The Investing Error That May Be Quietly Draining Your Returns

Key Points

• Some investors assume buying stocks at record highs leads to weak future performance.

• A Vanguard analysis found that investors can still outperform by buying the S&P 500 when it is near its peak.

• Trying to predict market swings is generally an ineffective strategy.

Had you applied that logic during a recent market high, you might still be waiting for the “right” moment to invest. In the meantime, the index has continued to rise, leaving you on the sidelines while gains passed by. That is a classic example of a costly investing mistake: holding out for a perfect entry point that may never arrive.

This kind of hesitation can do more damage than many investors realize.

Buying at a high is not automatically a bad move

Many investors assume that purchasing stocks near record levels means they are getting poor value or that most of the upside has already been captured.

History does not fully support that view. Market conditions that look expensive can still be favorable buying opportunities.

Vanguard examined stock market results from 1950 through 2025 and found that S&P 500 returns over one-year periods after a record high averaged 9.5%, compared with 9.2% on all other trading days. The difference was 30.2% versus 28.5% over three-year periods, and 55.8% versus 51.9% over five-year periods.

Over longer horizons, the relationship becomes less clear. The study found that buying on record-setting days produced below-average returns over 10- and 20-year periods.

Still, the main takeaway is straightforward: investing when the market hits an all-time high does not automatically signal poor future performance or an imminent decline. Investors have historically been able to earn solid returns for years after those peaks.

What to do instead

Long-term investing is about where your portfolio can go over decades, not what happens over the next year. A disciplined approach works best. Investing a set amount on a regular schedule, such as every paycheck or every month, can help you build wealth gradually, benefit from compounding over time, and buy more shares if prices fall. Together, those advantages can make a meaningful difference.

No one can reliably predict what the market will do over the next one, five, or 10 years. Rather than trying to guess the outcome, it is usually better to stay invested and stick with your plan.

The objective should not be to buy at the absolute lowest price. It should be to build real wealth over time.