Proof That Shares Can Make You Money Even With A Crash

Proof That Shares Can Make You Money Even With A Crash
Underwater by Andy Deitsch. Why?

Ten years on from the date the Dow Jones hit a new high, investing at the top of the market in shares of some of the world’s largest companies would have been a good bet.

Investing In Shares At The Market Peak Can Be Profitable

The Illustration Below Reveals A Decade Of Share Performance

On October 11, 2007, the Dow Jones Industrial Average hit a new high of 14,198.10 in intraday trading.

Following the stockmarket crash in 2008, it took almost six years to reach that high again. 

It’s a rather over-used phrase, but in that period, it was certainly a roller coaster ride, with a slow and unpredictable recovery.

Some of America’s largest, well known companies are pretty big over here too.  So what if you’d bought $1,000 of shares in some of those companies, at the pre-crash high in October 2007?

The fascinating chart below 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.

shares

The clear winner is Netflix, making you a staggering 51 times your investment.  It launched its streaming service around 10 years ago.

Amazon shares wouldn’t have been that shabby, clocking up a ten times multiple.  Even boring ‘blue chip’ shares like FedEx and McDonald’s would have doubled your money. 

The only company worth less (on the illustration above) is GE, though it’s worth noting that these shares would have paid a dividend along the way.

Historically speaking, over long-term timeframes, the stockmarket has almost always increased in value.  And it's true for this 10 year period too.

shares

For people that bought shares at the top of the market in October 2007, a year later, it might have felt like the world was ending and that a recovery was nearly impossible.  But in the full period, the Dow Jones grew by 66 per cent.

With hindsight, it would have been better to have invested at the market low in 2009.  Contrarian investors who jumped in then would have seen their money more than triple in value by today.

While it can certainly be argued that in October 2007, share prices were inflated through quantitative easing, record-low interest rates, and other controversial central bank tactics from the crisis onwards, such a portfolio of shares created at the 2007 peak would have turned out fine.

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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