Buying at All-Time Highs — Is It a Bad Idea?

Headlines like "S&P 500 hits a new all-time high" come up often. The natural reaction is hesitation. What if it drops right after I buy? What if waiting for a pullback is the smarter call? Let's walk through whether buying at the highs is actually unfavorable — from both the data and the psychology side.

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Why all-time highs trigger fear

Suppose you buy at an all-time high. Two thoughts surface almost automatically.

First, there's not much room left to run. It's already up a lot, so the remaining upside feels small.

Second, the downside risk feels heavy. All-time-high reads as too expensive — like a big correction is around the corner.

This is normal human psychology. Behavioral economics calls it loss aversion. A loss feels roughly twice as big as a gain of equal size. Buying at a high and watching it drop hits harder than just the loss — regret amplifies it.

So hesitating isn't irrational. It's how the brain naturally works. Whether that hesitation matches the actual data is a separate question.

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What the data shows

JP Morgan, RBC, Schwab, and others have studied the result of buying at all-time highs.

From 1988 to 2020, they compared two ways of investing in the S&P 500 over 30 years. One side buys on every single day. The other side only buys when the index closes at an all-time high.

Counter to intuition, the all-time-high side averaged slightly higher 1-year returns than the daily-buying side. The 1-year average came in around 14.6%, the 3-year around 50%, the 5-year around 78%. Comparable to or slightly above the daily-buying side over the same windows.

The reason has a structure. All-time highs are also signals that the market is in a strong trend. Strong trends often continue rather than reverse abruptly. The S&P 500 historically hits new highs 10 to 15 times per year on average, with new highs frequently following each other.

So an all-time-high headline isn't strictly a "crash incoming" signal — it can also read as a "market is in a good run" signal. The intuition and the data point opposite directions.

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Short-term results are noisy

That said, the data above is averages. People who bought at certain peaks did take heavy 1-year losses. The dot-com peak in 2000, just before 2007's financial crisis, late 2021 — buy then, and 1-year losses were substantial.

These cases show the real downside of buying at all-time highs. Get the timing badly wrong, and the short-term hit can be heavy.

Stretch the same starting point out to 3, 5, or 10 years though, and the picture shifts. Someone who bought at the March 2000 dot-com peak was roughly flat 10 years later, but 15 years out, they were back in positive territory. Someone who bought at the 2007 peak was back to even within 5 years and showed a meaningful gain at 10 years.

So buying at all-time highs can carry short-term risk, but long-term it converges toward the market average. The longer your horizon, the less the entry point matters.

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How to handle the fear

Even with the data on your side, the fear stays. And that fear can shake your decisions. Two common ways to handle it.

One is phased entry. Instead of deploying everything at once, you split it across 3 to 6 months. Take 100 million won and split it into 6 monthly chunks of about 17 million each. If the market falls, you get cheaper entries on the later tranches. If it rises, your earlier tranches do the work.

The upside of phased entry is narrower dispersion in your end result. Closer to average outcomes than putting everything in at once. The trade-off is that in a steadily rising market, the phased side can lag a one-shot entry. In exchange, you cushion the worst-case scenario (a sharp drop right after you bought).

Another option is to settle your time horizon first. Money you'll need in 1 year — buying at all-time highs is heavier when you can't ride out a drawdown. Money you'll hold for 10 years or more — the entry point matters much less because the long horizon dilutes it. Long horizon, smaller impact from timing.

Mixing the two also works. Deploy half today, split the other half across 3 to 6 months. The mix ratio reflects how much fear you're carrying.

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What about waiting for a pullback?

A related thought — wait for the market to drop, then buy in. Sounds clean.

This strategy carries two costs.

First, the market may not drop as much as you're waiting for. The market often falls 5% or 10% from an all-time high and then sets a new high again. While you wait in cash, you miss that move.

Second, even if the drop you wanted does arrive, you may not have the nerve to buy. When the market is down 30%, headlines are grim, and fear is everywhere. Putting your full position to work at that moment runs against the same psychology that kept you cautious in the first place.

Put simply, "buy on the dip" is clean in theory and rough in practice. You have to be right twice — recognize the bottom, and act on it. Academic studies show these attempts underperform fully invested over the long run on average.

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Wrapping up in one line

Buying at all-time highs feels risky, and long-term data tells a different story. New highs often signal a market in a good run, and longer horizons dilute the entry point. To manage the fear, phased entry is the standard playbook. Waiting for a pullback comes with the burden of two timing decisions. Settle your time horizon first, then pick the phasing ratio that matches your fear level.

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• This information is not investment advice.
• Past performance does not guarantee future results.
• Backtest results are simulations and may differ from actual trading outcomes.