Encore: Investing When the Stock Market Is At All-Time Highs

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A little over four years ago (June 2021), I uploaded a video to YouTube titled “Investing At All-Time Highs”.

If you don’t remember how the stock market performed that year, you are forgiven; there were a lot of other things going on. Here is a brief recap:

• US stocks had recovered from their initial COVID lockdown panic to finish 2020 higher.

• 2021 kicked off with hopes of businesses and schools returning to some semblance of normal operation. The stock market responded by reaching new all-time high levels throughout the year.

  
  

Fast forward to August 2025 and the S&P 500 and NASDAQ are again trading at all-time high levels.

Over the past four years, the stock market has not gone up in a straight line even though it may feel like it. There have been corrections caused by economic and political news.

• In 2022 rampant inflation led to a significant increase in interest rates. Both the bond and stock markets suffered, and the traditional 60/40 portfolio offered little stability.

• Tariff-induced volatility caused a sell-off in the early part of this year.

  
  

In the video, I mentioned a few investment strategies to consider and some behavioral tendencies to avoid. The main takeaway was that one shouldn’t avoid investing in stocks just because the market has achieved new heights. Historically, subsequent highs are a more likely result than a dramatic drop. In other words, yes a correction is coming but we don’t know when and it may not be right away.   

Every time the stock market reaches new heights, I like to revisit the core principles of a disciplined investment strategy. Recently I have been having conversations with clients about how to proceed with their portfolio decisions in this environment. From managing an existing nest egg that has appreciated with the rising stock market to investing cash that was previously in a savings account, these ideas are worth revisiting here.

How to Invest With the Market Near All-Time Highs

The three strategies I highlighted in the video remain an important piece of navigating all-time high stock markets.

1.      Complete a thorough portfolio review

2.      Rebalance your positions back to your intended asset allocation

3.      Dollar cost average new money into the stock market

Review your Investment Portfolio

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A stock market near all-time highs means it’s a good time to do a deep review of your investment portfolio. During the review, you can look at:

• Asset Allocation: What is your existing balance of stocks and bonds? Is this appropriate given your time horizon and expected return? If you decide that a change is needed, now is a good time to do it. The decision to adjust your asset allocation is more than just pursuing higher returns; it should be based on your future spending needs and tolerance for volatility.

• Holdings: What are the actual investments making up your portfolio?

• Performance: How has your total portfolio performance compared to an appropriate benchmark? For retirees, the S&P 500 may not be the best index to compare your performance to. You’ll likely have some fixed income and cash assets in your portfolio which are included for their stability in lieu of outsized returns. For those with both stocks and bond holdings, a blended benchmark customized to your asset allocation will give you better insight into how your portfolio has stacked up.

  
  

Rebalance your Investment Portfolio

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This should happen one to two times a year in any stock market environment.

Rebalancing your portfolio is the action of returning to your intended asset allocation.

Let’s say you started investing with a goal allocation of 60% stocks and 40% bonds.

If the stocks outperformed the bonds for a few years, your portfolio would start to tilt more heavily towards the stocks. Now your allocation may be 70% in stocks vs. 30% in bonds, representing more risk and volatility than you had originally wanted.

Rebalancing in this case means trimming some of the gains from your stocks and buying more bonds.   

Many people find this action hard to take. It’s difficult to bring yourself to trim from your winners and add more money to the trailing positions.

Nonetheless, it’s a smart portfolio strategy – not to increase your portfolio returns, but to reduce volatility and risk.

Dollar Cost Average New Money

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This applies to money that is being freshly invested.

There is real hesitation from people in investing in the stock market when we’re at new highs.

I often hear things like “I’ll buy the dip during the next crash!”.

It might work to wait for a better buying opportunity. But I’ve found that when the buying opportunity presents itself, most cash holders aren’t eager to jump in when everyone else is panicking.

For those with cash building up in savings accounts earning low interest, there is a more measured and rules-based way to proceed…

Dollar cost averaging is the action of buying into the market at predetermined dollar amounts each month.

Example: If you have $100,000 cash to invest, you would divide your purchases into $10,000 installments for the next 10 months.

The important part is sticking to your predetermined purchase dollar amount. That forces you to buy more shares when prices are lower and fewer shares while prices remain high.

Meanwhile, it doesn’t sit in savings while you wait for the next market correction. You’ve introduced a rules-based approach that removes the guesswork.

 

I enjoyed watching my video from four years ago and reflecting on all that has happened since that time. On an economic and stock market level of course, but also professionally and personally. We will get back to making YouTube content (more on that soon!) in our new office in Pauahi Tower. 

 

Enjoy the weekend!

Travis

Investment advisory services offered through Andrews Advisory Associates LLC, a registered investment advisor. This blog is not meant to give investment advice. Before investing in any advisory product please carefully read any disclosure documents, including without limitation, the firm’s Form ADVs. The information herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions.