Did You Miss The Stock Market Recovery?
Over the past several weeks, I’ve heard stories about people who sold all of their investments and went to 100% cash right at the bottom of this market correction (around the end of March 2020). Since then, we have seen substantial recovery; the stock market is almost back to where it was before this all happened. Whether or not that recovery remains, or we see another dip, is yet to be seen. Regardless, many people who either sold back in March or held off on investing cash at that time, now feel like they missed their chance at recovery. While there is an element of truth to that, it’s important to take a long-term perspective here.
The Stock Market Crash of 2008
Looking back at the stock market crash of 2008-09, we heard similar stories of people who sold their investments at the bottom, waited to get back in for 6-12 months, and therefore “missed out” on huge portion of the recovery. Between March 2009 and June 2009, the S&P 500 saw nearly a 38% increase in just 4 months. The following year, between June 2009 and June 2010, the S&P 500 saw an additional 20% increase. So if someone were still sitting on cash in June 2010 and remained in cash because they felt like they “missed” the recovery, they would have missed out on almost 172% in investment gains from June 2010 to June 2020! So while it is true that they may have missed those early days of recovery, the market was ultimately still at a low point compared to where we are at today. Looking back at June 2010 now, that seemed like a great time to invest, even though the market was nearly “recovered”.
The Best Time to Invest in Your Future is Today
All that is to say, the best time to invest in your future is right now. While it may feel like you missed out on the rapid recovery of 2020, this could very well still be a low point when considering where it could be 10-20 years from now (similar to 10 years ago in 2010). The market rewards those who invest consistently and those who wait patiently. While it’s tempting try to time the market by strategically making buy/sell decisions based on these large ups and downs, that strategy ultimately leads to fear, anxiety, and losses. Hopefully you have a portfolio that reflects your unique risk tolerance, which will help you manage these ups and downs much easier.
Make your investment decisions based on evidence, not emotion. Stay the course, and you will be rewarded for it.