The S&P 500 (^GSPC 0.54%) has been booming over the past year and a half, currently up by nearly 50% from its low in late 2022. The index has also reached two dozen all-time highs throughout 2024, its most recent in late May.
Stock market surges can't last forever, though, and a correction is bound to happen sooner or later. If you invest when prices are at all-time highs and the market dips, it could take a major toll on your portfolio.
So is it really wise to invest when the S&P 500 is reaching new heights? Or should you hold off and see what happens? Here's what history says about investing during the market's high points.
Image source: Getty Images.
To buy or not to buy
Investing at all-time-high prices may seem like a dangerous move, but there's one trick to ensuring it doesn't wreck your portfolio: Stay invested for the long term.
The stock market will always be volatile to a degree in the short term, but over time, it's incredibly consistent. Over the last two decades, the market has faced some of the worst crashes in history -- including the dot-com bubble burst, the Great Recession, the COVID-19 crash, and, of course, the slump throughout 2022.
However, the S&P 500 has also earned total returns of 263% since 2000. Even if you'd invested at seemingly the worst possible moment (at any of the market's highest points before a crash or recession), you'd still have earned positive returns by today.
^SPX data by YCharts
Research also shows that, historically, there's never been a bad time to invest in the S&P 500 if you're a long-term investor.
Analysts at Crestmont Research examined the S&P 500's rolling 20-year total returns since the index's inception. From there, they determined how many of those 20-year periods ended in positive total returns.
Their findings? All 105 periods -- from 1919 through the end of 2023 -- ended in positive total returns. In simpler terms, this means that if you'd invested in an S&P 500 index fund or exchange-traded fund at any point in history and held it for 20 years, you'd have made money.
The most dangerous mistake you could make right now
The moves you make right now can make or break your earning potential, and one of the riskiest strategies is attempting to time the market.
In theory, timing the market makes sense. If you can buy when prices are low and then sell when the market peaks, you could make a substantial profit. Likewise, by holding off on buying until the next correction, you could snag stocks at discount prices.
In practice, though, timing the market is nearly impossible to pull off. While a correction could be right around the corner, it's also likely that the market could continue soaring.
The average bull market since 1929 has lasted over 1,000 days, according to investment group Bespoke. Considering we're just over 600 days into the current bull market, there's a chance we could have many more months -- or even years -- of soaring stock prices still ahead. If that's the case, you could miss out on serious gains by not investing right now.
It's unclear where the S&P 500 is headed in the coming months, but the best thing you can do right now is to continue investing consistently. By keeping your money in the market for the long haul, you can minimize risk while maximizing your earnings potential over time.
Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
FAQs
Their findings? All 105 periods -- from 1919 through the end of 2023 -- ended in positive total returns. In simpler terms, this means that if you'd invested in an S&P 500 index fund or exchange-traded fund at any point in history and held it for 20 years, you'd have made money.
Should you buy S&P at all-time high? ›
One: the market hits all-time highs more often than you might think. The S&P 500 has hit a new peak in about 30% of more than 1,000 months analyzed since 1926. If you try to dodge those moments, you could miss out on a ton of opportunities. Two: investing at a market peak hasn't hurt returns, historically.
Is now a bad time to invest in the S&P 500? ›
Also, research suggests that when it comes to the S&P 500's historical returns, there's never been a bad time to buy as long as you're a long-term investor.
Should I invest in the S&P 500 in 2024? ›
The S&P 500 generated an impressive 26.29% total return in 2023, rebounding from an 18.11% setback in 2022. Heading into 2024, investors are optimistic the same macroeconomic tailwinds that fueled the stock market's 2023 rally will propel the S&P 500 to new all-time highs in 2024.
Is it better to invest in S&P 500 or Total market? ›
Bottom Line. Total stock market index funds are only slightly more diversified than S&P 500 index funds. Since both types of indexes are heavily weighted toward large-cap stocks, the performance of the two funds is highly correlated (similar).
Should I invest in Nasdaq or S&P 500? ›
Sector preference
In a comparative study between the Nasdaq 100 and the S&P 500, the Nasdaq 100 outperformed the S&P 500 every year from 2008 to 2023 posting a total average return of +17.5% compared to the S&P 500 return of 9.2%.
Is it too late to invest in the S&P 500? ›
Is it too late to invest in the stock market? While stock prices are up significantly compared to a year or two ago, the good news is that with the right strategy, there's never necessarily a bad time to invest. Building wealth in the stock market is a long-term strategy.
Is Roth IRA or S&P 500 better? ›
Best for investing in broad, low-cost index funds
This can be as simple as owning the stocks that comprise the S&P 500, an index of the 500 largest companies trading on US stock exchanges. History shows this can be a solid long-term strategy that is particularly suited for retirement accounts, such as a Roth IRA.
What is the best time of day to buy S&P 500? ›
The opening period (9:30 a.m. to 10:30 a.m. Eastern Time) is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.
What is the best way to invest in the S&P 500? ›
How to invest in the S&P 500. The easiest and most efficient way to invest in the S&P 500 is via a low-cost exchange-traded fund (ETF). Several ETFs track the S&P 500, but the oldest and most popular is the SPDR S&P 500 ETF Trust (SPY).
Stock market forecast for the next decade
| Year | Price |
|---|
| 2027 | 6200 |
| 2028 | 6725 |
| 2029 | 7300 |
| 2030 | 8900 |
5 more rowsAug 16, 2024
"While stocks should stabilize in the near term, the medium-term direction is to the downside," writes BCA. "We continue to expect the US to enter a recession in late-2024 or early-2025." "We expect the S&P 500 to drop to 3750 in 2025 and the 10-year Treasury yield to fall to 3%," BCA adds.
What is the 5 year projection for the S&P 500? ›
Overall, Yardeni Research forecasts S&P 500 operating earnings at $250 in 2024, up 12% vs 2023. He puts them at $270 in 2025 (up 8%) and $300 in 2026 (up 11.1%). These figures compare with analysts' consensus forecasts of $244.70 in 2024, $279.70 in 2025 and $314.80 in 2026.
Is it smart to invest everything in the S&P 500? ›
Investing in an S&P 500 fund can instantly diversify your portfolio and is generally considered less risky than purchasing individual stocks directly. Because S&P 500 index funds or ETFs track the performance of the S&P 500, when that index does well, your investment will, too. (The opposite is also true, of course.)
Why is the S&P 500 not a good investment? ›
One of the limitations of the S&P and other market-cap-weighted indexes occurs when stocks in the index become overvalued. They rise higher than their fundamentals warrant. The stock typically inflates the overall value or price of the index if it has a heavy weighting in the index while being overvalued.
Should I invest $10,000 in S&P 500? ›
Assuming an average annual return rate of about 10% (a typical historical average), a $10,000 investment in the S&P 500 could potentially grow to approximately $25,937 over 10 years.
How often should I buy S&P? ›
A simple strategy for investing in the S&P 500 is to buy a set dollar amount each week or month and hold it for the long term. This is known as dollar-cost averaging. Dollar-cost averaging is a strategy where you divide the total amount you want to invest across periodic purchases of the target asset.
What happens when a stock hits all-time high? ›
Time provides perspective for long-term investors
What history tells us is that stocks tend to move higher over the long term. New highs are a normal occurrence and don't necessarily warn of an impending correction. They may in fact signal that further growth lies ahead.
Should I invest in mutual funds when the market is high? ›
Avoiding them during market highs can disrupt your goal and strategy for wealth creation. Continue your SIP investments even when the market is on a high. These days, the Nifty is reaching new highs, causing investors to feel ecstatic and increasingly optimistic about the profits they anticipate from the stock market.
Should you invest in more than one S&P 500? ›
You only need one S&P 500 ETF
All three of the ETFs listed here have lower-than-average expense ratios and offer an easy way to buy a slice of the U.S. stock market. You could be tempted to buy all three ETFs, but just one will do the trick.
