After a terrible 2022, one that saw the market tank amid rapidly rising interest rates, investors benefited from a bounce-back year in 2023. And the momentum has continued into 2024.
Just look at the Dow Jones Industrial Average (DJINDICES: ^DJI). The widely followed index rose 13.7% in 2023. And it just hit a fresh all-time high on Feb. 2. Investor optimism is certainly on the way up.
But if you’re someone who missed this rally, should you still buy stocks right now?
Time in the market matters
It’s understandable why one would be hesitant to invest in the market when asset prices are at highs. The assumption is that things are too expensive now, and there’s the belief that there is a good chance that prices will drop in the near term. After all, no one wants to put money to work when they think they could lose it.
So, it’s probably best to wait until there’s a dip before buying, right? Trying to correctly time the market bottom seems like the right course of action.
This sounds good, but it’s undoubtedly the wrong approach. Market timing is a losing game. It’s incredibly difficult to quickly move in and out of stocks to avoid the worst days and take advantage of the best days, as no one can figure this out consistently ahead of time.
This points to how critical it is to view things with a long-term perspective, one that spans several years and even decades. The Dow Jones Industrial Average has returned on average 8% per year in the last five decades. And even if someone invested in it at a peak, the potential returns, especially over a long enough time horizon, would still resemble the historical average.
Therefore, investing now, and staying fully allocated, is the no-brainer decision to make. Time in the market is what matters most.
Stocks to consider
Now that we’ve established that it’s still a wonderful time to be a buyer of stocks, we need to figure out where to find worthy investment ideas. We can even look at the components of the Dow Jones to find some inspiration.
The Dow Jones Industrial Average contains 30 different businesses that are considered blue chip names. They have profitable histories and have come to dominate their respective industries.
There are companies like Apple and Microsoft that have done nothing but reward shareholders over the years thanks to impressive financial performances and the ongoing popularity of their various products and services. Valid arguments can be made that their stock prices are expensive these days, though, but the businesses should still be on your radar.
Investors might also want to take a closer look at Visa and American Express. These two top financial stocks aren’t as exciting as the tech giants, but they both possess powerful network effects in the global payments sector. And each of these Dow constituents continues to post stellar double-digit earnings-per-share growth.
If picking individual stocks isn’t something you’re interested in, then perhaps it’s best to consider an exchange-traded fund (ETF) that provides exposure to the Dow Jones Industrial Average, like the SPDR Dow Jones Industrial Average ETF Trust. Fees are extremely low, and this product is offered by a reputable firm in the asset management industry.
Even with the market at or near its all-time high, it’s still smart to be invested in stocks. And there are a lot of great options to get started. Remember, those who have patience, a long-term mindset, and who invest early and often get rewarded.
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American Express is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Visa. The Motley Fool has a disclosure policy.
The Dow Jones Just Hit a Record High: Should You Buy Stocks Now? was originally published by The Motley Fool