Does a record high FTSE 100 mean it’s time to sell?

It’s been quite a year so far for the flagship FTSE 100 index. This week, blue-chip company sellers again hit all-time highs. It crossed the 8,000 mark for the first time.

With the market hitting new highs despite a sluggish economic backdrop, is this a sign that I should sell some of my stocks in anticipation of a pullback?

Take a long-term investment approach

My approach to the stock market is based on my belief in long-term investing.

As an investor, over time, there will usually be boom times – and bad times as well. Making quick decisions in the moment can lead to costly mistakes or regrets. That’s why I have an investment philosophy that I use when considering certain questions, like what to do now that the FTSE 100 is in new territory.

So some elements provide feedback on this week’s developments.

The danger of market timing

Trying to decide what will happen next to a stock index can take a lot of time and effort. At best though, it just ends up as an educated guess.

No one knows what will happen to the FTSE 100 next week, let alone the months and years ahead.

Looking at one data point – in this case the level of the FTSE 100 – and using it to try and predict what will happen is a form of market timing. The thinking behind that approach is that I can sell now, wait for the market to crash, and then buy the same stock I had before at a lower price.

In theory, I could do that. In practice, trying to time the market can be an expensive fool’s errand. A lot of smart people are constantly trying to figure out where the market is going to be next. He couldn’t do it with confidence – and neither could I.

A stock market

Another insight for me with the main stock index in the new area is that, in a way, it doesn’t matter to me. I have some FTSE 100 shares for example M&G and JD Sports but I don’t have an overall index. As they say, this is a stock market, not a stock market.

In other words, when the FTSE 100 looks cheap, some stocks may be overvalued. On the contrary, even if it looks high, this does not mean that individual stocks are necessarily expensive. Both M&G and JD Sports are below the top, for example.

My approach to the rising FTSE 100

Taken together, these two elements of an investment strategy can be summed up in one idea.

I am trying to buy shares in an outstanding business that is trading at an attractive price. That is related to the analysis of the business of each company and its value. It has nothing to do with what happens in the FTSE 100 index!