Very steep market plunges of 30% or more are rare, but they do happen every decade or so. But the crash of 2020 was different from downturns of times past. Fool.com contributors Jason Hall, Jon Quast, and Nicholas Rossolillo discuss their experiences in 2020 and compare them with the Great Recession of 2008-09 in this Motley Fool Live segment from “The 5” recorded on Oct. 1.
Jason Hall: If any of us have been through a real market crash, how related to the March 2020 drop? How do you handle it mentally? What percentage did your portfolio drop? Did you add to your positions, what stocks? How did they fare from the lows from when we bought to date? What Foolish advice do we have to share? There’s a lot of questions there. We’re not going to answer all of those questions, but I think it’s a good opportunity just to take a couple of minutes, and talk about your experiences going through market downturns. I want to say this first before you guys unmute. Guys, this was a real market crash. Just because it was short, it was a very real market crash. Go. You guys are just the nicest guys in the world. Nick, you go.
Nicholas Rossolillo: It was a real market crash last year, for real. The nice thing was you blink and everything was rallying, so that was cool. 2007, ’08, and ’09, and 2010, I guess for that matter, it was all just one really long continuous slow burn. It just hurt for years.
Hall: Well, there were two crashes. There was the initial crash. Then when Barack Obama was elected, I think the market bounced a little bit, and then it just crashed again before the markets bottom.
Rossolillo: Yeah. 2010 was very volatile. Then 2011 started out good. Then this time of year in 2011, there was the 20 percent plunge in September before it rerallied at the end of the year. Those were really painful years because it was just so long and drawn out.
Hall: To set the dates, the pre-global financial crisis peak was early October of 2007. We’re talking all the way into 2011.
Rossolillo: It was rough. I was only a couple of years in investing myself when we hit those peaks in 2007. I was completely lost. I had no idea what to make of any of that. I got really disillusioned with investing and I tried my hand at trading for a while. I think what was so hard about it is there was seemingly nowhere safe to turn except for treasuries and really boring stuff made a nice little uptick in 2008 during the worst of it, but that’s not long-term investment. If you missed it, you missed it. There was nothing to ride beyond the spike in ’08. That’s how I would compare it to this.
I think what’s different though this time is how connected the world is. It’s much easier to find ideas. Sometimes, the connected world has it’s downside still because we’re sometimes drowning it feels like in news that we’re not sure how trustworthy it can be. But at the same time, you can also find a lot more information that is accurate than you could in the past too.
Also, back in ’08, there was no focus on, what is still a long term investment theme? Everything just got clobbered. But in this crisis, we have already very well established certain segments of the economy that are riding these very long-term secular trends. Those trends just accelerated by the pandemic, technology, computing, and just basically how all of that is disrupting the status quo of the world. That’s a big difference because it was not a really well established fact yet in 2008. It probably should have been in hindsight, but nobody was paying attention to that. No one was paying attention to the fact that, hey, Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), some of these other [tech companies] had IPOs since that didn’t exist at that time. But we now know really well at this point what is going to be growing for the next 10, 20, 30 years. That’s a big benefit that can help you ride out these bouts of really extreme volatility, just stay focused on what is going to continue to grow at a high pace for decades.
Jon Quast: That’s really good, Nick. We really appreciate all that. Vihan, to your question here, I can’t really speak to the Great Recession crash. I had only just discovered the stock market in 2007, I believe it was, and bought my first stock around then. I’m going to tell a story though, and it’s all going to make sense in the end. One of the first stocks that I bought was for my newborn son at the time. You know how when your children are born, relatives and stuff, give you money and stuff and I thought I’m going to invest this for him and then 20 years when he has grown up, maybe it’ll be worth something. Well, I bought Bank of America (NYSE:BAC) stock, brand new in investing, put it all in Bank of America, not the greatest strategy. I’m not saying that that is the best thing to do, but that’s what I did. I remember in the market crash that happened shortly thereafter.
Rossolillo: When was this, Jon?
Quast: It was either 2006, 2007 that I bought Bank of America. It was around $40 if I recall. By the height of the market crash, it had gotten down to below three, I…