Fortunate investment of an unfortunate investor

According to a common misconception, investing is much like gambling: whether you win or lose largely depends on luck. But what if you are just unlucky? One day you may be investing at the peak of growth, and the next thing you know, the market drops by 50%! What if this happens over and over again? Can you ever make a profit? Turns out, you can! To show how, we would like to share with you a story about Bob.

Bad investments lead to...profits?

In 2014 Ben Carlson, the director of institutional asset management at Ritholtz Wealth Management, came up with a fictional story about Bob, “the worst investor of all time”. Despite the unflattering title, he still managed to increase his assets by 5.5 times after 40 years of investment!

Bob began his journey in 1970 with a simple plan in mind: each year he would put aside $2,000, increasing this sum by another $2,000 every decade until his retirement in 2013. So, in the 70s he would put aside $2,000 yearly, in the 80s — $4,000, the 90s —  $6,000 and then 8,000$ until he would eventually retire.

As planned, by 1972 he had saved $6,000. He chose to put his money in the S&P 500 Index fund (there were no index funds in 1972, but let’s assume this one did exist). However, in 1973-1974 the market dropped by almost 50% due to the collapse of the Bretton Woods system, not to mention the onset of the oil crisis. Needless to say, Bob's money was gone.

Following that, Bob stayed away from investing for the next 15 years. Nonetheless, he continued to accumulate savings, keeping to his initial plan. In 1987, once again at the peak of the share price, Bob put the $46,000 he had saved in the same S&P 500 Index fund. Right on the verge of Black Monday. This time the market downturn was 30%.

Bob's next investment was in 1999. This time he put to use $68,000 of his savings, only for the market to crash once again by 50% (recovering fully only in 2002).

Finally, before retiring, Bob decided to make another big purchase. In October 2007, he invested the last of his savings ($64,000). Thus, Bob concluded a series of terrible investment decisions by choosing the moment right before another crash, when the stock market fell by 50% due to the US mortgage crisis.

However, in the 40 years of his unfortunate investment career, Bob did make one good decision. He never sold any of the previously purchased shares, despite the deepest market downturns. In the end, after the last crisis had died down, Bob woke up a millionaire! After 40 very rocky years, he had $1.1 mln to his name, having initially invested only $184,000. This is the result of the average yearly growth of shares by 10%.

Putting the cards on the table

“How could this happen!?”, you may ask. Here is the secret:

  1. Bob had planned out his savings from the start, never deviating from his long-term goals.
  2. Without selling a single share, Bob retained the potential for their growth. While it was really difficult to live through all the downturns, Bob did not succumb to the crises, knowing that the market would always recover. After all, losses are an integral part of investing.
  3. Bob’s investment plan was fairly simple: he put his money in an index fund that accumulates ordinary shares and company bonds with the most liquidity. By investing in an index fund, you are not putting money in stocks of individual companies, but in the country's economy as a whole. While a company can fall in price or even dissolve, the country's index is extremely likely to see long-term growth.

Does this work for P2P?

If someone were to put their money in a P2P platform before the financial crisis of 2007, they would still have the opportunity to make a profit. They would simply have to follow Bob’s example: plan the savings out from the start and continue investing through the unprofitable first year. This remains to be the case even today, as the world suffers the consequences of the Coronavirus crisis.  At the height of the pandemic, the P2P market declined by 40% overall. Still, the platforms have already started to recover, reaching the volumes of the pre-crisis period. Despite the pandemic, the P2P lending market is set to grow significantly. For an instance, Statista predicts that in the next 4 years the amount of transactions in the alternative lending market will experience an annual growth of 8%. Also, according to a recent study by, the market will fully recover by Q4 2021 and hit €6.2 bn under the neutral scenario.

So, to answer the question of whether Bob would have yielded profits from a P2P investment: yes! Naturally, he would have to pick a reliable P2P platform, similar to how he chose to go with the S&P 500 Index fund. In other words, if you choose your platform wisely, stick to your plan, remain calm and rational, you can achieve the desired income even during a period of general economic downturns. Moreover, the increased need for affordable borrowing among the public allows the P2P segment to quickly “get it together”.

If by some luck Bob had invested on a reliable P2P platform before the Covid-19 struck, he would have remained in the clear even during the pandemic’s peak. In fact, he would likely have received additional benefits. Some of the platforms introduced additional neat bonuses during the crisis, allowing investors to benefit more.

There is, however, one crucial mistake Bob made that we just cannot excuse: he put all his eggs in one basket. Diversification of assets allows you to lower the associated risks, which is why it is best to avoid focusing on one thing, no matter how promising it may seem. Let your investment portfolio evolve smoothly as you become more experienced and knowledgeable. Planning, patience and tenacity will go a long way towards making your investments as consistent and efficient as possible.


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This calculator gives you just a rough estimate. Your final income depends on various factors and might be greater or less than calculated results.