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A Tale of Two Investors: Time in the market

By John R. Berry

None of us has a crystal ball, but we all have a rearview mirror. Look into your review mirror. You are about 13 years younger. It’s March 9, 2009. This was the bottom of the Great Financial Crisis.


We will compare the fortunes of two investors with $100,000 in retirement accounts who took different paths on that day.


In March 2009, Oblivious Olivia is living off cash savings volunteering in rural India. Internet access is spotty, and she doesn’t really care about the financial markets anyway. At age 42, she had a good run as a newsroom manager before being laid off.


Olivia does not change the investments in the retirement account she left behind, which on March 9 still has $100,000 in it. For simplicity’s sake, let’s assume it was fully invested in an S&P 500 fund.


Our second investor is Basket Case Billy, also 42. In March 2009 he is an Industrial Designer for a firm that makes stress balls. He did not get laid off because business is booming, and his firm is considering expanding into anti-anxiety toys for children.


Billy hears about the economy at every meeting as his company continues to develop products for the rapidly expanding U.S. market. Billy checks his retirement account every day and has watched it tumble to $100,000.


While Olivia doesn’t make any changes, Billy loses his nerve and moves his $100,000 into a popular mutual fund that has more bonds than stocks.


Where are these investors today (11 a.m. July 7), assuming they made no further changes and invested no more money into these particular accounts?


  • Olivia: $429,801 (13.14 % annual return)
  • Billy: $298,459 (8.54 % annual return)


Olivia has over $100,000 more than Billy does despite starting with the same amount. She just stayed invested in a boring stock fund. Hers was a wilder ride, to be sure, and now that she is 55 she is diversifying her investments toward her retirement goal.


We have to hand it to Billy. His is not the worst case scenario. At least he stayed invested. Billy’s friend Train Wreck Tim freaked out and moved all his 401(k) funds to a stable value fund paying 1%.


Train Wreck Tim has $113,856, which adjusted for inflation is nearly $20,000 less than he started with 13 years ago.


In conclusion, we have numerous charts and graphs demonstrating how your returns will vary based not only on your investment choices, but also on the day you invested those funds.


Remember: It’s time in the market, not timing the market. Because we can’t predict either the good or the bad days, all we can recommend is that your long-term money stay invested appropriately for your time horizon, and that you keep enough cash on hand to smooth out the bumps life throws at us.

 John R. Berry is a Certified Financial PlannerTM professional and owner of Corner Post Financial Planning.


Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through ICA Group Wealth Management LLC, a registered investment advisor. ICA Group Wealth Management LLC and Corner Post Financial Planning are separate entities from LPL Financial.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal. No strategy assures success or protects against loss.