The Worst Decade to Start Investing And What Survived It

Imagine you finally decide to start investing. You've saved up $10,000, done your research, and you're ready to begin your wealth-building journey. You invest on January 1st, 2000 - and immediately watch your portfolio lose 50% of its value over the next three years.

Welcome to the worst decade to start investing in modern history.

The Perfect Storm: 2000-2009

The decade from 2000 to 2009 was brutal for new investors. It included:

• The dot-com bubble burst (2000-2002)
• The 2008 financial crisis
• Two major bear markets
• Years of negative or flat returns

If you invested $10,000 in the S&P 500 at the start of 2000, you would have lost money for most of the decade. By the end of 2009, your investment would have been worth roughly $9,000 - less than you started with, even before accounting for inflation.

This is the nightmare scenario that keeps people out of the market. But here's what most people miss: even in the worst decade, certain strategies survived - and even thrived.

What Actually Survived?

1. Diversified Portfolios

While the S&P 500 lost money from 2000-2009, a diversified 60/40 portfolio (stocks and bonds) would have fared much better. Bonds provided crucial cushioning during both crashes.

A $10,000 investment in a 60/40 portfolio in 2000 would have been worth approximately $12,000-$13,000 by 2009. Not great, but positive - and much better than pure stocks.

2. Dollar-Cost Averaging

The investor who invested $1,000 per year from 2000-2009 would have had a completely different experience. They would have:

• Bought stocks at high prices (2000-2001)
• Bought stocks at low prices (2002-2003, 2008-2009)
• Averaged down their cost basis
• Ended the decade with a profitable portfolio

This is the power of dollar-cost averaging: it turns bad timing into good timing by spreading purchases over time.

3. International Diversification

While U.S. stocks struggled, international markets (especially emerging markets) performed better during parts of this decade. A globally diversified portfolio would have reduced losses.

4. Value Stocks

Value stocks (companies trading below their intrinsic value) outperformed growth stocks during this period. The dot-com crash hit growth stocks hardest, while value stocks held up better.

The Recovery: What Happened Next?

Here's the crucial part: investors who stayed the course and continued investing through 2000-2009 were rewarded handsomely in the following decade.

From 2010-2020, the S&P 500 returned approximately 13% annually. The investor who started in 2000 and held through 2020 would have seen their portfolio recover and grow substantially.

By 2020, that original $10,000 investment would have been worth roughly $30,000-$35,000 - despite starting at the worst possible time.

Other Terrible Starting Decades

The 1970s: Stagflation

The 1970s were brutal for different reasons:

• High inflation (peaked at 14% in 1980)
• Stagflation (high inflation + high unemployment)
• Stock market stagnation
• Oil crisis

An investor starting in 1970 would have seen minimal returns for a decade. However, the 1980s and 1990s were exceptional, and long-term investors were rewarded.

The Great Depression: 1929-1939

The worst starting point in U.S. history. An investor who bought stocks in 1929 would have lost 90% of their value by 1932. Recovery took decades.

However, even in this scenario, dollar-cost averaging and diversification would have helped. And by the 1950s, long-term investors were profitable.

What This Teaches Us

1. Starting Point Matters Less Than You Think

While starting in 2000 was terrible, investors who stayed the course for 20+ years still achieved solid returns. Time in the market matters more than timing the market.

2. Strategy Matters More Than Timing

The investor who used dollar-cost averaging, diversification, and rebalancing survived the worst decade. The investor who put everything in tech stocks at the peak did not.

3. Decades Are Arbitrary

2000-2009 was terrible, but 2010-2019 was exceptional. The investor who started in 2000 and held for 20 years experienced both - and came out ahead.

4. Emotional Resilience Is Everything

The investors who survived 2000-2009 were the ones who didn't panic-sell. They maintained their allocation, continued investing, and waited for recovery.

What Would Have Worked in 2000?

If you had to start investing in 2000, here's what would have helped:

1. Diversified Allocation

60/40 or 70/30 stocks/bonds would have provided cushioning. Pure stocks were crushed.

2. Dollar-Cost Averaging

Investing monthly or annually would have averaged down your cost basis and improved returns.

3. Rebalancing

Rebalancing during crashes (selling bonds to buy stocks) would have improved returns and maintained your risk level.

4. Long Time Horizon

Investors with 20+ year horizons recovered. Those who needed money in 5-10 years were in trouble.

5. Avoiding Hype

Investors who avoided dot-com stocks and stuck to diversified index funds fared better than those chasing the latest trend.

The Silver Lining: Starting After a Crash

While 2000 was terrible, 2002 and 2009 were excellent starting points. Investors who began investing after the crashes saw exceptional returns.

An investor starting in 2009 (post-crisis bottom) would have seen the S&P 500 return roughly 15% annually over the next decade. That $10,000 would have become $40,000+ by 2019.

This is why dollar-cost averaging works: you automatically buy more after crashes and less after booms.

How to Protect Yourself

You can't control when you start investing, but you can control your strategy:

1. Diversify

Don't put everything in one asset class. Spread across stocks, bonds, and potentially other assets.

2. Dollar-Cost Average

Invest regularly over time, not all at once. This averages out your timing.

3. Rebalance

Maintain your target allocation through systematic rebalancing.

4. Think Long-Term

If you need money in 5 years, don't invest it in stocks. Only invest money you won't need for 10+ years.

5. Test Your Allocation

Before committing, test how your allocation would have performed during different historical periods. This helps you understand your risk tolerance and set realistic expectations.

The best way to prepare for the worst? See how your portfolio would have performed during the worst decades in history. Our backtesting tool lets you test your exact allocation during the 2000-2009 period, for example. Understand your risk before you commit real money - it takes seconds.

Conclusion

The decade from 2000-2009 was the worst time to start investing in modern history. Yet investors who used proper strategies - diversification, dollar-cost averaging, rebalancing, and a long time horizon - not only survived but eventually thrived.

The key lesson: bad timing is inevitable, but bad strategy is optional. You can't control when markets crash, but you can control how you respond. The investors who panicked and sold in 2002 or 2009 locked in losses. The investors who stayed the course and continued investing were rewarded in the following decade.

If you're starting to invest today, you might be starting at a peak, a bottom, or somewhere in between. You'll never know until later. But if you use the right strategy - diversification, regular investing, rebalancing, and a long time horizon - you'll survive whatever the market throws at you.

The worst decade to start investing teaches us that timing matters less than we think, but strategy matters more than we realize. Focus on what you can control: your allocation, your contributions, and your emotional resilience.

Want to see how your strategy would have survived the worst decades? Test your portfolio allocation going back as far as 30 years with our backtesting tool. See how dollar-cost averaging, diversification, and rebalancing would have protected your portfolio - or where you might need to adjust.