Should I Invest When The Market Is High?

Its been more than a year since COVID-19 plagued the entire world and many economies are still tackling the aftermath of the pandemic.

Despite the underlying economy still showing weakness of and trying hard to recover back to pre-covid levels, the performance of the stock market is an entirely different story. After crashing down to a low of 2237.40, the S&P500 index came roaring back just 6 months later. As of 16 Apr, the index closed at an all time high of 4185.47

With the market at an all time high now, many will be hesitant to invest. If you're thinking of sitting on cash and wait for the next correction/crash to invest - that might not be a good idea too.

 

If the market continue to go up, you would be missing out on all the potential gains.
Well, if the market goes down, here's your chance to deploy more capital.
It is critical to make decisions based on term term expectations and not be emotionally affected by short term market moves.

It was in Jan' 18 when I was about to graduate from college and started investing. I had a plan to invest a portion of my monthly salary into Index Funds and rebalance yearly. With a few clicks, I invested 10,000 SGD into the IWDA index etf at ~57 USD per stock. At that time when I was invested, the market was nearing at an all time high.

No one told me or could have predicted what ensued. The following months saw tensions between US-China relations, each slapping tariffs after tariffs. Inevitably, the stock market reacted to it and the market dipped. The initial S$10,000 investment dropped as low as -14%.

After hearing headlines about a possible stock market crash, many would cut their losses, pull out their investments and invest back in at the very bottom.

In 2018, the S&P continued to hit all time high (ATH) for 19 times.
In 2019, the S&P hit ATH 39 times.
In 2020, the S&P hit ATH for 21 times.

Fast forward to present day, the S&P hit ATH on 22 occasions in only a span of 4 months!

If you were to invest S$10,000 in IWDA, like me, on Jan' 18. As of 16 Apr closing price of 80.76USD, the initial investment would have grown to S$14,346.54, an annual return of ~13%. Someone investing into S&P 500 would definitely get a higher return during this period.

Over the last decade, the S&P500 hit ATH 318 times! Instead of worrying of investing at the peaks, worry about your emotions and actions when the market comes crashing down. Will you falter to fear or continue to stick to your initial plan?

Market goes through a cycle, ups and downs are expected. If it goes up, celebrate a little and continue your monthly investment.
If it goes down, hurray too as stocks are selling at a bargain.

 

Do not jump in and out of the market and stay the course. Maintain a portfolio of diversified, low cost index funds. Patience will reward those with diamond hands.

Thanks for reading.