Buying stocks when the S&P 500 hits a new all-time high has historically been a smart strategy

From The Motley Fool: 2024-06-22 16:10:00

The S&P 500 reached a new all-time high in January and has continued to climb throughout the year, currently sitting near its peak. Investing when the market hits a new high has historically been a smart strategy, with average returns of 12.7% in the year following a new high.

Stocks tend to continually reach new all-time highs, and the S&P 500 has posted a new intraday high 30 times this year. Investing on the day stocks hit an all-time high between 1988 and 2020 led to a return of 50.4% after three years and 78.9% after five years.

Investors can still earn strong returns as stocks set new records. Spotting opportunities in individual company stocks can be challenging, but investing in a broad-based index fund like the Vanguard S&P 500 ETF may be a good option. The fund closely follows the S&P 500 and has a low expense ratio.

The bull market has been driven by a few key companies, with the top three in the S&P 500 – Nvidia, Microsoft, and Apple – accounting for roughly 21% of the index. For a more diversified portfolio, consider an index fund that tracks the S&P 500 equal weight index, such as the Invesco S&P 500 Equal Weight ETF.



Read more at The Motley Fool: Is Buying Stocks When the S&P 500 Hits a New All-Time High a Smart Strategy? History Provides a Clear Answer.