Investing at All-Time Highs: What 98 Years of Evidence Shows

Investing at an all-time high has historically produced better returns than waiting for a dip. That finding holds across nearly a century of share market data, whether measured over one year, five, or twenty.

In our work advising New Zealand households, we see this play out repeatedly: people sitting on a lump sum from a property sale, an inheritance, or years of accumulated savings delay investing because the market feels too high. The same hesitation affects people making regular contributions from salary. The fear of buying at the top is the most common reason money stays uninvested, and it is, based on the available evidence, the more reliable way to lose money. The delay itself, not the market's price level, is what typically costs people the most.

Research from Dimensional Fund Advisors, covering S&P 500 data from 1926 to 2024, found that buying at a new all-time high and holding delivered stronger average returns over one, three, and five years than waiting for a 10% correction before investing. For anyone with a time horizon beyond five years, a diversified portfolio, and the discipline to stay invested, the evidence favours putting money to work today.

Why All-Time Highs Are Normal, Not Warning Signs

An all-time high describes a price level, not a valuation verdict. Since 1988, the S&P 500 has set roughly 20 new closing highs per year on average, according to JPMorgan Asset Management's Guide to the Markets. Nearly 85% of the time, one-year forward returns from those highs were positive. Markets reach new peaks because the underlying companies are growing revenue, earnings, and dividends. A new high is the expected behaviour of a functioning market, not an anomaly.

The intuition that a fall is more likely after a record high turns out to be wrong. Markets that have just set new highs are statistically more likely to set another new high than to fall meaningfully. The reason is straightforward: the long-term trend of corporate earnings is upward, and share prices follow earnings over time.

JPMorgan's data also illustrates the cost of being out of the market at the wrong moments. Over the 20 years ending in 2023, an investor who stayed fully invested in the S&P 500 earned an annualised return of roughly 9.8%, according to JPMorgan's Guide to the Markets. An investor who missed just the 10 best trading days earned roughly 5.6%. Those best days tend to cluster around periods of extreme volatility, exactly when a sidelined investor is least likely to act.

Consider the decade from 2010 to 2020. The S&P 500 hit 242 all-time highs during those years, according to Citi research, while delivering a total return of more than 250% based on S&P Dow Jones Indices data. Media commentary persistently warned of an imminent pullback. Every one of those 242 highs looked expensive at the time. Every one turned out to be lower than what followed.

Headlines Are Almost Always Wrong

Financial media thrives on anxiety. To illustrate how unreliable forecasts can be, consider a sample of New Zealand headlines alongside what the S&P/NZX 50 Gross Index actually delivered. This clearly demonstrates how forecasts, even those provided by supposed experts, can be unreliable.

• 2015: “Bull run near end of tether” NZ Herald, 3 Jan 2015
  
  • Index rose 14%
• 2016: “Global risks threaten market returns in 2016” NBR, 8 Jan 2016
  
  • Index rose 9%
• 2017: “Why 2017 could be a tougher year for investors” NZ Herald, 30 Dec 2016
  
  • Index rose 22%
• 2018: "Are you ready for the great stock market melt-up?" NZ Herald, 26 Jan 2018
  
  • Index rose 5%
• 2019: "The longest bull market in history looks to be over" NBR, 4 Jan 2019
  
  • Index rose 30%
• 2020: "Stock market not likely to replicate turbocharged 2019" NZ Herald, 2 Jan 2020
  
  • Index rose 14%
• 2021: "2021 is shaping up as a year of recovery and rebound" NZ Herald, 26 Dec 2020
  
  • Index declined 0.4%
• 2022: "The NZ market is relatively well-placed heading into 2022" NZ Herald, 28 Dec 2021
  
  • Index declined 12%
• 2023: "Outlook for 2023 - when will share markets bottom out?" NZ Herald, 29 Dec 2022
  
  • Index rose 3%
• 2024: "GDP preview: Hold the champagne, recession or not, we’re going backwards" NZ Herald, 18 Mar 2024
  
  • Index rose 11%

Source: S&P/NZX 50 Gross Index. Returns calculated at each calendar year

The behavioural trap this creates is predictable: an investor waits for a correction, watches the market climb, becomes even more hesitant, then watches the market fall and decides the news is too grim to invest. When the recovery arrives, they repeat the cycle. The tendency to time the market is hard to resist precisely because the logic sounds reasonable, but the outcomes consistently disappoint. Our brains are wired for exactly this kind of pattern recognition failure. For NZ investors tracking how media coverage distorts investment decisions, this pattern is worth revisiting whenever anxiety peaks.

Famous investor Peter Lynch captured the principle well:

"Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."

The Real Cost of Sitting on the Sidelines

Waiting for a dip feels free. It is not. Here is an example to make the opportunity cost tangible.

Suppose you have $100,000 to invest. Under Scenario A, you invest immediately in a diversified global growth fund. Under Scenario B, you hold the money in a term deposit for 12 months, waiting for a better entry point.

If the growth fund returns 10% over that year (close to the long-run average for a global equity portfolio, per S&P Dow Jones Indices data), Scenario A finishes at $110,000. Scenario B, earning approximately 4% in a term deposit, finishes at $104,000. Scenario A is $6,000 ahead after one year.

By year five, assuming Scenario B invests the $104,000 at the start of year two and both portfolios then earn 10% per annum, the gap widens. Scenario A: $100,000 × 1.10^5 = approximately $161,000. Scenario B: $104,000 × 1.10^4 = approximately $152,000. The first-year head start has compounded into a gap of roughly $9,000, and it continues to grow with each subsequent year.

What if markets drop 20% in that first year? Scenario A falls to $80,000. Scenario B sits at $104,000. In the short term, waiting looks correct. But here is what happens next, using stated assumptions: a 25% recovery in year two followed by 10% annual growth, consistent with historical recovery patterns documented by S&P Dow Jones Indices. Scenario A: $80,000 recovers to $100,000 at the end of year two, then $110,000 at year three, $121,000 at year four, and $133,000 at year five. If the Scenario B investor deploys the $104,000 at the start of year two at the same price as Scenario A's original entry, they reach approximately $152,000 by year five. In this worst-case scenario, Scenario B finishes ahead. But a 20% drop in year one has occurred in roughly one out of every five years historically, according to S&P Dow Jones Indices data. In the other four out of five, Scenario A is ahead (these figures are illustrative; actual returns, fees, inflation, and taxes will vary).

In periods when the Official Cash Rate is falling and term deposit rates decline with it, the opportunity cost of holding cash instead of investing grows wider. The term deposit rate in Scenario B may be 4% today and 3% in six months, while the long-run equity return assumption stays the same.

Lump Sum or Drip-Feed: What the Research Supports

Many people asking whether they should invest at a high are sitting on a specific lump sum from a property sale, an inheritance, a business exit, or accumulated savings. The practical question is whether to invest everything at once or spread it over several months.

Vanguard's 2012 research paper comparing lump-sum investing with dollar-cost averaging, covering US, UK, and Australian markets, found that investing the full amount immediately outperformed spreading it over 12 months approximately two-thirds of the time. The reason is straightforward: markets rise more often than they fall, so delaying deployment usually means buying at higher prices later. For a deeper look at how dollar-cost averaging works in practice, we have a separate explanation.

That said, two investors with identical sums can have very different risk tolerances, income profiles, and emotional thresholds. If investing a lump sum in one go would cause enough anxiety to trigger a panic sell during the first downturn, drip-feeding over three to six months is a legitimate compromise. It gives up a small amount of expected return in exchange for a smoother emotional experience. The path with the poorest expected outcome is a third one: leaving the money in cash indefinitely while waiting for conditions that feel comfortable. If you are weighing these trade-offs with a meaningful sum, that is where working with an investment management team adds the most value, not in predicting markets, but in structuring the deployment to match your actual tolerance.

For those making regular contributions from salary or through a KiwiSaver Scheme, the decision is already made. Regular contributions are dollar-cost averaging by default. The optimal behaviour is the least dramatic one: keep contributing, ignore the market's current level, and let time do the compounding.

Why NZ's Settings Reward Staying Invested

New Zealand's tax and investment structure reinforces the "invest and hold" approach in ways many local investors underappreciate.

New Zealand has no broad capital gains tax on most share investments. Under current IRD guidance, an investor who buys and holds a diversified portfolio for decades faces no tax liability on the growth itself, provided they are not trading in a way that would be classified as business income under the Income Tax Act 2007. That is a meaningful structural advantage over jurisdictions like the United States or Australia, where realising gains triggers a tax event and creates friction against staying invested.

Contributions to a KiwiSaver Scheme combine employer matching, government contributions, and automatic payroll deductions into a system that structurally rewards long-term participation. It is, in effect, government-supported dollar-cost averaging with a guaranteed return through the employer match before market performance is even considered.

Collectively, these features mean the evidence-based recommendation to invest early and stay invested is, if anything, more compelling for New Zealand investors than for those in most comparable countries.

When Investing Right Now Genuinely Is the Wrong Move

The case for investing at all-time highs applies to long-term capital. It does not apply to every dollar you have:

• Money needed within three to five years belongs in lower-volatility options: term deposits, savings accounts, or a conservative managed fund. Your investment horizon is the most important variable in this decision.
• High-interest debt almost always offers a guaranteed "return" via avoided interest that exceeds what you could reliably earn by investing. Pay it down first.
• No emergency buffer. Before investing, ensure you have three to six months of essential expenses in accessible savings. Investing without a buffer creates the risk of forced selling at the worst possible time, and selling during a downturn is how temporary losses become permanent ones.
• Deciding between shares and property. The timing question applies equally here. If you are weighing a share portfolio against a property purchase, the decision rests on your personal circumstances, not on whether either market is at a high.

The evidence above assumes a diversified, professionally constructed portfolio. If you are picking individual stocks, concentrating in a single sector, or speculating on short-term price movements, the risk profile is fundamentally different, and the historical averages offer far less comfort.

Frequently Asked Questions

Does this apply to the NZX or only to the S&P 500?

The S&P/NZX 50 Gross Index has returned approximately 9.5% to 10.5% per annum over 20-year rolling periods, according to S&P Dow Jones Indices data, broadly consistent with the global pattern. Most NZ investors also hold international equities through managed funds, so global data is directly relevant to their portfolios.

What if I invest at an all-time high and markets crash the next day?

It has happened. An investor who bought the S&P 500 at its October 2007 peak, immediately before the Global Financial Crisis, and held through the downturn was back to breakeven by early 2013 and substantially ahead within a decade, according to S&P Dow Jones Indices total return data. The crucial variable was holding, not entry timing.

Should I switch my KiwiSaver Scheme investment to a conservative option when markets are high?

Switching to a conservative KiwiSaver Scheme investment option at a market high means crystallising your current position at lower expected future returns and missing the recovery if markets continue to rise, which they do more often than not. If your KiwiSaver Scheme investment horizon is long (more than ten years to retirement), a growth-oriented allocation has historically delivered better outcomes than switching based on market conditions. If your horizon is short (within five years of withdrawal), a more conservative allocation may be appropriate regardless of market levels.

What This Means for Your Next Decision

Joseph Darby, CEO of Become Wealth, observes:

"The clients who built the most wealth, including those who came through the 2020 COVID sell-off and the 2022 drawdown, are the ones who made a plan, funded it, and never tried to second-guess the timing. Entry point matters far less than staying power."

If your time horizon is long, your portfolio is diversified, and you have the discipline to stay invested through volatility, the evidence from nearly a century of data favours acting today over waiting for a more comfortable entry point. The market's current price level is, statistically, among the least important factors in your long-term outcome. Your behaviour matters more than your entry point.

If you are deciding how to deploy a lump sum, weighing the fundamentals of funds versus direct share holdings, or working out how to split contributions between your KiwiSaver Scheme investment and a separate portfolio, those are decisions where professional advice adds genuine value. Our investment management team works with clients on exactly these questions. Book your complimentary initial consultation.