Built to Last: Time IN vs Time ING
Do you remember how your portfolio was invested on October 1, 2007? The S&P 500 Index closed the day at 1557. That number probably means little today, but it reflected a 5-year climb of 88% from the March 2003 bottom of the tech bubble demise.
Sometimes we think we want to forget that October, all of 2008, and the first two months of 2009. By March 2009, at the very bottom, people rushed to liquidate anything and everything to raise cash. But the smart money was buying, and indeed, that bottom was the beginning of the recovery.
Instead of forgetting those painful times, I urge you to remember because they were great opportunities. Those who stood firm with their portfolios or, even better, who invested more all along the downturns have been rewarded with years of growth. Each recovery was a rocky road with multiple corrections along the way, but the trajectories have been up.
Last year, February 2020, I’m sure few of us thought how the S&P 500 Index reaching 3380 was memorable. Remember that number back in October 2007-that 1557? If your entire portfolio was in the S&P 500 Index AND if you stayed invested from the October 2007 TOP to the Great Recession bottom (-50%) and back to the February PRE-PANDEMIC top last year, your portfolio would have doubled.
The most recent stock market downturn last March was yet another test of long-term investing resolve. Unlike the tech bust and the Great Recession, the Pandemic Plunge ended as suddenly as it began. It was over in little more than a month. Very few who sold when it was going down could get back in at a lower price than they sold. Those who saw the fire sale as a buying opportunity have been well rewarded. On index price charts, the Pandemic Plunge looks like a one-day blip, a footnote to the long bull market.
The S&P 500 Index now has surpassed 4000. Remember that number back at the top on October 1, 2007? Who knows when we will have another great stock sale? One thing is for sure. The smart money buys more shares of great companies when these events come along. In ALL these market upheavals, we are shown over and over the importance of time in the market, not timing the market.
Successful investing requires having a plan based on your financial strength, your investable assets, your goals and your risk tolerance for those invested assets; having a strategy to align with the plan-strategic rebalancing and profit-taking, investing more if you can during price panics; having a savings safety net so the nest egg can grow for the long-term goals; and, having an analytics-driven selection and allocation of investments.
What do you think “the number” will be in 10 years? 20 years? 30 years? Do you really care what it will be next year if your portfolio is built to last your lifetime?