The S&P 500 (^GSPC 1.02%) is reaching new highs, as stock prices continue to soar. The index is up by more than 39% from its low point in October 2022, and we're now well into bull market territory.
The last few years have been rough for the stock market, and investors have been put through the wringer. Many people are feeling optimistic that brighter days are ahead. Others, however, are concerned that perhaps the best opportunity to invest has already passed.
It's normal to feel conflicted about the stock market right now, and there's good and bad news about the current S&P 500 bull market. Here's what you need to know to protect your investments.
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The good news
The good news about the stock market right now is that even though the S&P 500 has surpassed its all-time high, there is still plenty of opportunity for growth. And if you wait too long to see what happens, you could miss out on potentially significant earnings.
Of course, nobody knows exactly what the future holds for the market, and past performance doesn't predict future returns. It can be helpful, though, to look at what history says about times like these.
For example, during the Great Recession, the S&P 500 officially bottomed out in March 2009. Technically, that was the start of a new bull market, but the index didn't reach a new all-time high until March 2013.
So let's say that you waited until 2013 to buy, and you'd invested in an S&P 500 index fund. At the time, it may have seemed like you'd missed the best opportunity to invest, as the market had been performing well over the previous four years. Yet by today, you'd still have earned total returns of nearly 215% -- more than tripling your money in just over a decade.
On the other hand, say you'd waited just a little longer to see whether the bull market would continue or a downturn was on the horizon. If you'd held off just one year and invested in March 2014, you'd only have earned total returns of around 166% by today.
Time is your most valuable asset when building wealth in the stock market, so to maximize your long-term earnings, it's wise to get started investing sooner rather than later.
The bad news
The not-so-good news about the future of the market is that it will always be unpredictable to a degree, especially in the short term. It's a possibility that a downturn could be looming, and if that happens, your portfolio could take a hit.
However, that doesn't mean that right now is necessarily a bad time to buy. Timing the market accurately is nearly impossible, and there's always a chance you could guess wrong. If you choose not to invest and the market continues to thrive, you'll miss out on those potential gains. Rather than trying to guess where stock prices are headed, it's often best to simply ride out the storm.
Investing in the stock market is a long-term strategy, and short-term fluctuations are normal. But by investing consistently, you can limit your risk.
This approach is called dollar-cost averaging, and it involves buying at regular intervals throughout the year. Sometimes you'll buy when prices are low, while other times you'll invest during the market's peaks. Over time, though, those highs and lows should average out. This strategy can take the guesswork out of when to buy, making times like these a little less nerve-wracking.
Bull markets can be exciting, but they can also be daunting at times. There will never be 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 get started, the more you can potentially earn over the long haul.
