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So what has your learnt from the past month?
Old 10-27-2008, 11:37 AM   #1
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So what has your learnt from the past month?

I think it would be fair to say the events of the past month have had a significant impact on 99% of board members.

I would be interested to hear what lessons we have all learnt from the experience. These would probably be different for all of us as we all have different needs and ways of funding our RE.

For example I have seen some mention of possibly having to sell stocks in 18 months to replenish a cash supply - what will you be doing in future to avoid this if anything?

What about those who feel they drained their cash to get into the market after the initial drop? Would you rush in so quickly next time or develop a different strategy?

One thing I know I have to get stronger on is the decision making. Sometimes I get the deer in headlight moments, knowing I need to do something but hesitating to do so. Not sure how I will overcome this.
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Old 10-27-2008, 12:25 PM   #2
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I have learned that I am an optimist and may have put more of my money in harms way than I should have. I have been throwing money in this market as it has been falling -- and it kept falling!
I still have 4-5 years in cash and will not touch that or I will lose sleep. I believe this is an incredible buying opportunity that could increase net worth long term - but I am pretty much as in as I can be - maybe one more re-allocation if the bottom falls out?
I WILL re-allocate when the market rebounds - I did'nt last time and regret it.
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Old 10-27-2008, 12:26 PM   #3
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I was taken a little offguard by how fast the market dropped during the first two weeks in October.

My tiny Roth IRA which I regard as "play money" (to invest as I wish) got very badly hammered before I had a chance to react. I have lost 35.8% since October 1st in that account. Luckily, it is less than 1% of my portfolio, and I am only down 11.7% since October 1st in the rest of my accounts.

Here are two lessons learned:

(1) Things can happen really fast, and when they do I just might be occupied with other things that prevent me from giving my full attention to the market. So, batten down the hatches before the storm is nigh.

(2) The truisms of making a solid but possibly boring investment plan and sticking to it, have great merit. I thought my tiny play account would have a greater percentage earned than my other accounts, but it didn't. This was a humbling and instructive experience.
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Old 10-27-2008, 12:42 PM   #4
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There's no such thing as 'should have'.

When I find my thoughts tending toward 'should have', I think about the cat (and if he's close by, I start petting or brushing him).
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Old 10-27-2008, 01:15 PM   #5
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After the market returns to relatively normal levels, I think I've learned that 70/30 is a little too aggressive for me.
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Old 10-27-2008, 01:33 PM   #6
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...some mention of possibly having to sell stocks in 18 months to replenish a cash supply - what will you be doing in future to avoid this if anything?
N/A
...drained their cash to get into the market after the initial drop? Would you rush in so quickly next time or develop a different strategy?
i wished i could have jumped in, but it wasn't in the cards.

lessons learned...hmmm...several actually...
- stay with 55/45 AA. i shall continue to be a chicken!
- my self perceived stomach for risk was about right. no smiles here, but no insomnia.
- i shall continue to frequent this site as my best resource for info and real live experience. i feel a lot smarter for reading all the posts, especially from folks who have been FIREd longer. TY!
- in spite of the recent shellacking, my MF 10 year returns are still positive. that is the number i look at, since it roughly equals my remaining time to "real" retirement age. as that time horizon gets smaller, gradual rebalancing is planned and will occur. i'm using Bogle's rule about age and exposure to stocks for my target AA.
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Old 10-27-2008, 01:34 PM   #7
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Money isn't everything.
Even the best laid plans can be quickly derailed by life.
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Old 10-27-2008, 01:36 PM   #8
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I've learned that perhaps there's a bit of truth in the adage, "Sell in May and go away."

Is there a second adage about coming back?
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Old 10-27-2008, 01:43 PM   #9
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Originally Posted by Bestwifeever View Post
I've learned that perhaps there's a bit of truth in the adage, "Sell in May and go away."

Is there a second adage about coming back?
"October to May is the Time to make Hay"

"May to October will Make You Quite Sober"

I have a new one:

"Bernanke, Bernanke, go away,
Open your mouth another day,
Help my 401K today"..............
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Old 10-27-2008, 01:47 PM   #10
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I have used the expression several times, but first read it here, "If you want to buy at the bottom, there should be several opportunities over the next few months." I think I've leaned that I don't quite have the courage to go in and rebalance my portfolio in a falling market.
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Old 10-27-2008, 01:50 PM   #11
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One thing I know I have to get stronger on is the decision making. Sometimes I get the deer in headlight moments, knowing I need to do something but hesitating to do so. Not sure how I will overcome this.
As Unclemick is fond of saying, "hurry up and just stand there" may be a better long-tern strategy than a knee-jerk emotional reaction.

I've re-learned the market can decline faster, deeper, and (I'm afraid) stay down much longer than I envisioned.
I've learned having 5+ years in cash is a wonderful thing, but it doesn't guarantee a good night's sleep.
I've learned waiting to age 66 or 70 to start SS benefits is great in theory, but not necessarily the best option.
I've learned if you are retired and living entirely off your portfolio a very conservative 45/55 asset allocation can still be a Fruit-of-the-Loom staining level of risk.
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Old 10-27-2008, 02:21 PM   #12
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As Unclemick is fond of saying, "hurry up and just stand there" may be a better long-tern strategy than a knee-jerk emotional reaction.

I've learned if you are retired and living entirely off your portfolio a very conservative 45/55 asset allocation can still be a Fruit-of-the-Loom staining level of risk.
I think when we come out the other side of this there will be a new definition of a conservative asset allocation.
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Old 10-27-2008, 02:23 PM   #13
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Originally Posted by ziggy29 View Post
After the market returns to relatively normal levels, I think I've learned that 70/30 is a little too aggressive for me.
I've found 50/50 is too aggressive for me. I will go with 20/80 whenever I get back to ballpark pre-crash numbers. I'm not counting on being able to adjust anytime soon though.
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Old 10-27-2008, 02:50 PM   #14
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I have learned that I am an optimist and may have put more of my money in harms way than I should have. I have been throwing money in this market as it has been falling -- and it kept falling!
I still have 4-5 years in cash and will not touch that or I will lose sleep. I believe this is an incredible buying opportunity that could increase net worth long term - but I am pretty much as in as I can be - maybe one more re-allocation if the bottom falls out?
I WILL re-allocate when the market rebounds - I did'nt last time and regret it.
Ditto. I was too aggressive, too early, in buying into the market with extra cash as it fell. I was also too optimistic about the whole thing and should have listened to my instincts more about the whole unsustainable credit bubble. I've learned that many people can be delusionary in their optimism, even the supposed "smart people", economists included.

Not that I would try to time the market all in or all out. But I would reduce my risk more with a conservative AA and wait to get more aggressive after a significant fall when the risk is reduced and future returns are likely to be higher. I had done that somewhat, building up cash and FI to the point where I was about 50/50 AA at the top, but I bought back in too early.
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Old 10-27-2008, 02:59 PM   #15
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1. Once in a while the fringe guy really is correct.
2. My tolerance for risk was not as high as I thought.
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Old 10-27-2008, 03:09 PM   #16
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1. Even most of the financial pundits had absolutely NO IDEA that the investment banks were so extremely leveraged. I mean - is this stuff not reported?!?!?

2. That Alan Greenspan will actually admit that he was wrong!

3. Maybe, just maybe my "trigger" for rebalancing is too small. It fired way too often this year!

4. I'm sure glad I have my 2-3 year cash "bucket" and replenished it this summer.

5. That even faced with a huge blood bath portfolio loss, my gut conviction is still to maintain a pretty good chunk in equities. I just hope I get "rewarded" someday in the not too distant future!

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Old 10-27-2008, 03:18 PM   #17
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What about those who feel they drained their cash to get into the market after the initial drop? Would you rush in so quickly next time or develop a different strategy?
I put about a third of my ready cash into the market about one month ago (the DOW was north of 11k at the time). The value of those holdings has dropped over 25% since then. I'm still DCAing into the market, but in much smaller dollar increments.

In the future, especially in a declining market, I'll move slower, and DCA into the markets over a period of weeks or months.
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Old 10-27-2008, 03:18 PM   #18
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I think it is hard to learn from these things because they are so particular and time and place dependent. What you might learn from this event could be exactly what wil make it hard to succeed in the next one.

I think the only general thing I might have learned is keep an eye on your cash needs, and try to stay cool.

And don't gloat if you have missed the mess, and don't be too hard on yourself if you got mauled by the bear.

Remember the story about the guy who broke his leg and everyone thought it was a terrible thing? Until the Csar's men came around looking for conscripts.

Ha
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Old 10-27-2008, 03:25 PM   #19
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Remember the story about the guy who broke his leg and everyone thought it was a terrible thing? Until the Csar's men came around looking for conscripts.
Nice try, but I got a draft notice in 1969 and the market still tore me a new one...
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Old 10-27-2008, 03:41 PM   #20
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I've learned that:
  • The market can go lower than your lowest expectations.
  • Stupid people can make you lose money indirectly even when you do everything right.
  • Stupid people really do buy high and sell low.
  • The government will help stupid people get less wealthy by making the markets operate less naturally than they would otherwise.
  • It really is true that you should re-allocate to more conservative funds as you get older. (I'll keep this in mind in 10 years)
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