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Investors should not panic and go to cash because stocks are at all-time highs.
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At the same time, do not use leverage to put your portfolio on margin.
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Remember to always consider valuation when investing.
The U.S. stock market has been highly resilient in the face of macroeconomic and tariff uncertainty in the last few years. Since the beginning of 2023, the S&P 500 index (SNPINDEX: ^GSPC) has posted close to a 70% total return, marking one of the best two-and-a-half-year periods in stock market history.
Does that mean the market is overheating? The S&P 500 average price-to-earnings multiple is inching back close to all-time highs, putting large expectations on future growth for its underlying companies. As an investor, it can pay to have a level head and act rationally when the stock market is going on a roller-coaster ride (in either direction).
Here are three things not to do with stocks at all-time highs to help you position your portfolio and succeed over the long term.
A famous investing adage is, “you don’t go broke taking a profit.” While that is technically true, cutting short your returns on huge winning stocks can severely hamper your long-term returns, while also adding a large tax hit that is underappreciated by many stock investors. The huge winning returns in the market come from holding high-quality businesses such as Amazon, Netflix, or Nvidia for decades. If you bought and then sold them only after a double, you would be missing out on 100-fold returns.
In other words, don’t take your portfolio entirely to cash just because stocks are back at all-time highs. When looking at historical data, there is barely a difference between forward returns over one-, three-, and five-year periods when you buy the stock market at all-time highs compared to any other period.
This is a quantitative example of why investors should not try to time the market. It is close to impossible, doesn’t truly impact your long-term returns, adds new tax implications, and is much more stressful than buy-and-hold investing. That’s not a winning formula for stock investing. Stay patient and let your winning stocks keep riding to new heights.
Rising stocks can give you confidence. Sometimes, this can lead to irrational exuberance, and it is important to keep a level head even if you feel like a stock market genius right now.
One thing to not do — and perhaps the most important lesson all investors should take from reading this article — is to avoid going on margin to buy more stocks. Trading on margin means getting a loan from your brokerage to buy more stocks. For example, you may have $100,00 in cash deposited in your account but take on $50,000 in loans to buy more from your brokerage. Margin debt for investors has hit a record high in 2025.
