Adam Spatacco, The Motley Fool
4 min read
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:
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1957: The index slid from the high 40s to 39.
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1962: The index fell from the low 70s to 52.
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1966: The index dropped from the mid-90s to 73.
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1970: The index decreased from more 100 to about 69.
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1973-1974: An oil shock caused the index to fall from about 120 to 62.
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1982: The index fell from the 140s to roughly 102.
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1987: During Black Monday and its aftermath, the index was chopped from the mid-300s to about 224.
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2000-2002: After the dot-com bubble burst, the index fell by nearly half from 1,527 to about 777.
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2008-2009: During the Great Recession, the S&P 500 plummeted from 1,565 to 677.
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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.
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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:
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.
