What was the tone of this forum during the crash?

[unclemick]

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'.

 

[audreyh1]

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.

 

[tulak]

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."

 

[FIREd]

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.

 

[clifp]

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.

 

[Lucantes]

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.

 

[FIRE'd@51]

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).

 

[gozer]

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.

 

[audreyh1]

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.

 

[38Chevy454]

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.

 

[daylatedollarshort]

Some of the reasons we lowered our stock AA were more mental than financial. I read the book Against the Gods: The Remarkable Story of Risk by Peter Bernstein. In it there were several mentions to the law of diminishing marginal utility - how after a certain point, it hurts a lot more to lose half your money than it brings joy to double it.

So I know over the long run, the odds are we are probably not going to make as much money having less in stocks, but I feel like one of the things we are buying with our money is not having to have any financial stomach churning in the future, which is more important to me than most other items I could buy with more money.

If I was Warren Buffet and losing half my money meant getting down to my last $40B, I'd feel better taking more chances. But losing half my money at my age might mean mean having one or both of us going back to a full-time megacorp job, and I'd rather have less income and live more simply than risk having to go back to working and commuting from 7 am to 7 pm, with 2 weeks off for vacation.

 

[karluk]

I wasn't a member of this forum during the 2008 downturn, but I've participated in other financial forums during other bear markets, and I expect that there will be a wide variation in responses to the next bear market. So much so that I may temporarily stop reading this forum during a major downturn. My impression is that there is a plurality of members here who are fairly committed to buy and hold, but that it probably isn't a majority. And of course a downturn, especially a big one, is an open invitation to market timers to espouse their favorite "beat the market" strategies.

 

[Lsbcal]

... My impression is that there is a plurality of members here who are fairly committed to buy and hold, but that it probably isn't a majority. And of course a downturn, especially a big one, is an open invitation to market timers to espouse their favorite "beat the market" strategies.

You are probably right that buy-hold predominates here, but at least other ideas are discussed too with usually sensible restraint. I find that refreshing and at least entertaining. Lumping all market timing discussion into the "bad bin" is not wise.

There is absolutely no way to prove that any method is superior going forward.

 

[karluk]

There is absolutely no way to prove that any method is superior going forward.

You are right, but oddly enough that is precisely the reason I don't care to read about market timing schemes during times of doom and gloom, when it seems that buy and hold is a fool's game, and only a well thought out market timing scheme will allow anyone to make a profit. Market conditions during a downturn give such posts an air of wisdom they don't really have. After all, as you say, there's no way to prove whether the market timing scheme being advocated is really any better than buy and hold.

 

[FUEGO]

I think there was a lot of "the sky is falling" sentiments getting tossed around. I remained very bullish the entire time and had lots of fun*. I even switched to a more aggressive portfolio allocation in November 2008 (missing the absolute bottom by a few months).

My comments from 2008 from the thread W2R linked:

Just moved 15% of my portfolio from a large cap growth fund (down ~45% YTD) to a mix of US and international REITS and int'l small cap (all of which are down close to 60% YTD). So I guess I'm willing to take on more risk. Or rather I have moved my permanent asset allocation to what I want it at long term.

I'm still sticking with that new "permanent" asset allocation and don't plan on changing it any time soon (other than maybe decreasing my near 100% equities allocation to include more bonds/cash).

I think there were plenty of other people embracing the crash. I recall commenting something to the effect that "this is the buying opportunity of a lifetime for investors my age" (28 at the time).


*fun, but in the middle of a scary environment. Our company laid off half the employees, then half of what was left departed for better opportunities. We had a pay freeze, then pay cut. I decided to take the bar exam and get my law license "just in case". Everything worked out okay in the end, and I wasn't really worried since I had many many years of expenses in the bank even back in 2008 and 2009.

 

[M Paquette]

Meh. M... E... H...

http://www.early-retirement.org/for...e-unthinkable-happens-42945-4.html#post792609

I took the opportunity to clean up and simplify the portfolio at minimal cost, which also accomplished substantial tax loss harvesting, and rebalanced back to my long term personal investment plan's target. The losses booked will offset any capital gains that are realized for several more years.

Markets fluctuate. That's why I made a long term investment plan.