Did 2008-09 Results Help You Now?

[Idnar7]

Did the recovery after 2008 help you to stay the course this week? At what point will you make changes? For me 2008 helped as I only started investing in 2007 (other than 401k). Best thing I did in my taxable was to sell losers and buy VTI which has almost tripled since. There were times in 2008/09 when I almost gave up. This site helped me to hold on. How you?

 

[Big_Hitter]

Did the recovery after 2008 help you to stay the course this week?

not really - I rely on the following:

modern portfolio theory, historical Ibbotson data and dollar cost averaging

 

[Midpack]

I bought in during the 1987 crash and stayed the course (just rebalancing as always) through 2000 and 2008. Hindsight shows clearly that it would have been a mistake to do otherwise. Carefully and thoughtfully reading market history/behavior (The Four Pillars of Investing among others) are what gave me the confidence to stay the course - nothing else would have worked for me. Sure I worried a little, but I did not panic or sell, and I slept fine every night.

And no matter how good or bad things get, there's always another credible POV. Why Goldman thinks the S&P 500 is headed for an 11% rebound - MarketWatch

Unfortunately anyone can write doom and gloom articles to appeal to peoples natural fears. People who don't know market history/behavior are understandably sucked in. Take the long view, and understand how/why US markets have gone up for well over a hundred years.

And there will always be someone to tell you 'this time it's different' (see below I suspect) - they've all been wrong so far.

 

[W2R]

Did the recovery after 2008 help you to stay the course this week? At what point will you make changes? For me 2008 helped as I only started investing in 2007 (other than 401k). Best thing I did in my taxable was to sell losers and buy VTI which has almost tripled since. There were times in 2008/09 when I almost gave up. This site helped me to hold on. How you?

I think that 2008-2009 was very helpful to me, in that it tested my risk tolerance and asset allocation. That crash gave me more "boots on the ground" experience and demonstrated to me that I was not exposing myself to more risk than I could easily tolerate. This was timely since I was approaching retirement in 2009, and had just shifted to my retirement AA of 45:55 (equities:fixed) in 2006 or 2007.

Since I didn't bail out in 2008-2009, I am pretty sure my 45:55 AA is a good one for me. And, in fact, the idea of selling never entered my mind yesterday, to tell you the truth. I was thrilled at the opportunity to buy low, since I had just received the proceeds from selling my house and therefore planned to buy yesterday no matter what the market.

 

[Willers]

What helps me stay the course is an AA that fits my current situation. My risk is well below where my tolerance tests say it could be, but I'm taking the risk I have calculated I need to take and no more. That was tested a bit this week and worked well. I slept well even though I'm only 4-6 months from RE.

I handled 2008/2009 OK, but I'm not assuming such a quick recovery. If that happens, great. If not I'm prepared.

 

[easysurfer]

Two words: paper loss

Of course, if things go down down down for months to come, the two words will be: oh no

 

[REWahoo]

Similar to W2R, the 08/09 market decline and recovery solidified my resolve in my AA and the value of sitting on my hands and allowing the market and my portfolio to recover.

 

[Dawg52]

In 2008 I sold some stuff not out of panic(believe it or not) but to reshuffle things within my stocks. I took some losses for tax purposes and nibbled at the stocks I wanted over time. In the end, it worked out and my overall balances recovered. Of course I've read here where others did nothing and recouped everything so not sure if what I did was worth it or not. But I did sell some stuff yesterday with intentions of doing the same. Only I will buy index etf's as opposed to individual stocks. I started the conversion a few weeks ago. There are a couple of individual stocks I would like to buy, but it's going to be primarily index etf's from here on. Will probably dollar average the cash I'm sitting on over the next few weeks or months.

I'm sure others will recoup their losses quicker, but this approach is comfortable for me.

 

[Big_Hitter]

if equities didn't have a "risk premium" they wouldn't be an asset class

 

[pb4uski]

Similar to W2R, the 08/09 market decline and recovery solidified my resolve in my AA and the value of sitting on my hands and allowing the market and my portfolio to recover.

+1, but with a slight twist. In 2008/9 my AA was literally screaming at me to sell bonds and buy equities and I could not summon the courage to do so. I did however, stand pat. I know a lot of people who sold out, never figured out when to get back in and have regretted it.

I'll check my AA tonight and see if I need to do anything. I suspect not.

 

[REWahoo]

+1, but with a slight twist. In 2008/9 my AA was literally screaming at me to sell bonds and buy equities and I could not summon the courage to do so.

I solved that problem prior to 08/09 by having the bulk of our assets in balanced funds (Wellesley and Wellington). They took care of all that for me.

 

[CaliforniaMan]

I bought in during the 1987 crash and stayed the course (just rebalancing as always) through 2000 and 2008. Hindsight shows clearly that it would have been a mistake to do otherwise. Carefully and thoughtfully reading market history/behavior (The Four Pillars of Investing among others) are what gave me the confidence to stay the course - nothing else would have worked for me. Sure I worried a little, but I did not panic or sell, and I slept fine every night.

And no matter how good or bad things get, there's always another credible POV. Why Goldman thinks the S&P 500 is headed for an 11% rebound - MarketWatch

Unfortunately anyone can write doom and gloom articles to appeal to peoples natural fears. People who don't know market history/behavior are understandably sucked in. Take the long view, and understand how/why US markets have gone up for well over a hundred years.

And there will always be someone to tell you 'this time it's different' (see below I suspect) - they've all been wrong so far.

+1 Great Post!

I haven't sold in any downturn since '74. (I did sell at the bottom of that one, but thankfully was early in my investing career.) People who like to participate in panics don't tend to do very well. It is up to you whether you want to join the panic or just enjoy the show. Experience can help you, or just look at a long term total return chart. It's just noise. Relax.

 

[ejman]

Actually the crash of 1987 is the one that really helped me (20+% loss in one day!). I had just started investing a few years earlier and I was so paralyzed by panic and fear that I did nothing. Well, a few months latter I realized that nothing much had really happened and that my paralysis had actually saved me. When the rolling crash of 2000-2002 came along I just rebalanced along the way and ER'd at the end of 2002, when things looked the darkest.

The rise in the market meant that my stock allocation made it to the top of my wide rebalance band in 2007 so I sold then and was already at my ideal AA when the 2008 shenanigans took place so no harm done but I must admit it really looked dicey for a while there and I could see that a much different result could have ensued if the powers that be had taken a different approach .

 

[Closet_Gamer]

Did the recovery after 2008 help you to stay the course this week? At what point will you make changes? For me 2008 helped as I only started investing in 2007 (other than 401k). Best thing I did in my taxable was to sell losers and buy VTI which has almost tripled since. There were times in 2008/09 when I almost gave up. This site helped me to hold on. How you?

Unequivocally.

2008 taught me:

1). My risk tolerance was a little less than I thought, particularly with my kids college savings. I've adjusted my AA accordingly which is making me far more zen about this correction

2). My balance sheet assessment was too generous. I became far more thoughtful about liabilities (future college costs, deferred taxes) and far more conservative about assets (unvested stock)

3). The value of having cash on the sidelines

I'm heading into this storm with a smile on my face. My balance sheet is like Fort Knox and I'm cheering for each drop as it means my cash buys that much more. I hope we've got another 2000 Dow points of drop ahead of us. Let's take this puppy down >20%.

 

[EastWest Gal]

I talked with DS about this downturn tonight and he gets it. When all is said and done these downturns allow a couple of good things:

1. Portfolio rebalancing without paying taxes

2. Buying equities at a "sale" price

It's only bad if you have to sell. 2008 was way scarier than this. The market was too high anyway.


Sent from my iPhone using Early Retirement Forum

 

[Moemg]

I think I suffer from PTSD from the 2008 -2009 meltdown. I know logically that I am fine after all I survived after a huge loss in 2009(35%) but when we have a run of bad days I start thinking " Oh no not again " .

 

[sengsational]

Today I looked at a log chart of my portfolio and that 2008-9 bump didn't look like much. I'll never forget the amount tooth enamel I lost during that time, but I held on without bailing out. So yes, that experience helps me see that today's angst will be a bump on a chart in some number of years.

 

[Sycamore]

2008 taught me a lot, especially:

1.) My true risk tolerance. I didn't sell equities during the entire downturn. But I sure remember how I felt in late October '08 after Lehman went down. I dialed back my stock/bond ratio from 70/30 to ~60/40.

2.) Brutal bear markets bring fantastic buying opportunities. Remember Warren Buffet's Op Ed article in the New York Times in late October 2008. I think he titled it "Buy Equities, I Am." In January '09 I didn't re-balance like I did the prior ten years to my target stock/bond allocation. I should have because Mr. Buffet was right.

Read Sir John Templeton's analysis of his investments during the great depression, or Warren Buffet's insights on when to buy.

2008 is still a vivid memory for all of us, don't let a two or three year horizon cloud what's best for ten, twenty, and thirty years.

 

[ERD50]

What does this have to do with 2008?

Paraphrasing Crocodile Dundee ... "Downturn? At's naught a downturn! Now at's a downturn! (pointing to 2008-2009 > 50% drop)"

A 10% little bump? Wake me up when there's some real stormy weather.


-ERD50

 

[audreyh1]

Our portfolio is a lot higher now than it was at the peak in 2007, before the 2008/2009 drop.

A few years ago I started modeling my portfolio asset allocation to answer "what if" questions about various levels of market selloffs and how they might affect me. I had the drops in 2007, 2008 and 2009, and some data of how my asset classes and retirement fund performed overall during that period. As the markets and my portfolio reached new highs over the past few years I used that to model various corrections and bear market scenarios, including the worst of the 2008/2009 period.

This just let me guesstimate what the portfolio value might be after various scenarios, which then translated to what I might expect to withdraw after such an event.

One of the scenarios I had modeled was the S&P500 down 12% from its peak, and I had estimated that my portfolio would drop about 7.33% from its peak.

Well - we had a real world version of that today. The S&P500 is down 12.3% from its peak, and my portfolio dropped 6.76% from its peak.

So - my portfolio did a little better than the model, but my models weren't off that much either.

I can also see how much I would have to "tighten my belt" if we had a repeat of 2008.

 

[clifp]

Actually the crash of 1987 is the one that really helped me (20+% loss in one day!). I had just started investing a few years earlier and I was so paralyzed by panic and fear that I did nothing. Well, a few months latter I realized that nothing much had really happened and that my paralysis had actually saved me. When the rolling crash of 2000-2002 came along I just rebalanced along the way and ER'd at the end of 2002, when things looked the darkest.

The rise in the market meant that my stock allocation made it to the top of my wide rebalance band in 2007 so I sold then and was already at my ideal AA when the 2008 shenanigans took place so no harm done but I must admit it really looked dicey for a while there and I could see that a much different result could have ensued if the powers that be had taken a different approach .

The 1987 crash taught me a lot. The 2008/2009 gave me plenty of time to practice the lessons.

In 1987, I decided after listening to Bob Brinker that Saturday that I should sell stocks in my taxable account. I decided to leave my 401K alone.
Unfortunately lots of other people made the same decision, and the market crashed bad in the morning and continued to go down 22%

About an hour before the close I decide screw it I'll just ride this out. But I couldn't reach Fidelity by phones, so I ended up selling at the bottom. Fortunately I got most of money back in by the end of the week so the damage wasn't horrendous.

I am sympathetic to the poor mutual funds owners today. The heard the market was up today, decide to sell on the strength only to find out that millions of others did the same thing.

One of the big reasons I prefer ETFs to mutual funds is exactly this problem.

 

[Badger]

A few short years ago I was investing the maximum in my 403b, my wife's 403b and both of our Roth IRAs (including the catch-up). I was doing this since about 2000 and did not slow down until we retired. Reading posts here helped keep me calm during 2008-09. The result is that our retirement investments are much better off than what we expected. This time I haven't considered making any changes. We have a good size chunk of extra cash from after tax investment dividends that we don't have any plans for that might go for a few shares of something (or not).

I did, however, sell all my shares in CVX for 2 years of tax loss harvesting. If it continues to go down substantially after a month I will entertain buying it back.

I have other more pressing concerns to deal with at the moment than to spend time worrying about a little blip in the market.

Cheers!

 

[Corporateburnout]

Our portfolio is a lot higher now than it was at the peak in 2007, before the 2008/2009 drop.

A few years ago I started modeling my portfolio asset allocation to answer "what if" questions about various levels of market selloffs and how they might affect me. I had the drops in 2007, 2008 and 2009, and some data of how my asset classes and retirement fund performed overall during that period. As the markets and my portfolio reached new highs over the past few years I used that to model various corrections and bear market scenarios, including the worst of the 2008/2009 period.

This just let me guesstimate what the portfolio value might be after various scenarios, which then translated to what I might expect to withdraw after such an event.

One of the scenarios I had modeled was the S&P500 down 12% from its peak, and I had estimated that my portfolio would drop about 7.33% from its peak.

Well - we had a real world version of that today. The S&P500 is down 12.3% from its peak, and my portfolio dropped 6.76% from its peak.

So - my portfolio did a little better than the model, but my models weren't off that much either.

I can also see how much I would have to "tighten my belt" if we had a repeat of 2008.

When I established my asset allocation a few years before retirement I considered the S&P 500 loss from 10/2008 to 3/2009 of 54% and decided on a 50/40/10. I figured that if the equity market drops to the same levels I would not be devastated if my portfolio drops by 27%.

With the recent S&P drop of 12.3% from its high I'm down 5.4% which is slightly better than my forecast.

 

[lem1955]

What helps me stay the course is an AA that fits my current situation. My risk is well below where my tolerance tests say it could be, but I'm taking the risk I have calculated I need to take and no more. That was tested a bit this week and worked well. I slept well even though I'm only 4-6 months from RE.

I handled 2008/2009 OK, but I'm not assuming such a quick recovery. If that happens, great. If not I'm prepared.

Willers - I'm out about 4 months from retirement too. I'm wondering what you did to prepare? I moved my 401k from my big employer to my IRA, invested 8% in laddered CD's and the rest in 4 Index funds all within my tIRA. I have enough in cash and CD's for about 2.75 years expenses. I'm hoping that will be enough to get me through this dip. Not planning to do anything else.

 

[marko]

Yes it did. That, coupled to a fairly good set of dividend payments make a downturn easy to take..."hey, we're still getting paid the same amount each month".

What also helps is what I've mentioned on a few other threads: that my "smarter than everybody else" neighbor sold her entire portfolio on Feb 15, 2009, and then a few weeks later....

I keep reminding myself of that whenver some crazy idea comes niggling into my brain.

I do find myself reviewing and re-reviewing my dividend/CG payments a lot more during these times though. Some sort of comfort.