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How Tall Is The Empire State Building?

|Includes: SPDR S&P 500 Trust ETF (SPY)

Even if you don't know, you can look it up. Easily.

The height --the top-- is a well-documented fact.

You never know the top in a market. Stocks, tulips, a Renoir. No expert can ever call, every time, the top price the next buyer is willing to pay.

This is a particular conundrum when advising retail clients. We've all talked to the client who just knows the market is trading at the high. It's topped out. "I'm not putting any more money into the market now."

So the cash sits in some banking product paying a you're-never-gonna-retire interest rate.

Sitting on the sidelines in 2011 amidst double-dip recession fears didn't cost you that much. Missing the ~20% broad market jump in 2012, well, that's sad, but surely that was the top.

Except for 2013.

And 2014.

If an investor DIDN'T buy a broad market ETF like SPY at the beginning of 2012, by the start of 2015 they left a 52% return on somebody else's table.

So of course we're at the top now. No, we're not calling it. We're saying, like we've always said, buy and hedge. Buy now when the market is expensive, and it's actually cheaper to hedge.

If the market goes up, the investor captures some return they wouldn't have by sitting on the sidelines.

If the market actually crashes again-the fear that keeps a lot of retail cash close to the mattress-then the now valuable hedge (an option contract) can be used to reinvest in the market at new lows.