Coronavirus vs. the 2008 Financial Crisis

LAST REVIEWED Apr 21 2021 3 MIN READ

By The Human Interest Team

In the past month, not only have we seen the biggest losses of any quarter in the last 10 years, but we’ve also seen the Dow Jones posting the best one-day gain since 1933.

Source

This type of market turbulence can be hard to stomach.

Can we draw on any lessons from the 2008 Financial Crisis to help us figure out what to do when faced with the market ups and downs we’re experiencing today?

Consider two investors, each of whom invested $50,000 in August 2008, just before the market was about to crash.

  • Investor 1: Weathered the turbulence. If they kept their money in the market between 2008 and 2018, their initial $50,000 investment would have grown to be worth much more — roughly $97,000 (not adjusting for inflation).

  • Investor 2: Spooked when they saw their balance fall and pulled out their money two months later. They’d have locked in their losses with the market down 24%, coming out with just shy of $38,000.

Be like Investor 1 and do nothing. What’s best for many of us will be to simply wait it out until the market rebounds. 

Investor 1 vs Investor 2

Data based on historical returns and outcomes are for two hypothetical investors for illustrative purposes only.

Remember retirement is a long-term play. Be like investor #1 and do nothing.

If 200 years of stock market history is any indicator, it’s likely that investment markets will rebound from negative news and price declines.

Are you looking for more information about how coronavirus affects your 401(k) and your retirement plan?

Check out our resources for people with a 401(k). If you run a 401(k) at your company, also check out our page for you. Both are updated regularly with new information.

Still have questions? Please don’t hesitate to call us at 877 475 0179.

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