Is the Market Too Hot to Buy Index Funds?

Has the market run up so far that investors buying index funds today are going to get burned?

Jason Moser
Jason Moser
Apr 7, 2014 at 2:49PM

In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who writes:

I am a relatively novice investor trying to move away from managed mutual funds into more index funds/ETFs. I'm hesitating to buy index funds right now though, because the market seems to be at a peak. Does this matter when buying index funds? Will there be benefits (like dividend payments) that make it worthwhile no matter what level the market is at? Or should I wait a while and hope for cheaper prices of ETFs?

Jason and Brendan both think investing with ETFs and/or index funds is a great way to avoid the fees charged by many actively managed funds. Buying shares in something that mirrors the S&P 500, for example, can give an investor plenty of diversity while presenting all the opportunity to partake in the market's overall gains. Because Fools tend to look at investing over the course of many years, instead of trying to time the market and invest when prices are lower, investors are better served by investing on a consistent basis. Buying in both good times and bad times will help smooth out returns over the long haul while eliminating the need to try to figure out where the market will go in the short run.