Should You Invest in S&P 500 ETFs When the Market is Down?

Should You Invest in S&P 500 ETFs When the Market is Down? What the Experts Say

Everyone is aware that the stock market has had a rough go of it in recent months. Despite an attempt to recover in recent weeks, the financial markets remain mostly in the midst of a lengthy sell-off that has hit some of the most well-known stock names.  

According to CNBC, the Dow Jones Industrial Average hasn’t had a losing streak this long (7 weeks) since 2001, while the S&P 500’s six-week slump is at its worst since 2011.  

Concerns about the economy and geopolitical tensions have combined to create the perfect storm of inertia, and many investors are already witnessing on-screen losses in their portfolios following a successful 2021.  

What do experts say?

While many investors saving for the future may be unsure what to do in such a volatile market, the best thing to do, according to renowned experts like Warren Buffett, is: “don’t worry too much about it” and “don’t watch the market too closely.”  

Stock market corrections such as the one we’re experiencing aren’t a major cause for concern. This is because they are fairly frequent. Indeed, one benefit of a stock market decline is that it will likely create buying opportunities. However, if you don’t feel comfortable picking stocks by hand, you might want to participate in the broad market by purchasing ETFs.  

Many experts advise investing in index funds like ETFs, which are automatically diversified and own all of the stocks in an index. Big-name American corporations like Apple and Amazon, for example, are included in the S&P 500.  

Investing in “good firms” over time will see results in 1-3 decades. Investing in good firms for lengthy periods of time is how money is made, and professionals will often advise that this is exactly what investors should do with their investments regardless of the market climate.  

A buy-and-hold approach was advocated by the late, great investor Jack Bogle, who suggested that buying stocks and keeping them was the greatest approach to investing since “your emotions will completely conquer you if you attempt to sell your assets to prevent losses and then try to come back in later.  

However, is now a good time to buy, or would it be better to wait?   

Take advantage of the situation.

One thing about the S&P 500 is that it always bounces back. The S&P 500 Index was the first market-cap-weighted equity index in the United States, and it is largely regarded as the best single indicator of large-cap American equities. The index is the world’s most prominent equity index, with trillions of dollars benchmarked to it.  

ETFs allow you to invest in a group of stocks with a single transaction. Likewise, investing in S&P 500 ETFs allows you to own a share of the 500 largest, most dynamic, publicly traded companies not only in the world, but in the world’s largest economy. As a result, your portfolio will have a lot of variety (diversification is key).   

It eliminates the need to invest countless hours in stock research and selection. Over time, the index has been a consistent, reliable performer. According to Investopedia, the index achieved total annual returns of 14.59% for the 10-year period ending Feb. 28, 2022.   

It also provides security during periods of high volatility, such as the one we’ve currently been dealing with.  

This is both a good moment to buy more shares of an S&P 500 stocks and ETFs. Although the stock market hasn’t necessarily reached rock bottom, there is still plenty of room for market growth. So, if you buy S&P 500 ETFs now, your portfolio is likely to grow in value over time.  

Of course, due to the current market correction, a number of once-overpriced equities are at present trading at lower levels. So, if you’ve been considering diversifying your portfolio by purchasing individual stocks, it’s a good time to do so.  

A good way to deal with today’s drop is to add both S&P 500 ETFs, as well as specific stocks that you believe have great growth prospects, to your portfolio. You’ll be better positioned to benefit from profits when the market rebounds, but you’ll also potentially have an opportunity to outperform the market with the appropriate individual stock purchases.  

State Street Global Advisors’ SPDR S&P 500 ETF (SPY) is currently the largest S&P 500 ETF, with $405.1 billion in AUM as of February 3, 2022.  

Keep investing for the long-term

Many investors assume that buying stocks while the market falls is a poor decision. In reality, the opposite is more likely to be true. Downturns in the stock market can be a great opportunity to invest because you can buy in at a cheaper rate.   

As long as you have sufficient money on hand to manage a few months’ worth of your necessary bills and expenses, and you won’t have to dip into your portfolio in the near future, it makes sense to keep investing — even if the market is turbulent and stocks face a tough road ahead to recovery.  

Trying to react to market trends is likely to backfire for most investors and they’ll end up thwarting their own long-term objectives, so it’s better to wait out the market’s ups and downs in most cases.  

If you’re looking for a low-cost, low-risk way to diversify your portfolio with ETFs, while minimizing potential volatility, open an arty account today and try it for FREE. arty offers a selection of well-diversified ETF portfolios that you can copy to your own ETF brokerage account. 

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