of S&P500 (^GSPC -0.48%) Stock prices continue to rise and hit new highs. The index is up more than 39% from its October 2022 low and is now well into bull market territory.
In recent years, the stock market has been in a difficult situation, and investors are facing a difficult time. Many people feel optimistic that brighter days are ahead. But some worry that the best investment opportunity has passed.
It's normal to feel conflicted about the current stock market, and there's some good news and some bad news about the current S&P 500 bull market. Here's what you need to know to protect your investment.
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good news
The good news about the current stock market is that even though the S&P 500 has surpassed all-time highs, there is still plenty of opportunity for growth. And if you wait too long to see what happens, you could potentially miss out on big returns.
Of course, no one knows exactly what the future of the market will be, and past performance does not predict future returns. But it may be helpful to see what history has to say about times like this.
For example, during the Great Recession, the S&P 500 index officially bottomed in March 2009. Technically, it was the beginning of a new bull market, but it wasn't until March 2013 that the index hit a new all-time high.
So let's say you wait until 2013 to buy and invest in an S&P 500 index fund. The market has been strong for the past four years, so it may have seemed like you missed the best investment opportunity at the time. Still, that's a total return of nearly 215% to date. This means that his funds have more than tripled in just over 10 years.
^SPX data by YCharts
On the other hand, suppose you wait a little longer to see if the bull market continues or if a recession is just around the corner. If he had postponed his investment by just one year and invested in March 2014, his total return to date would have been only about 166%.
^SPX data by YCharts
Time is your most valuable asset when building wealth in the stock market, so it's wise to start investing early to maximize long-term returns.
bad news
The not-so-good news about the future of markets is that they are always somewhat unpredictable, especially in the short term. A recession may be imminent, and if it does, your portfolio could suffer.
However, that doesn't necessarily mean now is a bad time to buy. Timing the market accurately is nearly impossible, and there's always a chance that your guess could be wrong. If you choose not to invest and the market continues to thrive, you will miss out on those potential profits. It's often best to simply weather the storm rather than trying to guess where stock prices will go.
Investing in the stock market is a long-term strategy and short-term fluctuations are normal. However, you can reduce the risk by investing consistently.
This method is called dollar-cost averaging, and involves making regular purchases throughout the year. Sometimes you buy when prices are low, and sometimes you invest when the market is at its peak. However, over time, these highs and lows should average out. This strategy eliminates the need to guess when to make a purchase, making times like these a little less stressful.
Bull markets can be exciting, but they can also be daunting at times. There is never a perfect time to buy. So it's often better to simply invest now and give your money as much time as possible to grow. The sooner you start, the more profit you can potentially make in the long run.
