The best time to buy stocks is when you’re financially ready to invest money you won’t need for at least five years. Market timing, where you try to buy at the perfect low point and sell at the peak, sounds appealing but consistently fails in practice. Your personal financial situation matters far more than what the market is doing on any given day.
That said, there are real factors that can help you decide whether now is a smart entry point or whether you should wait. Here’s how to think through both sides: your own readiness and what’s happening in the broader market.
Get Your Finances Ready First
Before putting a dollar into stocks, two financial priorities come first. The SEC’s guidance for investors puts it plainly: there is no investment strategy anywhere that pays off as well as, or with less risk than, paying off high-interest debt. If you’re carrying credit card balances at 20% or more, paying those down delivers a guaranteed return that stocks can’t match. Every month you carry that balance, the interest compounds against you faster than a stock portfolio is likely to grow for you.
The second prerequisite is an emergency fund. Most financial planners recommend three to six months of living expenses in a savings account before you start investing. This cash buffer means you won’t be forced to sell stocks at a loss if you lose your job or face an unexpected bill. Selling during a downturn because you need the money is the single most reliable way to lock in losses.
Once those two boxes are checked, any money you can invest with a time horizon of five years or longer is a reasonable candidate for stocks.
Why Timing the Market Rarely Works
The appeal of buying low and selling high is obvious. The problem is that nobody can consistently identify the lows and highs in real time. The market’s best days and worst days tend to cluster together, often within the same week. According to Hartford Funds, if you missed just the 10 best trading days over the past 30 years, your total returns would have been cut in half. Ten days out of roughly 7,500 trading sessions. The penalty for sitting on the sidelines at the wrong moment is enormous.
Those best days frequently happen right after sharp drops, which is exactly when fearful investors are most likely to have pulled their money out. Waiting for the market to “feel safe” again usually means missing the recovery that already happened.
What Market Valuations Tell You
Valuations can give you a rough sense of whether stocks are cheap or expensive relative to history, even if they can’t tell you what will happen next month. The most widely watched long-term gauge is the P/E10 ratio (also called the CAPE ratio), which compares stock prices to the average of the past 10 years of corporate earnings, adjusted for inflation. Its historical average sits around 17.7.
As of March 2026, the P/E10 stands at 37.1, which is 110% above that long-term average and sits at roughly the 97th percentile of its entire historical range. The trailing 12-month P/E ratio is 24.0. By these measures, stocks are expensive compared to most of history.
Does that mean you should avoid buying? Not necessarily. Valuations have stayed elevated for extended stretches before, and high valuations don’t predict short-term crashes. What they do suggest is that future long-term returns from these levels are likely to be lower than the historical average. If you’re investing for 20 or 30 years, that matters for setting expectations, but it doesn’t mean you should wait indefinitely for prices to drop.
Corrections Are Normal and Frequent
If you’re hesitating because you’re afraid of buying right before a drop, it helps to know how common drops actually are. Since World War II, the stock market has experienced a correction (a decline of 10% or more) roughly every 2.2 years on average. Bear markets, defined as drops of 20% or more, show up about every 5.6 years.
Here’s the part that matters for buyers: in the 12 months following corrections of 10% or more, U.S. stocks have delivered average gains of 31%. Bull markets have averaged 76 months in duration, while bear markets have averaged just 15 months. The math is lopsided in favor of buyers who can ride out the downturns. Stocks spend far more time going up than going down, and the recoveries tend to be swift and powerful.
This doesn’t mean you should try to wait for the next correction to invest. Corrections are only obvious in hindsight. A 7% drop might recover the next week, or it might turn into a 25% decline. You won’t know which one it is until it’s over.
Lump Sum vs. Dollar-Cost Averaging
If you have a chunk of money to invest, you face a practical choice: put it all in at once, or spread it out over weeks or months? Investing gradually is called dollar-cost averaging. You buy a fixed dollar amount on a regular schedule regardless of price, which means you automatically buy more shares when prices are low and fewer when prices are high.
Vanguard’s research on this question found that lump-sum investing, putting the money in all at once, produces higher returns the majority of the time. The reason is straightforward: markets rise more often than they fall, so money that’s invested immediately has more time to benefit from compounding. Spreading purchases over several months means part of your money sits in cash earning less while it waits for its turn.
That said, dollar-cost averaging has a real psychological benefit. If you invest a large sum and the market drops 15% the following month, the emotional pain can push you toward panic selling. Spreading your purchases over three to six months softens that blow. If the slight reduction in expected returns helps you stay invested through volatility, that trade-off is worth it. The worst outcome isn’t buying at a slightly higher average price. It’s panicking and selling at a loss.
The Factors That Actually Matter
Rather than asking whether the market is at the right price, focus on questions you can actually answer:
- Time horizon. Money you’ll need within one to three years belongs in savings accounts or short-term bonds, not stocks. Money you won’t touch for five years or more has historically recovered from every major downturn in U.S. market history.
- Consistency. Investing a set amount from every paycheck, through a 401(k) or automatic brokerage transfer, removes the timing question entirely. You buy in all conditions, which means you’ll catch the lows along with the highs.
- Diversification. Buying a broad index fund rather than individual stocks means you don’t need to be right about which company will outperform. You own a slice of the entire market.
- Risk tolerance. If a 30% portfolio drop would keep you up at night, you may want a mix that includes bonds alongside stocks. A portfolio you can hold through bad years beats an aggressive one you abandon at the worst moment.
When You Should Wait
There are a few situations where holding off genuinely makes sense. If you’re about to make a major purchase like a home down payment within the next year or two, keep that money out of stocks. Short-term market swings could shrink your down payment right when you need it. The same applies to money earmarked for tuition, a car, or any expense with a firm deadline.
If you’re still carrying high-interest debt, every dollar directed toward that balance gives you a risk-free return equal to the interest rate. A credit card at 22% APR is a guaranteed 22% drag on your finances. No stock portfolio reliably returns 22% per year.
Outside of those situations, waiting for a “better” entry point is a bet that you can predict the market’s short-term direction. Decades of evidence suggest almost nobody can do that consistently. The cost of being wrong, sitting in cash while stocks climb, compounds just as surely as the stocks themselves.