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Technology and growth stocks continued to lead the market higher.
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The Invesco QQQ Trust is a great ETF investment vehicle that could continue to play into this long-term trend.
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While people keep talking about the AI bubble, the bigger 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 its current bull market, investors may be wondering where to invest, or even if they should start investing. There is a lot of talk about the market being overvalued and the artificial intelligence (AI) bubble.
However, I would ignore this noise because there are rarely perfect times to invest. Instead, I firmly believe that the average investor should adopt what is known as a dollar-cost averaging strategy. This is simply investing a certain amount of money on a regular basis, say once a month, regardless of how the market is doing. This takes emotion and market timing out of the equation, ultimately helping you build long-term wealth.
For example, if you started with $1,000 and continued investing $1,000 per month in an exchange-traded fund (ETF) for 10 years, you would have approximately $264,000, a return of 15%. However, the sooner you start and the longer you hold your investments, the better off you’ll be. For example, if you held an ETF for over 30 years and had the same returns, you would have $5.6 million, 94% of which came from gains. This is the power of compound interest.
Too often, people are afraid to talk about market valuations and wait for a pullback that never comes. However, bull markets can last for a long time. In fact, by the time the market entered its third bull market year over the past 50 years, it was already in its fourth, according to data compiled by the Carson Group. Meanwhile, JPMorgan analysts found S&P 500 Index New highs are reached about 7% of trading days, and about a third of the time the index never moves lower.
This is a good reason to start investing rather than waiting for a pullback. Another reason is that even if you correctly predict a market pullback, you must choose the right time to enter the market. JPMorgan found that the market’s best days tend to follow some of its worst, but if you missed the market’s 10 best days over the past 20 years, your returns would be cut by nearly half.
As for the idea that we are in an AI bubble, I also find it unconvincing. Artificial intelligence still appears to be in its early stages of development, as many of its benefits are only just emerging. At the same time, the leading companies are some of the world’s largest technology companies, which have strong balance sheets and can generate strong free cash flow. They see how big the opportunity is in the future, and they have the resources to pursue it.
