Investing in a bear market sure is exciting, isn’t it? My first day on the job was July 3, 2006. It was a one-week locum tenens assignment in Punta Gorda, Florida that I started just after graduating from residency.
The Dow Jones Industrial average (DJI) stood at 11,090, or about 500 points below where it was when I kicked off the new millennium on Bourbon Street wondering if the Y2K bug was real or not on January 1, 2000..
To say that things took a turn for the worse for equities after October of 2007 is an understatement. By March of 2008, the DJI dropped below 12,000. It dropped below 11,000 in September of 2008, erasing any gains from the decade, and the pain had just begun.
I saw those initial investments I made early in my career tank. Subsequent investments tanked a little less. But the overall trajectory for 18 months was down, down, down. It was a true stock market crash and part of one of the worst recessions in U.S. history.
Let’s look at three hypothetical scenarios with nice round numbers to make the math simple. All three scenarios will have the market beginning and ending the year at 10,000 points, and we’ll invest $10,000 into these markets each month.