PSA: For those able, a good time for starting investing

[Radagast]

This is why it is a good idea for new investors to set their investments on autopilot. What we have here is a chart of an investor who invested $1,000 into Vanguard Total Stock Market (VTSAX) every month starting in January, 2008. You can't tell from the chart, but that was exactly the right timing for when the economy drove off a cliff.

Over these three years, the market lost value at an annualized rate of -1.63% as seen in the Time Weighted Rate of Return (TWRR). Wowza!

Our intrepid investor made money on their investments at an annualized rate of 14.48% as seen in the Money Weighted Rate of Return (MWRR)

Just by making regular contributions this person beat the market by 16.1% annualized over three years! They have an amount of money nearly equal to four years of contributions after just three years! That is the kind of return that would make even Warren Buffet proud. Anybody using any method of market timing would have been very unlikely to have made a higher rate of return. People who sold their investments at any point in this cycle almost certainly did much worse.

The important thing to understand is that a new investor making regular contributions without stopping is the closest thing that exists to magic in the investing world. It is guaranteed to reduce investment risk and increase returns during the worst times, and the worse things get the better it works. And yet it is so simple that you can literally set it up once and then walk away for a decade.

Realize that stocks do not become cheap without a strong reason. What we are seeing now is one of those strong reasons. Any time that stocks become cheap, there will always be a feeling in the air at least a little bit similar to this (though maybe not with as much concern for personal health). Not everybody will remain employed to do this, but that is how the world goes. If you are able to invest and fear getting caught up in events, now is the best time to follow a set-it-and-forget-it investing strategy.

Link to this back test at PortfolioVisualizer:
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2008&firstMonth=1&endYear=2010&lastMonth=12&calendarAligned=true&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VTSAX&allocation1_1=100

[kingxiaodi]

Thanks for this. A nice reminder to stay the course.

Over these three months, the market lost value at an annualized rate of -1.63% as seen in the Time Weighted Rate of Return (TWRR). Wowza!

I think you mean years here, not months. I definitely struggled initially understanding the time frame.

[afox]

yeah its easy, all you need to do is start investing at the beginning of the longest bear market in history.

[Radagast]

Thanks for this. A nice reminder to stay the course.

Over these three months, the market lost value at an annualized rate of -1.63% as seen in the Time Weighted Rate of Return (TWRR). Wowza!

I think you mean years here, not months. I definitely struggled initially understanding the time frame.

Thanks! Fixed.

[Radagast]

yeah its easy, all you need to do is start investing at the beginning of the longest bear market in history.

Exactly! 2008 was not anywhere close to the longest though, especially if you adjust for inflation.

[BTDretire]

I pulled some money out at the end of last year and then some more on 2-28-20 after the start of the Covid 19 drop. I just put it all back in yesterday. It may be to soon, but I had a fear of missing out. You have to be in the market, when it rises.
I bought back in about 20% cheaper than I sold, so even if I'm to early,
in the longer term, I still did good by selling. 

[Radagast]

Let's see how this worked out for our Intrepid Investor during 2020.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2020&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VTSAX&allocation1_1=100

Our 2020 investor earned a 45% return on money invested into VTSAX once per month throughout the year, beating the market by 25% annualized by doing nothing other than making regular contributions. They ended with $16,000 on only $12,000 invested. Holyshitsnacks!

Friends tell friends to continue their regular investments during market crashes.

[Zamboni]

Two thumbs up!

[markbike528CBX]

Two thumbs up!

Let's see how this worked out for our Intrepid Investor during 2020.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2020&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VTSAX&allocation1_1=100

Our 2020 investor earned a 45% return on money invested into VTSAX once per month throughout the year, beating the market by 25% annualized by doing nothing other than making regular contributions. They ended with $16,000 on only $12,000 invested. Holyshitsnacks!

Friends tell friends to continue their regular investments during market crashes.

PTF  and to have linked as a counter example for the next fear thread.  @RWD any updates?

https://forum.mrmoneymustache.com/investor-alley/would-you-106836/msg2426621/#msg2426621

[Radagast]

Two thumbs up!

Let's see how this worked out for our Intrepid Investor during 2020.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2020&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VTSAX&allocation1_1=100

Our 2020 investor earned a 45% return on money invested into VTSAX once per month throughout the year, beating the market by 25% annualized by doing nothing other than making regular contributions. They ended with $16,000 on only $12,000 invested. Holyshitsnacks!

Friends tell friends to continue their regular investments during market crashes.

PTF  and to have linked as a counter example for the next fear thread.  @RWD any updates?

https://forum.mrmoneymustache.com/investor-alley/would-you-106836/msg2426621/#msg2426621

Not sure if there will be many PTF :) it has been an interesting 12 months and I am writing only the 9th post!

[Bloop Bloop Reloaded]

It may still be a good time to invest but it'd be a lot better if the stimulus were withdrawn and we let the economy tank a little so that those of us who are newer to investing or who have a bit of dry powder left can take advantage.

[RWD]

PTF  and to have linked as a counter example for the next fear thread.  @RWD any updates?

https://forum.mrmoneymustache.com/investor-alley/would-you-106836/msg2426621/#msg2426621

The latest one is here (from last month):
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/msg2792787/#msg2792787