Should You Be Invested in Stocks Right Now? Here's What History Says.

The stock market has crossed back out of its recent correction. Even the tech-centric Nasdaq-100 is only down 9% from its all-time high, compared to the 10%-below-peak threshold that officially marks a correction. That doesn't mean the last few weeks have been smooth sailing in markets, though.

News has come in a flood as President Trump and his team continue to shake things up geopolitically and economically through tariffs, sanctions, and a host of other tactics. Uncertainty is on the rise, which has sparked fear on Wall Street. Some investors are just taking their ball and going home.

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I'm here to tell you this is the wrong mindset, one that only leads to worse returns over the long term. Instead, both history and math suggest you should embrace Wall Street declines as stock-buying opportunities.

Crashes are not only natural, they're opportunities

Stock market crashes are a normal part of life on Wall Street. Whether you define a crash as a drop of 10%, 20%, or more, they happen on a regular basis and with varied severities. Take a look at the Nasdaq-100 index over the last five years: It has gone through separate 10%, 35%, 14%, and 12% declines, averaging around one per year. The 2022 crash was a true bear market, with many stocks that thrived during the bull run of 2020 and 2021 spiraling down by 80% from their peaks.

QQQ data by YCharts.

Now it's anyone's guess how severe this current drawdown will be. Last week may have been the trough, or the current tick upwards may evaporate en route to a worse plunge than the one that took place in 2022. Regardless, bear markets should be considered buying opportunities for the long-term. Whether you invest in index funds or individual stocks, falling stock prices mean you get to buy a stake in the same business at a discount to where it recently traded -- sometimes, a significant discount.

Investing may not feel fun during the periods when you're watching the value of your portfolio fall, but those periods are where you can make some of your most profitable long-term purchases. Not when markets are soaring to all-time highs and you have to buy the same stocks at higher and higher valuations.

Let's again consider the Nasdaq-100. From its cyclical low at the start of 2023, it has delivered an 85% total return for investors in just over two years. That crushed the market's average long-term returns. The index is also up by close to 200% from the low point it hit five years ago in March 2020, even with the steep decline it took in 2022.

The truth is that nobody can reliably time a market bottom. But what you can do is take advantage of falling stock prices to buy shares in high-quality businesses on the cheap.

Dollar-cost average and keep a long-term time horizon

Predicting short-term movements in the market is close to impossible. You shouldn't try it. Not even legendary investors like Warren Buffett try to time when the broad markets will hit a peak or nadir. It sounds like a smart idea to try and sell when the market is about to peak and buy when it touches bottom, but there is no record of any investor doing that successfully on a consistent basis.

However, what any individual investor with a steady income can do is dollar-cost average. This strategy involves regularly and consistently buying stocks -- or just index funds -- with a set amount of money. Many investors choose to do it every time they get paid. So, if you receive a paycheck every week, route a portion of it into your portfolio and immediately buy stocks or index funds. Yes, you have to decide what to buy, but the one rule is to not start accumulating cash and trying to time the market. This is why it is called dollar-cost averaging, because you are "averaging" into your positions over time, regardless of whether prices have gone up or down.

It also pays to invest with a long-term time horizon. This does not mean one or two years, but decades. When you frame your investments as picks that have many years to pay off, it becomes clear why stock market corrections are opportunities. Most bear markets only last a year or two, anyway. So instead of worrying when to invest in stocks, commit to permanently being invested in the stock market. Then, the only decisions you'll need to make are which stocks or index funds to buy.

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*Stock Advisor returns as of March 24, 2025

Brett Schafer 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.