As I write this article in late December 2025, the S&P 500 has just hit another all-time high for the 39th time this year and is up 18.75% for the year. This follows 2024 and 2023, when the S&P 500 was up 25.02% and 26.29%, respectively. As I have been talking to many clients on our year-end strategy calls, two nagging but extremely logical questions have come up: 1) Is the market in a bubble? 2) What do I do now?
To put new market highs in context, as of December 29, 2025, there have been 955 new market highs for the S&P 500 since 1975, with over 7% of the S&P 500 trading days closing at a new high. But these facts do not change the fact that investors of all types are nervous and do not want to make mistakes or lose money. This is where psychology gets in the way of our success. Many feel the overwhelming need to do something different to protect themselves. They feel that they must take action.
There are three common mistakes investors make during these periods:
The first mistake is trying to time the market, which rarely works. Logically, it makes all the sense in the world. The rationale is that the market is at an all-time high; let’s sell and buy back when the market corrects or declines. In reality, the execution is extremely difficult. You must be right twice: when to get out, and when to get back in. In taxable accounts, you also need to consider potential capital gains taxes that might be owed. If you miss just a few good days, the market could erode your long-term returns dramatically. Compounding is a much more powerful factor in long-term returns. One of the biggest mistakes individual investors can make is interrupting the incredible power of compounding money in a long-term investment plan.
The second mistake people make is buying what they wish they owned. They look back and think they should buy something because it has increased significantly in value. The idea is that since it went up a lot, the stock’s success will continue. This is also known as FOMO, or Fear of Missing Out. Chasing yesterday’s winners can be catastrophic to a long-term investment plan.
The third mistake is that many people believe that since the market has done well for several years, it is in a bubble and is going to crash. There are definitely times when the market crashes, and it is not unusual for the market to have 5-10-20% corrections each year. But remember, every time the S&P 500 has had a correction, it has always returned to a new all-time high. Major and lasting market corrections, or bear markets, usually stem from much larger issues than just three years of gains, such as a recession, the COVID-19 pandemic, or the Global Financial Crisis of 2008-2009. It is also during these terrible financial and economic times that the seeds of future new market highs are sown.
Now you know the 3 key mistakes to avoid. So, what should you do? How do you help ensure that you continue to move forward towards financial success and financial independence?
It is time to go back to the basics.
1. Update your financial plan so that it reflects your current dreams, aspirations, asset levels, cash flow needs, and risk appetite. This plan should be time- and dollar-specific and reflect your current economic realities. A time- and money-specific financial plan is the bedrock of continued financial success. In our experience, many people spend more time planning their vacations than they do their financial future. There is an old idiom that says, “If you fail to plan, you should plan to fail.” If you do not have a plan, complete one ASAP!
2. Continue saving and investing your savings based on your risk appetite and the asset allocation recommended by your financial plan. An effective way to invest is by using a consistent investment approach called “dollar-cost averaging” (DCA). DCA is an investment strategy where you invest a fixed amount of funds at regular intervals over time to reduce the risk of bad timing. This approach helps reduce some of the behavioral pitfalls of investing while allowing your wealth to grow as the market continues to move toward new highs in the future.
3) Recognize that money, especially market volatility, often adds extra stress to our lives. I have seen too often that these stresses can lead to poor investment decisions. Remember that newsworthy stories are not always economic events that cause long-term negative effects on the markets and your financial plans. Investing during these times can be emotionally tough, which can paralyze investors at the very moment they should be investing.
These three basics require patience, discipline, and consistency. Trillions of dollars of wealth have been created by the financial markets over time. Stay disciplined, enjoy the successes of the market, embrace volatility, and expect the market to eventually return to new highs, while remembering how unpredictable it can be. Truth be told, very few predicted the returns for the S&P 500 in 2025, and I cannot wait to see all the craziness of 2026.
Disclosure: Next Level Private LLC is a registered investment advisor. This commentary is for informational and educational purposes only. Next Level Private renders investment advice on a personalized basis, only after gaining a full understanding of a client’s goals and financial situation.
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