FACT #1
Investing in stocks is risky – but historically it’s been a risk worth taking

The COVID-19 pandemic – like the Cuban Missile Crisis in the 1960s, the 1987 Crash or the Financial Crisis in 2008-2009 – brought an end to one of the longest-running bull markets in history. But history has shown that patient investors who stayed in the market for a full cycle were rewarded. 

FACT #2:
You cannot predict the duration of market cycles

It is impossible to predict with precision when a pandemic will end.  The same is true for market cycles.  An analysis of market corrections of more than 5% since 2009 shows that they can last anywhere from a few days to a few months.  Recoveries can also vary greatly in their duration.

Source: Bloomberg, Morgan Stanley Wealth Management GIC.

WHAT MATTERS MOST: Your response to market volatility →

So how do you invest in a pandemic?

ANSWER: The same way you would in any market downturn.

The strategy you choose will determine the future trajectory of your wealth accumulation for years to come.

If you have a time horizon of at least five years, previous market downturns suggest that you remain invested and continue to contribute to your investment plan to take advantage when share prices are low. Of course, making regular investments cannot assure a profit or protect against loss, and you should consider your financial ability to continue making contributions through all market cycles.

We examined various scenarios over a period that encompassed the Financial Crisis of 2008-2009 and the subsequent recovery from that downturn. The results are illustrated in the chart below.

Hypothetical scenarios during a bear market

• Scenarios assume $100,000 at 12/31/2006 and monthly contributions of $1,000.
• MSCI World Index is the proxy for equities and US 3-month T-bill rate is the cash proxy.
• Outcomes are based on the three different investor behaviors for the period 12/31/06-12/31/19