Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 05-10-2009, 07:23 AM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,644
1) I got a good feel for my risk tolerance - I slept fine but need some tweaks. I was a little higher in equities than I should have been and let the downturn adjust that. On the way back up (unless notmuchlonger is right and the worst is yet to come) I will keep it there.
2) Related to that, I confirmed the importance of a substantial cash/cash equivalent bucket which I had just set-up before the crash based on what I read here.
3) Like Moemg I would sell the kidney rather than go back to work -- but I knew that .
4) I also noted that the catastrophe fallback plan I won't need unless things keep getting worse (sell the weekend house) is a brittle plan for the reasons Brewer discovered - when you need to sell is precisely when no one will buy.
__________________

__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-10-2009, 07:43 AM   #42
Thinks s/he gets paid by the post
Coach's Avatar
 
Join Date: Nov 2005
Location: Colorado, USA
Posts: 1,127
I learned that I need to learn not to be greedy. One of the simplest concepts is that as you approach retirement you probably should be modifying your AA to reduce risk. I was enjoying the returns too much to do that.

Coach
__________________

__________________
Coach is offline   Reply With Quote
Old 05-10-2009, 08:11 AM   #43
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,976
Good things:
  • I was 100% equities in the 01 dive, learned that lesson then which lessened the pain considerably this time.
  • Never sold anything, never lost any sleep this time.
  • Was happy with my AA going into this one, and still am.
  • Learned to listen but make my own decisions many years ago, a lesson some people never seem to get. In the end, no one cares about my portfolio except me - I have to live off it, no one else.
Bad things:
  • Learned to my dismay that all asset classes can go down together, didn't think that could happen. So much for negative correlation.
  • I knew there was a housing bubble, but thought I was immune. Never realized how expensive other peoples mistakes (individuals, banks, Wall St and especially the primary source of the whole mess, the US government & Fed) could be to me. If there is a way to protect myself from this, I haven't figured it out yet.
Great thread Brewer.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-10-2009, 08:12 AM   #44
Thinks s/he gets paid by the post
simple girl's Avatar
 
Join Date: Sep 2006
Posts: 2,505
I learned:
  • DH and I are lucky to be employed in different fields (diversification in careers is a good thing)
  • our risk tolerance is not as high as we thought (esp. for DH; I always had a lower risk tolerance than him)
  • we have lowered our stock allocation and have a plan to decrease the stock % by a certain amount each year as we get closer to FIRE
__________________
simple girl
less stuff, more time

(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
simple girl is offline   Reply With Quote
Old 05-10-2009, 09:11 AM   #45
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by Coach View Post
I learned that I need to learn not to be greedy.

Coach
Not sure I would go quite that far. More, be greedy at the right times (when the public at large is cr@pping their pants).
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 05-10-2009, 09:51 AM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by Midpack View Post
  • I knew there was a housing bubble, but thought I was immune. Never realized how expensive other peoples mistakes (individuals, banks, Wall St and especially the primary source of the whole mess, the US government & Fed) could be to me. If there is a way to protect myself from this, I haven't figured it out yet.
Yes, good point. Talk about systemic risk! When my neighbor makes bad decisions, the bill gets sent to me. I now think financial/economic literacy education for the public is every bit as important to society as driver's education and civics classes. It's not just about balancing your checkbook, it's about getting your finances in shape so that your money works for you and everything is on a sound footing--and then insisting that the government do the same. I hope we get there someday.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 05-10-2009, 10:02 AM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Amethyst's Avatar
 
Join Date: Dec 2008
Posts: 5,887
Great thread. I am so glad to have a place where people discuss money and investing from a pragmatic ER point of view. Workplace discussions tend toward the macho competitive ("I made such a killing, and the rest of the turkeys lost out"), which is OK, but not useful.

So much of what I read on the forum, confirms conclusions I reached through intuition, which is a useful confirmation to have. To maximize your investment returns and protect yourself and your family, you must learn to think of yourself as a small company, with assets, liabilities, a balance sheet, an income statement, and real shareholder equity. The composition and choices you make with your financial capital should reflect the nature and security of your career or job, which is your unique “human capital.” This is so true! What I was missing, was practical ways to make use of this concept (What is a balance sheet, anyway, and how do I construct one for Amethyst, Inc.?) From reading others' posts I now know that it's simpler than I feared.

We've made so many mistakes through not having the right information, or enough information ("you don't know what you don't know"). Because I continued to work after husband retired, we have been protected from the worst consequences of our errors, but we also haven't got the "cushion" for my retirement that we would have had, if we'd gone about things better.

Now I am trying to put us on a better path, and "lessons learned" posts like this one are so helpful. I would say that the lesson I've learned is not to buy and hold when my gut is saying, "That's high enough already! Sell now, pay the $#@! taxes, and who cares if the stock goes higher, you locked in your profit!"

Now I'm just worried that everyone else is thinking the same way...so the market can never recover
__________________
If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success – to be able to spend your life in your own way.’ Christopher Morley.
Amethyst is offline   Reply With Quote
Old 05-10-2009, 10:46 AM   #48
Recycles dryer sheets
 
Join Date: Apr 2006
Location: Hardscrabble Texas
Posts: 372
I learned that I should pay attention to my gut feelings. In 2004 I saw co-workers being approved for home loans that I knew were way more than they could handle. I knew their lifestyle and wages. Many had large amounts of credit card debt. Some had even gone through previous backruptcy.

My gut was telling me to back off on my equity exposure and increase fixed income. Hard to do when the markets are rocketing to new highs.
__________________
.....#.....
Poundkey is offline   Reply With Quote
Old 05-10-2009, 11:32 AM   #49
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,438
Quote:
Originally Posted by REWahoo View Post
I learned a 40-45% equity allocation works for me
I learned the "hurry up and do nothing" approach to rebalancing can be a workable strategy
I learned having 8+ years worth of expenses in a combined cash bucket and SS income lets me sleep at night
I learned that being debt free (including no mortgage) also helps with the sleep at night thingy
I learned I'd much, much rather cut expenses than go back to w*rk
I learned that months of the news media screaming "THE SKY IS FALLING" can work on my ability to sleep at night and cause me to question the benefits of all the planning above.
I learned I could hate CNBC more than I ever thought I could.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 05-10-2009, 11:45 AM   #50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,115
Quote:
Originally Posted by Poundkey View Post
I learned that I should pay attention to my gut feelings...

My gut was telling me to back off on my equity exposure and increase fixed income. Hard to do when the markets are rocketing to new highs.
And had you listened to your gut in 2004 and backed off your equity exposure, you would have missed out on an additional 35% gain prior to the market peak in 2007.

I learned long before this meltdown that neither my head nor my gut is smart enough to time the market. This is exactly why I've worked hard to find an AA I can live with no matter which way the market is headed.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 05-10-2009, 12:39 PM   #51
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by REWahoo View Post
And had you listened to your gut in 2004 and backed off your equity exposure, you would have missed out on an additional 35% gain prior to the market peak in 2007.

I learned long before this meltdown that neither my head nor my gut is smart enough to time the market. This is exactly why I've worked hard to find an AA I can live with no matter which way the market is headed.
Very good thing to remember!

I am reading an interesting book right now called "On Being Certain- Believing You are Right Even When You're Not".

I think it might be good reading for any investor. It demonstrates very convincingly that most of these gut feelings of certainty are generated internally by the limbic structures of our brains, and have little if anything to do with external reality.

Ha

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 05-10-2009, 12:40 PM   #52
Recycles dryer sheets
 
Join Date: Feb 2008
Posts: 147
Enjoyed this thread: a best of FIRE. My lessons learned:
  • 50/50 asset allocation works for me in good times and bad. Though games I played with valuing SS into my portfolio led me into buying equities too soon into the downturn.
  • Pure buy and hold doesn't cut it, especially if you dabble in hot areas such as commodities. I neglected to sell some very profitable positions because I thought the rest of the market was a sensible buy-and-hold investor, like me.
  • I learned how to tax loss harvest. (And will probably dislike the resultant paperwork at tax time as much as expected.)
  • It's OK to sell in a falling market (to tax loss harvest, or simplify your portfolio): just don't change your allocation to equities. (I didn't.)
  • No matter what, keep DCA'ing. (I doubled my 401K contribution in November, then again in March.) But once/month is adequate. I tried weekly investments and it was just a lot of transactions with no apparent benefit.
  • Rebalancing is a dark art, and achilles heel on the long-term investor. I started way too soon, early 2008, and was out of serious gunpowder by the summer. I learned that market trends can take years to develop, but a serious breakdown in a bull market (summer 2007) is a warning sign.
  • A steady job looks darn good when the economy tanks. You can even love your job for a while, based on that.
  • An emergency fund and liquidity are essential to peace of mind and bargain hunting. Our lifestyle never felt threatened in any way. In fact, we were able to shop for bargains, and increase our charitable contributions late last year.
  • Diversification is no panacea: but patience may be.
__________________
headingout is offline   Reply With Quote
Old 05-10-2009, 04:55 PM   #53
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
If you're reasonably young and looking for a job, don't underestimate the value of job security and a pension while considering the "total compensation" of the offers you get. Having those things can make stock market volatility a lot less relevant to your day to day life and your ability to retire.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 05-10-2009, 06:42 PM   #54
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,035
I also learned that having a cola pension with health benefits is like having a net underneath a high wire walker . You may fall but you'll survive .
__________________
Moemg is offline   Reply With Quote
Old 05-10-2009, 07:57 PM   #55
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,429
Quote:
Originally Posted by brewer12345 View Post
- You jump in while things are still falling at your peril: I was early and often and suffered for it. Simply put, next time I wait for things to convincingly bottom before jumping in and pulling out the stops.
While I think this is a great idea, how do you suggest applying it?

Personally, I don't think we're anywhere near the end of this downturn. I think there is still a large amount of bad news to come, which will result in more significant drops in the various markets. So if you assume "the immediate flames are out", is now the time to be getting back in? I don't think so. However, I could easily be wrong (again). The March bottom may have been it. My point is, how can you know? The only way I can find peace of mind is sticking with my AA and rebalancing schedule, come hell or high water.

Of course, if anyone has a better suggestion that is easy to apply and pretty much foolproof from a future point of view, I'm listening.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 05-10-2009, 08:05 PM   #56
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 291
Quote:
Originally Posted by harley View Post
Personally, I don't think we're anywhere near the end of this downturn. I think there is still a large amount of bad news to come, which will result in more significant drops in the various markets. So if you assume "the immediate flames are out", is now the time to be getting back in?
I've been pondering this as I tend to agree that there's more bad news to come out. What about deciding at what point you would sell and then actually bail? Is this market timing? I have too many shs of a particular stock that I should have sold a long time ago. But, no, I followed it to the bottom. Now, it's recovering slightly. I don't believe it will see it's previous high, but possibly there will be a bit more recovery. Right now, I'm treating it like a mental stop loss, and the question is will I really bail if the stock drops to x per share? I hope so, because like someone said up-thread, I believe I've learned that buy and hold isn't the proper course for me any longer.
__________________
bubba is offline   Reply With Quote
Old 05-10-2009, 08:12 PM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,976
Quote:
Originally Posted by harley View Post
Personally, I don't think we're anywhere near the end of this downturn. I think there is still a large amount of bad news to come, which will result in more significant drops in the various markets. So if you assume "the immediate flames are out", is now the time to be getting back in? I don't think so. However, I could easily be wrong (again). The March bottom may have been it. My point is, how can you know? The only way I can find peace of mind is sticking with my AA and rebalancing schedule, come hell or high water.
You could be right, but an awful lot more from the whole financial mess has already been discounted in. Unless you are talking about problems completely outside the whole housing bubble, Wall St overleveraging, prolonged artificially low Fed interest rates, to big to fail Corp failures, deficits/debt/stimulus, etc. mess - I think we are near the bottom. But I too, "could (very) easily be wrong."
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-10-2009, 08:57 PM   #58
Full time employment: Posting here.
Delawaredave5's Avatar
 
Join Date: Dec 2004
Posts: 606
Excellent thread - thanks for everyone's openness.

My equities were very diversified globally - I was 60% stocks - but I was convinced my risk exposure was much less lower than 60% all US stocks.

Key Learning: the whole world can tank at the same time....
__________________
Delawaredave5 is offline   Reply With Quote
Old 05-10-2009, 09:06 PM   #59
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
I learned that my Grandpa with only a fourth grade education was much more intelligent than I imagined. Many times he told me; stay out of debt, do not put all of your eggs in one basket and find pleasure in simple things. That's the way he lived his life.

Fortunately, I listened to him and followed his example. Well....most of the time.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
What I learned Part I - Macro View
Old 05-10-2009, 09:54 PM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,471
What I learned Part I - Macro View

What I learned - macro view:

Even though the market was reaching new highs in 2007 and quite a bit of concern was expressed about valuations and the housing bubble on this forum, I kept noticing that market valuation metrics continued to improve since 2003. The economy was doing well and things were nowhere near as wildly overvalued as in 1999 when I retired. I guess since it wasn't 1999, I wasn't worried! We had gone through a pretty long bear 2000-2002, so I guess I wasn't expecting another soon. I had let my equity allocation creep up slightly over the years for tax efficiency reasons and was content with my allocation.

Even though the housing bubble was obvious and the housing market had clearly topped in 2006 and coming down, I thought that the housing troubles might be somewhat insulated from the rest of the economy. Even though parties who had invested in mortgages and people taking out stupid mortgages would be hurt and financial institutions would be hurt, not to mention all the real estate related businesses, I honestly didn't understand how this might impact the rest of the economy and corporations or most people's investments.

Of course when everything hit the fan and the financial system started to collapse it became painfully clear that the "rest of the economy" would suffer tremendously if they were not able to get the financing they needed to continue normal operations, because the financial institutions weren't just "damaged", they were imploding!

What I did not realize was the extensive leverage the financial institutions had used while goosing the housing bubble, and how much of their own koolaid they had drunk. I never imagined they would get caught holding their own questionable paper - excessively leveraged no less!!! The actions taken were so outrageously stupid I just couldn't image that financial professionals would do what they did (echoes of Greenspan?). I still think the crisis would have been relatively minor and contained within the economy if it hadn't been for the outrageous leverage of the financial institutions and the ridiculous wishful thinking use of CDSs. It's not right that financial institutions making irresponsible decisions for short term gain and bonuses can wreck the financial system and screw up the rest of the economy. There is clearly such a thing as "too big too fail" and it has to be policed.

I'm not sure how these insights will help me in my investing future. I am not changing my investment strategy going forward other than very minor tweaks (next post). Even if I had become concerned like others in late 2007, I probably would not have done much different other than perhaps decide to go back to my equity allocation pre-creep. That was only a 3% difference - very minor.

Perhaps I have a new respect for long-term market cycles. Being cautious by nature, I had made contingencies for a long downturn by being sure I had a good portion of the portfolio in bonds and cash in my portfolio. I also maintained a 1 to 3 year expenses in cash cushion outside of my portfolio which very fortunately I had topped off mid 2008 - pure luck that. These things really let me sleep at night during an incredibly stressful worldwide market crisis.

Audrey
__________________

__________________
audreyh1 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Lessons Learned popowich Young Dreamers 24 07-14-2008 12:16 PM
Walgreen debacle DMS Stock Picking and Market Strategy 14 10-09-2007 04:27 PM
What have I learned so far? dessert Hi, I am... 4 02-03-2007 02:43 AM
Lessons appear as needed heyyou Other topics 4 06-25-2006 09:19 PM

 

 
All times are GMT -6. The time now is 02:22 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.