An all-time high in the investment world
An ‘All time high’ is a term in the investment world that is used to indicate a historical high of a stock market index . You often hear in the media about a stock index such as the AEX or Dow Jones when it has risen to a new highest level that has never been reached before. An All time high is also often referred to by the abbreviation ATH.
Should you watch out for an All-time high in investing? You can read more in this blog.
A rare phenomenon in investing?
An All-time high may sound like a rare event at first. However, this is not the case. Given that stock prices have historically been on an upward trend, ‘All-time highs’ are actually a recurring phenomenon and therefore not so special at all.
Take for example the price development of the DAX index; one of the largest stock indices in Germany. When we look at the index from 2005 for example (zoom in/out on the graph) we generally see an upward trend with various historical highlights.
It is important not to confuse the price development of an index with the performance development (a price development does not include dividend payments).
DAX Chart by TradingView
Bad time to enter for investors?
What should you do as an investor when media reports come out about all-time highs? It is wise to look at the valuation of the index price and not just at the height of the index price. A number of well-known ways to map the valuation are:
- The historical price-earnings ratio
- The risk premium
- The expected price-earnings ratio
Investing at an All-time High
Investing when prices are high is often not desirable. Many investors are afraid that prices will go down again after an all-time high, but there is also a chance that the price increase will continue. Buying at an all-time high can therefore still yield returns.
So don’t be blindly scared by an All time high, but be aware of the chance that the prices will go down again. A good solution to prevent a wrong entry moment can be the DCA strategy .
Please remember that the value of investments will always fluctuate and that historical results are no guarantee of future results.
Start investing yourself
Decide for yourself what you invest in and have control over your financial choices? Then start investing independently! You invest independently with an online broker, which offers you a platform on which you can execute your own transactions. The broker only facilitates as an intermediary and executes your orders. Do you want to start investing? Then find out which broker suits you: compare brokers .
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