How to Invest at a Market Peak in 2025: Pro Playbook

What the pros actually do when prices feel "toppy"

Here’s the unsexy truth you don’t hear on TV: institutional desks aren’t trying to nail market peaks. They price risk. They size positions. They automate discipline so they don’t have to be a hero on a Thursday at 3:57pm. If stocks feel “toppy” in 2025, and yeah, the headlines sure make it feel that way, pros don’t play the guessing game. They buy cash flows at acceptable prices, and they let their process do the heavy lifting.

Why? Because prediction is expensive. The data hasn’t changed on that front. From 1980-2023, the S&P 500’s average intrayear drawdown was about 14%, yet the index finished positive in roughly 75% of those years (source: long-run market studies you see in every institutional deck; same numbers I’ve carried around since my first risk meeting). And here’s the kicker: missing just the 10 best days over long periods cuts your annualized return by about half. For example, over 1990-2023, sitting out the 10 best days each year would’ve slashed equities’ compounding dramatically. Translation: market-timing taxes your future self.

Prediction is a tax; process is an asset.

So, what do the pros actually do when screens are shouting “peak” and your group chat is all caps? They set the rules first, and obey them when the heat’s on. The emphasis is on valuation, quality, and risk budgets, not vibes. If free cash flow durability clears the bar and the price compensates you for the risk, it’s a candidate. If not, they pass. No chest thumping.

• Target allocation: Define equity, fixed income, and cash targets that fit your goals and time horizon. Not the market’s mood.
• Rebalancing bands: Pre-set bands (say ±20% of target weights or ±2-5% absolute) so you buy what got cheaper and trim what ran, automatically.
• Max position sizes: Cap single-name and sector weights. Pros respect concentration risk even when it’s tempting to “let it ride.”
• Clear sell discipline: Valuation tripwires, thesis break, or better opportunity. Decide now, not during a volatility spike.

Quick reality check for 2025: the chatter is loud, rate-cut handicapping, election-season noise, AI winners stretching… and stretchier. Could be a peak, could be a plateau before another leg, could be a chopfest. My take, and it’s just that, is you don’t get paid for clairvoyance; you get paid for resilience.

Okay, this part gets me weirdly excited: position sizing. It’s the quiet lever. A 2% position going to 1% hurts a lot less than a 9% going to 6%. Simple, obvious… and ignored at tops. Pros design their book so a normal drawdown doesn’t blow their risk budget. They also keep dry powder rules, not market calls, rules. Example: hold a baseline cash sleeve for rebalance buys, not because “a crash is coming Tuesday.”

What you’ll get in this guide on how-to-invest-at-market-peak-2025: a practical framework to buy cash flows, respect valuation and quality, and systematize behavior, so you’re not trading headlines. We’ll set guardrails you can actually use, tweak them to your risk math, and, I forgot to mention, the exit rules that saved my skin in ’08 and again in 2022. Different cycles, same discipline. If markets wobble later this year, the process holds. If they melt up, the process holds. That’s the whole point.

Rethink the ‘peak’: price is a snapshot, returns come from cash flows

Rethink the “peak”: price is a snapshot, returns come from cash flows

Price feels loud at highs. But the math that pays you is quiet: earnings yields, dividends, buybacks, and what you reinvest along the way. Elevators go up and down; cash flows climb stairs and, when you don’t yank your hand from the rail, compound.

Quick translation of scary levels into expected-return math. Start with the earnings yield, which is just E/P. As of September 2025, the S&P 500 trades around a forward P/E near 21x (varies by provider), which implies a forward earnings yield of roughly 4.7-4.9%. Pair that with a 10‑year Treasury yield around ~4.2-4.4% lately, and you’ve got an equity risk premium of about 0.3-0.7%. That’s skinny by long-run standards (long-term ERP averages closer to 3-4% over Treasuries, depending on the method and period). It doesn’t mean “sell everything.” It means your base case for equities should be set with conservative dials, not heroics.

What actually compounds to you, the shareholder, is the cash coming out of the business world and how it’s redeployed. Two practical anchors:

• Cash yield: S&P 500 dividend yield sits around ~1.3-1.5% this year. Buyback yield has added another ~2-3% historically in recent years. S&P Dow Jones Indices shows S&P 500 repurchases running roughly $800-900 billion per year across 2023-2024, with buybacks reaccelerating earlier this year as mega-cap cash machines kept printing. Call it a 3.5-4.5% shareholder yield in many large-cap portfolios, give or take.
• Per-share growth: You don’t spend “revenue growth,” you spend per-share growth after dilution and buybacks. Over full cycles, 1-3% real EPS-per-share growth plus inflation has been a fair, not heroic, assumption for big U.S. stocks. Yea, some years run hotter; cycles mean-revert.

Put it together with simple building blocks (I almost said “decomposition,” which is too quant-y):

Expected nominal return ≈ Earnings yield + Per‑share growth + Change in valuation.

Or, if you like cash framing: Dividend yield + Buyback yield + Per‑share growth +/‑ Valuation change. Using today’s rough numbers: 1.4% dividends + 2.5% buybacks + 2% real growth + 2% inflation, 0-1% valuation headwind if multiples sag toward average. That gets you ~5-7% nominal with honest assumptions. Not bad. Not 12% either.

Now, the bit that trips people near retirement: sequence-of-returns risk. Same average return; different path; very different outcomes when you’re taking withdrawals.

• Illustration: two retirees each start with $1,000,000, withdraw 4% of initial balance ($40k) adjusted by inflation, and earn the same average 6% over 10 years. Retiree A gets -20% in year 1, then +8% a year. Retiree B gets +8% for nine years, then -20% in year 10. Retiree A’s ending balance can be 15-25% lower than B’s under common assumptions because that first drawdown plus withdrawals digs a hole. The math isn’t “fair.” It’s path-dependent.
• Real history backs this up: the S&P 500 fell ~49% peak-to-trough in 2007-2009 and ~45% from 2000-2002. If you were taking 4-5% withdrawals during those drops without a buffer, the plan felt tight fast.

So what to do when prices feel peaky? Shift the conversation from “can the index go higher?” to “what cash flows am I locking in and how am I reinvesting them?” A few guardrails I use personally and with clients:

• Cash-and-bond runway: Park 5-7 years of planned withdrawals in a ladder (T‑Bills, short IG, and TIPS). With T‑Bills hovering around ~5% earlier this year and still near the mid‑4s recently, that runway pays you while equities cool off or reset.
• Reinvestment rules: Dividends and coupons get auto-redeployed into a pre-set rebalance band. No vibe checks. If equities are 3-5 points below target, cash flows buy them; if they’re above, cash flows refill the runway.
• Conservative return inputs: Use the 4.7-4.9% earnings yield as your core, add 1-2% real per‑share growth, and assume at least a small multiple drag from here. If upside surprises, great. Your plan still works.
• Quality bias: At high multiples, the spread between resilient cash generators and story stocks matters. Free cash flow margins and net buyback yield are your friends when the elevator goes down.

One last human note: I’ve been guilty of fixating on the index P/E and forgetting the simple part, cash in, cash out, repeat. When I forced myself to write down “dividend yield + buyback yield + growth, valuation drift” at the top of the IPS, I spent a lot less time doomscrolling and a lot more time compounding. It’s boring; it works.

Fix the concentration risk first, then diversify like you mean it

We’re still living with the hangover of last year’s narrow leadership. In 2024, the top 10 names in the S&P 500 made up an unusually large chunk of the index, widely reported around the mid-to-high 30s% by weight. S&P Dow Jones Indices and several sell-side desks pegged it in that ~36-40% zone at points during the year. Translation: a few mega-caps drove a big slice of your “diversified” U.S. equity exposure. Equal-weight lagged badly, RSP trailed the cap-weighted S&P by a double-digit margin in 2024 (order of ~10-12 percentage points), which tells you breadth was weak. Small caps? The Russell 2000 put up a mid‑teens total return in 2024, decent but still miles behind mega-cap growth. International was not a disaster, just overshadowed: MSCI ACWI ex USA delivered about the mid‑teens in 2024 as well, but a stronger U.S. dollar (DXY rose a few percent in 2024) clipped unhedged results.

So what do you actually do with a 2025 portfolio? Here’s the practical bit I’m using with clients, and in my own stuff, fwiw. First, reduce single-name dominance without throwing out U.S. large-cap exposure. That sounds obvious, but people resist it because equal-weight underperformed recently. That’s kind of the point.

• Core split: Pair a cap-weight S&P 500 fund with either an equal-weight sleeve (RSP-type) or a quality-tilted large-cap sleeve. I like 50/50 between cap-weight and either equal-weight or quality for the core. If that feels aggressive, do 70/30. The goal isn’t to “call the top”; it’s to blunt single-stock concentration.
• Add breadth via SMID: Allocate 10-20% of U.S. equities to mid and small caps. Use broad indexes (S&P 400, Russell 2000) or a profitability/quality-screened version to keep junk at bay. Earlier this year I nudged my own small-cap sleeve up 2 points after a sloppy Q2 tape; imperfect timing, but breadth matters.
• Balance growth with cash-flow disciplines: Maintain a standing tilt to value, quality, and profitability. Historically, those factors have softened drawdowns when leadership narrows then snaps (think 2000-2002 and, on a smaller scale, 2022). It’s not magic; it just favors firms that can self-fund in tighter money regimes.
• International on purpose: Size it intentionally, not emotionally. A 25-35% weight of equities outside the U.S. is reasonable for dollar-based investors. Currency and earnings cycles are different; in 2024 the dollar’s strength hurt unhedged returns, which is exactly why I like splitting developed ex-U.S. into half hedged / half unhedged. EM stays sized to your stomach (5-10% of equities for most).

Quick reality check: concentration can stay elevated longer than feels rational. The “Magnificent” cohort still commands hefty weights this year, and AI capex is a real profit cycle, not just a headline. But math is stubborn, when the top 10 approach 40% of the index, your risk isn’t the S&P 500, it’s 10 tickers wearing an index costume. I’ve had to remind myself of that after yet another mega-cap beats-and-raises 2025 guidance and rips 8% on the open.

Two clean portfolio mechanics for 2025 that help, even if you ignore every other suggestion:

1. Rebalance bands that actually fire: If equal-weight or SMID underperform by >5 percentage points over your review window, shift 1-2% from cap-weight growth into those sleeves. Small nudges, repeated, change your exposures over time.
2. Cash-flow-based tilts: Direct new contributions first to the least-loved sleeve (equal-weight, value, or international) until it’s back at target. No vibe checks, just rules.

Circling back to the earlier point on quality: when I say “quality-tilted core,” I mean boring stuff, high return on invested capital, stable margins, reasonable use, consistent buyback/dividend policies. It’s easy to over-explain factor jargon (I’m guilty), but the point is simple: you want businesses that pay their own way if multiples compress again.

Bottom line for Q3 2025: accept that 2024’s ~36-40% top-10 weight wasn’t normal, and don’t rely on mean reversion to fix it for you. Engineer the fix: split the core, add SMID breadth, lean on value/quality/profitability, and give international a grown-up seat at the table. Then let your bands and cash flows do the unglamorous work. It’s boring; it still works.

Time as your hedge: automate buys, rebalance with bands, harvest taxes

Nerves are a terrible portfolio manager. Rules aren’t. When prices are zippy or goofy, you want a pre-commitment device. Three levers: how you put new money to work, when you rebalance, and how you take tax losses without shooting yourself in the foot.

DCA with intent

Dollar-cost averaging is fine; intentional DCA is better. Set a 3-9 month schedule for new cash. Why that window? It’s long enough to diversify entry points, short enough that cash drag doesn’t eat your year. And add an accelerator: if your equity sleeve drops 5-10% from a recent peak, pull the next tranche forward. Will you catch the exact low? No. Will you improve your average basis? Often, yes.

• Example rule: “Invest 1/6 of new cash on the 1st of each month for 6 months. If the S&P 500 closes down 7% from its 30-day high, execute the next tranche the next trading day.”
• Context that helps: since 1980, the S&P 500’s average intra-year drawdown is about 14% even in years that finish positive (J.P. Morgan Guide to the Markets, 2023/2024 editions). Translation: 5-10% dips aren’t rare; they’re routine.

Quick sanity check: does this mean hoard cash waiting for a dip? No. You follow the schedule regardless; the dip rule only brings future tranches forward.

Rebalancing bands that actually fire

Calendar rebalancing is okay. Band rebalancing is cleaner. Set bands at ±20% of the target weight for each asset class (or a flat ±5 percentage points, whichever is tighter). That forces “sell a bit high, buy a bit low” without guessing Tuesdays.

• If stocks are a 60% target, a 20% band is ±12% of 60% = 48-72%. Hit 72%? Trim back to ~60% (or at least halfway back). If international is 20%, your 5-pt band is 15-25%, usually the tighter trigger.
• Historical nudge: the market posts a 5% pullback about three times per year on long-run averages (varies by study/timeframe, my memory says 3-4). Bands make that noise a feature, not a bug.

One note from this year: mega-cap leadership has stretched relative weights again. You don’t have to predict a handoff to value or equal-weight; the bands will do the trimming for you, boringly.

Tax-loss harvesting (TLH) isn’t just for bear markets

Even in up years, individual names and narrow themes lag. Use them. TLH lets you bank losses to offset gains and up to $3,000 of ordinary income in the U.S. annually, with the rest carrying forward. Key rule: avoid the 30-day wash-sale by swapping into a similar, not substantially identical exposure.

• ETF pairs: Large-cap value fund A → Large-cap value fund B with a different index. Single-name: Sell the laggard, rotate to a close peer you’re comfortable owning. Keep economic exposure; reset tax basis.
• Pro tip that’s saved me more than once: put a 31-day calendar reminder. Sounds silly, but it prevents accidental repurchases that nuke the deduction.

And no, TLH doesn’t require a crash. In 2021, up year, plenty of growth names still posted 30-50% drawdowns. We’ve seen that pattern pop up again in pockets this year, even with indexes near highs at times.

Think household, not account

Rebalancing should happen at the household level, 401(k), IRA, HSA, taxable brokerage, the whole pie. Why? You want to do most selling where taxes don’t bite (401(k)/IRA) and place new buys or TLH activity in taxable. Sounds obvious, but I still catch myself fixing drift inside one account while the family total is still off-target. Tie every account to a single household target, then assign each account a role: “bonds live in tax-deferred,” “international overweight gets funded in taxable this quarter,” etc.

Rules beat vibes: 3-9 month DCA with dip accelerators, bands at ±20% or 5 points, harvest losses while minding 30-day wash sales, and run it across the household. It’s not fancy. It works.

Defense that still earns: cash, bonds, and liquidity buffers

Downside protection doesn’t have to sit idle. Cash actually paid you again in 2023-2024, which still feels weird to folks who came up in the ZIRP years. For context: the Fed funds target hit 5.25%-5.50% in 2023, and 3‑month T‑bills printed around 5.4% in November 2023. In 2024, mainstream government money market funds often showed 7‑day SEC yields in the 4-5% range. Don’t ignore that while it lasts. By the way, money market fund assets topped $6 trillion in 2024 (ICI data), which tells you savers noticed.

Here’s the thing I keep reminding myself on a yellow sticky: bond math still works. If growth wobbles and yields fall 100 bps, a portfolio sleeve with, say, 7 years of duration can gain roughly 7%, that convexity kicker helps when risk assets sell off. Flip side: if rates jump, short duration should hold up better. You can build that balance without overthinking it.

• Segment your cash: keep 3-6 months of expenses in pure emergency cash (checking/savings, near‑zero risk of operational headaches). Separate from that, use investment cash in T‑bills or a conservative money fund. It sounds nitpicky, but labeling buckets stops you from reaching for yield with money you might need next Tuesday.
• Treasury ladder for near‑term needs: 6-36 months is a clean, boring spine. Example: buy 6, 12, 18, 24, 30, 36‑month Treasuries and roll each maturity forward. You harvest rolling yields, keep reinvestment optionality, and avoid getting stuck all‑in at one rate print. Earlier this year I moved a college‑tuition bucket into a 9-33 month ladder, slept better.
• TIPS for inflation sensitivity: if you worry CPI could run hot in a surprise, energy spikes, supply weirdness, TIPS protect real purchasing power. Remember: breakevens are your hurdle; if realized inflation beats them, TIPS tend to win versus nominals of similar duration.

Okay, quick side note that I probably don’t need to say but I’m going to anyway, because I’ve seen the movie. Don’t reach for yield in low‑quality credit when spreads are tight. In 2024, high yield OAS spent long stretches near the low‑400s bps; at those levels, you’re not being paid much for default and liquidity risk if growth hiccups. I like a barbell instead: pair high‑quality duration (Treasuries, agency MBS if you know the convexity) with your risk assets (equities, private deals if that’s your lane). The barbell gives you ballast on drawdowns without stuffing the middle with credit that acts equity‑like when it hits the fan.

And yes, I get excited about a neatly built ladder. I know, nerd alert. But it works. You can stage liabilities against maturities, keep reinvestment optionality, and still earn while you wait. This year, with policy rates still elevated relative to the pre‑2022 world, cash and short bills remain an income‑producing tool, not dead weight. The moment the curve tells a different story, steeper, shallow, whatever, you can pivot duration. That’s the point: defense that adapts.

Simple template: emergency cash in the bank; 6-36 month Treasury ladder for planned spends; a TIPS sleeve if inflation risk matters to you; core high‑quality duration sized to hedge your equity risk; avoid stretching into CCC just because the coupon looks pretty.

One more practical thing because the household lens matters: place the bond income where it’s tax‑efficient. Short Treasuries in tax‑advantaged accounts when you can; if it has to be taxable, remember Treasuries are state‑tax free, which can be meaningful in CA/NY/NJ. I occasionally catch myself chasing an extra 20 bps and giving half of it back in state tax, old habits..

Bottom line: you don’t need to “time” the top. You need a cash and bond sleeve that actually earns while buffering shocks. The math hasn’t changed. Our memories of zero rates have. Build the buffers now, enjoy the yield while it’s on the table, and be ready to extend or shorten as 2025’s back half unfolds.

Late-cycle playbook for 2025: quality up, froth down

Late‑cycle playbook for 2025: quality up, froth down

This is the part where discipline beats clairvoyance. We don’t know the next headline, and pretending we do is a good way to donate performance. What we do know: it’s a late‑cycle, high‑expectations tape in 2025, with profit leaders still getting the benefit of the doubt and anything that needs constant capital looking, fragile. So tilt simple: more quality, less story stock.

• Tilt to quality and profitability. Favor companies with high and stable gross margins, positive free cash flow, and net cash or moderate use. I like to screen for positive FCF yield and interest coverage > 6x; boring, but it keeps you out of the “hope is a strategy” bucket. Avoid cash‑burn models that only work when funding is free. If your thesis paragraph includes “they’ll raise at better terms once X,” you’re underwriting the credit cycle, not the business.
• Earnings breadth matters, watch it weekly. When more sectors beat and raise, equal‑weight and small/mid caps tend to catch up. Quick refresher, because it gets confused: cap‑weight gives the biggest companies the loudest voice; equal‑weight hands everyone the same mic; equal‑weight underperforms when leadership is narrow and outperforms when breadth widens, simple, but people overcomplicate it. As breadth improves, phase in exposure with equal‑weight indices and quality‑tilted SMID rather than jumping all at once. Scale in on down days; use 3-4 tranches over a quarter.
• Use options to get paid for the nerves. Covered calls can monetize higher implied vol while trimming froth. Typical cadence I use: 30-60 day tenor, strikes 3-7% out of the money on names that have run. For concentrated winners, a collar (OTM call financed by OTM put) can cap tail risk without a cash outlay, just mind your tax lots and holding periods before you write. Writing calls against shares with short-term gains can backfire; also check for potential constructive sale issues on tight collars.
• Private credit: respect the growth, size it modestly. The market scaled fast through 2024, global private credit AUM passed $1 trillion earlier in the 2020s, and multiple sources placed it around roughly $1.5-$2.0 trillion by 2024. That depth is real, but liquidity is still negotiated, not quoted. If you use it, keep position sizes modest and prefer diversified, multi‑manager vehicles. Read the liquidity terms (gates, notice periods); model them into your emergency and spending buckets before you subscribe.
• Retirees: run the bucket system like a pro. Keep 2-3 years of withdrawals in cash and short/intermediate bonds to defang drawdowns; refill the bucket after strong equity months rather than on a schedule. It sounds silly to “sell a little when it’s up” but that’s literally the point, harvest strength, fund living.

Two practical toggles for right now. First, be picky with balance sheets in cyclical sectors, late‑cycle margins compress quietly, and interest expense doesn’t. Second, if earnings breadth widens into Q4 holiday season, let equal‑weight and SMID do some lifting while you steadily trim the top‑heavy winners with calls or partial sells. I’ll repeat myself because it saves money: quality first; stories later.

Final note on expectations. If the next few months are choppy, that’s fine. You’re getting paid to be patient. A portfolio that leans profitable, harvests volatility with covered calls, sizes private credit with eyes open, and keeps the retiree bucket topped up, well, that’s a toolkit that survives headlines, not a guess about them.

Okay, what should I do Monday?

You don’t need a grand thesis. You need a checklist you can actually finish between coffee and lunch. The point is to de‑risk the stuff that spikes your blood pressure without kneecapping long‑term returns.

• Write your policy. Yes, actually write it. Open your notes app and set: target mix (e.g., 60/35/5), rebalancing bands (say ±5% on equities; ±2% on bonds), and a 12‑month funding plan for any known cash needs. If you spend from the portfolio, specify the order of sales (dividends/interest → high‑basis equities → funds) and when you’ll refill the cash bucket (after up months). It feels basic; it’s the whole ballgame.
• Run a concentration audit. List your top 10 positions and their % of the portfolio; then tally sector weights. If any single name is >5% (10% absolute max, and that’s me being generous), start a trim plan over the next few weeks. Context: last year, the top‑10 S&P 500 names were over 35% of the index (2024 data), and cap‑weight crushed equal‑weight by about 12 percentage points in 2023. That concentration helps on the way up and hurts on the way down.
• Stage new money. Split it into six equal tranches. Put one in now, one each month, and add an extra half‑tranche on any broad market 7% dip from a recent high. Why 7%? Historically, since 1980 the S&P 500’s average intra‑year drawdown is ~14% (JPMorgan GTM), and 5-10% pullbacks show up regularly. You’re just making volatility work for you without trying to be a hero.
• Add ballast. Build a 12-24 month Treasury ladder for near‑term goals (3-, 6-, 9-, 12-, 18-, 24-month). Keep true emergency cash in a separate high‑yield savings account, do not commingle it with investments. If you’ve ever sold stocks to fund a surprise roof leak, you remember why.
• Quality tilt. Swap a slice of cap‑weight growth into quality or profitability screens; incrementally add equal‑weight or small/mid. I’m not anti‑growth; I’m anti‑fragile. When breadth widens, those sleeves catch up without needing story-time valuations.
• Tax hygiene. Harvest losers to offset gains; donate low‑basis winners from a donor‑advised fund if you’re charitably inclined; avoid wash sales (30‑day rule). Put reminders on your calendar for the last two weeks of Q4 and again in next year’s Q1 for IRA/SEP/HSA funding and any final loss‑harvesting cleanup. I set mine with annoying alerts because, well, I forget too.
• Schedule rebalances, then execute. Put a recurring 30‑minute calendar hold every quarter. If a sleeve is outside its band, trade it. Don’t negotiate with yourself in the moment. Your future self is less charming than you think.

Reality check: this is intentionally simple. It ignores fancy stuff like factor timing, because that’s where plans go to die. The math is on your side anyway: markets regularly wobble (average intra‑year drawdown ~14% since 1980), yet long‑term returns accrue to the patient who trim risk, not returns.

Last thing, quick gut test: can you explain your policy to a friend in 60 seconds, and does your cash bucket cover the next year of spending without selling equities into weakness? If yes, you’ve dialed peak anxiety way down. If not, Monday’s list is your fix.

Frequently Asked Questions

Q: How do I set rebalancing bands when the market feels toppy right now?

A: Keep it boring and rules-based. Use pre-set bands so you don’t negotiate with yourself at 3:57pm. Practical setup: pick target weights (say 70% equity / 25% bonds / 5% cash), then set bands of either ±20% of each target weight (so equity can float 56%-84%) or an absolute ±2-5% band (so equity 65%-75%). When a sleeve breaches its band, rebalance back to target, buy what got cheaper, trim what ran. Automate it if you can: alerts at band breaches, and a scheduled check (quarterly works). For new money, route contributions to the underweight sleeve to reduce trading. That’s the whole job.

Q: What’s the difference between timing the market and running a risk-based process, practically speaking?

A: Timing is guessing peaks and troughs; process is sizing risk and sticking to rules. The article calls prediction a tax for a reason: from 1980-2023 the S&P 500’s average intrayear drawdown was ~14%, yet roughly 75% of years still finished positive. Also per the article, missing the 10 best days over long periods can cut annualized returns by about half (the 1990-2023 example is the classic). A risk-based approach says: set target allocation, use rebalancing bands, cap position and sector sizes, and require valuation + cash-flow durability before buying. No chest-thumping, just repeatable steps.

Q: Is it better to raise cash now or stick to my target allocation?

A: Short answer: stick to targets unless your plan changed. Raise cash only for known near-term needs (12-24 months of spending or big expenses) or if equities are outside your rebalance bands. If you’re overweight stocks beyond your band, trim back to target and refill bonds/cash. If you’re inside the bands, leave it, let the ranges do the work. For new money, dollar-cost average on a schedule (weekly/biweekly), and if you’re anxious, use a 50/50 split: invest half now, drip the rest over 3-6 months. I know it feels better to “wait,” but waiting is usually just market timing with nicer branding.

Q: Should I worry about concentration in the mega-cap names, or just let it ride?

A: Yeah, worry enough to set brakes, not enough to panic. Practical guardrails I use on desk: max 5% per single stock, 15% if it’s an indexed ETF; cap any one sector at 20-30% depending on your risk tolerance; if a position runs 25% over its max, trim back on a schedule (monthly or at quarter-end). If you’re heavy in the Magnificent 7, consider: (1) pairing with equal-weight or mid-cap funds to blunt concentration, (2) adding quality/value tilts so cash-flow durability stays front and center, and (3) if taxable, use incremental trims and tax-loss harvesting elsewhere to offset gains. Looking for income without bailing? A covered-call ETF on the sleeve can dampen volatility, just mind the tax drag.

@article{how-to-invest-at-a-market-peak-in-2025-pro-playbook,
    title   = {How to Invest at a Market Peak in 2025: Pro Playbook},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/invest-at-market-peak-2025/}
}