Investing can sometimes be rough, but don’t give up now

There’s no way to sweeten things up. The last few months have been absolutely terrible for investors. the S&P500 Hint has plunged 18% so far this year. Multitudes of stocks fell even further from their peak. There is no end in sight for the selloff, given all the headwinds the global economy is currently facing.

Tough times like this can make even the most seasoned investors want to throw in the towel and liquidate their portfolios. However, I would like to encourage you to get through this difficult time. I want to share my investing story and some data to give you some hope that this too will pass.

Image source: Getty Images.

I learned to invest the hard way

I was only a few years into my journey as an investor when the Financial crisis upset the world economy and the stock market. Prior to this event, my experience with stocks was that they were going up. It caused my confidence to swell to overconfidence.

So I made some really reckless investing decisions as stocks started to tumble. I’m lucky that I didn’t completely destroy my wallet. I started buying stocks simply because their price had dropped a lot. I focused on the stock price and not the underlying business. One of the dumbest (and I mean really stupid little “f”) moves was to buy a call options on the investment bank Lehman Brothers, convinced that the government would bail them out. Suffice it to say; I lost a lot of money on this bet.

As my portfolio plunged deeper into the red, accelerated by my untimely transition from investor to trader, I got to the point in early 2009 where I had to take a break from investing. However, instead of liquidating what was left of my portfolio, I just stopped making changes. I took a month off from buying and selling stocks and reset my strategy.

I learned some important lessons during this difficult time:

  1. Forget the stock price; focus on business: I stopped buying stocks because they had low prices and focused on investing in companies that I thought could prosper in the long term.
  2. Credit is crucial: I started putting more emphasis on a company’s balance sheet, focusing on those with higher quality credit ratings, as it gave them more financial flexibility to survive tough times so that they can thrive in the eventual recovery.
  3. Cash is king: This lesson goes hand in hand with a strong balance sheet. Cash flow gives businesses the funds to grow when credit is not available.

As tempting as it was to throw in the towel on investing in 2009, I’m so glad I didn’t. This difficult time has made me a better investor, and the value of my portfolio has increased by leaps and bounds in the more than a decade since the financial crisis. While, like most investors, the value has fallen a lot since the peak lately, I sleep well at night knowing that for the most part I have a portfolio filled with several high quality companies with balance sheets and strong cash flow. who will weather this storm and thrive on the other side.

These figures encourage you not to give up

I want to pivot my story to share an eye-opening chart that I recently discovered that shows the power of perseverance as an investor. When stocks are in freefall, it can lead an investor to think about liquidating to avoid further damage. However, historically, some of the best market days have come during these times. Investors who give up in the market could see their returns suffer:


S&P 500 prices return

Return excluding top 10 days per decade































Since 1930



Data source: CNBC and Bank of America.

The middle column shows the total return investors have earned over the decades. Over the long term, investors who have kept their money in the market have earned a stunning return, even as they endured their share of bear markets. However, if an investor liquidated his portfolio and turned to silver, he ran the risk of missing out on some of his best days. They would earn far lower returns if they were on the sidelines for the best 10 days of each decade.

stay the course

These are certainly tough days to be an investor. However, please don’t give up as they should eventually pass. Instead, use this time to reassess your investment strategy so your portfolio can thrive again when the market recovers.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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