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Passive income hunters are having something of a purple patch, aren’t they? Markets are hitting record highs yet again. Both the FTSE 100 and S&P 500 are at or near the highest they’ve ever been. Not to mention the added bonus of dividends to throw into the mix. And with investing for the average person easier than ever, it’s looking like something of a golden age for retail investors. Or is it?
One possible fly in the ointment is that, with markets surging for years, it might be too late for newcomers on the scene. Have the best gains in the markets been and gone? Is it harder than ever to build wealth in a Stocks and Shares ISA? Is August 2026 a terrible time to get started building a passive income? Let me explain why my answer to each of those three questions is big fat NO!
Buy low
What’s the most repeated stock market phrase or saying? I reckon ‘buy low, sell high’ must come pretty close. The idea that you buy stocks when they’re cheap and sell after they’ve risen in value makes perfect sense. So it’s natural to see markets near all-time highs and think the good times are in the rear-view mirror and it’s all downhill from here.
The reality is the opposite. All-time highs are simply the sign that companies in a given market are growing. The S&P 500, on average over the last 80 years, hits a new all-time high 17–18 times a year. Investing on such days of all-time highs has been shown to be virtually identical to investing on random trading days.
And the converse is a disaster. For example, the 30 years of stagnation Japan experienced didn’t have many all-time highs – much to the chagrin of Nikkei enthusiasts.
One option?
A FTSE 100 stock that has set a lot of record highs in recent years is BAE Systems (LSE: BA.). In 2022, the defence manufacturer rocketed past its previous high of 650p – it would have been easy to look at that as a bad time to buy.
What happened next? The share price kept growing on the back of increased defence spending in the wake of conflicts like Ukraine. The shares now change hands for 2,230p, and that’s not including dividends paid over the period.
The shares are close to an all-time high now too. But I still think they could be worth considering.
While the defence sector might deter some for ethical reasons, and a price-to-earnings ratio of 31 can be off-putting, this is a company that’s world class in its field. It produces some of the best kit going and the bevvy of contracts it has received in recent months is testament to that. With governmental defence spending only looking to increase in the years ahead, I think this could be a company that sets many new all-time highs in the future too.
Should you invest £5,000 in BAE Systems right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?
John Fieldsend owns shares in BAE Systems.
This story originally appeared on Motley Fool
