If I Could Tell Every Investor 1 Thing About Building Lasting Wealth in the Stock Market, It's This

Stock market investors have been able to participate in the country's best wealth-creation program. The S&P 500 (SNPINDEX: ^GSPC) always goes through ups and downs, but over time, it has been an incredible wealth-building machine. Over the past 30 years, for example, it has gained 1,890%.

That's why exchange-traded funds (ETF) that track the index have become such a popular investing vehicle. The Vanguard S&P 500 ETF (NYSEMKT: VOO) has become the largest ETF in the world, with $1.7 trillion in assets.

There are many methods for investing successfully, beating the market, and building wealth. But they all have one thing in common no matter which method you choose: staying in the market for the long term.

It's about time, not timing

The first thing to note is that investing in the market consistently yields excellent results. Studies have shown that trying to time the market isn't effective, and that the costs of staying out of the market outweigh any benefits of finding the perfect time to invest. Staying in the market, and even investing at the "wrong" time, beats waiting for the low, the dip, or the bargain. In other words, it's about time in the market, not timing.

One study found that, in the absence of the ability to time the market perfectly -- a statistical impossibility -- the investment approach with the best returns was to invest consistently at all times. Since you can never know in advance when the highs and lows are going to be, you need to stay in the market and keep investing even when it appears to be at a high.

Now is a great example. There are signs that the market is frothy, with the cyclically adjusted price-to-earnings (P/E) ratio, or CAPE ratio, at its second-highest level ever. At the same time, artificial intelligence (AI) companies continue to grow rapidly, and many are highly profitable. It would be a shame to pull your money out of the markets out of fear of a potential crash while it's still rising.

You need time to make it work

This model works if you have enough time to account for some periods of loss. The market doesn't always go up; it just goes up more often than not. The S&P 500's incredible growth over the past 30 years, for example, came with seven years of annual losses, including a three-year period when it lost 38% of its value and one single year when it lost 38%.

According to Crestmont Research, in every 20-year rolling period dating back to 1919, the S&P 500 yielded a positive result. If you stop trying to time the market and instead invest consistently and hold on for at least 20 years, if not longer, you're likely to build lasting wealth.

Jennifer Saibil has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.