Who says buy and hold investing is dead?
With today being the 25th anniversary of Black Monday -- the day the Dow Jones industrial average fell 508 points, or 22.6% (the equivalent of a 3,000-point drop today) -- I wondered how well (or badly) you would have done if you had bought stocks on the Friday before the crash and held them over all these years. So I checked the return for Vanguard 500 Index (symbol VFINX), an index fund that tracks the U.S. stock market, from Friday, October 16, 1987, through October 18, 2012.
If you had bought that Friday, you suffered not only through the 1987 crash, but also a 20% bear market decline in 1990, a 48% tumble in 2000-02, a catastrophic 55% drop in 2007-09 and a drop of nearly 20% last year. Despite all of that, the annualized total return, including reinvested dividends, for the Vanguard 500 Index fund over the past 25 years is 8.9% (the chart below is based on closing prices, not total return, but demonstrates the volatile ride since 1987). If you had invested the $3,000 minimum on October 16, 1987, in your IRA (and thus not had to worry about taxes), your stake would be worth roughly $25,280 today.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You may not get 8.9% a year over the next 25 years, but you'll stand a good chance of earning more than the inflation rate, and your stock holdings will almost certainly do better than bonds, which because of today's ultra-low yields are destined to deliver sub-par results in coming years. The bottom line is that if you have a long time horizon, stocks really are the best choice for most investors. You just have to have the intestinal fortitude to ride out those big declines, which occur regularly and can occasionally be gut-wrenchingly steep.
Subscribe to Manny Schiffres on Facebook for his latest commentary on investing (and baseball).
Kiplinger's Investing for Income will help you maximize your cash yield under any economic conditions. Subscribe now!
-
3M, GM, Blue Chips Lead to the Upside: Stock Market TodayThe S&P 500 followed the Dow Jones Industrial Average into green territory, but the Nasdaq lagged the other indexes because of its tech exposure.
-
Social Security Payment Schedule for 2026Find out when you can expect your 2026 Social Security payments and the date you get paid when your scheduled day falls on a holiday.
-
3M, GM, Blue Chips Lead to the Upside: Stock Market Today
The S&P 500 followed the Dow Jones Industrial Average into green territory, but the Nasdaq lagged the other indexes because of its tech exposure.
-
Dow Adds 516 Points on Broad Optimism: Stock Market TodayEasing trade war tensions and promise from early earnings reports has investors looking on the bright side to start the week.
-
Stocks Rise to End a Volatile Week: Stock Market TodayThe market's fear index reached and retreated from a six-month intraday peak on Friday as stocks closed the week well.
-
Dow Sinks 301 Points on Trade War Talk: Stock Market TodayThe contentious relationship between the world's two biggest economies continues to drive global financial markets.
-
Trade Uncertainty Sparks Whipsaw Session: Stock Market TodayVolatility is making a cameo here in mid-October, a generally positive month marked by its historic stock market events.
-
Stocks Swing in Volatile Session: Stock Market TodayThe main indexes fell sharply in early trading on rising China tensions, but rebounded thanks to encouraging bank earnings.
-
Dow Adds 587 Points as Stocks Bounce: Stock Market TodayThe main indexes rebounded sharply Monday after President Trump took a calmer stance toward China.
-
Dow Dives 878 Points on Trump's China Warning: Stock Market TodayThe main indexes erased early gains after President Trump said China is becoming "hostile" and threatened to cancel a meeting with President Xi.
