There is a classic meme out there titled Bad Luck Brian. The individual in the picture is from the Akron area and decided to take a “classic” picture for his high school yearbook. Since then his picture has been edited time and time again with quotes such as “Has a pet rock…which runs away.” Now, if Bad Luck Brian were to invest at the worst times in the market what would his results be? We now have some insight.
Ben Carlson did a nice analysis on his blog “A Wealth of Common Sense” to show what happened to his version of Bad Luck Brian. The assumptions are pretty straight forward. Brian started his career in 1970 at age 22. He saved $2,000 annually during the 70’s and increased the savings amount $2,000 each decade until he retired at age 65, which ended the year 2013. His annual savings were $2,000 in the 70’s, $4,000 in the 80’s, $6,000 in the 90’s, and $8,000 a year until he retired. Everything he invested went 100% into the S&P500.
Now this is where it gets fun. He invested his savings at the end of 1972 and the market dropped nearly 50% from 1973 to 1974. Talk about bad luck. Well, Brian is dedicated and decided not to sell any of his investments, however, he was nervous about putting new money into the S&P500 index. It was 15 years before he invested again and this next amount was $46,000 in August of 1987. Bad Luck Brian once again encountered his typical luck as the market lost 30% immediately. Once again he let the money stay invested. Because Brian is a consistent individual he continued to save and decided to invest $68,000 of savings the end of 1999. Yep, another downturn struck him. This time it was a 50% one that lasted until 2002. Finally, Brian invested his last big chunk of savings of $64,000 in October of 2007. The Great Recession then began and dropped his investments another 50%. After this Brian kept his savings going forward all in cash until his retirement in 2013. Everything he had already invested in the S&P500 stayed where it was.
So, what was the end result? Bad Luck Brian invested $184,000 in the S&P500 at the peaks over the last 40+ years. By leaving those investments in place he managed to turn his investments into $1.1 million. Not too shabby for someone with the worst investing luck. Brian was disciplined with his savings and investments and kept his focus on the long-term. Would you have the fortitude of Bad Luck Brian with your investments if every time you invested the market immediately dropped? Why not?