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The Price of Admission

By Charlie Bilello
Compound Capital Advisors

When investors think about risk, 2008 is usually the first thing that comes to mind. And for good reason. It was the worst year that most investors alive today have ever experienced. With dividends included, the S&P 500® Index lost 37% in 2008, its largest decline since 1931 (during the Great Depression).

Since the end of 2008, the S&P 500 has gained 449% with only one down year, a small loss of 4.4% in 2018. That’s a gain of 15% per year, compounded over 12 years.

Seems like an easy ride, but any investor living through the last 12 years will tell you otherwise. There were 27 corrections of more than 5% since the March 2009 low. Of these, 10 were larger than 10%, three exceeded 20%, and one was more than 30%. Before investing, many will tell you that they can easily stomach a 20-30% decline—they can “tolerate” such a risk. But, when it actually happens, and real dollars are at stake, the true test begins.

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The Price of Admission