On February 19th, 2025, the S&P 500 hit a new all-time high. After posting back-to-back annual returns of over 20% in both 2023 and 2024, the market carried its momentum into the new year. Optimism was high. FOMO, the fear of missing out, was everywhere. Volatility was low. The VIX, barely registered concern. Greed had replaced caution.
Many 401k investors stayed on course, continuing their regular weekly contributions. But those with after-tax cash were aggressively pouring money into the market, fueling a buying frenzy. Then reality hit.
Concerns about tariffs, inflation, and a possible economic slowdown started to creep in. Markets wobbled. Nervousness set in. And by early April, fear took over. What began as jitters evolved into full-blown panic. Investors wanted out. Headlines all read “correction”. The market plunged nearly 20% from its highs.
But not everyone flinched.
401(k) investors, by and large, did nothing. They didn’t panic, didn’t sell, didn’t shift to cash. They continued to buy at cheaper prices. without emotion, without hesitation. Stone-faced and systematic, their automated contributions bought more shares as prices fell. This is dollar-cost averaging in action.
On April 8th, the market quietly began its recovery. Skeptics called it a dead cat bounce. Many investors, still shaken by recent losses, stayed on the sidelines. On April 7th, they couldn’t stomach looking at their account value
From that point forward, the market roared back, rising 19.7%* from April 8th to May 16th.
The lesson?
You can be overweight or underweight the market, but you can’t afford to be out of it. Missing even a few weeks can cost you years’ worth of returns. Emotional investors trying to time their exit and reentry never stood a chance of recapturing that rally.
401(k) investors weren’t necessarily smarter. They were just consistent. They had a long-term plan to build wealth. They didn’t allow short-term noise to derail their long-term strategy.
In the end, they were emotionless, and that made all the difference.
*Fact Set 08-APR-2025 to 16-May-205
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