This year has been promising so far for investors, with stock prices finally starting to look up. After falling nearly 20% throughout 2022, the S&P 500 is currently up by more than 7% in 2023.
While nobody knows for certain what will happen over the coming weeks and months, many investors are feeling optimistic right now. If you’re thinking about investing in an S&P 500 tracking fund, is now the best time to buy? Here’s what history says.
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Is now a good time to invest in the S&P 500?
It can be unnerving to invest during periods of economic uncertainty, and it’s normal to be cautious right now. But the good news is that historically, there’s never been a bad time to invest in the S&P 500.
Research and analytics firm Crestmont Research examined the rolling 20-year total returns of the S&P 500 since 1900 and found that all 103 of those years (from 1919 to 2022) produced positive returns. In other words, if you had invested in an S&P 500 index fund or ETF at any point after 1900 and held your investments for 20 years, you would have made money.
Historically, then, it’s actually harder to lose money with the S&P 500 if you’re a long-term investor. Even if there’s more volatility on the horizon or we face a recession, as long as you hold your investments for at least a decade or two, it’s extremely unlikely you’ll lose money.
Case in point: Say you had invested in an S&P 500 ETF in January 2007, immediately before the Great Recession. At the time, that may have seemed like the worst possible time to invest, as your portfolio would have almost instantly lost value.
However, within 10 years, you’d have earned returns of nearly 58%. By today, your earnings would have soared to more than 190% — and that’s despite the major market tumble over the past year.
How much can you earn with the S&P 500?
With a long-term outlook, you can earn more than you might think with an S&P 500 ETF or index fund. Historically, the index itself has earned an average rate of return of around 10% per year. In other words, the annual highs and lows have averaged out to roughly 10% per year over the long run.
Say you’re investing $300 per month in an S&P 500 ETF earning a 10% average annual return. If you invest consistently, here’s approximately how much you could accumulate over time:
| Number of Years | Total Savings |
|---|---|
| 20 | $206,000 |
| 25 | $354,000 |
| 30 | $592,000 |
| 35 | $976,000 |
| 40 | $1,593,000 |
Source: Author’s calculations via Investor.gov
Again, a long-term outlook is key to making money in the stock market. Nobody knows what will happen in the coming months, and there’s always a chance that more volatility could be looming.
But the S&P 500 has a century-long track record of recovering from downturns and earning positive returns over time. Rather than waiting for the perfect time to buy, it’s wise to start investing now and give your savings as much time as possible to grow.
Periods of volatility are intimidating, but the stock market is one of the best money-making machines out there. By investing in the right places and keeping a long-term outlook, you’ll be on your way to building life-changing wealth.