A Look Back at Volatile Market Periods

Investors' nerves are frayed after a turbulent few months in the stock market. But investors should never base their buying decisions on near-term market movements, and this period is no exception.

In this segment of Backstage Pass recorded on Jan. 7, Fool contributors Toby Bordelon, Rachel Warren, and Will Healy take a look back at how the market and some well-known stocks performed in the aftermath of the last big downturn. Toby also discusses his investing journey during the last few market crashes. 

Toby Bordelon: I see a question here that I want to address real quick if we can guys, if you had some thoughts on it, feel free to jump in. Actually he has a couple of questions and that maybe feed in to each other. Vihaan here he says, he's a new investor started with Motley Fool last year, 35% down his portfolio since the high, if there's a crash he's worried it could go low or it could go half.

Asks, "What's the worst have I seen my portfolio? How do you handle it? How do you take advantage?" There is more questions, tech stocks are, getting beaten down all that stuff. Smart to add or not in this environment? Let me show you a chart.

I don't think you were Rachel and Will if you were investing back in in 2008, 2009, 2007, you remember that? Some people trying to block that out.

Rachel Warren: Trauma.

Toby Bordelon: It was not the best of times for that, but let me show you this. This is from the S&P 500. This is the percent off high for the S&P 500 from I just picked October 2007, which is before things were getting pretty bad through April 2009.

The bottom was really at March 2009. Again, this is for the index S&P 500. If you've seen these percent-off high charts, you often see like lines have dipped down and go and dip down again, and get back to the high [laughs].

Note that that doesn't happen here. It never gets back to zero for this almost two-year period, year-and-a-half period and it would be quite some time before we get back into that zero mark.

But you can see here, we were down at this point right here, the low point, that was 55%, almost 60% down on the high of the S&P 500 a little over a year-and-a-half. That's substantial.

Again, this is the index doing this. If the index is doing this, then individual companies in that index, were far, far worse.

My bad news for you Vihaan is it could get worse than half, that's possible, it did. It has happened before. I wonder if I can just put some random company in here.

What's a good example? Let me show you Microsoft. Microsoft, followed the S&P.

That's a giant tech company that has been so great over the past couple of years. Look at that, it actually was a little worse in many cases in the S&P 500 as they went down there. I don't know what's another one that had struggles.

Rachel Warren: Maybe MercadoLibre, is that one?

Toby Bordelon: I don't know if they were around they came after that.

Rachel Warren: It has been around for a while but--

Will Healy: Let's take a look at Amazon, Amazon had their bigger struggles in 2000.

Toby Bordelon: They did. But this was Amazon, you see the blue line Amazon. Oh my gosh, look at Amazon [laughs]. They hit their low before the low gets S&P 500, but good lord, they were down over 60% on the 70% range off of their high before and they started coming back.

They actually did better from their bottom than the index did for a while, but the point is that there were some pain that year and it can happen again. I'm telling you that the things we're seeing right now over this past year, do not really, haven't gotten to that level yet. If you are someone who's in there thinking, oh my gosh, this is bad.

It can and it has gotten worse and I guarantee you there will be points in the future, where it will be worse. Now, some individual companies have really been hit for sure right now, but from an overall standpoint, things have been a lot worse than that. How did I handle it?

That's a good question. If you want to jump in Will or Rachel, if you guys have some experience with this, in this point in 2007, 2008, 2009, I was very fortunate. I had no kids at this point. My wife and I were both working in very good jobs and we were essentially living on one of our incomes.

What I was doing as I kept getting lower, I started buying stocks hand over fist and it was awesome. I had a lot of income coming in and I didn't need inside and I was just throwing that at the market and that turned out to be a fantastic opportunity.

If you are in that position right now, where maybe you've got a great job, maybe your spouse got a great job and you have excess cash every month, then I think one thing you should think about doing is invest every month.

Like put some of that excess in the market and you're probably going to look back 10 years from now and say that was a great time to do that. The scenario was a little bit different in March of 2020, which also was a terrible time.

It didn't last nearly this long. It was fast down and fast up, but I did not have the opportunity available to me then at that point in time, partly because it happened so fast.

I was perhaps a little bit overexposed in some areas than I would've liked and that was painful.

I handled it with just by taking deep breaths and hoping it got better, which it did. Different experiences for me, different life points, different risk tolerances I think on those levels.