January 2024: For those concerned about investing at all-time market highs. 

For many investors who are ready to take action on their 2025 savings resolutions, the idea of putting money to work in the stock market when it’s at an all-time high can feel counterintuitive. After the S&P 500 notched 57 all-time highs in 2024, it’s intuitive to think, “What if I’m buying at the peak?” or “Shouldn’t I wait for a pullback?” While these concerns are completely understandable, history and data suggest that staying in cash or sitting on the sidelines due to market highs might not be the best approach (depending on your investment time horizon, or course).

Market Highs Are Often a Prelude to More Highs

The stock market has a remarkable tendency to build on its own strength. All-time highs often cluster together, meaning that a market reaching a new high is frequently followed by more highs. This phenomenon highlights the principle that “market strength begets market strength.”

Take a look at the dataset below, for example:

Source: JPMorgan Guide to the Markets; 1Q 2025 as of 12/31/2024

Since 1950, there have been numerous instances where investors who hesitated to invest during a market high missed out on further gains. In fact, some of these all-time highs set what could be called “market floors,” where the market never dropped more than 5% below that level again. For those who waited for a better entry point, it never came.

Why Timing Can Be Costly

We consistently preach to our individual and 401(k) clients that investing is about time in the market, not timing the market. By waiting on the sidelines for a “better” opportunity, investors risk missing out on compounding returns—the engine of long-term wealth creation. Successfully predicting market highs and lows consistently is extraordinarily difficult, even for professionals. Studies repeatedly show that investors who attempt to time the market often underperform those who adopt a disciplined, long-term approach. By trying to avoid short-term losses, market timers frequently miss out on the substantial gains that occur during recovery periods and bull markets.

The Data Tells a Compelling Story

Research comparing returns from investing on any given day versus investing on an all-time high reveal a surprising insight: the outcomes are comparable, and in some cases, returns from investing at highs are even better. This data, spanning decades, reinforces the importance of maintaining a long-term perspective rather than trying to time the market based on short-term fluctuations.

Source: JPMorgan Guide to the Markets; 1Q 2025 as of 12/31/2024

What Should You Do?

If you’re feeling hesitant about investing at market highs, consider the following:

  1. Focus on Your Plan: Your investment decisions should align with your financial goals, time horizon, and risk tolerance, not the current market level.
  2. Diversify Your Investments: By spreading your investments across different asset classes and sectors, you can reduce risk and capture a broader range of opportunities.
  3. Consider Dollar-Cost Averaging: This strategy involves investing a fixed amount regularly, regardless of market conditions. It helps mitigate the risk of market timing and takes advantage of market fluctuations.

Final Thoughts

Because we are all hardwired with the basic investment principle of ‘buy low / sell high’, the fear of investing at all-time market highs is natural, but it shouldn’t deter you from taking action. History shows us that markets tend to reward those who remain committed and focused on their long-term goals. 

If you have questions about how this applies to your financial situation, let’s connect. Your Bowline advisors are standing by to help you navigate these decisions with confidence and clarity.

DATA SOURCE: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.

*Market floor is defined as an all-time high from which the market never fell more than 5%. 

**Invest on any day” represents average of forward returns for the entire time period whereas “Invest at a new high” represents average of rolling forward returns calculated from each new

S&P 500 high for the subsequent 3-months, 6-months, 1-year, 2-year and 3-year intervals, with data starting 1/1/1988 through 12/31/2024.

Guide to the Markets – U.S. Data are as of December 31, 2024.