Over the last 10 years, investors faced a massive market crash followed up by an impressive 9 year bull market with several small downturns sprinkled in along the way. For any individual who remained invested in the market over this time period, they were rewarded generously.
To get an idea of what investing in the S&P 500 over the last 10 years has looked like, I created the following chart to show what a $100 investment would have returned up to this point (July 2017).
This chart assumes you invest $100 during a particular month and any dividends you received were reinvested. Check it out:
From the chart we can see that a $100 investment made during any month over the last 10 years has increased in value.
The worst possible time to invest would have been in October 2007 at the peak of the market right before the crash. A $100 investment during October 2007 would now be worth $190. So despite picking the worst possible month to invest in, an investment during this month still would have nearly doubled over the last 10 years. Think about how incredible that is. An investment right before one of the most devastating economic catastrophes of all time still nearly doubled in value after 10 years.
On the flip side, the best possible time to invest would have been during March of 2009 at the absolute bottom of the market. Any investor who had the guts to throw money into the S&P 500 during this month would have seen their money nearly quadruple in value. A $100 investment in March 2009 would now be worth $372.
A Real Example
Consider someone who received a paycheck twice a month during this time period and decided to dollar-cost average their investments over time. They made up their mind to invest $100 each month no matter what the market looked like. Over this 10 year period they would have invested a total of $12,000 which would have turned into $22,505.
For someone who decided to invest $1,000 each month during this time period, their $120,000 in investments would have turned into $225,050.
The Secret to Successful Investing
There were only two actions investors needed to take over the last 10 years to make money in the market:
1. Remain in the market despite the ups and downs
2. Consistently invest in index funds over time
Although this seems simple and straightforward, it’s anything but easy. During a time like March 2009, anyone who thought it was a good idea to invest would have looked like a fool. But 10 years later their money would have nearly quadrupled in value. It’s likely that the only people who were investing at the bottom of the market were the ones who had a system in place to automatically invest their money for them, despite the market conditions.
If you have any specific questions about the chart feel free to shoot me an email at firstname.lastname@example.org or leave a comment below 🙂
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Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
His favorite investment platform is M1 Finance, a site that allows him to build a custom portfolio of stocks for free, has no trading or maintenance fees, and even allows him to set up automated target-allocated investments.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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