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October 2007, going back
Old 01-16-2009, 09:52 AM   #1
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October 2007, going back

Going back to October 2007, knowing what you know NOW, what would you have done different regarding your portfolio, investments, lifestyle etc OR would you do everything the same.
Secondly,knowing what you know now how will you prepare for the NEXT stock market dip(azzuming there will be one)
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Old 01-16-2009, 09:55 AM   #2
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As some here know, on Halloween 2007 I almost cashed out of all equities. There was something in my mind telling me that things weren't right and I should get out. I dismissed it as nasty market-timing and didn't act on it. That failure to act has cost me about $150K on paper.

Still, there's nothing we can do about it at this point. I guess if there's one takeaway it might be that my risk tolerance isn't quite as high as I thought and that my asset allocation probably should be a little less aggressive. Still, I'm not going to change it now because that means selling low. Once the market has recovered some I may go down from a 70/30 target to about 55/45.
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Old 01-16-2009, 10:05 AM   #3
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I would have sold everything in Oct 2007.
Gone 3X short the S&P until the low - maybe even using margin.
Then gone 3X long the S&P until Jan 2, 2008 - and now be 100% in cash.
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Old 01-16-2009, 10:07 AM   #4
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Quote:
Originally Posted by ferco View Post
Going back to October 2007, knowing what you know NOW, what would you have done different regarding your portfolio, investments, lifestyle etc OR would you do everything the same.
Since hindsight is 20-20, I would have sold everything in August of 07, put half my portfolio in to cash, used the other half to short financial stocks, and spent hours on this forum telling everyone what a genuis I was, that buy and hold is a dead strategy, and how anyone with a modicum of intelligence could have seen it coming for years.

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Originally Posted by ferco View Post
Secondly,knowing what you know now how will you prepare for the NEXT stock market dip(azzuming there will be one)
My key strategy for the next one is to be significanly poorer - that way I won't have nearly as much to lose.
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Old 01-16-2009, 10:13 AM   #5
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We had a 55/45 target and that portfolio is now 45/55 courtesy of Mr. Market. I'm also finding my risk tolerance has been lowered. So I'll rebalance using a market timing technique which I've thoroughly backtested. Still plan on having a buy-hold portfolio as well but will rebalance equity money from the BH part of the portfolio as the market moves up while letting the MT portion expand. See the Boglehead forum for some very long discussions on MT techniques -- and plenty of doubters .

Here is a link to some articles on market timing if you are curious: FundAdvice.com - Articles
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Old 01-16-2009, 10:29 AM   #6
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Well Instead of Reducing my Equites by 75% and adding to my Treasury Bonds? I would have done sold off 100% and Bought More of a Bear Fund ( UIPIX and GRZZX) ...

These Financial Columnist and Newsletters? They Knew.. they just didn't want to say the truth for causing a Major Crash Worse than the crash of 29' and 87's .. onvernite.. and Over 50,000 Brokers Loosing their Jobs.. and Corporations not having your $ to Go Sqander anymore.. GOD FORBID!

The Politians now want to create More Jobs? They leave out one Big addtion:. To Create More Jobs for the Uneducated and Unskilled people in our coutnry ..That Were told to get educated and a job Skill yrs ago..but They were getting paid so much for knowing so little, they didn't do it.. Now it's time to pay the Piker..

If you Are Early Retired? Then you should have MORE than enough $ that a 30/70 Portfolio provides and if you have a higher In equities? that's your fault for bieng greedy.. ( I didn't retire early until I had 50% More than Others told me I would need and not at no 60/40 mix but at a 30/70 mix ) Thus you apply as if you are 65-70 yrs old just like other Retirees, not so fortunate to retire earlier..regardless if your alot younger..

And I Don't mind hiring a Nice looking Housekeeper (and a nice Looking Gardner for the wife)..and now having to pay Their SS and Health Insurance, Just don't force me to pay them more than $3 hr and provide them Free Housing and Free Food ..and be off 16 hrs a day..to use my Home/TV's/Pool...and our cars...and live like we do..

;->)
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Old 01-16-2009, 10:43 AM   #7
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I would have gone to 100% cd's.
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Old 01-16-2009, 10:49 AM   #8
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That represents an unreal scenario. Since there is no way to KNOW the future, you can't learn much by looking back to what you would have done if you had known the future with certainty.

The only thing you can do is see if there was any way to gauge whether the market was "overvalued". Even though 2007 saw new highs, the market was much less "overvalued" than it was in 1999, so it's hard to say. Market valuation gauges are tricky as they can keep you out in bull markets as well as protect you in bear markets.

How will we know when the next 40% sell-off will occur? We won't. So how can we reasonably prepare for it?

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Old 01-16-2009, 10:54 AM   #9
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Sorry to be blunt, but this is really a question that leads nowhere. Obviously, if I could be prescient (i.e. know what I know now, but know it in Oct 2007) I would have bought a few 3 Nov 2007 Powerball tickets bearing the numbers 1, 31, 38, 40, and 53. But I didn't have that information about the Powerball game , and none of us had the information about what the markets would do, either. Any more than we know what is going to happen next.
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Old 01-16-2009, 11:13 AM   #10
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No changes to the long term plan - hindsight is 20/20. I sleep well with a 50/50 AA, come what may. I will adjust AA in accordance with the age = bonds rule as time goes on.
lifestyle changes? no drastic operations are planned at this time.
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Old 01-16-2009, 11:15 AM   #11
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What if you "knew" that back in 2007 and were wrong? Would you still be happy with the lower-than-it-could-be portfolio you would have had then?
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Old 01-16-2009, 11:51 AM   #12
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That represents an unreal scenario. Since there is no way to KNOW the future, you can't learn much by looking back to what you would have done if you had known the future with certainty.
Why is it extremes and absolutes? If a farmer sees a storm on the horizon, maybe caution is warranted. Sure it may not amount to anything, but life is a process of navigating probabilities.
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Old 01-16-2009, 12:17 PM   #13
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I can tell you what I learned from 1987: 1) diversify; and 2) continue to think long term for equity investments.

I took my nose off the grindstone long enough to notice Id lost 30% or so in a 100% equity PF; figured it was too late to cash out. In mid-1990, with new money, I started buying bonds to diversify and slice and diced my equity holdings. I lost count of how many downturns the PF went through, each time it either lost a little or just stood still; that struck me as balanced but dull. Even dragged down by bonds it did well in the long bull market.

2008 and 2009: Im buying equities with new money and yield from bonds, only to see each new purchase lose value. But that is short-term thinking. I still believe in stock appreciation but it feels like 1974 when I had no expectations that my PF would ever amount to a hill of beans. I wont know the value of what I buy now for many years. Buy and hold.
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Old 01-16-2009, 12:44 PM   #14
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Here's what I would do differently if I could go back to October 2007, knowing what I know now: I would make this investment on November 7, 2007.
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Old 01-16-2009, 01:51 PM   #15
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I would have gone to 100% cd's.
Luckily, that's what I did. I was going to put a big chunk into some index funds (I think I was posting questions about Vanguard and the like) and I got chicken, converted to local currency and stuffed it all in 5.6% CD's instead. Currently in 6.7% 1 year CD's with Swedish bank SEB.
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Old 01-16-2009, 01:56 PM   #16
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Wouldn't have done anything different. Was saving in CD's then, and still saving in CD's now of after tax money and all 401k money is in S&P indexed and 2030 lifecycle funds. I have low tolerance for risk, but hedge my bets in the market(401k) if my conservative nature is wrong. The CD path may get eaten by inflation in the future. Thinking of buying land around my house to get a tangible asset for my mula.
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Old 01-16-2009, 02:56 PM   #17
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I would have put my entire 401k in cash. I looked at doing it back then, but my 401 has a restriction where I cant move the $ back within 30 days of a transfer. I was worried that I could miss a run-up in the 30 day period, so I stayed put. What a mistake.
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Old 01-16-2009, 03:33 PM   #18
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Originally Posted by ferco View Post
Going back to October 2007, knowing what you know NOW, what would you have done different regarding your portfolio, investments, lifestyle etc OR would you do everything the same.
Secondly,knowing what you know now how will you prepare for the NEXT stock market dip(azzuming there will be one)
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Originally Posted by samclem View Post
Sorry to be blunt, but this is really a question that leads nowhere.
Actually that's what everyone fills out on their "investor risk tolerance" questionnaires. And we all say that we can handle just about any market volatility-- until we have to handle any market volatility. Or we say that we want to be "absolutely safe" and then kick ourselves when the market jumps 20% one year and we're in 5% CDs. It's one thing to be a Vulcan investor and quite another to watch the daily hemorrhage.

It's sure not our first time. Our ER portfolio was whacked 40% after 9/11 and we took a pretty big hit in Oct 1987 (don't remember how much, long research project to figure it out, but probably at least 20%). So losing 40% in the last 15 months has been deja vu all over again. Our response back then was to throw every penny we had into the stock market and DCA like mad. Of course we were working back then, too.

In this case, after six years of ER, we got from "Woo-hoo!" to "This is unbelievable" to "This is just freakin' stupid" without any tripwires. I expected things to back off 20% and we could all get on with our lives. After all, we'd just finished selling off our last mutual fund a few months before that and we were about to start rebalancing everything into our dream asset allocation. I was even going to slowly get rid of our individual stocks over the next few years. We had a plan, it already involved playing plenty of taxes, and it was not a time to "take some off the table."

Frankly it felt like Monopoly money. My pension check kept coming, our tenants kept paying the rent, and our home didn't drop significantly in value. Why fret about the market?

One thing I've learned is that investing can be very hard work. The process of picking the best assets requires several hours of daily effort-- research, spreadsheet models, price points, and patience. I've also learned that I'm lazy. Index funds are a great deal for those who want to capture an outsize portion of market returns with obscenely little effort.

We still believe in a keeping a high-equity portfolio, and in rebalancing to stay within 20% of each asset's allocation, but dividends are going to be reinvested a little differently. When our ETFs rise above their long-term averages then we'll start taking the dividends in cash (money market or CDs) until one of our assets is below their long-term average.

And when we get back to "Woo-hoo!" territory, if we're tempted to give into the wealth effect then we'll raise twice the cash we think we need. That'll give us significant pause before making a major purchase, and it'll make us think about whether we need to be getting ready for another reversion to the mean.
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Old 01-16-2009, 04:15 PM   #19
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Why is it extremes and absolutes? If a farmer sees a storm on the horizon, maybe caution is warranted. Sure it may not amount to anything, but life is a process of navigating probabilities.
Sorry - but that is a totally false analogy.

Audrey
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Old 01-16-2009, 06:44 PM   #20
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Shoulda, woulda, coulda. If the people in the know didn't know, how could I know? No point in crying over spilt milk. The important thing is to learn how to prepare for a repeat performance.

Luckily I am in the accumulation phase, i.e. w*rking. Next time there is a downturn I will probably be retired, so my goal is to build up cash and cash equivalent reserves sufficient that I won't have to touch any equities for at least five years before I pull the plug.
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