As of last Friday, the S&P 500 index is a whisker away from its all-time high.
When markets are high, holding stocks can become uncomfortable for some.
You may have questions.
So, here are some answers.
1. Will the stock market undergo a correction or fall into a bear market?
Yes, it will.
But here’s the more important question: when will it happen?
No one knows.
A market decline could start this week, next month, or maybe even a year from now.
All we know is that market downturns have happened before, and they will happen again.
History shows the S&P 500 declines by 10% or more (a market correction) every 1.5 years or so and experiences a fall of 20% or more (a bear market) every four years or so, based on data from wealth manager Ben Carlson.
Knowing the odds is not the same as knowing when a decline will happen.
2. Should I sell my stocks?
In theory, selling your stocks at market highs sounds good.
But here’s the truth: your temporary relief will soon be replaced with a nagging worry: when do you get back in?
It’s a valid concern.
As I pointed out in last week’s Business Times article, if you missed the 10 best days (read: gains) in the stock market over the past 30 years, your returns would be less than half compared to being fully invested for the same period.
That’s the risk you will be taking.
We’ll revisit the topic of selling at the end again — for now, let’s move on.
3. What if I sell and the stock market goes up?
It’s certainly possible.
According to Carlson, the stock market goes up roughly three out of every four years.
That’s a 75% chance of experiencing a gain in any year.
What’s more, if you hold for a 10 year period, history shows that you will have a 93% chance of coming out ahead with a positive result.
Lengthen that to 20 years and the odds increase to 100%.
That’s as good as it gets.
4. What if I don’t sell and the stock market goes down?
Yes, that’s possible too.
In fact, over the next 10 years, history says that you have a 95% chance of experiencing a bear market.
Oh dear …
… but wait, didn’t the statistics also say that there is a 93% chance of scoring a gain over the next decade?
How can that be?
Here’s the truth: the market will be volatile even if it goes up over the long run.
In all likelihood, there will be pullbacks, including a high chance of 20% downturns or more over the 10 years — it’s the price to pay for long-term returns.
Sounds terrible?
Well, downturns are not as bad if you can keep your nerve.
As shares become cheaper, you have a higher chance of getting better returns too.
For instance, The Smart All Stars Portfolio managed to pick up shares of Meta Platforms (NASDAQ: META) back in January 2022 and again in February 2022.
The two buys are up nearly 115% and over 243%, respectively.
Now, that doesn’t sound too bad, ain’t it?
5. Should I buy bonds instead?
Of course, you can — that is, if you do so for the right reasons.
There’s nothing inherently wrong with buying bonds.
For instance, the cut-off yield for a six-month Singapore Government Securities Treasury Bill (SGS T-Bill) on 5 June 2025 was 2.35%.
It’s a decent yield, albeit lower than last year.
Bonds also offer capital protection which makes it a good option to park your money.
But like any investment vehicle, this idea can be taken too far.
The problem starts when impatient investors try to treat bonds like stocks.
Some will try to guess whether bonds or stocks will bring better returns in 2025.
Others will attempt to squeeze out an extra percentage or two from bonds so that they can get a slightly higher yield from their bonds.
That’s when the trouble starts.
Some may swap out stocks for bonds, thinking that bonds will provide higher returns in the near term.
They may be relieved at first, but if the stock market continues to go up, envy creeps in, and that’s where mistakes happen.
On the flip side, if the market goes down, the initial contentment will give way to the familiar nagging worry of when is the right time to re-enter the market.
That’s trading, not investing.
Ultimately, you should buy bonds for the right reasons: capital protection with a decent yield.
Get Smart: It’s about your financial well-being, not bragging rights
Ideally, you should sell your shares when you hit your financial goals.
That’s truly the best reason to let go.
Here at The Smart Investor, we’re lifelong students of the investing game.
We firmly believe investing can add so much to our lives.
But let’s not lose sight of a simple truth: investing is a vehicle, a way to get you to where you want to go.
So, when you arrive there, it’s okay to step off.
As I have always said: you’re not successful when you beat the market or outshine your friends.
You’re successful in investing when you achieve the goals you set out to achieve.
It’s as simple as that.
Good luck.
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Disclosure: Chin Hui Leong owns shares of Meta Platforms.
