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Technology and growth stocks continue to lead the market higher.
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Invesco QQQ Trust is a great ETF to invest in to continue playing this trend over the long term.
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Although there has been talk of an AI bubble, the biggest mistake is often to sit on the sidelines.
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10 stocks we like better than Invesco QQQ Trust ›
As the market enters the fourth year of the current bull market, investors may be wondering where to invest, or even if they should start investing at all. There has been much talk of market overvaluation and an artificial intelligence (AI) bubble.
However, I would cut through that noise because there is rarely a perfect time to invest. Instead, I strongly believe that the average investor should use what is called a dollar cost averaging strategy. This simply means investing a certain amount of money on a regular basis, like once a month, regardless of the market’s performance. This takes emotion and market timing out of the equation and ultimately helps you build long-term wealth.
For example, if you start with $1,000 and continue to invest $1,000 each month in an exchange-traded fund (ETF) for 10 years, you’ll have about $264,000 with a 15% return. However, the earlier you start and the longer you maintain the investment, the better off you will be. For example, hold an ETF for 30+ years with the same return and you’ll have $5.6 million, 94% of which comes from earnings. This is the power of combining.
Too often people are afraid to talk about market valuations and wait for a pullback that never comes. However, bull markets can last a long time. In fact, according to data compiled by the Carson Group, over the past 50 years, when the market reached its third year of a bull market, it reached its fourth year. Meanwhile, JP Morgan analysts found that S&P 500 it hits a new high about 7% of all trading days, and about a third of the time, it never sees the index trade lower.
This is a great reason to start investing and not wait for a withdrawal. The other reason is that even if you were to correctly predict a market pullback, you would also need to choose the right time to enter the market. JP Morgan has found that the market’s best days often come after some of its worst days, but if you missed the market’s 10 best days over the past 20 years, your returns would be almost cut in half.
As for the idea that we’re in an AI bubble, I don’t find that convincing either. AI seems to be still in its infancy as many of the benefits of AI are still being developed. Meanwhile, the companies leading the charge are some of the biggest tech companies on the planet, with strong balance sheets that generate robust free cash flow. They see how big the future opportunity can be and have the resources to pursue it.