By Brett Arends
If you’re thinking of pulling your 401(k) out of the stock market, or you’re too terrified to invest more, you need to meet my friend Betty Badluck.
Poor old Betty has had the worst luck of any stock market investor you’ve ever met. In the last 40 years she has invested in the stock market just six times. And on each occasion her timing was an absolute disaster.
The first time Betty invested in stocks was at the end of September 1987. She’d been kicking herself for missing the great 1980s boom, and when stock prices started to come down late that summer she figured this was a great time to buy the dip. She invested $400, which is (adjusted for the consumer-price index) exactly $1,000 in today’s terms.
A few weeks later, on Oct. 19, the stock market staged its biggest one-day collapse in history, eclipsing even the worst day of 1929. Betty saw a quarter of her money wiped out in a blink of an eye.
Well, after that experience she didn’t want to go near the stock market again for years. It wasn’t until 1990, when the market had fully recovered, that she worked up the nerve to invest more in stocks. On July 31, 1990, she invested another $450 in the stock market, which (again) works out at $1,000 in today’s money.
A couple of days later, Saddam Hussein invaded Kuwait. Oil went through the roof, the stock market tanked, and the world entered a crisis.
Once again, Betty kicked herself as she saw some of her hard-earned money vanish before her eyes.
She figured, fool me once, shame on you—fool me twice, shame on me. So after these two disastrous experiences she swore off the stock market altogether. And it was years before she even considered it. But throughout the 1990s she watched as the Dow Jones /zigman2/quotes/210598065/realtime DJIA +1.27% and the Nasdaq /zigman2/quotes/210598365/realtime COMP +2.09% went up, and up, and up, and up. They even ran commercials on TV bragging about how high the Nasdaq was going. And eventually this wore Betty down. At long last, after many years of refusing to throw another nickel into her 401(k), she gave in. And on July 31, 1998, she invested another $560 (which is $1,000 in today’s money).
A couple of weeks later Russia defaulted on its debts, sparking a global financial crisis. A giant hedge fund called Long-Term Capital Management imploded, even though (Peanut gallery: “Ha ha ha!”) it had multiple Nobel Prize winners on its border. Everything collapsed.
You get the picture. Poor old Betty Badluck. She didn’t give up. But every time she plucked up the nerve to invest in stocks, it turned out to be a terrible, terrible moment. So she bought at the end of March, 2000—which turned out to be the peak of the long bubble and the beginning of the longest bear market since the 1970s. She bought again at the end of August 2001, just before 9/11. And she bought more stock at the end of August 2008, just before Lehman Brothers collapsed.
Her timing literally could not have been any worse.
But Betty did two other things.
The first is, she didn’t try to pick stocks, funds, or even markets. She invested in a global stock market portfolio that matched the MSCI World index, including U.S. and foreign stocks.
And after investing her money, and watching it plunge…she left it there.
What happened to Betty?