All-time Highs Have Been A Great Time To Buy

The stock market usually goes up. Over 6-month, 1-year, 2-year, 3-year, and 5-year periods, the S&P 500 on average has generated positive returns.

That trend even applies to record market highs. As data from JP Morgan Asset Management shows, investing specifically at all-time highs generated even higher average returns over these time horizons.

"Investors usually use all-time highs as a reason to stay in cash or on the sidelines," JP Morgan analysts wrote. "However, history suggests that investing at all-time highs is not a bad strategy because new highs are typically clustered together. In other words, market strength begets more market strength."

If you have money to put to work in the stock market, it's reasonable first to ask if market conditions are attractive.

Unfortunately, it's impossible to know if or when prices will fall before climbing again. And waiting for lower prices risks missing out on important gains.

The key question is whether you are willing and able to put in the time. The longer your investment timeframe, the better your odds of generating a positive return.

The best thing about all this is knowing that you don't have to be a good market timer to be a successful investor.

Checking in on the unluckiest market timer I know

I recently wrote about the unluckiest market timer I know. This unfortunate fellow has a history of making big, lump-sum purchases near market tops.

Unfortunately, that unlucky market timer is me.

After doing my 2024 tax returns in February, I learned I had some extra cash to put to work. So, I tossed it into my self-employed 401(k) plan and made a lump sum purchase of an S&P 500 index fund on Feb. 18.

The market climbed to a new record high the very next day. That ended up being a top, and from there the S&P 500 proceeded to fall by around 20% before bottoming on April 7.

But was I as unlucky as I felt in the moment? As unpleasant as that experience was, I knew I had the luxury of time and that I shouldn't let my emotions get near my portfolio. Because as TKer Stock Market Truth No. 2 reminds us, double-digit, intra-year drawdowns are typical even in upward-trending markets.

That self-counsel proved wise. The stock market surged from its April lows and set a new record high on June 27. It was a quicker recovery than usual and what I would've expected. But that's the stock market for you.

As I wrote back in March, "Time is the unlucky market timer's best friend."

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