The market has taken a sharp turn for the worse in recent weeks. The tech-focused Nasdaq Composite (^IXIC +1.52%) plunged into correction territory this week, with the S&P 500 (^GSPC +1.20%) and the Dow Jones Industrial Average (^DJI +1.79%) not far behind.
If you're feeling rattled by this sudden downturn, you're not alone. Between President Trump's tariffs, surging inflation rates, and the threat of a looming recession, many investors are worried about what the future holds for the market and the economy.
With all of that in mind, just how safe is it to invest right now? Here's what you need to know.
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Should you invest now or wait?
When stock prices are volatile, it's often tempting to wait until the market calms down before investing. But short-term fluctuations (even severe ones) are a normal part of the market's cycle. If you wait for the perfect time to buy, you'll end up missing out on your best opportunities.
Time in the market is far more valuable than timing the market. Giving your money more time to grow can lessen the impact of volatility, and investing at even the seemingly worst time can still reap rewards down the road.
If you'd invested in an S&P 500 index fund in January 2022, for example, your investment would have immediately dipped as stocks sank into a bear market that would last nearly a year. But by today, you'd have earned total returns of close to 17%, as of this writing.
For a more severe example, say you invested in the S&P 500 in January 2008. The market was about a month into the Great Recession, and stocks still had a long way to go before they bottomed out in 2009. But if you'd simply stayed in the market for the next 10 years, you'd have nearly doubled your money.
For a more extreme example still, let's say you'd invested in the S&P 500 in January 2000 -- immediately heading into the dot-com bubble burst. The following bear market would become one of the longest-lasting downturns in S&P 500 history, and as soon as stocks began reaching new highs, the Great Recession set in.
It would have taken much longer to see the light at the end of the tunnel in this instance, but by holding out for 20 years, you'd still have earned total returns of roughly 120%. By today, your total returns would have skyrocketed to around 279% -- nearly quadrupling your money.
In short, the longer you stay in the market, the greater your chances of seeing substantial returns -- even if the short-term is incredibly volatile. The market has a flawless history of recovering from recessions, and while past performance doesn't predict future returns, it's incredibly likely it will continue pulling through whatever may lie ahead.
Protecting your portfolio
Continuing to invest consistently throughout the market's ups and downs can help maximize your long-term earnings while also limiting risk.
Dollar-cost averaging is an investing strategy that involves buying at regular intervals throughout the year, regardless of how the market is faring. Sometimes you'll buy at record highs, while other times you can snag stocks at steep discounts.
Over time, the highs and lows can average each other out -- making it easier to take advantage of the market's low points without having to buy at just the right time. By investing consistently and keeping your money in the market for at least a few years, you're far more likely to ride out any stock market downturns.
The stock market may seem like a dangerous place right now, especially if prices continue to plummet. But even the worst downturns are only temporary, and those who stay invested for the long haul will reap the biggest rewards.
