Deciding when to invest your money can feel overwhelming.

When the stock market reaches a new high, it can feel like there’s only one way for it to go: down. Every bear market starts right after the S&P 500 achieves a new peak. However, when stock prices decline, it can also be daunting, as it’s tough to predict how low they might go.

Following a significant drop in the S&P 500 earlier in August, the index has made a strong comeback towards its previous highs. You might be regretting not purchasing when prices dipped. But if you missed that fleeting chance, historical data indicates it’s still a favorable time to invest, even as the market reaches new peaks.

After hitting a record high, stocks typically continue to rise

Every investor understands that stock values generally increase over time. Why invest if you don’t expect your investment to grow?

Even if stocks are at an all-time high, investors generally believe they will eventually reach even greater heights. The concern for some may be how long it will take to achieve those new highs since the stock market is known for its ups and downs.

However, after hitting a new high, stocks tend to keep climbing for a while. For instance, in 1995, the S&P 500 closed at a record high 77 times, accounting for around 30% of trading days that year. So far in 2024, the S&P 500 has reached a new all-time high 38 times after first doing so on January 19.

Although the S&P 500 has risen over 16% since hitting a new high after more than a year in January, the long-term gains could be even more significant. On average, a bull market lasts 46 months with a median total return of 110%. We are currently only 22 months out from the lows of October 2022, having risen 62%. If historical patterns hold, this bull market could persist for another two years, potentially climbing another 30% from here.

In fact, investing when the S&P 500 reaches a new high has historically resulted in better performance compared to periods when it doesn’t. Since 1970, the S&P 500 has averaged a 9.4% return in the year following a new peak, and a 20.2% return in the next two years. This includes returns from the very top of the market prior to a downturn. In contrast, investing during other periods has yielded average returns of 9% and 18.5% over the same 12 and 24-month periods, respectively.

In essence, now is an excellent time to consider investing in the stock market.

Investing strategies when the market is at an all-time high

Finding worthwhile individual stocks to invest in can be challenging when the market is rising. There simply aren’t as many companies available at attractive prices compared to a bear market. Nonetheless, dedicated investors can still uncover plenty of promising options if they put in the effort.

However, analyzing financial statements and the intricacies of various industries may not be for everyone. One effective approach, especially when the market is at an all-time high, is to invest in a simple index fund that tracks a wide market index like the S&P 500.

The Vanguard S&P 500 ETF (NYSEMKT: VOO) stands out as a top choice. Its affordable expense ratio and consistent performance in tracking the index means you can expect returns that closely mirror the S&P 500’s gains. And as historical data shows, those returns can be quite substantial, especially following a new peak.

There are numerous ways to invest your money when prices are near an all-time high. Generally, it’s not wise to hold cash in hopes of a price drop. Stocks often continue to rise instead. However, when a pullback does occur, like the one experienced in early August, it can be beneficial to take advantage of any spare cash you have to invest. While the duration of the opportunity is uncertain, it’s almost assured that the stock market will continue to break new highs in the long run.

Adam Levy has no investments in any of the stocks mentioned. The Motley Fool has investments in and recommends the Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

The Motley Fool collaborates with YSL News to provide financial news, insights, and commentary aimed at helping individuals take charge of their finances. This content is produced independently from YSL News.

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