Key Points
The S&P 500 has generated a 7.5% compound annual growth rate (CAGR) dating back to 1957.
Despite many bear markets and 10 recessions, the stock market has consistently moved higher over time.
Trying to time the market is folly. It is far better to buy and hold.
10 stocks we like better than S&P 500 Index ›
Is now the right time to buy stocks? It’s a question that’s been asked countless times, and whenever I field it, my answer is the same: “Yes!”
That might seem crazy, but I assure you, it isn’t. Here’s why: Over the long term, investing in a benchmark stock index like the S&P 500 (SNPINDEX: ^GSPC) has always proven to be a winning strategy — even if someone’s timing is horrible.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
Still don’t believe me? Then take a look at this chart:
^SPX data by YCharts
This is the S&P 500 dating back to 1957, when the index expanded to 500 companies and acquired its current name. Since then, it has increased by an astounding 14,000%. That works out to a compound annual growth rate (CAGR) of 7.5% — and that’s before accounting for dividend payments.
During that stretch, there have been many corrections, several bear markets, and 10 full-blown recessions. And yet, no matter when someone bought, they would have made money — if they had stayed invested in the market.
Image source: Getty Images.
There’s a lesson here: Timing the market is folly. Many fortunes have been made by people claiming to know when the right time to buy — or sell. But far more money has been left on the table by investors trying to time the top or the bottom.
The best advice is the simplest: Avoid trying to predict price movements in the short term. Instead, save what you can and invest for the long term. Ignore the headlines — particularly when the market is going down. And whenever you have doubts, glance at the chart above and remember: Stay patient, hold your stocks for the long term, and you’ll come out a winner.
Should you invest $1,000 in S&P 500 Index right now?
Before you buy stock in S&P 500 Index, consider this:
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Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
