Is it sensible to start investing when the market is at a record high?

A record high, also called an all-time high, simply means that a stock market index is higher than it has ever been before. That is all. It does not automatically mean that shares are too expensive, or that a fall must follow soon.

The distinction matters. When we say the market is at a record high, we are comparing its level with past levels. Whether shares are expensive relative to earnings is a different question. That comparison looks at share prices in relation to company profits.

Both can be true at the same time, but they do not mean the same thing. A record high is not a ceiling that forces the market back down.

Imagine a stock market index at 100 points today and at 500 several decades later. To get there, it has to keep reaching new highs along the way: 101, 110, 150, 200, and so on. New records are therefore a normal part of a market that grows over long periods.

Of course, that does not mean shares always rise. Between two record highs, there can be severe market downturns, recessions and years with no progress. A record high does not mean risk has disappeared. Equally, a record on its own is not a signal that a fall must come next.

The past cannot tell us what the future holds, but historical data can help us test our intuition. Vanguard studied U.S. stock market data going back to 1950 and compared two types of starting points: days when the market reached a new record high, and all other market days. They then looked at how much higher or lower the market stood on average after 1, 3, 5, 10 and 20 years.

Source: Vanguard Investment Advisory Research Center, Figure 2. These are average cumulative price returns over the full period, not annualised returns, and exclude dividends. The dataset uses the S&P 90 from 3 January 1950 through 3 March 1957 and the S&P 500 from 4 March 1957 through 24 September 2025. Past performance is not a guarantee of future results.

How do you read this table?

Take the first row. Historically, if you started on a day when the market reached a record high, the index was on average 9.5% higher one year later. For all other starting days, it was 9.2% higher on average.

What stands out? Investing at a record high was not always better historically. But neither was a record high consistently a poor starting point. Average returns after record highs were slightly higher over some periods. Over longer periods, they were lower in this dataset. Individual outcomes also varied widely.

The most useful conclusion is therefore not that a record high is good or bad news. It is simpler than that: a record high alone tells us little about the returns that follow.

Waiting may sound cautious, but it also means making a choice based on where the market will go next. Suppose an index is at 100 today. You decide to wait for a 15% fall.

The market first rises to 130 and then does fall by 15%. The index ends up at 110.5. The drop you were waiting for has arrived, but the market is still higher than when you decided to wait.

The opposite can happen too, of course. The market could fall by 10%, 20% or more shortly after you start. The problem is that nobody knows in advance which scenario will unfold.

Waiting for “a better moment” therefore means having to get two things right: when the market will fall, and when it will then be time to start investing. That is exactly why market timing is so difficult.

It can happen. An investment made today may be worth less next month, even with a strong financial foundation and broad diversification. That is part of investing in shares.

A fall just after you invest does not automatically mean the earlier record high was a useful warning signal. In hindsight, the right moment often seems obvious. Identifying it beforehand is much harder.

This is why your investment horizon matters so much. Money you will need soon has little time to recover from a difficult period in the market. A longer horizon leaves more time to wait for a possible recovery. The question of when to start is therefore closely tied to how long you can leave the money invested.

Today’s market level attracts a lot of attention because it is visible and measurable. But for someone starting to invest, other questions often matter more:

• Is the financial buffer large enough to cover unexpected expenses?
• Can the money stay invested for a long time?
• Are the investments sufficiently diversified?
• Is it clear that shares can fall sharply along the way?
• Is there an approach that remains manageable when the headlines become less positive?

These are things you can influence. Next month’s market level is beyond your control.

Investing regularly means buying at different times. Some purchases happen when the market is high, others after a fall, and many somewhere in between.

This does not prevent losses or guarantee good returns. It does, however, make your financial future less dependent on a single perfect starting date. The question “Is today the right moment?” then becomes less important than the habit of following a long-term plan consistently.

There is no universal yes-or-no answer. A record high may be followed by a fall, or the market may keep rising. Nobody knows in advance which path it will take.

Historical data do not give a clear indication that a record high, on its own, is a good reason to stay out of the market. A more useful question is therefore not

“Is the market too high today?”

but rather:

“Is my financial foundation strong enough, and is my investment horizon long enough, to cope with the uncertainty of investing?”

A record high tells you where the market has been. It does not tell you where it will go tomorrow.