When investment markets reach record highs, it can be tempting to wait for prices to fall before putting more money to work.

That reaction is understandable. But an all-time high does not, by itself, tell us what markets are likely to do next.

If you are investing for long-term goals such as retirement, it can be more useful to focus on your financial plan, your timeframe and the level of investment risk that is appropriate for you than to try to predict the next market movement.

Investing when markets are at all-time highs

If you are still saving toward retirement, few things do more for your financial future than owning assets that are expected to outpace inflation.

In our opinion, the best way to do this is to contribute monthly to a diversified portfolio matching your financial plan’s required rate of return. If you are lucky enough to receive a significant lump sum, the same approach applies, and putting it to work promptly lets compounding start sooner.

However, when markets reach record highs, investing new money can start to feel like a potential mistake. When prices have climbed a long way already, it seems intuitive that what has risen this far has more room to fall than to rise.

It’s in these moments that some investors decide that it is sensible to wait for the market to decline before investing more money.

New market highs are normal

To make better decisions at these times, we need a better understanding of how often market highs occur.

A record sounds like a rare event. After all, on the sporting field, records are celebrated precisely because they are rare, and when they happen, the assumption is that they will remain unbeaten for a long time.

However, for an investment market that grows over long periods, it is closer to routine. If the general direction of movement is upward, the market tends to spend much of its time passing its old high-water mark and setting new all-time highs.

History shows that a new market decline can start at any time, and most are unexpected, so a new market high does not guarantee more short-term returns. It only means that a record, on its own, tells you very little about what comes next.

The cost of waiting to invest

Waiting for a better time to invest can feel prudent, but for many investors it ends up being costly.

The decline you are waiting for might not arrive for a long time. When it does arrive, it may begin from a level well above where prices sit today. While you wait, your money sits idle, missing out on growth that you are not participating in.

If the market decline you expected does come, it will arrive wrapped in bad news, because bad news is usually what makes prices fall in the first place. What you expected to be a buying opportunity rarely feels like one in the heat of the moment.

Is the decline itself a reason to wait for further declines?

Once you are caught up in this cycle, it becomes very difficult to invest with confidence.

We believe the best investors know their timing will never be perfect, but they decide to invest anyway.

Putting money to work

More important than any market forecast is controlling what you can.

Money you will not touch for many years belongs somewhere quite different from money you need soon. Getting that right does more for your long-term result than any attempt to guess the market’s next turn.

If you have money to put to work and your plan calls for it, a record high is not a reason to hold back. The principle we work to is simple, and we call it “investing by sunset”: put money to work as soon as it is available, rather than holding out for a better day.

However, if handing over a large sum in one go still makes you uneasy, you can commit now to investing it in equal amounts on set dates over the coming months. The key is that the schedule is fixed in advance, not left to how the market feels on the day.

Should you invest when the market is at an all-time high?

An all-time high is not, on its own, a reliable reason to invest or to delay investing.

What matters more is whether the money is intended for long-term investment, how much risk you are comfortable taking and whether investing it supports the wider financial plan you have in place.

Trying to wait for the “perfect” entry point can leave you making decisions based on short-term market movements rather than your long-term objectives.

If current market levels are causing you to hesitate, it may be worth reviewing your plan before making a decision.

At Pentins Financial Planners, we help clients understand how their investments fit into their wider financial plans, including retirement, income needs, risk and long-term goals.

If you would like to review your position, please get in touch and we can talk through the options with you.

Important information

The value of investments can fall as well as rise, and you may get back less than you invest.

This article is for general information only and should not be treated as personalised financial advice. Whether an investment approach is suitable will depend on your individual circumstances, objectives and wider financial position.