It seems counterintuitive. After all, isn’t the saying “Buy Low”, not “Buy High”?
This one surprised me, but I recently came across some data from JP Morgan Private Bank that would suggest buying at market tops may be just as good a time as any to invest, maybe even better.
Let’s look at the data…
The article states, “If you invested in the S&P 500 on any random day since the start of 1988 and reinvested all dividends, your investment made money over the course of the next year 83% of the time. On average, your one year total return was +11.7%. Now, what do those figures look like if we only consider investments on days when the S&P 500 closed at an all-time high? They’re actually better! Your investment made money over the course of the next year 88% of the time, and your average total return was +14.6%. And if we look at cumulative total returns three or five years after the original investment, the takeaway is the same.”
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For context, the article was written in August 2020, after the market had soared 56% in 5 months, putting the market at a new all-time high.
If you recall, earlier that year we experienced the fastest drawdown in history with the S&P 500 (SPY) retreating -33.4% in about 30 days (February 20th through March 23rd) as a result of a little thing called Covid-19. In other words, we experienced both a bear market (down 20%+) and a bull market (up 20%+) in the span of about 6 months.
This left a lot of folks dazed and confused, wondering when the best time was to put cash to work. Did they miss a low? Was the market going to retreat again? Had they missed the boat?
Hopefully they decided to go ahead and invest.
From August 2020 to March 2024, the market increased another 57%. Not too shabby.
I’m more and more convinced, and this data set may be what pushes me over the top that the best time to invest is “now”. By now, I don’t necessarily mean this specific day I’m writing this but just that generally if you have money to invest, invest it now. As in don’t wait. Sure there could be some opportune environment that may or may not come. But if you have a long time horizon (5+ years at least), why wait?
Of course, past performance is no guarantee of future results but I think the general takeaway is don’t worry about trying to time the market. If markets are up and you have money sitting on the sidelines, maybe go ahead and consider investing now. If you have money to invest and you have time to leave it alone for a while, take the guesswork out of it and just go ahead and get your money to work. History would suggest “buy now” is your best bet.
