Can the Stock Market Keep Rising Forever? Here's How to Prepare for All Scenarios.

The S&P 500 is at nearly 6,000 and only 3% off of its all-time highs. While many investors are excited about the prospect of the market hitting new highs, some investors might be wondering how high it can go.

It's a question that investors have grappled with many times, and yet the market has always climbed higher. The S&P 500 has almost doubled over the past five years and delivered life-altering wealth for confident investors who have remained in the market over time.

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If this is something you worry about, it's a good idea to prepare for all different types of scenarios. The likelihood is that the market will, in fact, keep climbing, but smart investors generally have a broad, long-term strategy to cover their bases. Here's what to do to be well-armed for any scenario.

1. Stay in the market

Is there inherent risk in investing in the stock market, even in the "safest" of stocks? Absolutely. But is the alternative any safer?

If you look over the past hundred years, you'd have missed out on incredible gains if you had taken the pessimistic stance. While the past isn't any guarantee of the future, it's a pattern that has repeated itself over and over again. During that time, investors who have resisted the temptation to panic sell or give in to worries about how high the market can go have been well rewarded.

Stay optimistic and remain in the market. Invest consistently in stocks that you've researched to meet your investing goals.

Image source: Getty Images.

2. Keep an emergency fund

Although it makes sense to stay in the market and invest consistently, you should always keep an emergency fund with enough money to cover three to six months of your daily living expenses. This way, if you need to generate cash, you can avoid selling stocks when the market is down when you may have to take a loss.

Staying in the market means leaving your funds in the market over a long period of time so they can compound. That will require you to weather market drops. I don't say that as a maybe but as a given.

Over 20 or 30 years or longer, there are going to be challenging times when the market drops and you're tempted to pull your money out. Having an emergency fund available will help you ride out the storms and stay in the game.

3. Diversify in many ways

If you're worried about how the market will perform, make sure you have your money diversified among asset classes and categories. Consider having about 25 to 30 stocks spread across a variety of industries, sizes, and across various categories tailored to your personal risk level and preferences. Considering what's happening with tariffs today, investors are also becoming more interested in putting some of their money to work for them outside the U.S.

Beyond the stock market, you can and should invest in real estate, bonds, gold, and other assets. Many assets move in contrast with the market, and that's what hedging your assets is all about.

4. Stay educated

If you're concerned about the direction of the market, reassess your strategy on a regular basis based on current and changing market conditions. Although "experts" can't tell the future and often offer differing opinions, you want to be aware of what's happening in the markets and in the world so you can make educated decisions and take decisive action when necessary.

5. Invest like Warren Buffett

As part of your diversification efforts, make sure to have some solid, anchor stocks that can provide a bulwark under challenging circumstances. These are often slow-growing companies with stocks that are undervalued because their growth prospects are more limited than the new, hyped-up, exciting stocks of the day. They are well-established companies that can withstand the tests of time.

These are the qualities that famed investor Warren Buffett often praises. His two longtime favorite and longest-held stocks, Coca-Cola and American Express, are both more than 100 years old and are still thriving today. Every investor should have some stocks like this to protect their investments.

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American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.