People who are new to investing often ask, “when is the best time to invest?” The prospect of making money when the market goes up is exciting, but the thought of investing your hard-earned money into a falling market may seem scary.

Logically then, a new investor might reason that the best time to invest would be when the market is rising quickly. Let’s test that idea.

the 20 best days for stocks

Let’s say you wanted to be invested on the days the stock market had its absolute highest returns. What market environment would you look for?

• A strong economy?
• Innovative technology growth?
• A flourishing business environment?

I looked at nearly 100 years of daily returns of the S&P 500 index and found the 20 highest-return days. Contrary to what you may imagine, they all occurred during harrowing market conditions.

15 happened during the Great Depression
2 happened during the 2008 Financial Crisis
2 happened during the COVID-19 lockdowns
1 followed the worst single-day drop in US stock market history (1987 Black Monday)

What does this mean

Maybe the biggest challenge in investing is that following our natural human instincts, which serve us well in other areas of life, rarely leads to investment success. It can be scary when markets fall. Seeing your hard-earned nest egg lose value can feel alarming. It’s natural to want to stay on the sidelines when times get rough and wait for things to get better before you invest.

But history shows us that the best returns and the worst returns often come one after another. Your greatest odds of catching the best days in the market is to stay invested through downturns.

the best time to invest

Investing is all about compounding. The longer you remain invested, the more time you allow for compounding to do its thing. So the best time to invest, by this logic, is as soon as you are able. Then keep going.

Invest when things are going well.

Invest when it’s scary – don’t sit on the sidelines.

Don’t let the media or current events sway your investment strategy.

Invest according to your appetite for risk. If you’re a nervous investor, address that in your portfolio construction. You don’t have to put all your money in stocks, or any one type of investment. See this post on professional portfolio design for ideas.

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Wishing you wealth and peace.

– Matt