By ASH IDRISY
As irony would have it, the first time I thought about the stock market was a few months after the whole thing almost collapsed. I was 16, living in New York City, and the news was all about how Wall Street nearly cratered the world economy, the trillions of dollars U.S. taxpayers would be paying to bail out the banks, credit default swaps, over-leveraged trades. I didn’t understand much of this, but I did think “if stocks are going down and the system is being recalibrated, maybe I should buy these things on the cheap”. I didn’t do much beyond just thinking about it, as I had no idea how to buy and sell stocks.
Years later in grad school I started thinking about investing again, so I opened a brokerage account and poured in everything from my savings account. This was a mistake. One of the golden rules of investing is that you should only put money into the market you don’t expect to withdraw anytime soon. As folks like to say, “it’s time IN the market, not timing the market”. Therefore, you should set aside an emergency fund that can get you through at least six months, then start investing. But I was impatient. A year in, I ran into a personal calamity and had to pull all the money out. Don’t make this mistake like I did. If you want to invest, make sure its money you don’t need anytime soon.
I didn’t get back into the market until 2017, but let’s fast forward to the past few years. The market, as measured by the S&P 500, returned 24% in 2023, 23% in 2024, and 17% in 2025. If you bought $1,000 of the Vanguard S&P 500 index fund, which is like buying a little bit of the 500 companies in the S&P, by the end of 2025 you’d have about $1,800. Just for buying and holding. Most academic researchers and even the Oracle of Omaha agree that this style of “passive investing” is what leads to long-term returns for most people.
There’s no reason to assume that the market will continue these double-digit returns. In fact, some on Wall St are saying that because the market has been so hot these past few years, we should only expect returns around 5% in 2026. The nearly 100-year historical average return of the S&P 500 is around 7%, so the 5% hypothetical return in 2026 would at least mirror that historical average more than the returns of the past three years. A 5% return is still better than anything you can get with a CD or savings account. This is the so-called “risk premium” of investing, you take on additional risk and so you are promised a greater return.
Beyond reversion to the mean, another headwind that might affect the market next year is the uncertainty that remains about the tariffs. Plus, there are also geopolitical risks to consider: Ukraine and Russia, Israel and Palestine, and tensions between the U.S. and Venezuela. Another major headwind that could damage the market in 2026 is that capital expenditures in AI might not lead to increased profit margins, and the AI bubble goes pop. Bubble, bubble, toil and trouble?
It’s important to think about some of the tailwinds that might help the market this year. The One Big Beautiful bill does have tax cuts for corporations and high earners. This might lead to corporate buybacks or higher earners simply having more to invest, both of which would drive stock prices higher. President Trump will get to pick a new chair of the Federal Reserve who will probably be more dovish and try to reduce interest rates. In theory that should move markets higher.
Of course nothing is guaranteed, and part of the excitement that markets generate is due to this inherent uncertainty. Markets will rise, markets will fall, and pundits will always have a reason for both. What rarely changes is this: if you invest money, you can truly afford to leave alone, diversify broadly, and give time a chance to work, history suggests you’ll be rewarded. You don’t need perfect timing. You just need time. Investing, like planting a tree, rewards patience more than brilliance. The best time to plant one may have been years ago, but the second-best time is today.
