Unit 3 · Level 3 · DCA & lump sums
Through the storm
2008: the S&P 500 slid about 57% from peak to trough over 17 grinding months, and took roughly five years to reclaim its high. March 2020: a 34% plunge in just five weeks, then new highs within about six months. Different speeds, same lesson: the investors who kept their monthly buys running came out ahead of the ones who fled and waited for 'safety'.
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What you get asked
Match each crash to its shape
Crashes don't follow one script. Some grind, some snap back. Since you can't know which kind you're in, the plan can't depend on knowing.
An investor DCA-ing €300/month straight through 2008-09 was, in hindsight, doing what?
Every instalment in late 2008 and early 2009 bought shares near prices not seen again since. It felt like burning money at the time, which is exactly why automation had to do it.
The investor who sold in March 2020 and waited for 'things to calm down' mostly missed the ___ that followed within months.
The market reclaimed its highs in roughly half a year. Recoveries often front-load their gains into a handful of days; miss those and you miss most of it. League 2's market-timing lesson, now with scars.
During the five years the market needed to recover after 2008, what was quietly working for disciplined investors?
'Back to the peak' understates the DCA investor's result: their crash-era shares were bought far below the peak, so their recovery finished years earlier than the index's did.
What should a long-term investor with decades of horizon DO during the next crash?
Nobody rings a bell at the bottom, and 'confirmed recoveries' are just higher prices. The boring plan, followed through the scary part, is the whole game. 🐜
The rest of this unit
How money gets INTO the plan: drip by drip, all at once, and through the storms.