The S&P 500 sits about 3% below its Aug. 13 record close of 7,798.99, prompting the question of whether to buy the Vanguard S&P 500 ETF now or wait for a deeper pullback. A 2020 JPMorgan Chase study and a Fidelity review of 46 years of index history both point toward buying rather than waiting.
The S&P 500 has slipped roughly 3% since its Aug. 13 record close of 7,798.99, and that gap has investors weighing whether to buy the Vanguard S&P 500 ETF now or hold out for a bigger discount. History leans toward buying.
What the record-high data shows
A 2020 JPMorgan Chase analysis of S&P 500 returns dating to 1988 found that investors who bought the index on a random day made money over the next 12 months 83% of the time, with an average return of 11.7%. Investors who bought only on days the index closed at an all-time high did better on both counts: they profited 88% of the time, averaging a 14.6% return, and the same pattern held over three-year and five-year holding periods.
Corrections are common, but so are recoveries
Waiting for a pullback carries its own cost. Fidelity's review of S&P 500 moves from 1980 through 2025 found drops of 5% or more in 93% of calendar years, and drops of 10% or more in 48% of those years — the standard definition of a correction. Yet the index's largest intra-year drop averaged about 14% over that stretch, while the S&P 500 still posted an average calendar-year return of 13.3%. A 10% correction measured from the Aug. 13 record would put the index just above 7,000 — but there's no guarantee the next correction starts anywhere near today's price.
The Vanguard fund's price tag
The Vanguard S&P 500 ETF became the first exchange-traded fund to surpass $1 trillion in assets in June, after taking in about $69 billion of new money this year through early June. It charges a 0.03% expense ratio and owns the more than 500 stocks in the index. The fund trades at about 27 times earnings, a price that assumes the largest technology companies in the index keep growing profits at an impressive rate.
Writing for The Motley Fool, analyst Daniel Sparks argues that for money that can stay invested for years, buying now — perhaps dollar-cost averaging in — makes more sense than waiting on the sidelines for a correction that may never arrive at today's prices.
Source: The Motley Fool
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