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So, this is an emergency video. This is
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not the video I wanted to post today.
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There's not going to be any dramatic
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music. There's no stories. There's no
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intro. And there's no sponsors. Now, I
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might have titled this video something
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sensational to grab your attention, but
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that was on purpose because when the
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world feels like it's on fire, it's
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important to stay calm and level-headed.
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And right now, there's a serious
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conflict between countries. There are
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casualties. There's going to be scary
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headlines, scary news reports, and the
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markets are going to be on fire. The
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world is afraid of World War II. So, I
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just want to take a moment to slow
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things down for anyone who's feeling
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worried or overwhelmed. Because when
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people are losing their lives, the last
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thing they probably want to think about
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is money. But when fear takes over and
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markets do crazy things, we can make
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mistakes, especially with our finances.
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And as someone who's really passionate
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about helping people and sharing
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financial education, I think this is the
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right time to put out this reminder
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about staying calm, staying invested,
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and staying smart. So, I wanted to
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interrupt my normal schedule. This is
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not the video I was going to release
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today, but I want to share a few things
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that I think are incredibly important
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right now that will hopefully help you
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out. This information I'm about to share
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is something I've spent a long time
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researching because this is not the
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first time the world was in danger of
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global conflict. And it's definitely not
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the first time that investors asked what
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happens to the market during war. And I
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think the answer might surprise you.
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Historically, markets don't crash the
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way people expect during major
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conflicts. In fact, in a lot of cases,
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they actually recover really fast.
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sometimes even going up during the war
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itself. But let me give you a couple
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examples. After Pearl Harbor in 1941,
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the stock market dropped about 3% the
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next day and then fully recovered within
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a month. All it took was 1 month to
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recover from one of the biggest
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conflicts in the US. Now, during the
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Cuban Missile Crisis, which happened in
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1962, when the world was literally on
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the edge of nuclear war, the market went
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down about 7% in about four trading
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days. And then it recovered in just 10
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to 12 days. In 2022, when Russia invaded
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Ukraine, the S&P 500, that's the stock
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market, this ETF right here, VO, the
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market dropped 2.6% 6% on the day of the
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invasion, but within 1 month, the market
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had already bounced back and it was
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trading higher than before the war
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started. In other words, fear tends to
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hit the hardest before the worst case
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scenario happens. But once that fear
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turns into reality, once the thing the
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market is afraid of happens and the
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uncertainty is gone, the markets usually
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stabilize and they go back up again. And
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I know that sounds weird, but it happens
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because investors hate uncertainty more
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than anything else. Once the future is
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clear, even if it's bad, the markets
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start moving forward again. So, if
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you're watching the headlines right now
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thinking, "Should I sell everything?
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Should I go cash? Should I wait for
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things to get better?" Please hear this.
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Trying to time the market around a war
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almost never works. Let me give you a
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few more examples. And this time, I'm
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going to show you the actual data behind
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what I'm saying. In 2008, during the
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biggest financial crisis of my lifetime,
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the stock market dropped almost 57%. It
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felt like the whole system was
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collapsing. Banks were failing. Homes
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were being foreclosed on. People were
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losing their jobs. It was really bad.
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But if you held on through the worst of
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it, the market ended up tripling over
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the next decade. In fact, in the first 3
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weeks after the market reached its
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bottom, the market was already up over
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20%. After 9/11, the market was closed
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for almost a full week. And when it
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reopened, the S&P 500 dropped roughly
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11.6% in 5 days. The Dow dropped about
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14%.
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That was one of the worst weeks in
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market history. But even then, stocks
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recovered most of those losses within 2
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weeks. In 2011, when the US had its
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credit rating downgraded for the first
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time in history, the market dropped over
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6% in just one day. People thought that
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was the beginning of the end. But within
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just 6 months, the market had recovered
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everything it lost and then some. Even
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the COVID crash in 2020, which was the
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fastest crash in history, the S&P 500
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dropped 34% in just 33 days. But within
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5 months, the market fully recovered,
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and we went on to hit new all-time
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highs, and it just keeps going. Back in
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1987, we had something called Black
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Monday. I wasn't around for that. That
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was about 2 years before I was born. The
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market dropped 22%
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in one day. And to this day, that is
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still the worst 1-day percentage drop in
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all of US history. Imagine the S&P 500
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falling over a,000 points in just one
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trading session. Put yourself in that
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position for a second. People thought
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the whole system was breaking. But
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here's what happened next. Within two
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years, the market not only recovered, it
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doubled. In 2011, during the European
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debt crisis, global markets were under
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super heavy pressure. Countries like
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Greece, Italy, and Spain, they were
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facing what's called a default. They
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couldn't pay back their loans. There was
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real actual fear that the euro would
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collapse. The S&P 500 dropped about 20%
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during that summer, but over the next 12
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months, the market went right back up
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and even reached new highs. Here's
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another. After the Russia and Ukraine
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war that started in 2022,
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markets dropped immediately. Oil prices
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went up, gold went up, stocks went down,
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and that is in lock step with what just
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happened the moment this crisis broke
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out. But within just a month, the S&P
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500 had already recovered those losses.
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And sometimes people think Bitcoin is
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going to do the opposite. It's going to
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go up. But no, even Bitcoin dropped 8%
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on the day of the invasion. But then it
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also came back up in the days that
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followed and traded higher than where it
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was before. And to really drive this
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point home, let me just show you an
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example with three hypothetical
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investors. And big credit to personal
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financeclub.com.
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Because this example takes three
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investors, Tiffany, Britney, and Sarah.
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They all invested $500 a month into the
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S&P 500 index fund. So this ETF right
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here, they started in 1985 and they just
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kept doing that all the way through
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2024.
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That is almost 40 years of investing,
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over 470 months or so. And through every
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crash, we talked about all the bubbles,
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but each of them had a very different
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strategy of how they did it. And this is
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going to blow your mind. So Britney was
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the genius. She had the best market
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timing in the world.
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She waited and waited and only invested
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at the bottom of every major crash. The
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day after the lowest point, boom, she
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invested everything she had saved up
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until that point. Then there was
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Tiffany. She dumped all of her savings
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into the market right before each of the
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six biggest crashes like the dot bubble,
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the financial crisis, and even the COVID
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crash. And every single time she bought
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at the peak. And then there's Sarah. Now
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Sarah is the person that we should all
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be aspiring to be. She didn't try to
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time anything. She just set up an
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automatic $500 a month contribution and
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never touched it since 1985. Through
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every up and every down and every month,
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she put money in the market. And here is
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how it all played out. Britney, with the
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perfect timing, the genius investor
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ended up with about $3.3 million.
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Tiffany, with the worst timing possible,
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still ended up with $2.1 million. And
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Sarah, who just stayed consistent the
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whole way through, ended up as the
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winner with $3.5 million. So, the person
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who never tried to time the market and
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was not the smartest still ended up with
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the most money. How is that possible,
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right? It's possible because her money
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was always working for her. And over
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time, as you put more money into the
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market consistently, that money grows
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with compound interest and then you earn
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interest on top of that interest and so
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on and so forth. But when you try to
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time the market, especially in the
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beginning when you don't have a lot of
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money, even though you're getting a
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higher return, there's less money to
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return. There's less compound interest
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and less time. And Tiffany, even though
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her timing was really bad, she still did
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the most important thing. She never
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sold. She stayed invested in the market.
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And because of that, even with the worst
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timing imaginable, she was still able to
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turn $240,000 into over $2 million. And
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that's one of the best examples that
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I've ever seen of why time in the market
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beats timing the market. But aside all
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that, here's really the most important
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lesson in all of this. It's what not to
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do. Because the worst thing you can do,
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even worse than terrible timing, is to
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sit on the sidelines and stay out of the
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market completely. This chart from JP
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Morgan right here shows that if you had
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invested $10,000 into the S&P 500 and
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just left it alone from 2003 to 2022,
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your money would have grown to $64,844.
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But if you missed just the 10 best days
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in the market over that 20-year period,
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your return dropped to half, $29,78.
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Just 10 best days leaves you with half
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as much money. And if you missed the 20
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best days, you're down to just $18,000.
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Almost no growth at all. And here's the
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crazy part. The best days usually came
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right after the worst ones. So if you
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panic and you sell during a crash, you
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almost always miss the rebound. You have
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to be right twice. Selling at the top
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and then trying to buy back in at the
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bottom. But even if you could do that,
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which no one can, you still might lose
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to the person who dollar cost averages
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because they'll end up with more money
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over a longer period of time. And that's
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why there's that famous saying in
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investing, time in the market beats
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timing the market every single time.
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Now, I have no idea what the market is
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doing today. It could be up, it could be
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down. I imagine everyone's panicking
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right now, and the market's not doing as
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well as it would have been without this
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conflict. But as far as how I'm
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personally investing, I'm not doing
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anything differently. I am still dollar
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cost averaging into the broader US stock
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market. I'm still holding on to my real
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estate, holding on to my cash, and I'm
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still buying Bitcoin whenever there's an
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opportunity. But as far as World War II
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is concerned, not that my opinion
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matters. I'm no geopolitics expert, but
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I am optimistic and I don't think we're
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going to get World War II over what's
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happening right now. That's because I
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don't think Iran has enough full support
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to start one. China and Russia are too
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busy with their own problems. Russia is
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busy with Ukraine. China's busy fixing
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its own economy. and the US is just
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trying to stay out of geopolitics. And
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I'm hopeful and I'm looking on the
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bright side, but the ultimate takeaway
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is that you don't need to do anything
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fancy. You just need to not panic. So, I
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hope this video helped you out a little.
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As always, I hope you have a wonderful
00:12:43
rest of your day. Smash the like button,
00:12:45
subscribe if you haven't already. I'd
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love to see you back here next week with
00:12:48
my regular video. With that said, I'll
00:12:50
see you soon. Bye-bye. Sh.
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