The S&P 500 (^GSPC) has experienced significant price fluctuations in recent months, with some investors wondering whether to buy or wait until the market stabilizes. The answer, however, is rooted in history.

The Long-Term Investor’s Perspective

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Twenty-five Bear Markets Since 1928

The S&P 500 has entered bear markets 25 times since 1928, according to Yardeni Research. These instances have included market downturns caused by various factors, such as economic downturns, wars, and global events.

A Bear Market is Not the End of the World

The S&P 500 has been in correction territory even more times than bear markets, according to Yardeni Research. The chart, which goes back to March 4, 1957, when the S&P 500 was created in its current form with 500 companies, should answer any questions long-term investors might have about whether to buy stocks.

The Answer for Long-Term Investors

Any time is a good time to invest, if you’re willing to wait a while. The major market sell-offs of the past were painful at the time, whether we’re talking about the dot-com bubble bursting, the 2008 market meltdown, or the steep plunge at the beginning of the COVID-19 pandemic. However, they all look like minor bumps in the road, in the larger context of what’s happened with the S&P 500. Granted, you might have been able to make even more money if you were able to buy close to when the market bottomed out. However, timing the market is easier said than done. Some investors might avoid some of the downturn by selling stocks, but then miss out on the eventual recovery. Others could incur more losses by buying and selling as the market whipsaws back and forth than if they had bought and held.

Why History is on Your Side

History is on your side if you’re a long-term investor — and even if you’re a shorter-term investor (to a point). But why is that the case? The stock market has an autocorrect feature, which can be likened to regular rebalancing. Stocks that succeed receive a higher weighting based on their larger market cap, while those that flounder are assigned a lower weighting and can be replaced if their market caps decline too much.

History and the Stock Market

Going back to 1926, the 10-year annualized rolling return of the S&P 500 (and its predecessors) has nearly always been positive. Throughout much of this period, the 10-year rolling return was a double-digit percentage. The S&P 500 has also experienced significant price fluctuations in recent months, with some investors wondering whether to buy or wait until the market stabilizes. However, if your investing timeline is long enough, the best approach is usually to buy and hold.

A Shorter-Term Investor’s Perspective

Most financial advisors would recommend not putting money in the stock market if you’ll need it within the next five years. However, if your investing time horizon is 10 years, history shows you have pretty good odds of making money investing in the S&P 500 even if you’re a shorter-term investor who doesn’t have several decades to wait for your portfolio to grow. Going back to 1926, the 10-year annualized rolling return of the S&P 500 (and its predecessors) has nearly always been positive.

The Long-Term Benefits

The long-term benefits of investing in the stock market are clear. The major market sell-offs of the past were painful at the time, but they look like minor bumps in the road in the larger context of what’s happened with the S&P 500. In the current situation, worries about tariffs have caused the S&P 500 to sink. However, the longer the market remains down, the more political pressure will build to change course. The ultimate “autocorrect” for stock market corrections and bear markets resulting from political decisions is elections. In the U.S., a new Congress is elected every two years and a president every four years. Within the S&P 500, regular rebalancing can be similar to autocorrect functionality.

The Best Approach

You could try to wait for the dust to settle with the stock market. History is on your side if you’re a long-term investor — and even if you’re a shorter-term investor (to a point). In conclusion, the best approach is to buy and hold, especially if your investing timeline is long enough. History has shown that the stock market will rise over the long run, and the major market sell-offs of the past were painful but minor in the larger context of what’s happened with the S&P 500. The stock market’s ability to recover from setbacks and the regular rebalancing of its components have created a self-correcting mechanism that makes it an attractive investment option for many investors.