I have been investing in stocks since 2012. Though it’s been about 8 years now, I never really saw a major market crash. According to Investopedia, we’ve been having the longest bull market since March 2009. Below are the historical S&P 500 annual returns since the crash in 2008. There were minor corrections in 2015 and 2018 but the market quickly recovered the following years.
Source: macrotrends.net
Historical S&P 500 returns by years
| Date | Returns (%) |
|---|---|
| 12,31,2008 | -38.49 |
| 12,31,2009 | 23.45 |
| 12,31,2010 | 12.78 |
| 12,30,2011 | 0 |
| 12,31,2012 | 13.41 |
| 12,31,2013 | 29.6 |
| 12,31,2014 | 11.39 |
| 12,31,2015 | -0.73 |
| 12,30,2016 | 9.54 |
| 12,29,2017 | 19.42 |
| 12,31,2018 | -6.24 |
| 12,31,2019 | 28.88 |
| 8,18,2020 | 4.92 |
In Feb 2020, the S&P 500 was hitting new highs almost every day. After Feb 19th 2020, the market took a deep dive to -34% until it hit the bottom on Mar. 23rd. It was mainly in response to the COVID-19 pandemic and Oil price war between Russia and OPEC. It was terrifying to see the market drop like 10% a day and recover 5-6% the next day. It was my first time seeing market taking such a wild roller-coaster ride down to the bottom.
I knew from my past experience that trying to time the market never really works in my favor. Over the years, I have developed a habit of investing on a monthly basis and trust in dollar-cost averaging. Watching the extremely volatile market swings, I was waiting to see the bottom. As Warren Buffet said, I was ready to be greedy when everyone was fearful. I had about 6 months of living expenses in checking account. I decided to use those cash reserves and go aggressive since I felt this might be once in a decade kind of opportunity.
Aside from my regular transfer at the end of each month, I started putting lump sum investment starting in March. Below is the table of dates I had transferred funds into my brokerage account.
| Trade Date | S&P 500 | Amount |
|---|---|---|
| 2,28,2020 | 2954.22 | $2,500.00 |
| 3,03,2020 | 3003.37 | $7,500.00 |
| 3,10,2020 | 2882.23 | $2,500.00 |
| 3,26,2020 | 2630.07 | $1,500.00 |
| 3,31,2020 | 2584.59 | $2,500.00 |
| 4,08,2020 | 2749.98 | $1,000.00 |
| 4,20,2020 | 2823.16 | $2,000.00 |
| 4,30,2020 | 2912.43 | $2,500.00 |
| 6,11,2020 | 3002.10 | $1,000.00 |
| 6,23,2020 | 3131.29 | $3,500.00 |
| 7,23,2020 | 3235.66 | $3,500.00 |
Below is the graph of the S&P 500. Blue dots represent the dates when I made lump sum investments. My timing wasn’t perfect since I missed the very bottom on Mar. 23rd but no one knew it was the bottom at the time.
Conclusion
This was a great learning experience. I wish I didn’t put big lump sum money into the market too early but, I am happy with the result overall. I didn’t sell any of my assets out of fear. Instead, I made a series of purchases when everything was on sale. After hitting the bottom on Mar. 23rd, the market made a sharp “V-shape” recovery and now, we are again hitting all-time highs as of Aug 18th. A lot of people are saying the market is inflated and there will be another crash. Nobody knows the future. If another crash happens, I will just repeat what I did and be richer. A few more of this will make me achieve financial independence sooner.
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