How Long Did it Take Your Investment Portfolio to Rebound from Great Recession?

[nico08]

Hi. I am just trying to get an estimate as to how long it took for a typical (60% stock/40% bond) portfolio to recover during the Great Recession.

I used Vanguard 500 Index Fund Admiral Class (MUTF:VFIAX) as a representative stock index fund. It looks like it reached a high around 10/07 at 143.9. The fund value did not reach that amount again until about 3/13 when at hit 144.4.

Does that mean that it took about 5 years and 5 months for the market to recover? And does that mean one should try to have about 5 1/2 years worth of retirement spending money in short term accounts so that you don't have to sell out of fund during an extended market down turn?

Does anyone keep this many years worth of retirement spending money in short term, relatively safe, investments?

[athena53]

In 2003, I started tracking new money vs. investment income separately. I had about $300K at the time and, as an example, if I added $1,000 the next month but the month-end value was $304,000, I kept track of the cumulative amount invested ($301,000) and the total assets ($304,000), with the difference being investment income.

Between 1/1/2008 and 1/1/2009, the Investment Income from the whole previous period pretty much disappeared. A little over a year later it was back to its 1/1/08 level. Of course, what complicates it is that I was investing new money the whole time, so much of the recovery would have been on the investments I was buying at bargain-basement prices in 2008. If we have another slump like that, I won't have new money to put it.


And no, I would never keep 5 years' spending in short-term investments. We're withdrawing less than 3%/year and if the market dives we can cut out some fat (international travel) for a year or two and I could even file for SS to avoid taking $$ out of the market. We have DH's SS and I have a pension of $10K/year so some steady income. I'm 62 so would prefer to wait to file for SS.

[HFWR]

About two years.

[dallas27]

I don't know, but I loved the returns of buying into that recession and knowing damn well I was going to make nice returns eventually, I miss it. Don't feel nearly as confident dollar for dollar that I invest now - but I keep on chugging.

[REWahoo]

About 6 years for me, but I'm not sure how meaningful that is since I was withdrawing from it that entire time.

[MichaelB]

Quote:

Originally Posted by REWahoo About 6 years for me, but I'm not sure how meaningful that is since I was withdrawing from it that entire time.

Maybe 7 years for us, also withdrawing the entire time and without cutting back on spending.

[marko]

Two years. We peaked around early April of '08 and got back to the same amount in early March of '10.

To me, it was a great experience (!!!) in that I learned the real value in staying the course (despite all the lost sleep) and not panicking.

My other takeaway was that "ok, nearly the worst possible scenario occurred and despite that, all I lost was two years, not 10 or 15...". No wipeout; not the end of the world; now, dips, dives and corrections are viewed as opportunities.

Now, my neighbor (aka, the smartest person in the room) proudly announced that she sold everything on the last week of February 2009...and we all know what happened the following week, but that's for another day.

[W2R]

I guess about a year or two, IIRC.

A lot depends on whether one was retired or not at the time. I was still working and not living on my portfolio. So, I was in a good position to contribute to my investments while prices were low.

Buying low was awfully stressful and hard to do even with a job, and I can't imagine how hard it must have been for retirees to buy low at that time.

My AA was and is 45:55 (Equities:fixed) so that helped. Of that 55% fixed, 5% is cash.

[Bestwifeever]

Quote:

Originally Posted by nico08 Hi. I am just trying to get an estimate as to how long it took for a typical (60% stock/40% bond) portfolio to recover during the Great Recession. I used Vanguard 500 Index Fund Admiral Class (MUTF:VFIAX) as a representative stock index fund. It looks like it reached a high around 10/07 at 143.9. The fund value did not reach that amount again until about 3/13 when at hit 144.4. Does that mean that it took about 5 years and 5 months for the market to recover? And does that mean one should try to have about 5 1/2 years worth of retirement spending money in short term accounts so that you don't have to sell out of fund during an extended market down turn? Does anyone keep this many years worth of retirement spending money in short term, relatively safe, investments?

I don't know when ours recovered but it was in a much more conservative allocation than 60/40 back then, so it didn't take that much of a hit and we started reallocating it in 2009. We also have been taking distributions from it for a few years, which so far hasn't affected the value, because we did have six years (til DH reached FRA for SS) of our barebones spending (cut to the bone--pb&j sandwiches fir everyone, every day) in a money market fund (so yes to your last question)--we didn't need most of it, but using that didn't diminish the distribution-producing parts of the portfolio. We don't have a mortgage so didn't need to include those payments in the barebones budget.

I don't know if the 60/40 portfolio you describe would have taken as long to recover as the VFIAX alone did--the 40 percent would probably not have gone down so much?

[Moemg]

It took mine 4 1/2 years to recover . I was at a higher stock allocation than 60% probably 75% . I was also retired and taking withdrawals .

[youbet]

Quote:

Originally Posted by nico08 Does anyone keep this many years worth of retirement spending money in short term, relatively safe, investments?

No, absolutely not. The costs of keeping that much of your investment stash liquid are so high and the odds of needing that much liquidity are so low, it just doesn't make sense.

Remember, there are no doubt places in your portfolio to opportunistically grab some cash while markets are down other than from short term, safe investments. And, horrors, even if you did have to sell 10% of your equities while they were 20% down, would that be the end of the world? Is that all it would take to throw your FIRE plan to the dogs?

[youbet]

Quote:

Originally Posted by REWahoo About 6 years for me, but I'm not sure how meaningful that is since I was withdrawing from it that entire time.

Similar results here. Continued to withdraw after deciding that spending cuts were not on the radar. Never regretted this as most of the discretionary spending we were doing was time and age dependent and if we had delayed, it would have meant never taking/doing those kinds of trips, vacations and activities.

Thankfully the portfolio recovered despite our dipping into it while the market was so depressed. I RE'd in 2006 and even with the Great Recession hitting me in the face early on, I've been somewhat pleased with how the markets have done during this time.

[Animorph]

Quote:

Originally Posted by nico08 Hi. I am just trying to get an estimate as to how long it took for a typical (60% stock/40% bond) portfolio to recover during the Great Recession. I used Vanguard 500 Index Fund Admiral Class (MUTF:VFIAX) as a representative stock index fund. It looks like it reached a high around 10/07 at 143.9. The fund value did not reach that amount again until about 3/13 when at hit 144.4. Does that mean that it took about 5 years and 5 months for the market to recover? And does that mean one should try to have about 5 1/2 years worth of retirement spending money in short term accounts so that you don't have to sell out of fund during an extended market down turn? Does anyone keep this many years worth of retirement spending money in short term, relatively safe, investments?

You need to add back all distributions to get a more real-life picture of the recovery.

I think we were recovered in 2011, 100% stocks, with a possibility of some small withdrawals or contributions since DW still had income.

[M Paquette]

About 8 months to recover from the February 2009 low back to the previous personal high in June 2008. I did rebalance that February, in accordance with my Investment Plan.

Attachment 21462

Asset allocation. Sandwiches are important, of course.

[Alan]

2.25 years (9 quarters as I only keep quarterly totals).

However we were 2 years from retiring so were pumping $ into the accounts as fast as possible, myself at peak earnings, and making no withdrawals.

I'm sure it would have been a quite different story if we were in the withdrawal phase.

[steelyman]

I was also still contributing to retirement accounts on a monthly basis and kept on until leaving my position in late 2011. They finally allowed contributions to be directed to a Roth 403(b) starting April 2008 and I was right there, stopped all contributions to a traditional 403(b) in favor of the Roth. So that was lucky although I did wonder once things started going down the tubes.

Using a "cost basis vs. portfolio value" graph/report that are easy to generate with financial software, it looks like the period during which my cost basis was greater than the portfolio value was between 4Q 2007 and 4Q 2010, by which time the discrepancy got back to where you'd like it.

There was a "blip" in 3Q 2011 that I guess was due to the European crisis which had the talking bozos on financial networks flapping their wings, but it was only a blip and soon recovered.

The calculations include new investments and reinvested dividends/capital gains.

So it looks like it was about 3 years (36 mos) for me.

[NW-Bound]

I keep a daily record of my investable assets. It peaked on 10/31/2007, crashed to a bottom on 03/09/2009, then recovered back to the 2007 peak on 11/04/2010. That's 1100 days, or 157.14 weeks, or roughly 3 years.

My part-time work dried up during the recession, so my income did not cover my expenses, particularly with 2 children in college. So, I did draw some money, but do not know how much right off hand.

Quote:

Originally Posted by nico08 ... I used Vanguard 500 Index Fund Admiral Class (MUTF:VFIAX) as a representative stock index fund. It looks like it reached a high around 10/07 at 143.9. The fund value did not reach that amount again until about 3/13 when at hit 144.4...

I recovered faster than the S&P despite withdrawal, because I was trading, er, rebalancing. I started a thread on that experience here: http://www.early-retirement.org/foru...ion-72184.html. I posted the following graph on that thread.

[braumeister]

Quote:

Originally Posted by NW-Bound I keep a daily record of my investable assets.

I keep an annual record.
I can't get any credit at all around here, can I?

[Theseus]

27 months. Probably could have been less, but I was reeling for a while before deciding to get back on the horse bull.

[rayinpenn]

A friend called me all in a panic she was terrified the market was dropping like a stone. I said ride it out it will come back...she didn't listen - they never do. I rode it out I always do... A couple years later and I've got more then ever... I don't let the market gyrations make me crazy...


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