Is Investing at a "Market Peak" Prudent?
We often get the question, “is now a good time to invest, even though stocks are at an all-time high?”
Many investors are worried that investing in stocks right now is especially “dangerous.” After all, the market is a mere stones throw away from an all-time high.
While we understand it can be difficult to invest at a time when stocks have reached new highs, the fact of the matter is that under most circumstances, it really doesn’t impact returns.
That is - as long as your time horizon is long enough!
You will note in the graph below that there is very little difference in longer term returns when investing at a market peak versus any other market level.
There are things that investors can do that can have a meaningful impact on overall portfolio “returns.” Here are a few ideas:
Make sure that you have an adequately funded emergency fund. Doing so will eliminate the need to sell at a bad time.
Diversify your portfolio across a variety of asset classes. This serves to reduce portfolio risk over the long term.
Utilize low cost and tax-efficient investments in order to maximize your after-tax returns.
Is investing at a market peak prudent? You betcha!