Set objective rules for equity market re-entry

Buy low and sell high isn't that the mantra for making money in the equity market? The market is near all-time highs, so should you sell? As an investment advisor, I frequently encounter this question.

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Buy low and sell highisn't that the mantra for making money in the equity market? The market is near all-time highs, so should you sell? As an investment advisor, I frequently encounter this question.

When a significant portion of your life savings is at stake, the question does not seem unfair either. The possibility that the current notional gains might vanish in a market correction keeps many investors on the edge.

My usual advice is to resist the temptation to sell unless your asset allocation necessitates it. A rising equity market can quickly push your equity exposure beyond allocation thresholds. In such cases, there is merit in selling equities and reallocating the proceeds to the fixed-income portfolio. Otherwise, it's often best to sit back and relax.

However, investors often expect more cogent answers, so let's explore some of the other reasons as well.