Is It Safe to Invest in S&P 500 Funds Right Now, or Are You Better Off Waiting for More of a Decline?

Investing in top stocks via the S&P 500 index has historically produced great results for investors. On average, the index has grown by 10% per year. That's just the average, however, and the returns from one year to the next can vary significantly. In 2025, the S&P 500 rose by more than 16%.

But there are concerns that valuations have become too high and that a decline in the market may be overdue. Thus far in 2026, the index has been struggling to stay in positive territory, down around 1%. Is it still a good idea to invest in funds that track the S&P 500 right now, or should you hold off on doing so given the uncertainty and instability in the economy these days?

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Timing the market can be risky

Although the stock market may look shaky these days due to the war in Iran and general economic uncertainty, trying to guess when it might be due for a rally or decline can be a risky strategy. If you guess wrong, you could incur losses or miss out on gains.

That's why many experienced investors don't bother with trying to time the market. Instead, a simple buy-and-hold strategy involving an exchange-traded fund (ETF) such as the State Street SPDR S&P 500 ETF Trust (NYSEMKT: SPY), which tracks the S&P 500, is often preferable. Over the past decade, the ETF has generated returns of 240%, rising to more than 300% when including dividends.

For long-term investors, the answer is simple

Unless you need to access your cash soon or are nearing retirement, just staying the course and tracking the S&P 500 can still be an excellent option for your portfolio, regardless of what you think may happen in the short term. While there is no entirely risk-free investment in the market, going with an ETF such as SPY remains one of the best ways to keep your risk relatively low while also ensuring that you benefit from the market's performance in the long run.

The key is to be patient and not pay attention to developments that are likely to have only temporary effects on the S&P 500's performance. Over the course of 10 or 20 years, even a decline that spans several months may look fairly trivial in the big picture, but at the time, it may seem unbearable. This is where long-term investing pays off, as you don't have to worry about what's happening in the market every day. And that's why a simple buy-and-hold strategy that involves tracking the S&P 500 via an ETF is still a great option today.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.