Entry into the stock market despite highs – opportunities and risks

Entry into the stock market despite highs – opportunities and risks

According to a report by www.test.de,
Many people didn't expect this: the stock markets are reaching new highs - despite all the wars and crises that are shaking us and the world. The German stock index Dax jumped over 17,000 points for the first time in December, increasing by around 20 percent within a year. The global stock index MSCI World also performed just as strongly over the year, driven by the US market, which even achieved an increase of 23 percent over the past twelve months.

Is it still worth getting started
Anyone who has already invested in the global stock market with equity funds or ETFs or, in addition, in the German stock market, can look forward to significant increases in the value of their fund shares. However, people who still plan to invest money in the stock market are now wondering whether they have missed the opportunity to get started. Isn't there a risk of a downturn in the air? Can an investment go well at highs despite all the crises?

For our article Market entry – everything at once or in small chunks? We calculated what would have been statistically better in the past: an investment “all at once” or “gradually” over twelve months. The clear result: In 67 percent of all cases, investing “all at once” would have achieved a higher return. This also and especially applies in market phases when stocks are at their highest. If the MSCI World was 0 to -5 percent below its peak, entry “Everything at once” would have been better in 70 percent of cases.

Let the savings plan run
If you don't want to invest a large sum in one go, but rather save monthly with a savings plan, you don't have to ask yourself this question. You should keep an ETF savings plan running at any time. Sometimes you pay more, sometimes you pay less for your fund shares - but if you continue to pay in in a disciplined manner, you will most likely be rewarded with significant increases in value in many years.

Don't miss the one-time investment
The decision is more difficult if you want to invest a larger sum in one go. Isn't it worth waiting until the prices have fallen again before getting in? The idea sounds plausible, but it is not guaranteed that prices will fall below current levels again. If you then wait and wait, you will watch the stock markets continue to rise and miss the moment to get in.

In most cases, immediate entry is best
For our article Market entry – everything at once or in small chunks? We calculated what would have been statistically better in the past: an investment “all at once” or “gradually” over twelve months. The clear result: In 67 percent of all cases, investing “all at once” would have achieved a higher return. This also and especially applies in market phases when stocks are at their highest. If the MSCI World was 0 to -5 percent below its peak, entry “Everything at once” would have been better in 70 percent of cases.

Don't stretch the entry too long
If you feel more secure with this, you can of course still divide the investment amount and invest the money little by little. With cheap depot providers and neobrokers, the purchase fees are so low that they hardly count as a counterargument. However, our analysis of market entry: How long you should extend the deposit phase shows: Shorter entry phases are better than longer ones. Investors do not need to delay their entry for longer than two years. The probability of success drops from 40 percent at two months to 27 percent at 24 months.

These developments show that entering stock markets despite highs can still make sense, especially if you invest immediately. However, a cautious strategy could also be considered, especially for larger investment amounts.