As the market enters its fourth year of the current bull market, investors may be wondering where to invest, or even if they should start to invest at all. There has been a lot of chatter about the marketing being overvalued and an artificial intelligence (AI) bubble.
However, I would tune out that noise, as there is rarely a perfect time to invest. Instead, I highly believe that the average investor should employ what is called a dollar cost averaging strategy. This is simply investing a set amount of money regularly, like once a month, regardless of how the market is performing. This takes emotion and market timing out of the equation, and ultimately helps you build long-term wealth.
For example, if you start with $1,000 and continue to invest $1,000 each month into an exchange-traded fund (ETF) over ten years, you'd have around $264,000 with a 15% return. However, the sooner you start and the longer you hold your investment, the better off you'll be. For example, hold an ETF over 30 years with the same return, and you'd have $5.6 million, with 94% of that coming from gains. That is the power of compounding.
Too often, people get scared of talk of market valuations and wait for a pullback that never comes. However, bull markets can last a long time. In fact, according to data compiled by the Carson Group, over the past 50 years, when the market has reached the third year of a bull market, it has reached a fourth year. Meanwhile, J.P. Morgan found that the S&P 500 hits a new high about 7% of all trading days, and about a third of the time, it never sees the index trade lower.
Image source: Getty Images
That's a great reason to start investing and not wait for a pullback. The other reason is that even if you were to correctly predict a market pullback, you'd also have to pick the correct time to get into the market. J.P. Morgan found that the market's best days often come after some of its worst days, but if you missed the market's 10 best days over the past 20 years, your returns would be cut nearly in half.
As for the notion that we are in an AI bubble, I also don't find that convincing. AI appears to still be in its early innings, as many of the benefits of AI are still just emerging. Meanwhile, the companies leading the charge are some of the biggest tech companies on the planet, with strong balance sheets that generate robust free cash flow. They see how big the future opportunity can be, and they have the resources to chase it.
Many of these stocks are also reasonably priced. For example, Nvidia (NVDA +3.93%) has a forward price-to-earnings ratio (P/E) of only around 24 times 2026 analyst estimates, while Alphabet (GOOGL +1.55%) (GOOG +1.55%) trades at a 27 times multiple and Amazon (AMZN +0.26%) at 29 times. Those are not high valuations.
That's also why I think the best ETF to start investing in today is the Invesco QQQ Trust (QQQ +1.30%).
NASDAQ: QQQ
Key Data Points
A top tech-heavy ETF
The Invesco QQQ Trust tracks the Nasdaq 100 Index, which is home to most of the U.S.'s top tech and growth stocks. Its portfolio is very heavily weighted to tech stocks, with about 64% of its portfolio in the sector. However, if you include companies like cloud computing giant Amazon and Tesla, which is chasing robotaxis and robots, its tech weighting rises to nearly three-quarters of its portfolio.
When you invest in the ETF, you're getting a portfolio loaded with top AI stocks. Its top nine holdings are all AI plays, and make up more than half its portfolio. Meanwhile, its historical performance has been top-notch. It's generated an average annual return of 19.3% over the past decade and has topped the S&P 500 on a rolling 12-month basis nearly 88% of the time.
If AI stocks continue to lead the way for the next decade, this is the ETF you want to invest in.
