Record Highs, Record Risks? What History Tells Us About Investing at All-Time Highs
The Dow just closed above 47,000 for the first time in history. The S&P 500 is sitting at a fresh all-time high of 6,792. The Nasdaq? Also hitting records
If you’re feeling a little queasy about investing when markets are this high, you’re not alone. It’s human nature to think: “Surely this can’t keep going up… right?”
But here’s the plot twist: history says you’re probably wrong to worry.
Let’s dig into what actually happens when you invest at market peaks—spoiler alert: it’s way better than you think.
The Uncomfortable Truth: Markets Hit All-Time Highs… A Lot
First, let’s address the elephant in the room: all-time highs aren’t rare unicorn events. They’re actually pretty common.
Since 1926, the S&P 500 has hit an all-time high in 363 out of 1,187 months—that’s 31% of the time. In the past year alone, we’ve seen 57 all-time highs, which is above the long-term median but hardly unprecedented.
Since 1950, roughly 6.7% of all trading days have seen the market at record levels. Think about that: if you waited on the sidelines every time the market hit a new high, you’d be sitting in cash for nearly 7% of all trading days—missing out on massive gains.
So if you’re waiting for markets to “come back down” before investing, you might be waiting a really long time.
What Actually Happens After All-Time Highs?
Here’s where it gets interesting. Conventional wisdom says: “Don’t buy at the top!” But the data tells a completely different story.
12-Month Returns After All-Time Highs:
• When invested at an all-time high: +10.4% average return (adjusted for inflation)
• When invested at any other time: +8.8% average return
Wait, what? Markets actually perform better after hitting all-time highs than at random times?
Yep. And it gets even better:
• 81% of the time, the S&P 500 was higher one year after hitting an all-time high
• 86% of the time, it was higher five years later
• Average 3-year returns after market highs: +10.6% per year
• Average 5-year returns: +10.2% per year
So you’ve got better-than-4-in-5 odds of making money a year later, and nearly 9-in-10 odds five years out. Those are odds most of us would take all day long.
The Valuation Question: Are We in Bubble Territory?
Okay, but what about this time? The S&P 500’s P/E ratio is currently around 27.88 to 31.05, depending on the measurement date. That’s well above the historical median of 17.97.
Does that mean we’re in a bubble? Not necessarily.
The long-term average P/E over the past 100 years is around 24.96, and typical P/E values range from 21 to 28.94. We’re on the higher end, sure, but we’re not in dot-com bubble territory (which saw P/Es above 40) or the 2009 financial crisis peak above 120.
Higher valuations can mean lower future returns, but they don’t predict crashes. Markets can stay “expensive” for years and still deliver solid gains—especially when earnings keep growing.
But What About the Crashes?
Fair question. Let’s talk about the scary stuff.
Yes, crashes happen. We’ve had some doozies:
• Black Monday (1987): Dow plunged 22.6% in a single day
• Dot-com crash (2000-2002): Nasdaq lost nearly 80% of its value
• Financial Crisis (2007-2009): S&P 500 dropped 56.8%
• COVID-19 (2020): S&P fell 34% in just one month
• 2025 Tariff Crash (April 2025): Markets lost over $3 trillion after Trump’s tariff announcements—but recovered by May
Brutal, right? But here’s the thing: every single one of these crashes was followed by a recovery.
After Black Monday 1987, investors who stayed put saw a 12.4% gain in one year and 67% over five years. After the dot-com bubble burst, the market eventually recovered to deliver annualized gains of around 3% by 2005. Even after the pre-COVID peak in February 2020, the market rebounded 16% in one year and delivered over 30% cumulative growth in three years.
The pattern is clear: crashes hurt, but time heals.
The Real Risk: Trying to Time the Market
Here’s the kicker: the biggest risk isn’t investing at all-time highs. It’s trying to time the market and sitting on the sidelines.
Studies show that “time in the market beats timing the market” every single time. Why? Because the best trading days often happen right after the worst ones.
Looking at the past 30 years, the 10 best trading days occurred during recessions, and five of them happened during bear markets. Three of the best days in the past 30 years were in March and April 2020—right in the middle of the COVID crash.
Miss those days, and you miss the recovery.
Schwab ran a fascinating study comparing hypothetical investors:
• Investor 1: Perfect market timer (invested at the lowest point every year)
• Investor 2: Used dollar-cost averaging (invested monthly)
• Investor 3: Worst timing ever (invested at the market’s peak every year)
The shocking result? The cost of waiting for the perfect moment exceeded the benefit of even perfect timing. Translation: even the worst market timer who stayed invested did better than someone who sat in cash trying to find the perfect entry point.
The Psychology Trap: FOMO vs. Fear
Investors face two competing psychological forces right now:
FOMO (Fear of Missing Out): Seeing the Dow hit 47,000 and thinking, “Everyone’s making money but me! I need to get in NOW!”
Fear of Heights: Looking at record highs and thinking, “This is way too high. I’ll wait for a pullback.”
Both are emotional traps.
FOMO can lead to impulsive decisions—chasing meme stocks, crypto, or whatever’s trending on social media without proper analysis. But fear of heights can be even more costly, causing you to miss years of gains while waiting for a “better” entry point that never comes.
The solution? Have a plan and stick to it. Don’t let short-term emotions—whether greed or fear—drive long-term investment decisions.
So… Should You Invest at All-Time Highs?
Based on nearly a century of data, the answer is pretty clear: yes, you should.
Here’s what the data tells us:
• Markets hit all-time highs frequently—it’s normal, not abnormal
• Returns after all-time highs are actually better than average
• Staying invested beats trying to time the market
• The best days often follow the worst days—miss one, and you miss both
• Every major crash in history has been followed by a full recovery (and then some)
Does this mean markets will never crash again? Of course not. Volatility is the price of admission for long-term gains.
But it does mean that worrying about all-time highs is usually a waste of energy. The S&P 500 has delivered an average annual return of 10.46% over the past 100 years. Over the last 10 years, it’s been even better: 12.57% per year.
The Bottom Line
Record highs don’t mean record risks—they usually mean the economy is growing, companies are profitable, and markets are doing what they’re supposed to do: go up over time.
The Dow at 47,000 might feel scary. But so did 40,000. And 30,000. And 20,000. And yet, here we are.
The real mistake isn’t investing at market peaks—it’s letting fear keep you on the sidelines while everyone else rides the wave higher.
So take a deep breath, ignore the noise, and remember: time in the market beats timing the market, every single time
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