The S&P 500 Hits New All-Time High: Is It Time to Invest?
The S&P 500 (^GSPC -0.16%) has been on a tear this year, reaching new all-time highs and continuing to climb higher. While some investors may be hesitant to jump into the market at such lofty levels, history shows that buying stocks when the index hits a new all-time high can be a smart strategy.
Since hitting a new all-time high on Jan. 19, the S&P 500 has posted a new intraday high 30 more times this year. This trend of setting new records is not uncommon, as stocks tend to go up over the long run. In fact, the index has historically averaged a 12.7% return in the 12-month periods following an all-time high, outperforming the average returns for all other periods.
Despite the S&P 500 currently sitting about 13% above its January peak, there is still room for growth in the current bull market. Data analyzed by JPMorgan shows that investing on the day stocks hit an all-time high between 1988 and 2020 led to strong returns after three and five years, outperforming the average returns of the index during the same period.
For investors looking to capitalize on the market’s momentum, investing in a broad-based index fund like the Vanguard S&P 500 ETF (VOO -0.22%) can be a solid choice. This fund closely tracks the S&P 500 and offers a low expense ratio, making it a convenient option for those looking to diversify their portfolio.
While the current bull market has been driven by a few key companies, investors seeking a more balanced approach can consider an index fund that tracks the S&P 500 equal weight index, such as the Invesco S&P 500 Equal Weight ETF (RSP 0.13%). This fund weights all 500 components of the index equally, providing a more diversified exposure to the market.
Overall, investing in stocks when the market hits a new all-time high can lead to strong returns over the long run. By staying invested and focusing on quality companies, investors can take advantage of the market’s upward trajectory and potentially grow their wealth in the process.
