I've been putting in a fixed percentage of my salary in SP500 etf. Right now, it's an ATH. I got worried and was wondering if I should continue this strategy, or just wait for market to correct itself.
Found these articles on investing in ATH enviornment:
Should You Buy An All-Time High?
Is Buying Stocks at an All-Time High a Good Idea?
Essentially, it's showing based on past data that investing in ATH is not worriesome. Some notable callouts:
A. When SP500 is near an all-time high, returns over the next year are similar to those when the SP500 is more than 5% away from an all-time high, which suggest fear of market crash could be more psychological.
B. Average annualize return over the next three years when investing near an all-time high is 8.2% versus 7.4% when investing 5% away from an all-time high.
C. A strategy that just buy and hold stocks during ATH and switch to bond when it's not ATH, provide better performance and lower volatility than one that just buys stocks regularly.
D. Similar observations made for international stocks.
IMO, the most important take away is to ensure that we have a (a) diversified portfolio, meaning not just investing in a single asset class, or worse a single company, and (b) not investing the entire nest egg at one single time but rather invest across time i.e. dollar cost averaging.
With multiple news articles/blogs/tweets about a possible market correction, bear market etc., It's easy to over worry about investing in the current environment. Hope this helps others who like me am wondering if we should continue investing.
Submitted November 05, 2021 at 12:24AM by paperboiko https://ift.tt/3k4yvFd
