Here's How Much Money You'd Have Today If You Invested $1,000 in the S&P 500 During Every Stock Market Crash Since 1950 (Spoiler Alert: Wow!)
Key Points
The stock market has experienced a number of setbacks during the past several decades.
Investing during stock market plunges allows you to buy quality companies at a discount.
Holding on to your best investments through volatility often yields outsized returns.
- 10 stocks we like better than S&P 500 Index ›
Have you ever wondered what would happen to your capital if you simply kept investing a modest sum into the S&P 500 (SNPINDEX: ^GSPC) every time the stock market had a meltdown?
Even without precisely timing the exact bottom of each crash, you'd still be looking at a pretty sweet pile of cash simply from investing during the thick of panic. That's the power of treating stock market slumps as opportunities rather than disasters. Let's walk through how this plays out and what smart investors can learn about buying the dip.
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Taking a look at each market crash since 1950
The stock market has experienced its share of rough patches during the past 75 years or so. For the sake of this analysis, I am specifically isolating events during which the S&P 500 dropped by 20% or more:
- 1957: The index slid from the high 40s to 39.
- 1962: The index fell from the low 70s to 52.
- 1966: The index dropped from the mid-90s to 73.
- 1970: The index decreased from more 100 to about 69.
- 1973-1974: An oil shock caused the index to fall from about 120 to 62.
- 1982: The index fell from the 140s to roughly 102.
- 1987: During Black Monday and its aftermath, the index was chopped from the mid-300s to about 224.
- 2000-2002: After the dot-com bubble burst, the index fell by nearly half from 1,527 to about 777.
- 2008-2009: During the Great Recession, the S&P 500 plummeted from 1,565 to 677.
- 2020: During the early days of the COVID-19 pandemic, the index fell from 3,386 to 2,237 over the course of a month.
- 2022: The bear market of 2022, which featured historically high levels of inflation, dragged the index from 4,800 to roughly 3,577.
Running the numbers
In each case, I'm assuming that the series of $1,000 investments was not made at the absolute rock-bottom close. To be realistic, I'm treating each outlay as being roughly 10% higher than the trough. That would equate to the following entry points and gains:
| Year | S&P 500 Entry Point | Implied % Gain | Implied Worth of $1,000 Investment |
|---|---|---|---|
| 1957 | 43 | 17,923% | $180,233 |
| 1962 | 58 | 13,262% | $133,621 |
| 1966 | 80 | 9,588% | $96,875 |
| 1970 | 76 | 10,097% | $101,974 |
| 1974 | 68 | 11,297% | $113,971 |
| 1982 | 113 | 6,758% | $68,584 |
| 1987 | 246 | 3,050% | $31,504 |
| 2002 | 855 | 806% | $9,064 |
| 2009 | 745 | 940% | $10,403 |
| 2020 | 2,460 | 215% | $3,150 |
| 2022 | 3,935 | 97% | $1,970 |
Data source:
Here's the simple math behind the table. Each $1,000 investment divided by the entry price tells you how many "units" of the S&P you own. From there, I multiply those units by the current level of the S&P 500 -- about 7,750. In total, these 11 separate investments generated more than $750,000 in cumulative gains -- a return of more than 68-fold.
What is the lesson here?
Market stumbles always have and always will happen. But every single time, one common theme emerges: The market eventually rebounds, and the S&P goes on to new highs.
One of the most common aspects of behavioral finance is to panic sell when the outlook is bleak. But if you remain calm and disciplined, smart investors can use these resets as a chance to buy quality companies at a discount. From there, exercising patience is the key as the market's long-term ascent does the heavy lifting for you.
The big takeaway here is simple: Don't run for the hills when things get ugly. Instead, use dips to your advantage, and let time and compounding do the hard work. The S&P 500 has a long, resilient history of recovering and moving higher. Over the course of a long-term time horizon, the market ultimately rewards those who stick around.
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Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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