How to escape the buy-high, sell-low trap?

Attempting to predict the market peak is inherently risky. Historical patterns show that out of every three attempts to identify a peak, two are likely to be wrong. Rather than relying on speculation, recognizing technical and behavioral signals in the market may offer more reliable insights.

VN-Index: Signs of a Forming Peak?

According to Nguyễn Việt Đức, Head of Digital Business at VPBank Securities (VPBankS), the Vietnamese stock market has shown strong momentum since early 2025. At the start of the year, VPBankS expressed optimism that the VN-Index could reach 1,800–1,900 points. With the index currently trading around 1,630 points, Đức argues that while the market hasn't peaked yet, there are early indicators that a peak zone may have begun forming as of August 18.

One major catalyst is the growing expectation that Vietnam’s equity market may be included in FTSE Russell’s watchlist for reclassification to secondary emerging market status during its upcoming review in September. This potential upgrade has become a central focus for both domestic and international investors.

Technical indicators also suggest that the market is currently experiencing one of its hottest periods in history, though not yet at its peak. Over recent weeks, both trading volume and price have surged significantly. Notably, FOMO (Fear of Missing Out) sentiment, which had previously been absent, is beginning to surface as investors chase sector-specific rallies. This behavioral shift is often a precursor to peak formation.

A rarely triggered technical overbought signal—recorded only 16 times since 2000—has recently been activated, with a historical accuracy rate of around 80% in forecasting market overheating. This indicator implies that the market is in a highly active phase but hasn’t yet hit its final top. Historical data suggests that, following this signal, the market typically continues to rise for 2–3 more weeks before a correction occurs. Even then, that correction doesn’t necessarily signal the final peak, as the index may resume its upward trajectory afterward.

From a strategic perspective, short-term investors holding excess cash could consider entering positions within a 1–2 week window. For those with a medium-term horizon (3–6 months), more attractive entry points are expected to emerge in early September.

Escaping the Buy-High, Sell-Low Cycle

Breaking out of this destructive cycle requires confidence and discipline. Volatility is a given in equity markets, but failure to act during 5–10% corrections often results in missed opportunities. In such cases, investors may be better off allocating capital promptly rather than waiting for a “perfect” entry point.

A study comparing three hypothetical portfolios sheds light on this issue:

- 80/20 portfolio: 80% equities, 20% bonds, held throughout the investment period.

- Tactical 60/40–100% strategy: 60% equities during the best 12 months, 100% equities during the worst 12 months.

- Tactical 100%–60/40 strategy: 100% equities during the best 12 months, 60% equities during the worst 12 months.

The results showed no significant difference in long-term returns. Even the best tactical allocation only yielded 13.5% annually, compared to 11.9% for average investors and 10.3% for underperformers. These returns still outpace bond investing and traditional savings products, emphasizing that consistent equity exposure often outperforms tactical timing attempts.

As a result, a stable allocation of around 80% in equities is generally recommended. For more conservative investors, a 60/40 split (equities/bonds) may be suitable. For aggressive investors, a 100% equity allocation may be justified during strong uptrends. However, allocations below 60% in an uptrend are discouraged.

FOMO vs. Full-Cash Paralysis

FOMO is often blamed for impulsive investing behavior, but according to Đức, a full-cash position may be even more detrimental. Investors who avoid deploying capital during rising markets often suffer from missed opportunities and performance drag—especially when leverage is not a concern.

There are three primary causes of full-cash paralysis:

- Inability to value stocks properly: Retail investors often lack valuation frameworks, causing premature selling of high-potential stocks due to disbelief that prices can double or triple.

- Over-trimming weak positions: Selling underperforming stocks too early leads to excess idle cash.

- Premature exits before sustained uptrends: Exiting the market just before a major rally leaves investors sidelined.

Another issue stems from the short-term orientation of most brokerage recommendations, which tend to focus on 1–2 month outlooks rather than multi-year horizons. As a result, many investors entered 2025 aiming only for VN-Index to reach 1,400 points before cashing out — missing the broader growth trajectory.