A Fun Client Story About Poorly Timing the Market

A while back I was reviewing a new client’s investment portfolio, and I noticed a sizable position in Microsoft stock (this is not a recommendation to buy or sell) that they had purchased long before we met. I looked at the “tax lots,” which show when the stock was purchased, and I saw January 17th, 2000. I was shocked. As most investors know, 2000 was the beginning of one of the biggest market meltdowns of all time, known as the Dot-com bubble. Not only that but after doing a quick search, Microsoft stock peaked in January of 2000. It was obvious they had got caught up in the internet stock craze as many investors did.

The first year of owning the stock must have been a gut punch – down 53%!

To their credit, they held on, did not sell a single share, and road it back up. Not too bad!

As nice as it would have been to be the investors scooping up shares when it was down 53%, in the grand scheme of things, it didn’t matter that much because they held on for so long. That massive first-year loss looks like a tiny blip in the picture above. They had some luck picking one of the best-performing stocks of the last 20+ years, but the truth is that they didn’t even have to pick a great stock to do well. If they had bought the S&P 500 on the same day before the market started crashing, they would still be up over 400+%.

Even for people retiring today, there is likely a portion of your investments that should be geared toward long-term growth over 10+ years. And if you have a long enough time horizon, when you buy has historically mattered very little – it’s time in the market that matters, not timing the market.

Happy Planning,

Alex

This blog post is not advice. Please read disclaimers.