Buying Stocks at an All-Time High: What History Reveals

The S&P 500 (^GSPC 0.02%) has experienced remarkable growth over the past two-and-a-half years. Since hitting its lowest point during the bear market on October 12, 2022, this benchmark index has surged by an impressive 76%, reaching new heights as of July 3, 2025.

Investors who strategically allocated funds into the stock market while prices were declining in 2022 have reaped substantial rewards. Those who began investing in 2023, 2024, and even early 2025 have also enjoyed significant returns, particularly if they capitalized on market pullbacks observed in March and April of this year.

However, following such a robust market performance, investors may hesitate to commit additional capital, especially with the S&P 500 now at an all-time high. Concerns surrounding trade policies and ongoing international conflicts in regions like the Middle East and Europe contribute to a sense of unease. It’s natural to fear that another bear market could be imminent, prompting caution among potential investors at this market peak.

Nevertheless, historical data provides clear insights into whether investing in stocks when the S&P 500 reaches a new all-time high is a sound strategy, and the results may come as a surprise.

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Understanding the Frequency of New All-Time Highs in the S&P 500

It may surprise you to learn that the S&P 500 frequently closes at an all-time high. Since the index was expanded to include 500 companies in 1957, it has achieved a new closing record approximately once every 20 trading days. This frequency is a testament to the stock market‘s upward trajectory, as investors generally expect prices to rise over time.

However, it’s important to recognize that the journey of the stock market is rarely a linear ascent. This volatility makes investing at all-time highs a daunting prospect. Market corrections can occur, leading to prolonged periods of decline. For instance, the Japanese stock market languished below its all-time high for an astonishing 34 years following 1989. Moreover, the S&P 500 experienced a similar trend, remaining below its all-time high for much of the period between 2000 and 2013.

Conversely, when new all-time highs occur, they tend to cluster together. For instance, the S&P 500 achieved four new all-time highs within just five trading sessions leading up to July 3 this year. Historically, once the market sets a new all-time high, momentum tends to propel stock prices even higher.

Since 1950, investing in the S&P 500 on days when it reaches a new all-time high has yielded returns that surpass the average across one-, three-, and five-year periods. Extending the timeframe back to 1929, the data reveals even more encouraging trends. The S&P 500 has delivered an average total return of 205% in the ten years following a new all-time high since 1929. In contrast, the average ten-year return from investing on any other day has been just 137%, according to research from investment consultancy Creative Planning.

The current bull market first reached its all-time high on January 19, 2024. Since that milestone, the index has increased by 30%, indicating substantial potential for further growth based on historical averages. Remember that the impressive 205% average ten-year return is merely an average; typically, earlier new all-time highs in a bull run generate even greater returns.

Effective Strategies for Investing at New Market Peaks

When the overall stock market is trading at or near an all-time high, identifying value investments can become more challenging. During a market crash, discerning investors can easily find attractive bargains, provided they possess the discipline to execute their analysis and act decisively. This same level of discipline is vital for stock pickers in a more expensive market environment, requiring them to resist the temptation to invest unless a stock demonstrates compelling value.

Undeniably, the S&P 500 appears expensive at present compared to its historical averages. As of now, the index is trading at a forward price-to-earnings (P/E) ratio of approximately 22, whereas the historical average hovers in the mid-teens. Despite that, there are still numerous opportunities for value investments within the S&P 500 if investors take the time to research individual stocks.

However, this process demands considerable knowledge, time, and effort. For investors who prefer a less hands-on approach, a straightforward option is to invest in a standard S&P 500 index fund, which historically has proven to be a wise choice.

For those seeking a potentially enhanced strategy, consider an equal-weight S&P 500 index fund, such as the Invesco S&P 500 Equal Weight ETF (RSP 0.19%). Unlike traditional funds that allocate investments based on the market capitalization of each of the 500 components, this Invesco ETF invests equally in each stock, rebalancing quarterly in line with updates from Standard & Poor’s. This approach results in a portfolio that is more heavily focused on smaller stocks within the index, which often have greater growth potential.

Historically, the equal-weight index has outperformed the market-cap-weighted index. However, this trend has shifted recently, as the ongoing bull market has primarily benefited the largest companies, raising questions about whether this trend will continue. Nevertheless, the equal-weight index currently boasts a more favorable valuation, trading at around 17 times forward earnings, which enhances its appeal.

It is essential to bear in mind that investing in anything other than a traditional S&P 500 index fund carries the risk of underperforming the index. If your goal is to partake in the potential for outsized returns typically associated with the S&P 500 after it hits a new all-time high, sticking with the standard index fund may be your best bet.