2024 has been a remarkable year for stock markets.
The S&P 500 will likely finish the year up nearly 30%, an exceptional performance driven by economic resilience, technological innovation and investor optimism.
The question many investors are now asking is: “Should I sell my shares, take profits, and wait for the next downturn?”
It’s a natural question.
After all, when markets perform this well, there’s always a temptation to “lock in” gains, reduce exposure, and wait for prices to fall.
But the answer is never that simple.
The Market Can Stay Overvalued for a Long Time
There’s an old saying in investing: “Markets can stay irrational longer than you can stay solvent.”
What does this mean?
Even if stocks appear “overvalued,” they can continue rising far beyond anyone’s expectations.
You might be thinking: “overvalued compared to what?”
Valuations are relative, not absolute.
Are stocks overvalued compared to historical averages? Perhaps.
Compared to bonds, cash or the future earnings growth of companies? That’s less clear.
Valuation metrics like P/E ratios or earnings yield offer guidance, but there’s no universal “fair value” that everyone agrees upon.
Timing the Market is Impossible
Selling now in anticipation of a downturn assumes two things:
History shows that very few investors get this right. Miss just a few of the market’s best-performing days, and your long-term returns are significantly reduced.
There are legitimate reasons to reduce your equity exposure—but they should be grounded in your personal goals, not market speculation.
Have Your Goals Changed?
If your financial situation, time horizon, or risk tolerance has shifted, adjusting your allocation might make sense.
For example, someone approaching retirement may decide to gradually reduce their equity exposure to preserve wealth.
There are other options as well, such as:
Rebalancing for Risk Management:
When markets perform well, your portfolio may drift out of alignment.
If equities now make up a larger percentage of your portfolio than your target allocation, rebalancing back to your original plan can help manage risk without reacting emotionally to market highs.
As part of our Momentum® service, we rebalance your portfolio when any asset drifts away from the target allocation by more than 10%.
Diversification, Not Market Timing:
Reducing risk doesn’t necessarily mean selling out of equities entirely.
Instead, it could involve diversifying across sectors, geographies or asset classes—ensuring your portfolio remains balanced and resilient in different market conditions.
A great example here is where clients take some of their employee share stock and purchase over 26,000 shares in our Navigate Portfolios®.
Staying Invested is Often the Best Strategy
History has consistently rewarded those who stay invested.
After a strong year, markets often continue to rise so selling too early means you may risk missing further gains.
Even if a correction does occur, long-term investors have time on their side.
The market’s upward trajectory over decades shows that volatility is a feature, not a flaw, of investing.
The key is to align your portfolio with your goals, avoid emotional decisions and remember that time in the market beats timing the market.
As we enter the new year …
2024 has delivered extraordinary returns, and while it’s tempting to “take profits”, the real question is: What’s your plan?
If your portfolio remains aligned with your goals, there’s no need to make drastic changes based on short-term market performance.
Markets may be overvalued, undervalued, or somewhere in between—but nobody can say for certain.
What is certain is that a disciplined, long-term approach gives you the best chance of success.
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