Is This the Top?

Here are some better questions to ask yourself:

Have scary news headlines, market valuation techniques, pundit predictions, geopolitical events or your gut instincts ever worked as legitimate market indicators in the past?

Should picking tops in the market even have a place in your investment process?

Do you have a reliable signal, based upon the weight of historical evidence, that will tell you when to get out of the market?

Do you also have a reliable signal that will tell you when to get back in?

Do you have the discipline to follow-through with such a strategy?

What would you regret more: Missing out on a further 30% gain if you sold now or taking part in a 30% loss if you didn’t?

Do you consider your time horizon before making important investment decisions?

What if you’re wrong?

How have things working out for that guy who called the last crash who’s been calling for another one ever since?

How many people have become famous in financial circles for being right once in a row?

Do you know how many TV gigs and investment conferences it’s worth to call a market top or bubble?

Do you find youself paying more attention to pundits and investors who speak with a sense of certainty about an uncertain future because it gives you an illusion of comfort and control?

Have much time do you spend worrying about daily economic data releases?

Remember when the dollar was supposed to collapse as the world’s reserve currency?

Or gold was supposed to go to $5,000 an ounce?

Or the Fed was going to cause hyperinflation?

Or we were certain to witness to a double dip recession?

Do you spend too much time worrying about low probability events that are completely outside of your control?

How many times over the past few years have you thought to yourself: ‘This has to be the top, there’s no way stocks can go any higher’?

Have you missed a huge rally in stocks because you were worried about a 10% correction?

Or have you already forgotten what it’s like to experience a large loss?

How will you react if we do see a significant drop in stock prices?

Are you mentally prepared for the next time we see a 10% correction? A bear market? A market crash?

Do you have an investment plan in place?

That you can and will follow?

No matter what everyone else around you is doing?

Further Reading:
The Psychology of Sitting in Cash