Filed under → The Dead Investor Test
The best investor in the room is dead.
You had money in the market when it fell apart. Everybody did something about it. Pick a real crash, pick what you did at the bottom, and watch it run all the way to today on the actual numbers. The person who did nothing is very hard to beat.
The bottom
The whole ride
Everyone who was in that room
Same crash, same starting balance, same monthly deposit. The only thing that changed is what each person did in one month. Three of the four put in exactly the same money.
And the one who never came back at all
$0
So how do you become the dead one
Step 01
Automate the deposit
Set a transfer that leaves your checking account the day after payday and buys a broad index fund. If the decision happens every month, you will eventually decide wrong. Apps like Acorns do this for you starting at a few dollars a week.
Step 02
Delete the app
Not the account. The app. Checking your balance during a crash is how selling happens. The only people in this test who lost money to a crash are the ones who watched it.
Step 03
Decide now, not then
Write down what you will do the next time the market drops 30%, while nothing is happening. The answer should be "nothing" or "keep buying." Then you are just following instructions instead of making a call while scared.
The math, in the open
The numbers are real. Every balance on this page is run through the actual month-end values of the S&P 500 total return index, dividends reinvested, from January 2000 to this month. No average annual return, no smooth curve. The crash you pick really happened and it played out exactly like this.
How each month works. Your balance grows or shrinks by the index move for that month, then the deposit goes in at the end of the month. Every scenario starts at the market peak and ends on the same date, so they are always directly comparable.
What "sold everything" means. At the month the index bottomed, the whole balance moves to cash and the monthly deposits go to cash too. After the number of months on the dial, all of it goes back into the market in one lump. Cash earns 2% a year the entire time, which is generous for some of these stretches and stingy for others.
What "stopped adding" means. The balance stays invested. Only the new deposits pause, and they pile up in that same 2% cash. When the pause ends, the pile goes into the market. That is the kind version. Plenty of people spend it instead.
What "bought more" means. The monthly deposit doubles for the length of the dial, then goes back to normal. Note this is the one choice that puts in extra money, so it is not a fair fight. It is in here because it is the only thing that reliably beats doing nothing, and because almost nobody does it.
Selling at the exact bottom. Nobody knows they are at the bottom. That is the point. The bottom is where fear peaks and it is where the selling actually happens, which is why the test puts the decision there. Move the dial to see how much of the damage is the getting out versus the staying out.
Month-end closes hide the worst of it. These are monthly numbers, so the drops shown are smaller than what people lived through. In 2020 the index was down about 34% at its worst day and only about 20% at the worst month-end.
Not in here. Taxes, and selling a taxable account is a taxable event, so the real cost of panic is usually higher than what this shows. Also no trading costs, no fund fees, no inflation adjustment. Past returns do not predict future ones.
Show me the numbers
Balance at the end of each year, from the peak to today.
| Year | Did nothing | You | The gap |
|---|