The S&P 500 index could be referred to as the benchmark for investing returns. In order to justify managing your own money or paying someone else, your returns have to beat this index otherwise you’re better off putting your money in a low fee S&P 500 index fund(Vanguard, Spyder).
The chart below indicates if you had put your money in at anytime in the last 90 years(except in the last couple months) you would have seen a return from your investment. There were better years than others but as long as you held you would have made money.
Although it’s next to a sure thing that you will make money if you’re in it for the long term you probably wouldn’t want to pile in all of your money at once unless if the market has took a huge beating like in early 2009.
If you had piled in all of your money at the peak of the tech boom in the year 2000 you would have seen your investment get cut by close to half at the bottom of the tech bust the following year.
That decade wasn’t the best for a long term investor due to the Great Recession that followed in 2008. The index rose back to its high after the tech bust only to get slammed even worse. It’s like falling madly in love only to get heartbroken and then have it happen all over again soon after you recovered.
If you weathered the storm until today though you’re in love again. In 2001 the index at its peak was at around 1500 points and in 2018 it’s been in the 2500-2800 range.
Instead of piling in all at once a more prudent strategy would be to put smaller portions every month so that you hedge against having all of your money invested at the top. Sure, if you go all in at once you’ll more than likely see your investment above water one day but in the case presented above you would have had to wait until 2013 to see a gain from your 2001 investment. That sucks.
If the index has taken a bad beating already though it’s probably a strategic move to put in more money than you usually would. Buying at the bottom is how you get the largest returns.