3292: [Part 2] Why You Should Invest, Even in Peak Markets by Chelsea of Smart Money Mamas on Investment Advice

Summary

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Episode Overview

Podcast: Optimal Finance Daily | Host: Diania Merriam
Episode: 3292 – [Part 2] Why You Should Invest, Even in Peak Markets by Chelsea of Smart Money Mamas
Date: September 22, 2025

This episode, narrated by Diania Merriam, dives into the perennial question of whether you should invest when markets are at all-time highs. By sharing data-driven insights from Chelsea of Smart Money Mamas, Diania explores the historical resilience of long-term investing—even in the face of recessions—and emphasizes how discipline and time in the market can outweigh fears of poor timing. Diania also reflects on her own investing philosophy, providing personal insights into managing risk and emotional responses to market volatility.

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Key Discussion Points & Insights

1. Lessons from the Great Recession

• Historical Case Study:

  • Investing $10,000 at the S&P 500 peak (10/9/2007) right before the Great Recession.
  • Value dropped by over 50% ($10,000 → $4,322 by March 2009) but fully recovered by August 2013 and continued climbing.

• Takeaway: Despite investing at the “worst” possible time, staying the course led to substantial gains over the long run.

  “By holding steady and recognizing that the market naturally rises over time, you would have recouped your whole investment by August of 2013. By now you would be up over $5,000. Your average annual return would be 4.7% with a total return of 54.7%.”
  — Chelsea (via Diania, 02:57)

2. The Power of Dividends and Reinvestment

• Dividends Matter:

  • Many S&P 500 companies pay dividends, either as cash or via reinvestment into more shares.
  • Reinvesting dividends would have led the hypothetical $10,000 to grow even more:
    • $18,810 over the period for a 6.5% annual return—nearly matching long-term stock market averages (03:29).

• Aggregate Data:

  • Across ten previous U.S. recessions (since 1948), only in one case would a $10,000, non-dividend-reinvested investment have lost money over ten years.
  • On average, even investing at the “peak” before a downturn:
    • Without dividends: $10,000 grows to $21,659 in 10 years (7.1% annual return)
    • With dividends reinvested: $10,000 → $32,906 (11.6% annual return) (04:36–05:13)

• Key Insight:

  • Even the worst-timed investments can yield strong returns over time if dividends are reinvested and investments are left untouched.

  “You would have to fight through seeing your account balance fall through one and sometimes two recessions. But if you did, your money would be worth a whole lot more than if you just buried it in your backyard.”
  — Chelsea (via Diania, 05:23)

3. The Emotional Toll & Generational Lessons

• Millennial Skepticism:

  • Many Millennials experienced formative years during the Great Recession, leading to a skepticism and reluctance to invest.

  “Too many of us have let the memory of the bad keep us from seeing the truth of the good.”
  — Chelsea (via Diania, 05:52)

• Impact of Panic Selling:

  • Emphasizes that only those who “panicked and took their money out of the market in the darkest days of 2008 and 2009… never had a chance to benefit from the strong market recovery.” (06:20)

• Central Advice:

  • “If you can have the discipline to invest for the long term, the sooner you get your money invested in the market, the more wealth you’ll have in the future.” (06:38)

4. Diania’s Reflections: Navigating Risk and Volatility

• Summarized Takeaways:

  • (1) Investing is essential to meet financial goals
  • (2) Accepting some risk is necessary
  • (3) Long-term mindset is critical (08:52)

• Diania’s Coping Strategies with Volatility:

  • Adopts a passive approach, rarely checking market ups and downs:

    “I look at the money I invest like a tax that I’m paying to my future self. I see that money as not really mine, meaning present-day Diania has no claim to it.”
    — Diania Merriam (09:38)

  • Maintains a strong cash position (a year’s worth of expenses) to insulate against short-term needs and avoid dipping into investments.

    “A passive investment style alongside some blissful ignorance and a long-term focus makes the risk of investing much more tolerable for me.”
    — Diania Merriam (09:59)

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Notable Quotes & Memorable Moments

• On staying invested through market crashes:

  “If you managed to invest your $10,000 at the exact peak before a downturn and left it invested for 10 years, you would see an average annual return of 7.1% without dividends and 11.6% if you had dividends reinvested.”
  — Chelsea (via Diania, 04:55)

• On learning from past recessions:

  “Our parents’ retirement savings were only decimated if they panicked. If they let that fear settle in and took their money out of the market in the darkest days... they never had a chance to benefit from the strong market recovery over the past eight years.”
  — Chelsea (via Diania, 06:14)

• Diania on emotional separation from invested money:

  “Whether my portfolio is up or down doesn’t really have an effect on me right now and I can happily ignore it.”
  — Diania Merriam (09:41)

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Timestamps for Key Segments

• [00:57] — Main episode content begins
• [01:00–03:45] — The Great Recession investment scenario and recovery
• [03:47–05:27] — Data on returns through ten prior recessions
• [05:30–06:39] — Psychological barriers, lessons for Millennials, power of long-term investing
• [08:51–09:59] — Diania’s summary and personal strategies for long-term volatility management

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Episode Flow and Utility

This episode masterfully weaves historical data, behavioral insights, and practical strategies, making it highly relevant for anyone anxious about investing at market highs. The consistent message is clear: the market’s long-term upward momentum, especially when harnessing dividend reinvestment and emotional discipline, has repeatedly rewarded patience—even in the wake of severe recessions. Diania’s closing perspectives provide actionable techniques for developing the mindset and structure to invest confidently through inevitable ups and downs.

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Transcript

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This is Optimal Finance Daily why you should invest even in peak markets part 2 by Chelsea of smart moneymamas.com the Great Recession On October 9, 2007, the S&P closed at 1,565.15. This would be the peak day before the worst recession the US Economy has seen since the Great Depression. For an example, we'll assume you invested $10,000 on that exact day every year. For the next year and a half, you watch your hard earned investment go down. Most people would take this as a sign to sell, but this is what would happen if you didn't. In March of 2009, your $10,000 would have fallen to $4,322 in value. A greater than 50% drop would be a pretty big gut punch. But by holding steady and recognizing that the market naturally rises over time, you would have recouped your whole investment by August of 2013. By now you would be up over $5,000. Your average annual return would be 4.7% with a total return of of 54.7%. Not the 7% long term average, but well above the 0% of your checking account and the 1 to 2% annual inflation rate. And this is forgetting one very important dividends. Many stocks in the S&P 500 pay dividends. So either you would have been receiving some cash payout on your $10,000 investment along the way, or you could have chosen to reinvest the dividends over time. Reinvestment is exactly what it sounds like. Instead of getting a quarterly dividend check. Your fund provider would just deposit that money right back into your investment account. Had you chosen reinvestment, your account value would be $18,810 today for a 6.5% annual return, almost in line with the long term average of 7% every recession since 1950. For the great Recession, it seems like you would have done quite well even if you invested on the worst possible day before the downturn. What I wanted to know was does it hold true in other cycles as well? This 10 year time span between cycles isn't typical. Usually a cycle happens every six to nine years. So if you invested right before a downturn, you could potentially see two declines.

[E]

Over your investment period.

[D]

To find out the answer for our unlucky investor, I looked at the investment returns during the 10 recessions prior to the Great Recession. The National Bureau of Economic Research tracks market recessions and contractions since the mid-1800s, and the Bureau of Economic Analysis measures recessionary periods based on gross domestic product. In only one out of the past 10 recessions, starting in 1948, would you have seen your $10,000 investment lose money over a 10 year period and only then if you had chosen not to reinvest the dividends on average for all recessions, including the Great Recession. If you managed to invest your $10,000 at the exact peak before a downturn and left it invested for 10 years, you would see an average annual return of 7.1% without dividends and 11.6% if you had dividends reinvested. This means on average, even if you had the worst recession market timing possible, your $10,000 would more than double to $21,659 over a 10 year period. If you had chosen to automatically reinvest your dividends, your $10,000 would more than triple to $32,906. You would have to fight through seeing your account balance fall through one and sometimes two recessions. But if you did, your money would be worth a whole lot more than.

[E]

If you just buried it in your backyard.

[D]

Don't let your money sit idle. Millennials came of age during the Great Recession. We heard how our parents saw their 401k and retirement savings decimated. We faced tough job markets at graduation. So today many of us have an intense distrust of Wall street and the stock market. But too many of us have let the memory of the bad keep us from seeing the truth of the good. We have the opportunity to learn from a severe cycle that happened early in our lives. Our parents retirement savings were only decimated if they panicked. If they let that fear settle in and took their money out of the market in the darkest days of 2008 and 2009, they never had a chance to benefit from the strong market recovery over the past eight years. Investing in a peak market isn't easy, but if you can have the discipline to invest for the long term, the sooner you get your money invested in the market, the more wealth you'll have in the future. Your money works for you. Don't let it sit idle. You just listened to part two of the post titled why you should invest even in peak markets by Chelsea of smartmoneymamas.com this message is brought to you.

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[D]

Made simple I got three main points out of this article. First, you need to invest to reach your financial goals. Second, you need to be comfortable with some risk and third, you need to be in it for the long term. The way I see it, the fact that I'm a long term investor is intrinsically tied to my ability to handle the risk of investing. Despite the fear driven decision I told you about yesterday, I accept that investing in the stock market requires a tolerance for volatility, especially when you have a 100% stock portfolio like I do. I deal with the volatility in two ways.

[E]

Firstly, I just don't watch the rollercoaster.

[D]

Ride of the stock market very closely. I look at the money I invest like a tax that I'm paying to my future self. I see that money as not really mine, meaning present day Diana has no claim to it. So whether my portfolio is up or down doesn't really have an effect on me right now and I can happily ignore it. Secondly, I pair my investments with a really strong cash position. Most people think that I'm holding way too much cash because I have about a year of expenses just sitting there earning no meaningful interest. But for me, holding this much cash provides extra insurance that whenever financial needs arise, it's unlikely I'll need to tap into my investments anytime soon so I can truly leave them to grow over the long term. A passive investment style alongside some blissful ignorance and a long term focus makes the risk of investing much more tolerable for me. That's a wrap for another Monday show. Have a great rest of your day and start to your week and I'll be back tomorrow where your optimal life awaits.