It’s one year later since the stock market crash due to COVID, where it reached it’s lowest in the S&P 500 of 2,191 on March 23, 2020. Now as of March 23, 2021, the S&P 500 closed at around 3,910, which is approximately 78% increase. The major U.S. stock market indices have risen historically since the COVID lows, as the DOW increased 95%, and S&P 500 and Dow Jones both increased 76%. (See chart below)
Although it was during a time where millions of people were unemployed and the economy took a downturn, this was not reflected in the stock market. The U.S. and the world literally shut down due to the pandemic. So why did the stock market go up significantly? The U.S. government tried to jumpstart the economy by giving stimulus checks to Americans. People invested in the stock market. The individual or retail investors were sitting at home and with the ease of use of investing apps, such as Robinhood, you can buy and sell stocks from your phone.
According to a Wall Street Journal report, individual investors accounted for 19.5% of the shares traded in the U.S. stock market, which is up from 14.9% last year and double from 2010. Big tech stocks were the big winners and new young retail investors were willing to take on risks and invest.
Based on the graphic below provided by FOX Business News, if you invested $1,000 one year ago you would have seed that turn into $8,729 if you invested in Bitcoin, and $7,714 if you invested in TESLA.
If you panicked and sold your stocks during the stock market downturn, you lossed money. If you held your stock, in most cases your portfolio would have been better based on the major indices statistics above. If you took advantage and bought the stock when it was low, you saw huge profits.
Here are a few top stock performers in 2020:
Company Price Change If Invested $1,000
TESLA 743% $7,430
Moderna 434% $4,340
Peloton 434% $4,340
Zoom Video 396% $3,960
Etsy 302% $3,020
Can you imagine if you just invested $1,000, you could have turned that into a larger investment. The best time to invest is in a market downturn. It’s unusual to see returns as high as this. As they say, you should sow in the time of a famine.
We also saw Bitcoin, digital crypto currency, rise significantly. As more institutions accept bitcoin, the more we will see the continued increase in bitcoin. On March 23, 2021, the price of bitcoin was about $55,000.
This shows the importance of having an emergency fund. If you had an emergency fund as a source for immediate cash, and you lost your job or had a large expense, you wouldn’t have to cash out your stocks. Instead, you could have took advantage of buying more stocks at very low prices. Just think that you could have turned $1,000 into $7,430 in less than a year. Or you could have your money sitting in a savings account earning 0.1% interest.
Citation:
Getty Images by traviswolfe
van Doorn, Philip. “These are the Best Performing Nasdaq and S&P 500 Stocks of 2020.” MarketWatch, 2 January 2021, https://www.marketwatch.com/story/these-are-the-best-performing-nasdaq-and-sp-500-stocks-of-2020-2020-12-29
Excellent article!
Thank you!