Learn the stock market › Saving for the long term › Lesson 2 of 5
Investing monthly when the market falls
The same amount buys more when prices are low
A fixed amount each month buys few shares when the price is high and many when it is low. So the average price you pay per share ends up below the average of the prices. The average cost calculator works the same way: every purchase pulls your average toward the price you paid.
For someone who invests every month, a fall is not only a loss. It is also a time when new money buys cheap.
The financial crisis, month by month
Here someone started putting $500 a month into the S&P 500 in October 2007, the month the index closed highest before the financial crisis. What the crisis was is in the lesson on the 2008 financial crisis.
| Month | What happened | Paid in | Value |
|---|---|---|---|
| Oct 2007 | Index at its top, first purchase | $500 | $500 |
| Feb 2009 | Index at its low, −52.6% from the top | $8,500 | $5,404 |
| Nov 2009 | Savings back above what was paid in | $13,000 | $13,200 |
| Mar 2013 | Index back at its top | $33,000 | $43,669 |
The index fell 52.6% to February 2009. By then the saver had paid in $8,500, and the savings were 36.4% below that. That is less than the index's fall, because the later purchases were made at lower prices.
By November 2009, after 26 deposits, the savings were worth more than what had been paid in. The index needed 66 months to reach its top again, and by then the savings were worth 32% more than the $33,000 put in.
Five falls
Each row starts investing in the month the index closed highest before the fall.
| Top | Index fell | Savings back in profit | Index back at its top |
|---|---|---|---|
| Aug 1929 | −86.0% | Jun 1933 | Sep 1954 |
| Dec 1972 | −46.2% | May 1975 | Jul 1980 |
| Aug 2000 | −46.3% | Dec 2003 | May 2007 |
| Oct 2007 | −52.6% | Nov 2009 | Mar 2013 |
| Dec 2021 | −24.8% | Mar 2023 | Dec 2023 |
The pattern is the same in all five: the savings were in profit long before the index was back. The worst was August 1929. The index fell 86% and reached its top again only in September 1954, 25 years later. Someone investing every month from the top was in profit again by June 1933, after 47 deposits. How deep and how long each crash went is in the study of every stock market crash since 1928.
But only if the deposits continue
This depends on the deposits continuing through the whole fall. Someone who stopped at the bottom, or sold, did not share in the recovery the way the table shows. And once the plan has run for many years most of the money is already in, so a fall near the end hits harder than one at the start. The dollar cost averaging calculator shows this: choose an amount and a number of years and see every start month since January 1928.
Whether it is better to put everything in at once is in Lump sum or monthly investing.
Test yourself
You invest $100 a month. The price is $10 one month and $5 the next. How many shares have you bought?
How we calculated
- One purchase at each month's last close, from the top month. The value is the shares times the month's last close.
- S&P 500 closes to Nov 6, 2026, without dividends. With dividends the savings would have been back sooner.
- Commissions, fees and taxes are not included.
- "In profit again" is the first month after the index's low when the savings were worth at least what had been paid in.