Index investors get a bad rap.

A lot of investment professionals think index investors don’t know what they are doing.

I don’t agree with that.

I think index investors are smart enough to know not to waste time trying to beat the market.

And they still make disciplined investment decisions.

What are index funds?

What did the 98% do?

To find out, we need to look back at the stock market during the summer and fall of 2011.

The S&P 500 ended up falling 19% and change fairly quickly, which while not technically a bear market by round number standard, really felt like one at the time.

What happened to cause this 19% fall?

The United States’ credit rating fell from AAA to AA.

So what did index investors do during this scary time?

In the first eight trading days of August, including two of the most volatile days since 2008, just under 2% of 401(k) participants at Vanguard made a change to their portfolios. In other words, over 98% stayed the course. Ninety-eight percent took no action. Ninety-eight percent took the long-term view.

I’m impressed.

Only 2% panicked and sold out of the market.

But were those 98% rewarded for their decision?

Anyone who bought U.S. stocks during this period or simply held on has been rewarded handsomely. Since October of 2011, the S&P has more than doubled, rising almost 140% on a total return basis.

Looks like good things do come to those who wait.


If you’ve read this blog much, you know I consistently say stick with your investment plan.

This is why.

When you stick with your plan and ignore short-term volatility, you make money.

A lot of money.

Have you held on through volatility to be rewarded later?

If so, let me know in the comments below.

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