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Old 11-23-2014, 08:12 PM   #41
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This was a really useful look back. I wasn't on the board at that time as I was in my hard charging young exec mode (blech). I withstood the downturn well because my paper losses were balanced by savings and bonuses and a well-timed maturing of company stock -- when I look at my records I see net worth in 2008 ended down only 1%. The next time around, since I am now out and free, it won't be so easy to stay calm, I am sure! But I do think shared wisdom and company can help us all through the decisions we will need to take - even if that decision is to do absolutely nothing and wait it out. I have a stress test built into my basic spreadsheet and I feel confident at 25% or even 30% down - but modelling it is different from living it!


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Old 11-23-2014, 08:15 PM   #42
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I love to take credit in hindsight. Investing since 1966 becoming a Boglehead along the way - I can brag about staying the course with my consolidation into VG Target Retirement in 2006.

Truth told the drop did get a tad chewy and my Ho Hum was sometimes thru gritted teeth.

heh heh heh - with Mr Market back up I'm a HERO in hindsight and can deny any fleeting thoughts of 'this time it's different'. Steely eyed investor.

But emotions is emotions - yell at tv during football games and shed a tear when the Royals lost game 7 even though I rarely watch baseball.
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Old 11-23-2014, 08:17 PM   #43
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I have a stress test built into my basic spreadsheet and I feel confident at 25% or even 30% down - but modelling it is different from living it!
That was a huge lesson learned for those of us who were retired and living through it. Many who were sure they knew their risk tolerance discovered they really had no clue.
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Old 11-23-2014, 08:38 PM   #44
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I have a stress test built into my basic spreadsheet and I feel confident at 25% or even 30% down - but modelling it is different from living it!
Quite a few folks saw their net worth almost cut in half in late 2008 early 2009. You really have to prepare to weather 40% down.

At least that cut in half didn't last much longer. But next time? You never know!
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Old 11-23-2014, 09:23 PM   #45
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It was all over the dartboard , from eminent apocalypse , to "No big deal , just hunker down"

I will paraphrase about the main lesson I leaned from one of Buffet's books: "If you can't stomach seeing your investment portfolio go down 50% for up to 10 years, you have no business being in equities" . This is as true today as ever, I have had aquantenances think being invested in mutual funds somehow protect you from this Just look at the NASDAQ composite from 1999 to present.
Mmm- that seems a bit extreme...has there ever been a market that went down 50% for 10 years? Even during the long slumps of the Great Depression and modern day Japan there have been ups and downs and dividends, so while I am sure such a gloomy scenario is possible--anything is--that seems to be asteroid planning to me...


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Old 11-23-2014, 10:16 PM   #46
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Mmm- that seems a bit extreme...has there ever been a market that went down 50% for 10 years? Even during the long slumps of the Great Depression and modern day Japan there have been ups and downs and dividends, so while I am sure such a gloomy scenario is possible--anything is--that seems to be asteroid planning to me...
Lakewoods's paraphrase is close. I found what apparently is the actual quote (no mention of length of downturn) here in a Forbes's list of Buffett quotes: Top 40 Buffett-isms: Inspiration To Become A Better Investor - Forbes

Quote:
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”
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Old 11-23-2014, 10:25 PM   #47
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That was a huge lesson learned for those of us who were retired and living through it. Many who were sure they knew their risk tolerance discovered they really had no clue.
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Old 11-23-2014, 10:31 PM   #48
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Mmm- that seems a bit extreme...has there ever been a market that went down 50% for 10 years? Even during the long slumps of the Great Depression and modern day Japan there have been ups and downs and dividends, so while I am sure such a gloomy scenario is possible--anything is--that seems to be asteroid planning to me...
If you are down -40%, it is not going to seem out of the question that a further nasty drop is just around the corner. Animal instincts can take over. The Great Depression was incredibly volatile in equities. More like September and October 2008 for a few years running. Try monthly declines of -10% or -15% with +10% other months. Do this for a few years and many would just pop a gasket here.

Here are some monthly returns from the 1930's to show what I mean. I'm sure many were blown away well before this stuff even took place:

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Old 11-23-2014, 10:59 PM   #49
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Good for you guys with a higher risk tolerance, but I read things like the article in the link below and know I could never stomach this at the ages DH and I are at now:

"Between October 2007 and March 2009, the Standard & Poor's 500 lost 55 percent of its value. An investor with a $1 million exposure to an S&P 500 fund would have lost $550,000 in the span of 17 months. Unfortunately, many investors' retirement accounts were top-heavy in equities and, as a result, suffered significant losses in the recent crash. Nearly one in four investors ages 56 to 65 had more than 90 percent of their account balances in equities going into 2008, and more than two in five had more than 70 percent in stocks, according to the Employee Benefit Research Institute."

Source: Do stocks make sense for the 50-plus crowd?

Our plan for retirement is just to have a pleasant life with low overhead and continue to grow our nest egg with continued savings and maybe part-time work, and not mainly stock market returns.
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Old 11-23-2014, 11:09 PM   #50
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Several of the posters on that thread haven't been around for years. Wonder what happened to them?
Perhaps we should call them up at work and ask them

Sorry, that was kind of uncalled for, especially as I've been thinking of looking for a part-time job recently.
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Old 11-24-2014, 12:09 AM   #51
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Perhaps we should call them up at work and ask them

Sorry, that was kind of uncalled for, especially as I've been thinking of looking for a part-time job recently.
Right. At 21 yrs of ER and counting things are going so well maybe I should get a job(part time or full) just to tick myself off.

heh heh heh - It would remind me how good things are - AND reinforce my courage to keep saying NO to those 'opportunities to volunteer'.
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Old 11-24-2014, 12:47 AM   #52
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By March 2009, our portfolio had suffered a 40% drop from the peak in 2007. It was actually lower than where we had started in 2000. And that was in nominal terms. I didn't dare calculate in real terms. We had ~55% in equity funds at the time. Many bond funds were creamed too.

We actually hadn't been drawing down our portfolio during the period, hoping to let it grow for 10 years before drawing. It would have been far worse if we had.

Fortunately the situation improved quickly after that, but it still took several years to recover in real terms.
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What was the tone of this forum during the crash?
Old 11-24-2014, 12:50 AM   #53
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What was the tone of this forum during the crash?

I was around and did what I should do (buy more), even though it did not feel good. I was accumulating at the time, with good employment, so that provided a certain amount of safety. But I also remember being down six figures, which was a first and a bit surreal.

I went from about 90% equities to over 95% at the time. The one memory I have is audreyh1 posting about feeling not so good about rebalancing into a down market multiple times with no end in sight. I related to this, since I was doing the same and why after five years I still remember reading her words. The first time you do this, it's not so bad. After a few times, it doesn't feel that great. Makes you feel like you're just throwing away good money after bad. In the end, it all worked out, fortunately.

It makes me recall the quote from Fred Schwed, which I read in Bernstein's books, "Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. Art cannot convey to an inexperienced girl what it is truly like to be a wife and mother. There are certain things that cannot be adequately explained to a virgin either by words or pictures. Nor can any description I might offer here even approximate what it feels like to lose a real chunk of money that you used to own."
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What was the tone of this forum during the crash?
Old 11-24-2014, 01:36 AM   #54
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What was the tone of this forum during the crash?

Back then, I was in my early 30s. DW and I were working and making good money, and we only had a modest amount of money invested in equities. Except during the darkest days of October/November 2008, we managed to keep our net worth pretty stable from October 2007 to March 2009 by saving as much of our income as possible. So we did not feel the pain of the Great Recession as much as others did here. But next time the market drops, we won't be so lucky. We have a lot more to lose now, I quit working a while ago, and DW is winding down her career.

The mood on the forum was definitely somber, but it was still a good place to find much needed sanity and of course commiserate. This forum inspired me to stay the course and it paid off on the rebound.
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Old 11-24-2014, 01:43 AM   #55
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I was around and did what I should do (buy more), even though it did not feel good. I was accumulating at the time, with good employment, so that provided a certain amount of safety. But I also remember being down six figures, which was a first and a bit surreal.

I went from about 90% equities to over 95% at the time. The one memory I have is audreyh1 posting about feeling not so good about rebalancing into a down market multiple times with no end in sight. I related to this, since I was doing the same and why after five years I still remember reading her words. The first time you do this, it's not so bad. After a few times, it doesn't feel that great. Makes you feel like you're just throwing away good money after bad. In the end, it all worked out, fortunately.

It makes me recall the quote from Fred Schwed, which I read in Bernstein's books, "Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. Art cannot convey to an inexperienced girl what it is truly like to be a wife and mother. There are certain things that cannot be adequately explained to a virgin either by words or pictures. Nor can any description I might offer here even approximate what it feels like to lose a real chunk of money that you used to own."
That was definitely one of my favorite quote in Bernstein book.

I posted something light hearted on the forum about losing a million dollars in the market back in 2009. I reminded myself, that it was only on paper, I was extraordinarily fortunate to lose a million and still have more than million left, and it was all about the income the portfolio generated.

Still despite all my rationalization and my confident prediction of the bull market coming eventually, it still was stomach churning. At times a down right scary year, cause maybe this time the bear were right and it really was different.
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Old 11-24-2014, 06:40 AM   #56
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I wasn't a member back then, but I experienced a 31% decrease in my 401K balance during this period (May 2008 to Feb. 2009). I was scared.
I was still well employed and just kept doing what I was doing before the fall, everything has come back and more (was back to nominal by July 2009).
If I had just retired I think I would have been seriously worried.
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Old 11-24-2014, 08:03 AM   #57
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The thing that hurt me the most during that period was the dividend income lost. Although my portfolio actually went down more in the 2000-2003 crash, it was not as noticeable because there was no dividend income lost (in fact S&P 500 dividends continued to rise during that period), since most of those tech/internet stocks didn't pay dividends anyway. However, From 2007 through 2010 the S&P 500 dividends dropped 20% (since fully recovered to about 30% higher than 2007). To make matters worse, I was over-weighted in financial stocks (some of which went to near zero), so my dividend income dropped even more than the market's. On top of that was the reduction in short-term interest rates to near zero. The reduction in short-term interest rates essentially eliminated the opportunity cost of liquidating cash, so I used my cash to help meet expenses (which I cut a bit, but not enough to reduce my standard of living in any significant way). I also wrote options against my portfolio to suppliment my income. Other than some shares that got called away, I sold no stocks when the market was down. I was able to mitigate the effect of losing the shares that got called away when the market started rising by selling puts. On paper, my portfolio dropped about 50% from its 2007 high (now fully recovered and then some). At the 2007 high, my portfolio was about 75% stocks - today it's about 68%.

Of course, now I am seven years older, so presumably I have less time to make up another drop like 2008-2009, so I have cut back my equity exposure somewhat and will probably cut it back a bit more. The problem is that the interest earned on short-term fixed income securities is less than the dividend income from stocks. My plan is to continue to write options, mostly calls and call spreads against my portfolio to gradually reduce my equity exposure while increasing my income. Unlike some here, I don't like to make drastic cuts to my equities (e.g. sell 25%-50% all at once).
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Old 11-24-2014, 08:29 AM   #58
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I was still working at the height (or is that low) of the recession. So, I built a new house, bought a new truck and new travel trailer. All at heavily discounted prices. I continued to invest about 50% of my gross income. Mostly stock funds. I saw it as the chance of a lifetime. Even better than the tech bubble burst. I had a lot more capital to put to work this time.

If I had just retired, I suspect I would have been less excited. Both due to fear of watching my investments shrink and also because I was missing out on an awesome opportunity.

I am most reserved when the market is hitting highs as it is now. I have been consistent in this behavior across multiple market swings since the 80's.

Now that I am retired, we'll see how it goes going forward.
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Old 11-24-2014, 09:00 AM   #59
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I rebalanced in July 2008, October-Dec 2008, and Jan 2009. It felt like suicide buying equities to rebalance, especially the Jan 2009 time. The only way I could make myself do it the last time was knowing that I had enough in cash and (already beaten down) bonds to last me 10 years, even if equities kept going down. That plus my short-term spending money was in very good shape.

You actually have to believe the markets will eventually recover to stay invested. Then the question is - how long? 7 years is often given as a potential duration, so my 10 years is padded. But that's my sleep at night number.
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Old 11-24-2014, 10:13 AM   #60
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I was not on here back in that time frame. However, I was (and still am for short time.....) working and in accumulation mode. I was nearly 100% stocks and stayed the course. I did not make substantial changes. Since I was in for longer term, it did not bother me in the sense I had not lost any real money, just paper loss. In simplest terms, what matters is what you buy at and what you sell at - the difference is what matters. If you don't sell when value is down, you have not lost anything in real money. Have confidence it will rebound and keep your AA at the level you desire.

Yes, I did experience drop in the dividend reinvestment amount, but I continued my maxing out of 401k contributions and viewed as a buying opportunity. Maybe I have distorted view glasses, but I feel stocks are best for long term results. I will be changing my AA to be more conservative in near future though, as I ease into retirement. Not because I have lost any faith in stock performance, but rather to reduce some volatility and not have to be as concerned about taking money out in a down market once I am in withdrawal mode.
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