Is It Really Safe to Invest in the S&P 500 Right Now? Here's What History -- and Warren Buffett -- Have to Say

Yahoo

12-07-2025

The market has been thriving in recent months, but the future is still uncertain.
No matter what may be looming, the market's long-term future is bright.
If you're nervous about investing, Warren Buffett can offer some reassuring advice.
10 stocks we like better than S&P 500 Index ›
This year has been a wild ride for the stock market. After sinking by nearly 20% between February and April, the S&P 500 (SNPINDEX: ^GSPC) has since soared by just around 26% from its low point -- officially reaching a new peak in July.
However, the market can change on a dime, especially with a slew of new policies taking effect in Washington. So is it really safe to invest in the stock market? Here's what history suggests -- and what Warren Buffett has to say about times like these.
The future may be uncertain, but that's never stopped the stock market from thriving over time. In the last 25 years alone, we've experienced multiple unprecedented events and record-breaking downturns. From wars and a global pandemic to the collapse of the tech industry and the Great Recession, the last couple of decades have been rough.
Despite all the volatility, though, the S&P 500 has soared by a staggering 326% since 2000, as of this writing. In other words, you'd have more than quadrupled your money by investing in an S&P 500 index fund and simply holding it through all the market's ups and downs.
While past performance doesn't predict future returns, it can be reassuring to know that the market has recovered from every single downturn it's ever faced -- without fail. No matter what may be coming, it's extremely likely to bounce back.
The key, though, is to maintain a long-term outlook. It can take years for stocks to recover from a particularly nasty bear market or recession, but the longer you hold your investments, the less likely it is that you'll lose money.
In fact, analysis from investing firm Capital Group found that, historically, there's a 33% chance the S&P 500 will earn negative returns over just one year. Over five years, that chance drops to 7%. And over the last 82 years, there's never been a 10-year period in which the index experienced negative total returns.
In other words, if you were to invest in an S&P 500-tracking fund and hold it for a decade, it's extremely unlikely that you'll lose money -- no matter how volatile the market is in that period.
In 2008, at the height of the financial crisis and the Great Recession, Warren Buffett wrote an opinion piece for The New York Times. In it, he offered some valuable lessons for investors on how to navigate downturns while still setting themselves up for long-term success.
"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," he writes. "To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense."
Now more than ever, it's crucial to ensure that you're only investing in quality companies with solid foundations. Weaker stocks can appear to thrive when the market is surging, but they'll have a tough time bouncing back from a downturn. Companies with competitive advantages over their peers, competent leadership teams, and healthy finances are far more likely to survive even the worst market slumps.
Buffett also emphasized the importance of continuing to invest even when it's daunting. "You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain," he wrote. "But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy."
Since Buffett's article was published in October 2008, the S&P 500 has generated total returns of nearly 558%. Those who earned the most were the ones who stayed in the market even when it was tough.
"I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month -- or a year -- from now," Buffett continued. "What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over."
Nobody -- even Warren Buffett -- can say what the market will do later in 2025 and beyond. But by investing in quality stocks and staying in the market even when it's nerve-wracking, you can generate life-changing wealth no matter what may be on the horizon.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is It Really Safe to Invest in the S&P 500 Right Now? Here's What History -- and Warren Buffett -- Have to Say was originally published by The Motley Fool
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