Investing at Market Highs
Surprisingly, the U.S. stock market has once again hit news highs this year!
I would not have guessed it shortly following the tariff announcements and turmoil and the resulting economic uncertainty.
It’s understandable to wonder, “Is now a good time to invest?”
I believe that there are few bad times to invest in the stock market, assuming you have a long enough time horizon to weather through volatility and you have your cash-reserve needs met.
What happens after market highs?
https://my.dimensional.com/one-pagers/why-a-stock-peak-isnt-a-cliff
Going back the last 100 years, the returns following brand new market highs are nearly identical to returns following any other point in the market.
Specifically, in the one year that follows a new market high, stocks tend to rise an average of 13.7%. Meanwhile, stocks generally rise at a rate of 12.5% following any other point in the market: high points, low points and everything in between.
If we look at a longer window, average returns in the five years following a new market high are identical to average returns following any other point in the market: 10.3% per year.
I think the takeaway here is that the stock market historically goes up, regardless of when you choose to invest.
With that, we need to be prepared to weather through storms of volatility as long-term investors.
We can’t have all the good without a little bad.
Do you have questions about your investment portfolio? Reach out to me at Ben@coveplanning.com or schedule a free consultation call.
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Ben Smith is a fee-only financial advisor and CERTIFIED FINANCIAL PLANNER™ (CFP®) Professional with offices in Milwaukee, WI, Evanston, IL and Minneapolis, MN, serving clients virtually across the country. Cove Financial Planning provides comprehensive financial planning and investment management services to individuals and families, regardless of location, with a focus on Socially Responsible Investing (SRI).
Ben acts as a fiduciary for his clients. He does not sell financial products or take commissions. Simply put, he sits on your side of the table and always works in your best interest. Learn more how we can help you Do Well While Doing Good!
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Ben Smith, and all rights are reserved. Read the full Disclaimer.