Over the past 50 years, when a market hits year three of a bull market, it’s always hit year four.
Since 1950, stocks have always traded higher in the next 12 months when the S&P 500 has gained 35% or more in a six-month period.
Index ETFs are a great way to invest in this trend.
10 stocks we like better than Vanguard S&P 500 ETF ›
Despite all the chatter about the stock market being overheated, the bull market just surpassed its third anniversary. History, meanwhile, gives a clear picture of what will happen next.
According to data compiled by Carson Group, every bull market over the past 50 years that has made it to three years has continued until at least five years. There have been five bull markets in that span, with the shortest fizzling out after five years and the longest lasting more than 12 years.
Meanwhile, since 1950, bull markets have lasted an average of five and a half years, so this market still should have some legs. In addition, whenever the S&P 500 has rallied more than 35% in a six-month period since 1950, like it did earlier this year, the market has been up 12 months later. During these five periods, the average return a year later was 13.4%.
That said, for exchange-traded fund (ETF) investors, the best strategy remains dollar-cost averaging in both good markets and bad. This will take out trying to time the market, and is what will ultimately help you create long-term wealth.
Let’s look at three great ETFs to buy as we head into the fourth year of this current bull market.
The S&P 500 is the benchmark for the U.S. stock market, and very few actively managed funds outperform it in the long run. In fact, over the past decade, only about 14% of actively managed funds have been able to top the index. That is why investing in a fund that tracks the performance of the S&P 500 is a simple yet wise investment choice. With an expense ratio of just 0.03%, the Vanguard S&P 500 ETF (NYSEMKT: VOO) is a great, low-cost option.
The ETF has generated a solid 14.6% average annual return over the past decade, as of the end of November. It’s performed even better during this bull market run, up an average of 20.5% over the past three years.
While the S&P 500 has been on a strong run, it’s largely been growth stocks that have been leading the way higher. That’s why investing in the Vanguard Growth ETF (NYSEMKT: VUG) can be a smart move. The ETF essentially tracks the performance of the growth side of the S&P 500, removing the value stocks from the equation.
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