Most small investors are feeling the itch to pull out of this market and go to cash or cash-like investments to protect their gains. This is a normal occurrence in an up market, but this year it is being exaggerated by record high after record high in stocks.

And this quest for safety increases logarithmically with age. The itch gets stronger every year driven by the fact that we have less and less time to replace our market losses.

On the surface, this appears to be a logical move, especially for retirees… Play it safe, lock in your profits, and wait for the sell-off that has to come. And it will come.

But no matter your age, the fact that a sell-off has to happen is the only aspect of this thinking that is correct.

In fact, going to cash now to protect gains is called the “cobra effect.” It says that there are unintended outcomes for many money decisions. In this case, selling into current highs is almost a guaranteed losing proposition for two reasons…

The first is that selling to protect gains is just another form of market timing. You think we are at or near the top of the market, so you pull out.

But all the data from decades of research says you cannot – with any degree of certainty – know where the top is. Market timing is a losing proposition in all cases.

And after you sell, there is the question of when to get back in. That’s a whole other article. But believe me, you won’t know that with any certainty either.

The second reason is that the losses, not the gains, add up.

The moment you cash in and go to an interest-bearing account, a state of comfort sets in. It seems like the best thing you’ve ever done with your money.

But the reality is, you immediately start amassing losses.

Cash investments (CDs, money markets and Treasurys) have never made and will never make money. By the time inflation and taxes take their bite, no matter how much you are earning in interest, you rack up small annual losses. And those losses quietly add up over time.

As a retired person with a heightened sensitivity to losses, you are more susceptible to giving in to this itch. And over a 20- or 30-year period, this “sell to protect” thinking can add up to a money disaster.

The bottom line is this: Anyone who gives up returns for security will get neither returns nor security. In fact, the security itch is not a sell signal but, in almost all cases, an indication that you are out of your risk envelope or comfort zone.

That’s for another time.

So if you can’t control the urge to sell – and I know how strong that urge can be – at least look at it as a portfolio adjustment, not a flight to safety. And, except for your emergency money, stay out cash!

This is the time of year when almost all market crashes of the last 20 years have occurred. That combined with the small investor’s propensity to try to time the market is setting up a terrific opportunity to lose a ton of money.