The stock market's wild ups and downs can be tough to stomach, and the last couple of years have been particularly volatile. Right now, many investors are feeling conflicted about the market. While stock prices have been surging (with the S&P 500 up more than 25% from its lowest point last October), experts are still debating whether a recession is coming.
If the market continues to thrive, now may be a fantastic time to buy while prices are still below their peaks. But if another downturn is looming, it can be tempting to hold off.
How safe is the market right now? And should you really be investing? Here's what you need to know.
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Why the market is safer than it seems
Short-term volatility can be unnerving, but if you're taking a long-term investing approach, it doesn't necessarily matter what the market is doing right now.
Despite the turbulent ups and downs, the market's long-term performance is incredibly stable. Research shows that if you stay invested for the long haul, there's not necessarily a bad time to buy.
Experts at Crestmont Research analyzed the S&P 500's rolling 20-year returns throughout the index's history and found that every single 20-year period ended with positive total returns. In other words, if you had invested in an S&P 500 index fund at any point and simply held that investment for 20 years, you'd have made money.
Even in the last two decades alone, the S&P 500 has soared despite experiencing some of the worst downturns in history.
Since 2000, the market has faced the dot-com bubble burst, the Great Recession, the COVID-19 crash, the slump throughout 2022, and countless smaller downturns along the way. Yet it's still up by more than 200% during that time.
The key to keeping your money safe in the stock market
Maintaining a long-term outlook will make it easier to stomach volatility, but it's equally important to ensure you're choosing the right investments. Not all stocks will be able to survive a downturn or recession. But companies with solid underlying fundamentals -- such as a competent leadership team, a competitive advantage, and solid financials -- are the most likely to recover from slumps and see positive long-term returns.
In times like these, it's especially important to ensure you're doing your research before you buy. The market could take a turn for the worse in the coming months, but if you're investing in solid stocks from healthy companies, your portfolio has a much better chance of surviving.
If you're a particularly risk-averse investor or simply want a safer option right now, you may opt for an S&P 500 ETF -- such as the Vanguard S&P 500 ETF (VOO 1.00%). This type of investment tracks the S&P 500 itself, so it includes stocks from all 500 companies within the index.
Because the S&P 500 itself has a decades-long history of recovering from slumps, this ETF is extremely likely to see positive returns over time. It's also a low-maintenance investment, as you never need to worry about choosing stocks or researching companies -- simply invest whatever you can afford, then give your money time to grow.
The stock market can be intimidating even in the best of times, and it's downright daunting during periods of volatility. But by choosing the right investments and keeping a long-term outlook, you can not only keep your money safer, but see substantial earnings over time.
