March 9th is the 15-year anniversary of the market low during the Global Financial Crisis – one of the most uncertain and challenging times that investors ever experienced. 

There are three critical lessons from that time that we can use to help us to make future investment decisions.  

First: These kinds of market events are impossible to perfectly predict. 

I am not aware of anyone who was able to sell right before the market began to decline and then began to buy when the market had reached its low point. In fact, let’s look at the WSJ and Time Magazine from that low point in the market:

The WSJ Headline on March 9, 2009 was “How low can stocks go?” 

In hindsight the headline should have been: This may be the best buying opportunity we ever see! 

Second: Staying diversified felt less painful and allowed you to recover faster. 

The S&P 500 was down 55% at the low point while a 70% stock / 30% bond portfolio, made up of 70% in the S&P 500 and 30% in the aggregate bond index was only down 40%. 

The stock and bond portfolio also recovered much faster, getting back to break even almost 15 months sooner than an all stock portfolio. It took the diversified portfolio a little more than 3 years to recover while the S&P 500 all stock portfolio took almost 4.5 years. 

Finally, as usual, if you were able to wait out the crisis, you wound up with wonderful results. 

A $1M investment in the S&P 500 on Oct 9, 2007, the day before the crisis started and the absolute worst day to invest during that time is now worth $4.5Million- a return of about 9.5% per year. 

Anyone brave enough to make a $1 Million investment instead on the low of March 9th has seen their investment grow to more than $10 Million! A return of almost 16% per year. 

Peter Lynch, one of the most successful and well known investors of all time famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

A market crisis like this one will happen again. We don’t know when, or what will cause it, or what the headlines will be but we do know that we will use these lessons to help our clients successfully make it through – just like we did 15 years ago. 

Thank you and we look forward to talking with you again soon.

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