Is the Vanguard S&P 500 ETF Still Worth Buying When Markets Are Down?

It probably goes without saying that the S&P 500 (^GSPC 0.41%) and the ETFs that track it are some of the best options for retail investors. Their broad diversification and ultra-low fees make them ideal for almost any long-term investing goals.

But people often dial back their risk tolerance when stocks start falling. It's not unusual for people to sell their S&P 500 ETFs altogether if stock prices fall far enough. This is one of the most damaging things investors can do to their own portfolio performance.

While it's tempting to exit in situations like this, let's look at some actual history to see what happened during past bear markets and why it makes sense to keep buying ETFs, such as the Vanguard S&P 500 (VOO 0.36%), even when times get tough.

It might be easiest to start with the argument for long-term dollar-cost averaging. It says that if you invest regularly, some purchases will be made at higher prices and some will be made at lower prices. Combine these transactions all together, and you'll end up with a lower average purchase price over time.

But the more compelling argument for many investors might be a simple one. Historically, the S&P 500 has a 100% success rate at recovering from a bear market and setting new all-time highs.

That doesn't mean the road will be painless. During some of the most destructive bear markets in history, it took stocks years to make a full recovery. At some point, that will likely happen again.

But history has shown that stock prices do eventually recover. It's the concept of buy and hold that allows investors the opportunity to capture the rebound instead of getting out when prices are already down.