Time to Get Your Money off the Table. All of It.

On my way to work Wednesday, I listened to a guest analyst on a major financial network offer the opinion that with the Dow Jones Industrial Average hitting an all-time high, now was a good time to take a little money off the table.

He's got it almost right -- but he's not going far enough. Now is a really good time to get all your money off the table. Right now. And to decide never to put it back there.

Say what?
Think about the imagery of owning stocks and having "money on the table." It's a not-so-subtle reference to being at the tables of a casino -- having more than you started with, perhaps, and taking a little of it off, putting it in your pocket, and making sure you leave ahead . or at least don't lose it all.

For anyone treating his or her investments as short-term "plays" -- gambles, speculations, wagers, games, all of the above -- with the market at an all-time high (as measured by the Dow, at least), there's a good chance you could be up. Now is the right time to pocket some "winnings" in your "game." This is the first high in a major market average in more than seven and a half years, after all. Next week or next month could just as easily be down as up.

Long-term investors, on the other hand, may want to consider an alternative strategy. For them, this may be a good time -- perhaps even a great time -- to add money to the market. Stocks in the S&P 500 are, after all, cheaper in terms of their price-to-earnings ratio than they have been at any time in the past 11 years. (Link opens Excel document.)

What happens when you sell at "the high"?
In our Hidden Gems investing service, our team is focused on helping the small-cap investor, so we've got a lot of experience seeing how long-term investors fare if they stay invested after the market starts hitting new highs.

The Russell 2000, the most widely followed index for small-cap stocks, hit a high of 614 in March 2000. It didn't return to that level again for four and a half years, until November 2004. Was late 2004 a good time to take small-cap money off the table? For "home-gamers" -- perhaps. For committed long-term investors, though? Let's take a closer look.

The Russell hit new highs in seven out of the following eight weeks, following its November 2004 return to record highs. And after that initial burst of new highs, the Russell 2000 hit new highs in an additional 20 different weeks between January 2005 and today.

So investors -- those committed to prospering proportionately to the companies they own over the long term -- have done very well over that period, simply by holding on to what they already owned while the Russell 2000 index steadily climbed.

What's true in the aggregate was true in many specific instances as well. Selling out of companies just because they've hit new highs, rather than participating in the long-term rewards of stock ownership -- particularly small-cap ownership -- denies you the long-term rewards of owning the right companies, even if it may spare you some pain along the way.

What follows is a list of companies that have, over the past 10 years, rewarded shareholders to the tune of more than 1,000%. Each hit new highs early in those travels, then lost at least 40% of their market caps . and then kept going a lot further:

The long and small of it
Taking some money "off the table" might have looked like a good idea for investors in all of these companies at various times over the past decade -- and certainly would have made the short-term losses less painful. If you're treating the market as a play place for your money, you can do a lot worse than leaving the game while you're ahead. That puts you ahead of most gamblers, certainly.

But you would have incurred plenty of capital gains taxes and lots of commissions, and worst of all, you would have missed out on the best part of the story, which came well after the first time a high was hit. These are the rewards that the long-term investor has enjoyed lately, and historically. Speaking of history, it is always worth repeating that small caps have handily outperformed the total market, by about 2% a year on average.

At Hidden Gems, we're holding on to recommendations of a number of companies that are trading at their 52-week and/or all-time highs, and think their futures look even brighter than when they were first recommended. Take a free monthlong trial to the service and find out what companies are on our list.

Bill Barker owns shares of American Eagle, but no other company mentioned in this article. American Eagle, Best Buy, and Healthways are Stock Advisor recommendations. The Motley Fool has a disclosure policy.