rather, you have the freedom to focus on what matters most—making regular contributions and staying invested across all market conditions.
That’s one of the many reasons we at Motley Fool Asset Management offer ETFs. We believe in the power of long-term investing—whether through passive or active ETFs, and whether markets are at all-time highs or not. Check out our lineup of funds and see how we help investors stay invested for the long run.