You are not alone if you're an investor spending some sleepless nights scared that your savings may be lost, and wondering whether it's time to just get out of the stock market. The extremely volatile day-to-day market swings are weighing on every investor's emotions.
Past market drops haven't been quite as steep as the one we are experiencing. Defined as a 10% drop from the recent highs, this correction took just six days. And the bear market -- a 20% drop from market highs -- occurred in just twenty days.
But while the angle of the drop may be steep, a look back at other severe market declines shows it was a good time to invest. Given a long-term time horizon, this one should, too.
A look back in history
In the midst of the crisis, it's normal for it to feel scary. And while the way down has been steep, the total percentage lost isn't something new. Let's take a look at the S&P 500 chart for the past twenty years.
Significant past drops include those related to 9/11, the Great Recession, and the short-lived bear market in December 2018. While these events and market reactions were noteworthy, the long term investor did well by either just holding through, or better yet, investing in the dips. Consider that the market corrections of 2013 and 2016 are barely even noticeable in the graph.
Where to invest
Investing in a time like this can seem overwhelming but there are many opportunities if you trust long-term growth. Look at some of the most obvious places and try to keep it simple.
Many blue chip companies have been around (and thrived) for decades through other crises. There's no need to get fancy when you can invest in stalwarts like Coca-Cola Co. (NYSE:KO), Home Depot Inc.(NYSE:HD) or Walt Disney Co. (NYSE:DIS) for places to invest.
A look at the twenty year charts will help to paint the picture. These returns vary versus the S&P, but one thing they all have in common is they made it through past market plunges and came out ahead on the other side.
It's still too early to gauge the exact impacts the COVID-19 pandemic will have on these businesses. The ramifications will vary by company, and some will fare better than others.
Disney had to close its amusement parks, cancel cruises, and the suspension or cancellation of sports leagues globally greatly affects its television programming and ad revenue. Home Depot relies on global supply chains that are being disrupted to some degree, and its store traffic may be affected as consumers are being told to stay home and avoid crowds. Coca-Cola is about as global as it gets.
Before the coronavirus crisis, however, these great American companies were all making investments for the future, and seeing results.
Built to last
Home Depot is in the midst of an $11 billion investment program called One Home Depot, that is focusing on the digital, online business and attracting more professional customers. Online sales have been growing at over 20% annually.
Coca-Cola's revenue grew 9% in 2019, with a 6% growth rate in its trademark brand as the company introduced new offerings like Coca-Cola Zero Sugar and a new juice and smoothie brand. Cash from operations was up 37%, and free cash flow up 38% for the year, which should be comforting in times of volatility like these.
Disney has had an exciting growth spurt with the acquisition of Twenty-First Century Fox, Inc., the introduction of its Disney+ streaming service, and a record $13 billion in worldwide box office revenue in 2019.
Right now, there's plenty to worry about as we work to get through the coronavirus pandemic and the serious economic impacts that will follow for years to come. But history shows that now is not the time to panic. And if you have money that can be invested in stocks -- meaning it won't be needed for years or decades -- today is probably a good time to invest in these familiar household names.