2025 has been an amazing year for investors who have long held shares of Bank of Montreal (TSX: BMO) stock. As of this writing, BMO stock trades at $174.72 per share, up by almost 60% from its 52-week low and by 25% year-to-date. The broader Canadian banking sector has been enjoying a strong run during the same time, but BMO stock has outpaced the industry’s returns of around 23% year-to-date.
After outperforming its closest peers, it begs to ask the question: Is it a good idea to invest in BMO stock right now, or would it be better to wait on the sidelines to let prices come back down before buying more shares?
Today, we will discuss the darling Canadian banking stock to determine what might be the better way to go about it.
Source: Getty Images
A strong year for the bank
The chart above shows exactly how well BMO stock has performed so far this year. It is unmistakable that it has been on a good run in these past few months, but its track record for the last 10 years paints an even prettier picture. The compounded annual growth rate (CAGR) for the stock between 2014 and 2024 stands at around 12%, which is terrific returns for a massive financial institution.
That said, periods of significant gains also tend to worry investors. It is entirely possible for the best stocks on the market to reach a point where growth stagnates or even pulls back. This is something newer investors must be careful about. Even if the stock has been soaring this past year, it does not mean the future returns will match the same pace. Investing in its shares at new all-time highs means you run the risk of buying at the peak of its performance cycle and facing losses at pullbacks that might catch you by surprise.
Timing is everything
Timing the stock market to buy low and sell high would be ideal if there were a reliable way to predict upticks and downturns. If it were easy, most investors would be making it big with well-timed trades. However, that does not mean you cannot consider timing at all.
Consider BMO stock and how it performed amid the pandemic. Between the market bottom in March 2020 and the peak in March 2022, BMO stock rallied by over 140%. However, between March 2022 and September 2024, it posted a 5% negative CAGR. For those wondering what it means, there is a simple way to look at it.
When investing in high-quality stocks, it is better to do so during periods of underperformance. Investing when there is plenty of optimism means you risk buying when prices are high. It is very easy to be riled up and swept away by bull runs, only to find disappointment when the eventual pullback comes along.
Foolish takeaway
At current levels, BMO stock is hovering around new all-time highs. Slashed interest rates (with further rate cuts on the way) might make it seem like an excellent investment. However, there is a risk of instability in global markets due to several geopolitical and macroeconomic factors. If you are interested in investing in BMO stock, I would advise waiting on the sidelines for prices to fall.
