Blue Bell PWM


10 Years from Financial Crisis

James Behr Jr

James Behr Jr

Vice President

September 13, 2018

On September 15, 2008, Lehman Brothers, the fourth largest U.S. investment bank, with $639 billion in assets and over $600 billion in debt obligations, filed for bankruptcy. Lehman’s collapse sent global financial markets into chaos. On September 29, 2008, the Dow Jones Industrial Average fell 777.68 points or 6.98% intraday while the S&P 500 fell 107 points or 8.82%. U.S. equity markets continued to decline into March of 2009 before finally bottoming on March 6. At its worst, both the S&P 500 and Dow Jones Industrial Average declined over 50% from their record highs in October of 2007.

As bad as investing in any equity markets seemed during this time period, what would have happened if investors would have stuck to a plan of continuing to invest over time? Depending on the investment selection, anyone who continued saving and making annual purchases in equity index funds would be doing well financially right now!

If an investor in the United States continued to make annual contributions to their IRA or Roth IRA account, up to the allowed limit on the first day of the year, since the beginning of 2008, and invested it into an S&P 500 ETF (SPY) their total contributions of $58,000 would be worth $125,814.57 as of the close this past Tuesday (9/11/18) with a total return of 116.92%!

SPX Chart from January 2008 through September 2018

Even if the same investor would have had an equally weighted, diversified portfolio of global equities and bonds, they still would be doing well. A hypothetical allocation to U.S. Large Cap Equities (SPY), U.S. Small Cap Equities (IWM), International Equities (VEA), Emerging Market Equities (VWO) and Fixed Income (BND) would be worth $97,532.81 today with a total return of 68.16% as of the close this past Tuesday.

Stick to your Strategy

Although it may be difficult during market downturns, having a strategy when it comes to your savings and investments will help during rough periods. Sticking to your investment strategy that you have created is the most important aspect though. Ten years removed from the global financial crisis, U.S. equity markets are reaching all-time record highs. As seen from the two examples above, continuing to save and invest money during even the harshest periods of 2008 and 2009 is extremely beneficial over the long term.

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10 Years from Financial Crisis

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