Thanks to the following posters who reminded us of how panicky the situation felt back then. As they say, if everyone is running around scared, and you are not, perhaps you may be the idiot that does not know what is coming.
Yeah, tsunami! What tsunami?
The main effect was to totally change my approach to generating income during retirement. Before the crash, generating income was all very abstract: put a bunch of money in to index funds and bond funds, and then withdraw around 4% when it was time to retire. Re-balance yearly. But when I saw the value of all my holdings (including international and bonds) plummet, suddenly what had been abstract became very visceral. My stomach hurt. It was hard to sleep. I could not imagine having to live for decades with that kind of stress and uncertainty. As I read the crazy financial news of the times (AIG bailout, synthetic CDO's, etc) and saw a lack of accountability and oversight of financial markets, I further doubted my investment approach...
I did not sell but did not buy until some months from the low. People who sold were, of course, matched by people who bought. Prices weakened because people who sold were highly motivated to do so, I guess.
Anyway, I'm sure some are kicking themselves for selling at lows. But they were just acting rationally -- rationally in most other forms of human activity. Normal human emotions do not mix well with investing. So you have to be realistic about your AA and planning up front. But few had experienced such a massively bad market as we saw in 2008 ... a learning experience for sure.
So, of course I was scared too. However, unlike many people here who were not involved in tech stock melt-down in 2000-2003, I lost 44%, counting from March 2000 to Oct 2002, though I did not own a single dot-com.
I recovered when I finally realized that it was pointless to wait for tech stocks like Cisco, Applied Material, etc.., to come back. Remember Nortel, or smaller semiconductor guys like Conexant? They NEVER came back!
I sold, took the loss and went into other sectors such as material, mining, agriculture, etc... I recovered to my 2000 high in Oct 2004. In 2006, I bought my 2nd home, and kept getting higher. Life was good until the housing bubble burst.
This time, learning from not bottom fishing for the previously high-flying sector that now crashed and burnt, I did not bother to watch financial stocks to buy, but rather the other "innocent" stocks that also got hammered. There were plenty of other much safer stocks to buy. I told of Caterpillar earlier. These were the ones I watched.
Did not care to watch the funds like Dodge & Cox Balanced that I had. Not even now. I only had a few percent in those, and they did not drop nearly as much as some individual stocks. Those were the babies that got thrown out with the bath water. Did I mention Caterpillar? Sold that too soon, doggone it, but still have Cummins. Heh heh heh...
I'm amazed at how so many folks were able to know that the bottom was the bottom at the time it was happening. Like you, I hung tough and stuck to my plan, including no reductions in spending (I'm 6 years FIRE'd). But at the time (that in retrospect I now know was "the bottom,") I didn't recognize it immediately. During the first few percent of the recovery, I was still highly suspicious that the recovery would reverse and begin going back down. Only after several months had passed, did I begin any aggressive actions aimed at taking advantage of rising recovery prices.
For you folks that knew the bottom was the bottom at the actual time it was the bottom (there's a mouthful!), how did you do it? Your own data? Pundits? Sounds, or lack of sounds, coming from W2R?
I certainly did not. Hence, my record shows I plowed $400K into the market, from Nov 2008 to Feb 2009. The market was of course still dropping, and my total went down another $127K in that time, on top of mucho money lost already.
So, I cried "Uncle" and told myself that the remaining cash had to be what I would keep to live on for the rest of my miserable life. My part-time work also was drying up around that time, and I did not bring in enough to live on, like I did in earlier years. That part-time income did help me take some more risks than I would otherwise though.
...See the
big red arrow? That was the low for the 2008 decline (shows as Feb 2009 since I'm plotting end of month results). But note the 1929 decline, the blue line. The temporary low that lines up with the 2008 bottom in about Jan 1930 had one looking smart for only a few months. Had you entered there you would have lost your shirt (or blouse).
It would be a bit less painful to lose my shirt if young female investors would also end up topless.
Yes, it was exactly the talk of "double dip" that made me took some money back out of the market for a little bit of gain, part of the $400K that I put in just prior to the bottom. Still kicking myself for not letting it in there a bit longer.
Compared to the tech bubble, top to bottom of the dips, I was down 37% instead of 44% in the 2000-2003 dip. A bit of improvement, perhaps, but this time as I had more, the absolute dollar amount was a lot more. Yes, it was a LOT of money, compared to what my income is now, and I do make good money.
Anyway, I still now have more than in Oct 07, before the crash, although I have had a net outflow. And I am very thankful.
