If you are still building towards retirement, one of the most important things you can do for your financial future is invest in assets with the potential to grow faster than inflation over the long term.

For most people, that means investing regularly into a diversified portfolio that reflects their goals, timeframe and attitude to risk. If you receive a lump sum, the same principle applies: the sooner your money is invested, the sooner it has the opportunity to grow and benefit from compounding. That sounds simple enough, until markets reach record highs.

When prices have already risen significantly, investing can suddenly feel like a mistake. It's natural to wonder whether you've missed the best time and whether you would be better off waiting for the market to fall. But record highs are far more common than they sound.

In sport, breaking a record is a rare event and something to celebrate. In investment markets, which have risen over the long term, new highs are a normal part of the journey. If markets never moved beyond their previous highs, long-term investment growth simply wouldn’t happen.

Of course, markets can fall at any time, and a new high does not guarantee that they will continue rising in the short term. But it doesn't mean a fall is imminent either. On its own, a record high tells us very little about what will happen next. Waiting can feel sensible, but it creates another problem: how will you know when the right time has arrived?

The fall you are waiting for may not happen for months or even years. By the time it does, markets could still be higher than they are today. Meanwhile, your money remains in cash and misses any growth along the way.

Even when markets do fall, investing rarely feels easier. Falls usually come with frightening headlines, uncertainty and predictions that things could get worse. The buying opportunity you were waiting for suddenly feels more like a reason to wait a little longer. That's how people can remain sitting on the sidelines for far longer than they intended.

The truth is that none of us can consistently predict the perfect time to invest. Successful long-term investing is not about finding the perfect day. It's about having a sensible plan and sticking to it, even when it feels uncomfortable.

Money you may need soon should be treated very differently from money you will not need for many years. Getting that balance right is far more important than trying to guess what markets will do next.

If you have money available to invest and it fits with your financial plan, a record high is not usually a reason to hold back. Once you’ve decided to invest, it often makes sense to put the money to work rather than waiting indefinitely for the “perfect” time.

If investing a large lump sum all at once feels too uncomfortable, you could instead agree a fixed schedule and invest it gradually over the coming months. The important thing is to decide the dates in advance, rather than allowing each day’s headlines or market movements to determine what you do.

Feeling nervous when markets are high is completely normal. But discomfort doesn't necessarily mean you're making the wrong decision. Sometimes it simply means you're investing without knowing exactly what will happen next, which is, of course, always the case. Trust your plan, think long term and try to ignore the noise. 🩷

Disclaimer:

The value of investments and any income from them can fall as well as rise, and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The right approach will depend on your objectives, investment timeframe, financial circumstances and attitude to risk. Please speak to a qualified financial adviser if you would like to discuss how this applies to you.