More than a year after it started rising from its bear market lows, we can finally say: S&P500 (^GSPC -0.07%) We're in a bull market. It was officially announced on January 19th when the index hit a new all-time high.
Some investors are concerned that perhaps the best time to buy has passed. The S&P 500 index is already up 36% from its October 2022 cyclical low, and those who hold off on investing are missing out on those gains.
But what does history say about investing after the worst is over? Is it possible to wait too long? Or should you buy the stock anyway, even though the price is already rising?
Image source: Getty Images.
Is it too late to invest in the S&P 500?
It's easy to look back and wonder when you should have invested. If you invested in October 2022, when the S&P 500 was at its lowest point, your portfolio today would reflect more than a year's worth of gains. But at the time, there was no way to know when the next bull market would begin.
Similarly, there is currently no way to know whether prices will continue to rise in the short term or take a turn for the worse. But if stock prices soar further and you leave your investable money on the sidelines, you'll miss out on even more profits.
The good news is that historically there are never necessarily bad times to invest, as long as you take a long-term outlook.
For example, during the Great Recession, the S&P 500 index bottomed in March 2009. If he had invested his money in the S&P index fund at the lowest point of the month, he would have earned more than 619% by today.
^SPX data by YCharts.
But suppose you wait a year and start investing in March 2010. In that case, you would have seen a return of nearly 327% to date.
^SPX data by YCharts.
Of course, that's a big difference. But if you had waited longer (e.g. until March 2011), you would have only made a 269% return to date. In other words, the longer you wait to invest, the lower your return will be.
^SPX data by YCharts.
Also keep in mind that even after the Great Recession ends, the market still experiences short-term declines. There will always be fluctuations even in good times, but if you put off investing until the best time to buy, you'll be waiting forever.
As daunting as it may seem, the best strategy is often to simply invest consistently and add money to your portfolio on a regular basis, regardless of market trends. No one knows where the market will go in the short term. If another recession is on the way, it's very likely that the S&P 500 will recover from it sooner rather than later. But if you wait until the market is in recovery mode to buy stocks, you'll miss out on valuable profits.
History is good news for the S&P 500
Since its inception, the S&P 500 Index has developed an impeccable track record of generating positive returns over the long term.In fact, research shows that it's actually difficult lose If you take a long-term view, you can make more money than you can make on the S&P 500.
Analysts at Crestmont Research examined the historical performance of the S&P 500 Index to determine how often it delivered positive returns over a 20-year period. They looked at the index's rolling 20-year total returns throughout its history and found that all of those periods ended with positive total returns.
This means that if you invested in an S&P 500 tracking fund, such as an S&P 500 index fund or an ETF, at any point in history and held it for 20 years, you would have earned a positive total return. Although the index still experienced periods of deep recessions and bear markets, it was still able to show positive gains over the long term.
The right investment to get started
If you're ready to start investing in the S&P 500, an ETF that tracks the index is the way to go. There are countless options, but some of the most popular include: Vanguard S&P 500 ETF (VOO -0.06%), iShares Core S&P500ETF (IVV -0.10%)and SPDR S&P 500 ETF Trust (spy -0.13%).
These ETFs all provide exposure to the S&P 500, contain the same stocks as the index, and aim to match its performance. It also has a low expense ratio compared to many other ETFs, which can save you thousands of dollars in fees over the long term.
Time is your most valuable asset when it comes to the stock market. By investing now and staying invested for as long as possible, you can rest easy knowing that no matter what happens in the coming weeks or months, you are likely to see positive returns in the long term.
