The market for initial public offerings (IPOs) is heating up. Inference chipmaker Cerebras Systems recently debuted to huge fanfare, while SpaceX looks set to become the largest IPO ever. Meanwhile, Anthropic and OpenAI could be around the corner.

While hot IPOs get investors excited, one analyst thinks this could be a sign of a market top. Zacks Chief Equity Strategist John Blank recently told CNBC that the IPO market was reminiscent of 1999 during the tech bubble, when companies were rushing to go public. The question then is, does it seem accurate, and if so, what should investors do?

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Now, the 1999 IPO market is much different from the IPO market of today, in my view. More than 450 companies went public that year in the U.S., largely in the tech sector. By comparison, over the past year, only about 100 companies have gone public, and less than 15 have been tech stocks.

Back in 1999, many companies were seeing absolutely bonkers first-day gains, like Akamai Technologies, which priced at $25 and closed at $156 its first day of trading. This time, results are more muted. Design software company Figma had the biggest opening day for companies valued at $1 billion or more, rising 250% when it debuted last July, only to lose 80% of its value from its IPO price. Circle Internet, which operates a stablecoin network, was the second-biggest gainer on its first day, up 168% when it debuted last June, but is now up roughly 25% from its IPO price. Neither company was exactly riding the AI boom.

Overall, we have not seen a huge surge in tech IPOs; instead, there have been a few very large companies looking to cash in and go public. To me, that is not the sign of a top. Meanwhile, the valuations of most AI stocks remain very reasonable, and the market continues to be led by huge profitable companies that generate a ton of operating cash flow.

The market is not without risks, and there is always the possibility of a pullback. However, it is rarely a good idea to try to predict one. It isn't uncommon for the market to hit new all-time highs, and you can miss out on a lot of gains waiting for a correction that never comes. And then, if you are right, you need to also invest while the market is going down, which isn't always easy.

That's why I recommend investors use an exchange-traded fund (ETF) that tracks the broader market, like the Vanguard S&P 500 ETF (NYSEMKT: VOO), as a core holding and to consistently dollar-cost average into it. This takes away emotions from the equation, and you'll invest the same amount on a consistent basis no matter if we're in a bull or bear market. This is a proven strategy that can help you build wealth over time.

Index ETFs are the best investment vehicle for this strategy, in my view, and are much better than individual stocks. The reason is that most stocks actually underperform, and many never recover after big sell-offs. According to a JP Morgan study, two-thirds of individual stocks in the Russell 3000 underperformed the index from 1980 to 2020, while 40% experienced a 70% stock loss from which they never fully recovered.

The S&P 500 index, however, continued to gain strongly during this stretch, driven by a handful of megawinners. The big reason the S&P 500 has outperformed 86% of all actively managed large-cap funds over the past decade is that, because it is weighted by market cap, it is designed to let its winners keep running.

With an instant portfolio of 500 of the largest U.S. companies, the Vanguard S&P 500 ETF has a great track record, with an average annual return of about 15.5% over the past decade (assuming you reinvest dividends). It may not be as exciting as investing in soaring AI stocks or hot IPOs, but dollar-cost averaging into this ETF over the long term is a smart move in any type of market.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Figma, JPMorgan Chase, and Vanguard S&P 500 ETF. The Motley Fool recommends Akamai Technologies. The Motley Fool has a disclosure policy.

Are Hot IPOs a Sign of a Market Top? One Analyst Thinks So. Here's What Investors Should Do. was originally published by The Motley Fool