The S&P 500 index has recently touched all-time highs which may cause investors some trepidation when investing new money. After all, we have always been taught to “buy low and sell high.” At the same time, because we don’t have a time machine to travel back to past market lows, we continue to believe that purchasing stocks even at these levels should offer a long-term return to investors. Keep in mind that ownership in stocks is ownership in the underlying companies. Companies are in business to offer a return to their stakeholders.
Recently, Dimensional Fund Advisors released a research piece that observed the returns of the S&P 500 for periods after months that ended at a record high. Below is an excerpt from their report that illustrates their findings.
Surprisingly, the returns after market highs are not too dissimilar to the long-term averages of the index. Looking at these results, we continue to believe investors should be rewarded by investing in the stock market.