Good morning & happy Monday!
“The true investor welcomes volatility … a wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses.”
Warren Buffet
So, something pretty amazing happened 2 weeks ago today (Monday, August 16, 2021). The S&P 500 closed at 4,479.66.
What’s so significant about that?
On March 23, 2020 the S&P 500 closed at 2,237.40 … so the value of 4,479.66 represents the market doubling from the market bottom.
The S&P 500 traded at double its value from the market bottom on March 23, 2020. Let that sink in for a minute. Absolutely amazing!
It took 354 trading days for this to be accomplished, the fastest time for the market to double from its bottom in history (using post WW2 modern era investment data). It usually takes over 1,000 trading days for this milestone to be achieved (the 2008 “Great Recession” took 540 trading days to double from its bottom). So, the coronavirus downturn was the fastest drop, the fastest recovery back to previous all-time high, and now the fastest doubling from the bottom. In hindsight I think we all see the amazing buying opportunity this coronavirus induced pullback provided … but that’s the thing about hindsight … it’s always 20/20 😉
Now, we can talk about all sorts of nerdy, analytical data about these stats (which personally gets me excited), but I think it would be far better use of time to point out a few practical observations / questions.
Has there been a single day from March 23, 2020 through today in which you have ever felt “the world is at peace, the opportunity is solid, I am completely comfortable in investing money in the stock market”? LOL, I don’ think so 😉 (For the record, I’ve never felt that way either.)
Since I have financial conversations every day, the far more common feedback I’ve heard recently is something along the lines of “I don’t think this is a good time to invest, the market has gone too high too fast, let’s wait for a pullback.”
My friends, sitting on the sidelines has NEVER been a good long-term investment strategy.
Let’s look at the big picture for a moment. From 1930 through 2020 (91 years) the S&P 500 has been positive 74.9% of the time. So, 3 out of every 4 years is positive. For those amongst us who are “waiting for a better time to get in” the stock market, you are playing a game where the odds are stacked against you. 3 out of 4 times you will be wrong if you are waiting to get into the market. The longer you wait, the bigger those odds are not in your favor.
So, when is a good time to invest? My response is always: now.
Let’s say I invested $100,000 into the S&P 500 on February 19, 2020 (the all-time high at the time)
By March 23, 2020 my $100,000 would be worth $66,075
On August 16, 2021 it would be worth $132,293 (just north of double the value on 3/23/2020)
And … all these figures ignore dividends which would have made the true total returns even higher.
Now, would I have preferred to invest money on March 23, 2020? Of course! My money would have doubled had I invested that day. But even if I invested at the all-time high, rode the market to the bottom and then rode it back up I would have been far better off that had I been on the sidelines the entire time.
My friends I totally understand all the emotions associated with market investing (I experience them all myself), but I believe the key to investing success is a plan, patience & discipline.
Thank you for trusting my team & I to be a part of your lives & the story you are writing.