What if you invested only during all-time highs?
Let’s take a look.
Quick story
Let’s go back to the early 2000s. Joe just graduated college with an accounting degree in 1999. Starting salary? $35,000 per year as a Staff Accountant I. Not too bad.
Luckily, Joe is a diligent saver. Living frugally allowed him to save $5,000.
He started learning about Warren Buffett and decided to invest it all in the S&P 500 Index Fund ETF, SPY, on March 24, 2000.
He didn’t know this at the time, but the S&P 500 Index reached an all-time high on that exact day he invested.
What happened next?
His investment had a -13.88% return in Year 1. It then had a -11.75% in Year 2, and -21.59% in Year 3.
Joe invested literally at the worst time, right at the top.
In 2002, his portfolio hit an all-time low of $2,979.69, more than a 40% decline from his original investment.
After seeing his portfolio crash in 2001 and 2002, he was disappointed, but he always remembered this quote from Warren Buffett: “The stock market is a device for transferring money from the impatient to the patient.”
So, he continued holding his S&P 500 portfolio, but he didn’t have the mental strength to invest more.
Luckily, the job market started recovering, he was making more money than before, and was able to save up an additional $20,000.
He was still recovering from his traumatic market experience, but seeing his initial $5,000 portfolio start to recover in 2006 and 2007, he made the decision to invest again.
On October 11, 2007, Joe invested $20,000 of his hard-earned money into the market again. Money he was saving for almost 7 years.
As previously, the S&P 500 index did not regain this level until April 10, 2013, almost 6 years later…
Joe did it again.
In 2008 alone, the $20,000 investment alone dropped to $11,948.
Luckily, Joe had the strength to just hold onto his portfolio once again. He was questioning his investment choices, but he carried on.
He continued living frugally, like he did his entire life. He saved his money, even though he knew that he probably should invest, but just couldn’t find the strength.
Joe saved $3,000-5,000 per year, 5-10% of his after-tax income.
On February 20, 2020, Joe decided to put his savings into investments again, about 13 years after his previous investment. This time, a much more significant amount, $60,000.
We probably all know what happened after – the COVID crash of 2020.
Just in 1 month, the $60,000 became $40,000, a 33% decrease.
Luckily, it all recovered very quickly, and he ended the year with a 13.07% positive return on investment.
So, how did he do?
Here’s a summary of his investments:
Total amount invested: $85,000
Total portfolio value as of 3/15/2025: $237,400
Joe’s nickname: Future Predictor
It’s important to add additional context:
- Joe saved well. He had a stable job. He didn’t have to sell his investments to save his house during market downturns to survive.
- Joe started investing in his 20s. Joe is now 50 years old. He had a lot of time to wait until his investments recovered. What if Joe had to retire on March 24, 2000?
- Joe invested 100% of his money in equities. That is an aggressive portfolio that may or may not be good for your specific scenario. This is generally not suitable for someone who is in his late 60s hoping to retire shortly.
But the main point is – invest for the long term. Hold your positions. Be patient. And remember, history doesn’t repeat itself, but it often rhymes.