14 Years Later

Every year that we see significant gains in equities, pundits and investors alike start to worry and wonder more and more about when the next selloff or ‘correction’ is coming. When we are asked this question, our answer has been and always will be some form of the following: “I don’t know, and if you have a long-term investment time horizon, it probably doesn’t matter.”

From time to time we get pushback on this response, and that’s completely understandable. It’s hard to sit through lengthy periods of time when one’s equity positions consistently lose value. But as long as the democratization of opportunity exists and hard work continues to be incentivized, we believe that our economy will keep growing and innovation will make our world better. If an investor believes that, then he or she should welcome these selloffs as opportunities to put more money to work at lower prices.

“I Can’t Live Through Another 2008-2009, I’ll Never Be Able to Recover.”

We hear that every so often, and wanted to share a powerful piece of compelling evidence we recently came across that further reaffirms our belief that it’s time in the market, not timing the market, that will dictate an investor’s long-term performance.

The single worst day to invest since the end of the second world war would have been October 9, 2007.* The S&P 500 closed that day at 1,565 and proceeded to fall 57% over the next 17 months, until it finally bottomed out on March 9th, 2009, at 676.**

What if you had never invested in public equities before, and put your entire life savings in the S&P 500 index on that October day, and did nothing since? In roughly 14 years, you would have invested through the worst economic environment since the Great Depression, a Global Pandemic, selloffs of 57%, 20% (2011), 20% (2018), 34% (2020), and many smaller selloffs in-between.***

Yet amazingly, through all of that, you would wake up today with the S&P 500 index at 4,395 and have made approximately 10% on an annualized basis, equal to this index’s long-term average.  

Good behavior and patience continue to reward the long-term equity investor. As Peter Lynch famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

As always, please let us know if there anything we can do for you.

*Nick Murray, 9/2021, **Yahoo Finance, ***JP Morgan Guide to the Markets