Investing in the stock market is a smart move, but it requires the right strategy.
The S&P 500 (^GSPC 1.04%) has been surging over the last year and a half, soaring by an incredible 54% from its lowest point in October 2022 through the end of July. If you haven't yet jumped into investing, now could be a smart time.
But just how safe is the stock market right now, especially for a beginner? Some experts are warning about a bubble burst or even a full-on recession, but the market is safer than it might seem. Here are three things you need to know before you invest to protect your money as much as possible.
1. The S&P 500 is a fantastic beginner investment
If you're just getting started investing and are looking for something that's safe and reliable, you can't go wrong investing in the S&P 500 itself. The benchmark index contains stocks from 500 of the largest companies in the U.S., including juggernauts like Apple, Amazon, Microsoft, and Nvidia.
All you have to do is invest in an or a comparable ETF,such as the Vanguard S&P 500 ETF (VOO 1.00%) or SPDR S&P 500 ETF Trust (SPY 0.92%). These investments track the index, meaning they include the same stocks as the S&P 500 and aim to mirror its performance. When you own just one share of an S&P 500 ETF, you'll instantly own a stake in all 500 companies within the index.
Investing in the S&P 500 can be a fantastic way to diversify your portfolio with minimal effort. And because the companies within the index are some of the strongest in the world, there's a much better chance this type of investment will recover from market downturns.
2. There's no bad time to invest -- with the right strategy
The S&P 500 has consistently reached new all-time highs throughout this year, but some investors may be worried that the index has nowhere to go but down. However, as long as you maintain a long-term outlook, there's never necessarily a bad time to invest.
It's impossible to predict exactly how the market will perform in the short term, and trying to time the market and buy at just the right moment can be costly. Stock prices could still rise further, and if you're holding off on investing, you could miss out on valuable gains.
While it may sound counterintuitive, the best way to take full advantage of the stock market is to ignore the short-term fluctuations, try not to worry about what's on the horizon, and simply stay invested. Over the long haul, you're far more likely to see positive returns with this strategy compared to trying to time the market.
3. Market downturns are normal -- and temporary
Sooner or later, the stock market will face a downturn. Whether that's next month, next year, or beyond is unclear right now, but downturns are part of the stock market's normal cycle. However, they certainly shouldn't stop you from investing.
While market slumps are inevitable, the good news is that, on average, bear markets are much shorter than bull markets. Since 1929, the average S&P 500 bear market has lasted 286 days, according to data from investment firm Bespoke. Meanwhile, the average bull market has lasted over 1,000 days. For context, we're currently 658 days into the current bull market, as of this writing.
Downturns can be daunting, but even the worst slumps are only temporary -- and the good times generally last far longer than the bad. If you let potential bear markets scare you away from investing, you could miss out on life-changing wealth.
Investing in an S&P 500 index fund or ETF is a fantastic option for beginners, and it's also one of the safest ways to invest in the stock market. By holding your investment for the long haul and avoiding getting caught up in the market's short-term ups and downs, you'll be on your way to building wealth that lasts a lifetime.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
