The Most Important Investing Lesson I Learned In The Last Recession

The coronavirus has wreaked havoc not only on people but on businesses, too. After a record-long bull run, stocks slid into a bear market in mid-March with the major stock indexes down more than 20 percent from their recent highs. This might, understandably, be making people nervous. It isn’t easy to watch hard-earned money lose value in the market.

But my suggestion? Wait it out if you can. Maybe even invest more. I’m not just saying this. I speak from experience.

Twelve years ago, when I returned from maternity leave to the magazine where I’d been for seven years, it was clear things had taken a turn for the worse. Within weeks, I was called into an all-staff meeting. There, our publisher shared an update on the state of business. I remember staring at the chart showing ad revenue projections. The line for print ad revenue started high up on the chart but steadily declined, while the line for digital ad revenue started near the bottom and rose just slightly over time. It was easy for anyone to see that the magazine was in serious trouble.

Soon after, I volunteered for a severance package, figuring the first buy-out offers would be the best the magazine would make.

My husband and I were hoping to eventually by a home, and I thought putting money in the stock market would be the most effective way to help us grow our money so we had enough for a down payment.

So I started hustling like mad to pick up as many freelance assignments as I could. And I invested almost all the money from my five-figure severance package into index funds that mirrored the Dow, the S&P 500 and the Nasdaq NDAQ stock indexes.

That was in July of 2008.

Two months later, the stock market crashed. On Sept. 29, 2008, all three indexes experienced the worst one-day losses in their history after Congress failed to pass a bank bailout bill. (Lehman Brothers had declared bankruptcy two weeks earlier.)

It wasn’t clear at the time, but we were already in the throes of what would be called the Great Recession. It began in the United States officially in December 2007 and lasted until June 2009, extending over 19 months. In the months that followed the market crash, I watched as my investment account—and the down payment on our future home—went on to lose more than 50 percent of its value. It was tough to watch, but I didn’t withdraw my money. I kept hearing the voice of my mom, a longtime investor, in my head. Stick with it. The market will recover. It always has.

It took a couple years before my investment finally did recover. But here’s the good news: It continued to grow. In 2010, I was able to take some money out for my husband and I to buy our home. And by the end of 2019, my remaining balance had more than tripled in value.

Now, I’m watching my investment accounts fall again. But I’ve been here before. And so has the market. In fact, in the last 90 years, there have been a dozen other bear markets. And the stock market has recovered from every one and gone on to hit new record highs.

Younger investors may not have had money in the market during the dot-com crash in 2000 or even the Great Recession, making this the first time they’ve seen their investments significantly decline in value. But history tells us that, like those downturns, this one, too, should eventually end. It may take longer than anyone wants. But when I look at my balances (which isn’t often) I remind myself that over a number of years after the last downturn, my money grew exponentially.

If I’d withdrawn my money from the market during that bear market, I would have lost money and missed out on all that growth. And if I’d put my money into a savings account from the start and left it there, I wouldn’t have earned nearly as much.

That’s why I’m investing more right now, during this bear market.

It’s important to remember, though, that investing in the stock market is really playing a long game. This isn’t a get-rich-quick strategy. Putting money in the stock market means leaving it there—for years.

It’s not a place to keep emergency funds for unexpected expenses or layoffs. Having an emergency savings fund—with enough to cover three to six months’ worth of expenses—means any money that does get invested really can ride out the ups and downs of the stock market. I’m still years away from retirement, and I don’t plan to touch my regular investment account anytime soon either, so I have the advantage of time.

Putting money into the stock market now and letting it sit there, watching it rise and fall, can require both patience and fortitude. But that’s true of many things that can pay off over time. And we can take comfort from the fact that throughout our country’s history, the stock market, and the economy, have always bounced back—even from the toughest times.

This article was written by Jennifer Barrett from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.