On October 11, 2007, the Dow Jones Industrial Average hit a new high of 14,198.10 in intraday trading.
At the time, it would have been impossible to know, but such a peak wouldn’t again be matched until 2013, almost six years later. Investors were in for a roller coaster, and a slow and unpredictable recovery – how would their portfolios fare?
INVESTING AT THE MARKET PEAK
Hypothetically, let’s say that you bought $1,000 of shares in some of America’s best-known companies, right during these pre-crisis highs in October 2007.
Today’s chart from HowMuch.net shows how you would have fared based on share price alone, not including the re-investment of dividends. Each blue dot below shows the $1,000 investment, and each pink circle represents the value of that investment today.
If you’d had invested in Netflix around the time company launched its streaming service in the United States, you would have brought in 50X your initial investment.
Meanwhile, Amazon shares jumped over 10X in value, and even “boring” blue chip companies like FedEx or McDonald’s at least doubled in value. The only company worth less (on the above list) is GE, though it’s worth noting that they would have also paid a dividend over this timeframe.
COMMON WISDOM?
Historically speaking, over long-term windows, the stock market has almost always increased in value. But for people that bought in October 2007, it would have felt like the world was ending and that recovery was impossible.
While it can certainly be argued that asset prices were inflated through QE, record-low interest rates, and other controversial central bank tactics from the crisis onwards, it can also be said that a portfolio formed at the 2007 peak would have turned out alright.
Of course, I think we all would agree that it would have been a lot nicer to invest at rock-bottom prices in 2009. However, it’s nice to know that holding stocks through the crisis ultimately paid off for those that had the patience to do so.
