We often hear stories of investors who became rich by buying at the bottom of the stock market and selling at the top. These tales are compelling—but they’re the exception, not the norm. For every rare success, there have been many more investors who, with the benefit of hindsight, waited too long, missed the rebound, or stayed out of the market altogether. The truth is market movements can’t be predicted.
22 July 2025
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Should I wait for the stock market to dip before investing?
The desire to wait for a “perfect” entry point is understandable. But history shows that trying to time the bottom of the market has often led to missed opportunities rather than better outcomes.
Market downturns, small and large, have been a regular feature of the investment journey. According to our research, the US S&P 500 Index has historically experienced:
- A 5%+ decline about twice a year
- A 10%+ correction roughly once every 18 months
- A 15%+ decline about once every three years
- A 20%+ ‘bear’ market approximately once every six years
Market downturns have happened frequently but have not lasted forever
That said, while markets have often dipped, one important observation is how quickly they tend to recover. Following a 10% decline, on average the US S&P 500 has historically delivered:
- +2.5% in the next 3 months
- +7.7% over the next 12 months
S&P 500 returns following the start of market decline
Past results are not a guarantee of future results.
Data from 1 January 1928 to 21 March 2025 in USD terms. The start of the market decline is defined as when prices fall -10% from the 52-week high. The market decline ends when there are no new -10% declines from the 52-week high within the next 30 trading days. Using this definition, there have been 60 market declines since 1928. Average refers to the mean return across all periods, while median is the middle value — showing the return that occurred most typically, unaffected by extreme highs or lows. Sources: Bloomberg Finance LP, Capital Group.
These figures highlight a critical insight: rebounds have been swift and substantial. Missing just a few of the best-performing days or weeks could therefore significantly reduce the potential for long-term returns. In fact, missing the rebound might be more damaging than enduring the dip.
Rather than waiting for the illusory “right” moment, it may be more effective to stay invested and remain consistent. While no one can predict market movements with certainty, historical patterns suggest that staying invested through market cycles has often led to more favourable outcomes than trying to time them. In the long run, it’s not about finding the ‘perfect’ entry point — but about considering if you’ve given your investments time to grow.
Investing during market highs versus market lows
It’s easy to assume that successful investing hinges on picking the ‘perfect’ moment to enter the market. But as the chart below indicates, even the worst timing could still lead to strong outcomes — if investors stay consistent.
This illustrative example compares two hypothetical investors who each contributed US$10,000 annually to the S&P 500 Index over a 20-year period ending 31 December 2024, one investing on the best day (the market low) versus one investing on the worst day (the market high) each year.
Hypothetical US$10,000 annual investment to S&P 500 index
Hypothetical examples are shown for illustrative purposes only. Investors cannot invest directly in an index. Indexes are unmanaged and therefore have no fees. Past results are not a guarantee of future results.
Best day investments data from 20 April 2005 to 31 December 2024. Worst day investments data from 4 March 2005 to 31 December 2024. Annual investment of US$10,000 in S&P 500 Index under different investing scenarios. The “best day” and “worst day” refer to investing a lump sum on the market low (best day) or market peak (worst day) of each year, just before a major market movement. “Total portfolio value” reflects the outcome of investing on those specific days, while the “cumulative scenario” shows the result of investing the same amount regularly over time, regardless of market timing.
Despite the stark difference in timing, the results were surprisingly close:
- Best-day investor: 12.25% average annual return
- Ending value (best-day investor): $802,378 from a total investment of $200,000
- Worst-day investor: 10.54% average annual return
- Ending value (worst-day investor): $626,978 from a total investment of $200,000
Even with poor timing, staying invested in the market and contributing regularly can potentially lead to meaningful long-term growth. While regular investing doesn’t guarantee a profit or protect against loss, it may help investors avoid the pitfalls of market timing and lead to benefits from the power of compounding over time.
That said, there’s no one-size-fits-all approach to investing. Each investor’s journey is shaped by their individual goals, time horizon, and comfort with risk. Understanding your own objectives and risk tolerance is key to building a strategy that works for you—especially through market ups and downs.