S&P 500 Recovery Times Vary Based On Future Returns
|If The S&P 500’s % Annual Return Is||You’ll Get Your Money Back In|
|9.8% ( long -term average return)||2.7 years|
But overall, there has been a strong upward trend over the years — even after the major market downturns in 2008 and earlier in 2020. If the market crashes again, it’s extremely likely it will recover.
As the economy recovers, stocks will continue to rise Sam Stovall, chief investment strategist at investment research firm CFRA, expects a 5.5% bump in U.S. economic output in 2021, continuing an economic recovery that began in the third quarter of 2020. That should lead to a good year for stocks, analysts say.
And if you take the right steps before a market downturn, you may not lose any money at all — regardless of how bad the crash ends up being. A market crash essentially means that stock prices across various sectors of the market take a sharp decline. When stock prices fall, your investments lose value.
The markets took about 25 years to recover to their pre-crisis peak after bottoming out during the Great Depression. In comparison, it took about 4 years after the Great Recession of 2007-08 and a similar amount of time after the 2000s crash.
|Best Value Stocks|
|Price ($)||Market Cap ($B)|
|NRG Energy Inc. ( NRG)||36.90||9.0|
|Bio-Rad Laboratories Inc. ( BIO)||603.54||18.0|
|Virtu Financial Inc. ( VIRT)||26.97||5.2|
When the stock market goes down, volatility generally goes up, which could be a profitable bet for those willing to take risks. Though you can’t invest in VIX directly, products have been developed to make it possible for you to profit from increased market volatility. One of the first was the VXX exchange-traded note.
You could sell your stocks thinking there was going to be a crash and the market could keep going up, and up, and up. If you somehow knew that the market was going to crash, of course you would sell everything before the crash then buy back in at the bottom.
It’s vital that you keep that money out of the stock market. The best place to store your emergency fund is an FDIC-insured account, like a savings account, money market account, or short-term CD.
Based on the U.S. history of previous market crashes, investors who are currently entirely in stocks could lose as much as 80% of their savings if the 1929 or 2001 crashes repeat.
A drop in price to zero means the investor loses his or her entire investment – a return of -100%. Because the stock is worthless, the investor holding a short position does not have to buy back the shares and return them to the lender (usually a broker), which means the short position gains a 100% return.
Seven badly hit stocks in 2020: Occidental Petroleum Corp. ( OXY ) Coty (COTY) Marathon Oil Corp. (MRO) TechnipFMC (FTI) Carnival Corp. (CCL) Norwegian Cruise Line Holdings (NCLH) Sabre Corp. (SABR)