5 February 2018: Volmageddon: the Dow drops 1,175 points
The Dow fell 1,175 points, then its largest point drop ever, as a sudden spike in volatility blew up products that had bet volatility would stay low. One popular exchange-traded note lost nearly all its value overnight and was shut down. Investors learned that a strategy which pays a little every day for years can lose everything in one afternoon. Picking up nickels in front of a steamroller, again.
The lesson: Steady small gains from selling insurance against chaos can vanish when chaos finally arrives.
What it meant for investors
$1,000 in S&P 500 index fund at the start of 2018 → $2,519 today, vs $2,519 in the S&P 500.
We start the clock at the start of 2018, the year it happened. That is 2.5 times the money, but $0 less than a plain index fund made over the same years.
What S&P 500 index fund teaches: Owning the whole market removes the risk of picking the wrong company but not the risk of a lost decade, so time horizon matters as much as diversification.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2015 | $2,060 | $3,301 | $3,301 |
| 2018 | $2,700 | $2,519 | $2,519 |
| 2020 | $3,250 | $2,092 | $2,092 |
green = beat the S&P 500 · red = lost money
What if you bought S&P 500 index fund? Every starting year and the full story →
More S&P 500 index fund history
- 19 February 2020: The S&P 500 hits a record before COVID
- 29 February 2020: The US reports its first COVID-19 death
- 3 March 2020: The Fed makes an emergency rate cut
- 6 March 2009: The S&P 500 touches 666
- 9 March 2009: The bear market bottoms
- 12 March 2020: Black Thursday: the worst day since 1987
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
Play Sixty-40