One psychological thing that has always struck me about investing is how frequently I hear the news reporting that the stock market is at all-time highs. I often feel like I hear the business media reporting this all the time.

 

This always makes me think that maybe the market is too frothy and I should build cash to invest later when there’s a correction and stocks go on sale. This is, of course, a bad idea since it would be attempting to time the market which has been proven time and again to not be a good strategy.

 

Intellectually, I know this is the case, but it’s still hard to hit the ‘buy’ button and not think you could be buying at the top. Still, I almost always press on with my time in the market and dollar-cost averaging strategy.

 

But, one day it occurred to me that maybe the news seems to be reporting that the market is at all-time highs because, well, it usually is. After all, we all invest in the market, including our long horizon retirement accounts, since we expect the overall market to go up over time. And we base that prediction on historical results.

 

So actually, just by math and logic, historically the news is reporting that the market is at all-time highs because it is. This effect is magnified when you consider that the news is almost always reporting absolute numbers, not inflation-adjusted ‘real’ numbers.

 

To check this, I found a data set going back to 1871. The graphs are revealing. While there are downturns, even sustained downturns, by looking at the graphs you can see that you should fairly constantly expect to hear that the market is at “all-time highs.”

 

The lesson here is to not let this noise fool you into trying to time the market.

 

 

Investing in stocks is a long-term game, and trying to time the market is a recipe for disaster.