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Sat, Feb

Should You Really Invest in the Stock Market Right Now? History Offers a Clear Answer.

Should You Really Invest in the Stock Market Right Now? History Offers a Clear Answer.

Financial News
Should You Really Invest in the Stock Market Right Now? History Offers a Clear Answer.

After years of record-breaking growth, the S&P 500(SNPINDEX: ^GSPC) has been stagnant in recent weeks -- up by just 0.24% since the beginning of the year, as of this writing.

Many investors are also divided on where stocks are headed. While around 35% feel optimistic about the next six months, according to the most recent weekly survey from the American Association of Individual Investors, 37% feel pessimistic about the future -- an increase from 29% in early February.

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So is it really safe to invest right now? Or should you hold off on buying? History offers a crystal-clear answer.

Gold bear and bull figurines are facing each other.
Image source: Getty Images.

History has good news for investors

With many stocks reaching record high after high, many investors worry that the only way to go is down. Historically, though, the market has proven that it always has room for more growth -- if you're willing to stay invested for the long haul.

By keeping a long-term outlook, it doesn't necessarily matter when you buy. Even if you invest at the seemingly worst moment, you can still build substantial wealth over time.

For instance, say that you had invested in an S&P 500 index fund or ETF in December 2007. The U.S. was just entering the Great Recession, which would last until mid-2009, and the S&P 500 wouldn't reach a new all-time high until 2013.

In other words, investing in late 2007 would mean buying at record-high prices immediately before one of the longest and most severe recessions in U.S. history. Those years between 2007 and 2013 would have been rough, but by today, the S&P 500 has earned total returns of more than 363%.

^SPX Chart
^SPX data by YCharts

Now, could you have earned more if you'd held off on investing until 2009, when stock prices were at rock bottom? Of course. But trying to time the market is a double-edged sword. Wait too long to invest, and you could miss out on much of the lucrative recovery period.

In most cases, it's safer to continue investing consistently, no matter what the market is doing. Even if you invest at a "bad" moment, you can still earn significant returns over time.

The secret to ensuring your portfolio survives

The overall market is incredibly likely to pull through economic rough patches, but not all individual stocks will be that lucky. Unstable companies are more likely to crash and burn, whether due to a weak business model, shaky finances, lack of a competitive advantage, or poor leadership decisions.

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