If You Would Have Invested 1 Million Dollars 10 Years Ago
Updated: May 5, 2020
Have you ever thought about what would have happened if you would have invested your money at the very bottom of the 2008 financial crisis? Well, March 1st was a big day because it represented the 10-year anniversary since the low point of the 2008 stock market crash.
Returns Over The Past Ten Years
If you would have invested just simply $100 into an index that tracks the market, according to Morningstar, you would have ended up with $499 on March 1, 2019. This goes the same if you would have invested $10,000. Your portfolio would be worth about $50,000 today. Let's go even further and say that you invested $1,000,000 into this index in 2009. You would now have a portfolio of almost 5 million dollars.
Why The Hell Didn’t I Invest When Stocks Were So Cheap?
Well, this is what probably happened. The stock market crashed, striking fear in not only you but the entire market. Because of this, you probably sold your investment due to the fear that your investment would crumble, even more, ruining your retirement. You didn't trust the market because you thought it was “too risky,” and you probably started investing a few years after the market had already recovered. I'm not saying that this was not a scary time, but we've had many crashes like it before. So, if you want to see this type of gain in the future when the stock market crashes again, follow these steps.
Steps To Profit From These Crashes
1. Do Not Sell Your Investment If The Market Has Already Crashed
Since it is extremely hard to guess the exact date when the market is going to crash, it is also very hard to know when to sell your investment. I recommend keeping your investment, but as the market begins to look overpriced, start to sell a little bit of your investment and keep it in cash. The reason for this is so you can capitalize when the market does crash.
2. Wait As The Market Crashes And Drops In Value Even More
Sooner or later, the market will crash, and when it does, start to slowly buy into the market. Do not buy right away when the market crashes but start to slowly buy into it as the market declines. By doing this, you limit your risk if the market keeps lowering, which will increase your gains in the future.
3. Keep A Diversified Portfolio
In the 2008 crash, there were many public companies that went bankrupt. If you were invested 100% into one of these companies, you would have lost your entire investment, which is what people were afraid of. However, if you invest in a diversified market index, you will have less risk but will still see these large profits when the market recovers.
4. Don’t Listen To Most People
When the market crashes, most people are going to be screaming at you to sell because they lost money. In all reality, they would not have lost money if they wouldn’t have sold, but they ended up selling their investment out of fear. A lot of people will think you are crazy when you are investing in the market at a time when most people are selling, but this is the most rewarding strategy.
5. Sell Off Your Investment As The Market Recovers And Becomes Overpriced Again.
This cycle always occurs. After a few years of the market crashing, it will start to regain and recover. At this point, people will see the gains and will start to trust in the market once again. This is when you will start to see your investment pay off. Hold your investment as this occurs until the market becomes overpriced again. At this point, you will start to slowly sell off your portfolio and repeat the process again.
As you look at the market and what it is done over the past 10 years, you should view it as an example of the type of gains we can make in the future from market crashes. Additionally, it should make you feel remorse for those who sold at the very bottom of the market. You can now see that one does not lose its investment unless he sells his position. Also, his investment will recover over time if he is invested in a well-diversified portfolio. With this said, the next time you think about a market crash, think about the gains that could be achieved rather than fearing the gains that could be lost if you sell your investment.
Disclaimer: I am not a financial advisor, so please review all of this advice with your CFP or financial advisor first.