Warren and I have this argument constantly. He thinks I'm reckless for buying index funds when valuations are high. I think he's overly cautious in a way that costs people real money over time. And right now, with the S&P 500's price-to-earnings ratio sitting well above its 30-year average, the argument feels pretty real.

The S&P 500 has been on a tear lately. Great if you were already invested. Terrifying if you've been sitting on cash waiting for a "better entry point." The P/E ratio, which is basically what you're paying per dollar of company earnings, is noticeably more expensive than its historical norm. So should you wait?

No. And I say that as someone who tracks her own numbers obsessively and hates overpaying for anything.

Yahoo Finance recently looked at this exact question, and the historical data paints a pretty clear picture. Trying to time the market based on valuations tends to backfire. Not sometimes. Consistently. Because markets can stay expensive longer than your patience lasts, and the big gains often happen during the stretches when everything looks overpriced.

I learned this the hard way. In 2023, I held back $3,000 from my monthly investing because I was convinced a correction was coming. That correction didn't show up for another 14 months, and by then the index had climbed roughly 18 percent. I lost more waiting than I would have lost buying at the "wrong" time. I ran the numbers in a spreadsheet at 2 AM, as one does, and it made me want to throw my phone across the room.

What I actually do now, and what I'd suggest if you're staring at the S&P 500 wondering if it's too late:

Dollar-cost average. Set an amount, buy on a schedule, don't look at the P/E ratio before each purchase. I buy $600 of VOO every single month whether the market is up, down, or sideways. Some months I'm buying expensive. Some months I'm getting a relative deal. Over decades it averages out, and I never have to guess what's coming next.

If you have a lump sum, the data says invest it all at once. But if that makes you physically nauseous, splitting it across three or four monthly buys is fine. The important thing is getting the money in.

And no, I'm not telling you to ignore valuations entirely. If the P/E ratio makes you nervous, that's a signal to check your overall allocation, not a signal to freeze. Maybe you don't go 100 percent into equities right now. Maybe you rebalance toward bonds or keep a slightly larger cash buffer. That's a reasonable response. Sitting completely on the sidelines is not.

For full transparency: my VOO position is up about 22 percent over the past 18 months. My QQQ is up more, my individual stock picks are a mixed bag, and my crypto bag is, well, it exists. Warren would say my crypto "existing" is the problem. I'll let you know who's right about that in five years.