3 Data-Driven Reasons You Should Ignore the Urge to Sell

With the market setting new records, it's completely natural to stare at your brokerage app and think, "It's too high. I should sell everything, wait for the dip, and buy back in." This feeling is compounded by alarming headlines about market concentration and global uncertainty. The temptation to time the market is strong, but the data is clear: trying to predict a downturn is usually a losing game.

I'm Zach Lundak, an hourly financial planner, and today we're going to break down three powerful reasons why you should resist the urge to sell at all-time highs—and three valid, smart reasons why selling might be the right decision for you.

Watch the full video discussion on this topic here.

1. The Market is "High" Most of the Time

The core of market timing rests on the assumption that an all-time high (ATH) is a rare peak, indicating an imminent fall. The data, however, tells a very different story.

• ATHs Are Common: Data going back to 1950 shows that the S&P 500 closes at an all-time high approximately 6.7% of all trading days. That may sound low, but it's a shocking frequency for what many investors view as an extreme anomaly.

• The New Floor: According to JP Morgan data, nearly 30% of all-time highs act as a market floor (meaning the market never falls more than 5% below that point). If you sold at that ATH, you would have to buy back in at a higher price, effectively missing all subsequent gains.

• Investing at ATHs Works: When looking at rolling returns, investors who only invested on days the market closed at an all-time high were actually better off than those who invested on any random day, across nearly all time frames (1, 2, 3, and 5 years).

The Bottom Line: If your reason for selling is "the market is high," you must realize that the market is either at an ATH or within 10% of one nearly 60% of the time. Selling now means you're gambling against the market's most frequent state.

2. Market Concentration: Panic vs. Perspective

You've likely seen charts warning that the "Mag 7" tech companies now make up a dangerously high percentage of the S&P 500's market capitalization—eerily similar to the 2000 tech bubble.

This concentration can be stomach-churning, particularly when you remember that the NASDAQ took years to recover from the 2000-2002 crash.

However, you must look at all the data, not just the chart designed to scare you.

• The Discrepancy: The valuation discrepancy between the market cap weighting (how much of the index they represent) and the earnings (how much profit they generate) is key. While some data sources show the market cap/earnings ratio is very high (like the 2000 bubble), other, equally credible data sources (like JP Morgan's Guide to the Markets) show a much higher earnings share for those same top companies.

• The Takeaway: The current situation is certainly unique, but the underlying earnings power of today's tech leaders is arguably much stronger than the speculative companies of 2000. Don't let one alarming chart drive your decision. If concentration concerns you, the solution is to diversify globally or adjust your allocation—not sell everything.

3. Geopolitics is Always Priced In

The world is never truly "stable." Whether it's a presidential election, a new war, or a trade conflict, uncertainty is the default state of global markets.

Markets are forward-looking. All the uncertainty you read about in the news is already being processed, discussed, and priced into stocks by millions of investors worldwide. History shows that even truly horrific geopolitical events—wars, major political crises, and terrorist attacks—often lead to surprisingly swift market recoveries.

Selling based on the political climate is an attempt to predict how the market will react to news that has already occurred or is widely known.

The Only 3 Good Reasons to Sell at All-Time Highs

While the "I think it will go down" strategy is doomed to fail, there are three perfectly valid, rational, and plan-based reasons to sell:

1. You Feel Physically Sick (Emotional Risk)

If the daily swings of the market are causing you significant anxiety, stress, or making you check your accounts hourly, you have too much risk in your portfolio. Your goal should be to find an asset allocation that allows you to sleep at night and stick with the plan during the inevitable downturns. Sell until you reach that comfort level.

2. You Need to Rebalance (Strategic Risk)

The recent strong run-up in stocks (particularly the major indexes) may have caused your equity allocation to drift higher than the target set in your Investment Policy Statement (IPS). If your target is 60% stocks, but your portfolio is now 70% stocks, you are holding more risk than you planned. Sell the excess stocks and move the proceeds into bonds or cash to restore your target allocation.

3. You Have a Big Expense Coming Up (Liquidity Need)

If you have a major planned expense within the next 1-5 years—a home down payment, a child's wedding, a big multi-year trip, or college tuition—you cannot afford to risk that money in the stock market. Sell the funds needed for that goal and move them into a low-risk, secure vehicle like a high-yield savings account or a money market fund.

Conclusion: The market being at an all-time high is not a reason to sell. The best investors stick to their plan, rebalance when necessary, and only sell when their financial goals or emotional tolerance demand it.

At Barrett FP LLC, we offer expert financial planning on an hourly basis, focused entirely on helping you achieve your goals.

Learn more about how we can help you build an objective, data-driven investment plan.