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Investing Lessons of 2008: Make Investing Automatic

By Dan Caplinger - Updated Apr 5, 2017 at 6:52PM

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Even the best investors flinched. Did you?

2008 was a crazy year and nobody knows for sure what 2009 will bring. We’ve spent the past month reflecting on 2008 and making predictions for 2009. Be sure to check out all of our coverage, including more Investing Lessons of 2008.

Even the most-renowned investors learned some lessons the hard way this year. Now that the bear has shown us all some humility, you should try to turn one of the worst years in stock market history to your advantage -- by figuring out how you can use your experience to improve your investing in 2009 and beyond.

One lesson I learned this year reminded me how hard it can be to follow through on your investing plan. As much as I had trained myself over the years to be ready to pounce when the market gave me an opportunity to buy stocks cheap, I discovered that I got the best deals in the accounts where I have an automatic investing program in place.

The key to the bear: volatility
One unusual thing about 2008 was just how volatile the markets were. Repeatedly, stocks reeled from economic challenges, surged when government entities took steps to address those challenges, and took further hits when those steps didn't accomplish as much as investors had hoped they would. Triple-digit moves in the Dow became par for the course.

Granted, that volatility presented investors with some unprecedented opportunities to pick up bargains in stocks. Consider some of the stocks that set new lows for the decade over the past three months, along with their rise from those lows.


Recent 10-Year Low

Price on Dec. 30

Gain From Low

Home Depot (NYSE:HD)




Time Warner (NYSE:TWX)




Harley Davidson (NYSE:HOG)




Merck (NYSE:MRK)




Source: Yahoo! Finance.

Of course, there's no assurance that those lows will hold, despite some significant gains since then. But ask yourself this: Did you actually have the nerve to buy stocks at those levels, or did you end up not having the courage to pull the trigger?

Keeping the plan simple
With fundamental assumptions about the economy and the markets getting challenged nearly every day, it's hard to know how best to react. Even a single government program, such as the $700 billion bailout of Wall Street financial firms, has had consequences far beyond what one might have first expected when the bill was passed. While Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) have reaped direct benefits, so too have companies well beyond the financial realm, such as carmakers General Motors (NYSE:GM) and Chrysler. And the line for government assistance may well not end there, as many industries that have felt pain from the economic slowdown seem poised to lobby Congress for a piece of the stimulus pie.

Short-term events like these present uncertainty for investors. Yet from a longer-term perspective, most investing strategies remain sound. Therefore, keeping things like long-term automatic investing programs in place makes it easier to pick up bargains whenever they come.

Why go automatic?
With an automatic investing plan, you can't second-guess yourself. When stocks are falling, it's always tempting to hold off on making a purchase -- either because you're scared your stock will fall further, or you're actually hoping it'll drop so you can pick up shares more cheaply. Either way, you don't buy -- and may miss out on what proves to be the best price.

But you won't miss out if it's automatic. For instance, I buy shares of an S&P index fund for my daughter's college account on the 18th of every month. I haven't nailed the absolute lows, but I've grabbed bargains in October, November, and December -- bargains I expect to give me great long-term returns on those purchases.

While I've been completely comfortable with those purchases, I've found it much more difficult to deploy cash in other accounts where I don't have an automatic program in place. As attractive as stocks look, having to decide exactly when to buy can paralyze you.

So to make sure you take advantage of the current opportunity that stocks are giving investors right now -- set up an automatic investing plan for at least one of your accounts. That way, you'll be sure to pick up some shares at today's low prices.

See these articles to learn more:

Want help putting together an automatic investing program of your own? Let our Motley Fool Champion Funds newsletter help you find the best mutual funds to put your investing on auto pilot. A free 30-day trial opens the door to a wealth of information with no obligation.

Fool contributor Dan Caplinger plans to put more of his investing on auto pilot. He doesn't own shares of the companies mentioned in this article. JPMorgan Chase is a Motley Fool Income Investor recommendation. Home Depot is an Inside Value selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy is automatic.

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Stocks Mentioned

Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
$88.93 (-0.29%) $0.26
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$120.14 (1.48%) $1.75
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
$351.68 (1.08%) $3.77
Time Warner Inc. Stock Quote
Time Warner Inc.
General Motors Company Stock Quote
General Motors Company
$38.46 (1.34%) $0.51
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$310.69 (-0.29%) $0.89
Harley-Davidson, Inc. Stock Quote
Harley-Davidson, Inc.
$39.58 (1.83%) $0.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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