You've likely heard on the news and elsewhere that this month is recognized as the ten year anniversary of the stock market collapse and the start of the Great Recession. While anniversaries normally entail celebrations to remember happy times, this one has tended to give me the chills. It was, after all, ten years ago this past week when Lehman Brothers was allowed to fail and the global economy felt like it was unravelling faster every day.
Having been in the business at the time I can tell you that September 2008 was a wild and uncertain month. Market and economic news seemed to worsen by the hour and people were scared. There were many phone calls with folks asking questions like, "Are we going to be okay?" and, "Is this the end of the financial system?" and even, "How quickly can we sell everything and find a mattress, or maybe jars to bury cash in the yard instead?".
While there are many takeaways from that period, for regulators, investors, and yes, also for advisors, a primary lesson should be something that we often discuss: When it comes to investing, focus intently on what can be controlled and try not to worry too much about the rest, even though it can be gutwrenching sometimes.
Quality, cost, allocation, and rebalancing are critical to investing successfully over a long period of time. Let's look at the latter two and how they would have helped us get through 2008 in one piece.
Here's a series of charts showing how an investor would have fared if they had stayed the course with their allocation and rebalanced during the Great Recession, instead of heading to the mattress store.