Two years after the bottom: lessons learned

[haha]

That was well before my time, but perhaps there was another asset class that did well? gold maybe?

Gold definitely, and oil, and single family homes and commodities in general.

However, it is awfully difficult to be in the right thing all the time, especially as a retired person who would like some income and stability.

Ha

 

[Zero]

Anyone care to predict the affect the Japanese earthquake will have on the market?

 

[REWahoo]

Anyone care to predict the affect the Japanese earthquake will have on the market?

It will go down, then up...

 

[KingB]

Anyone care to predict the affect the Japanese earthquake will have on the market?

It will be shaky.

 

[Zero]

It will be shaky.

Now you've got me trembling.

 

[HFWR]

Yes; however in the the even larger crash of 1973-74, treasuries did quite poorly so it really depends on the environment.

Ha

Yep, difference between a rising interest rate environment and a falling interest rate environment. Wonder where rates are headed from here?

 

[Danmar]

It will be shaky.

 

[Retire Soon]

Agree with 4out of 5. The crash didn't do much to reinforce the diversification point. Everything tanked at the same time.

You've raised a very valid point. Here are the 2008 total returns for some Vanguard Funds:



S&P 500 Index -37.02

Total Stock Market Index -37.04

REIT -37.05

 

[HFWR]

If memory serves, only the total bond market fund was negatively correlated.

 

[DblDoc]

If memory serves, only the total bond market fund was negatively correlated.

As well as the treasury bond funds. Swedroe is a proponent of taking your risk with equities and stick to only the highest quality bonds. In this past crash his point was well made.

DD

 

[target2019]

I've been on a steady course of self-education since 2005. With some boglehead help, I simplified, and then expanded our total portfolio. However, I learned during this Great Recession that other strategies exist, and you don't have to ride things down 50%, and wait a few years to return to the previous high. Since we are accumulating, the lessons learned are different than for an early retiree. In fact, there are so many variables, such as when you started, etc., that some up control to an FA, or even a dogma.
I've seen a great deal of success applying momentum investing concepts to our retirement funds which receive new money every week. I follow moving averages on all of our funds, so that I have a very good idea of where things have been. I can't predict the future, but I have a plan for mitigating some of the downside.

 

[Gone4Good]

Agree with 4out of 5. The crash didn't do much to reinforce the diversification point. Everything tanked at the same time.

"Almost" everything tanked. Long treasury bonds rallied a ton.

But besides that, diversification still worked. Owning 100% Lehman fared far worse than 100% S&P Index. And a 50/50 allocation between the S&P Index and Total Bond Market Index fared better than just owning the SPX.

Diversification did exactly what it was supposed to do. What it didn't do was prevent any losses. But then it never was said to do that in the first place.

 

[Free To Canoe]

Just reviewed a retirement overview by a Fido represenative that was done in 2007. It was very conservative portion of a Monte Carlo analysis. What struck me was that our assumption of income used for the study was high. Couple that small overestimate with the inflation assumption and it made quite a bit of difference on the portfolio survival.

 

[unclemick]

Target Retirement 2015 since jan 2006. After all these years finally becoming a better Boglehead - stay the course, hurry up just stand there, revision to the mean, close your eyes and let those Vanguard computers rebalance their little electrons out.

On the other hand - among 'my few good stocks' a few deck chairs on the Titanic were thrown overboard(sort of like an angry golfer) - mainly financials like BAC, Citigroup. Plus some painful dividend cuts.

Saint's didn't make the playoff's either.

Rats!

heh heh heh - so index/lifecycle funds for real money and 'a few good stocks' to cry and laugh with - for medicinal purposes to keep the hormones under control - don't you know.


P.S. My chickenheartedness theory required cutting expenses during the period of 'unpleasantness'. I really am cheap at times.

 

[teejayevans]

We pretty much did what the article said, but have some friends who lost a ton by doing the following

One had 100% company stock in his 401K, it is now about 30% of what it was at it's height.

Did not watching Enron collapse teach them anything?
TJ

 

[omni550]

Target Retirement 2015 since jan 2006. After all these years finally becoming a better Boglehead - stay the course, hurry up just stand there, revision to the mean, close your eyes and let those Vanguard computers rebalance their little electrons out.

Question to Uncle Mick, or anyone else in a "Target xxxx" fund. What are you planning to do with those funds when the target year is reached?

omni

 

[Ready-4-ER-at-14]

We have a small % going into one of these Target xxxx funds. It will be liquidated and will go toward an annuity, long term treasury, or dividend stock depending on what is most advantageous at that time. If we had a decent pension, the annuity would not be an option.

 

[HFWR]

Question to Uncle Mick, or anyone else in a "Target xxxx" fund. What are you planning to do with those funds when the target year is reached?

omni

I don't own one, but the target date determines the asset allocation; i.e. 2015 would be fewer stocks and more bonds than, say, 2040. Or, as Vanguard puts it: "The Fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date." Not sure if/when that reaches steady state. Guess it would have to at some point. Hard to have more than 100% bonds...

 

[Stevewc]

I've had a small amount (IRA) in the vanguard target plans for many years.
They move percentages of stocks and bonds very slowly. I have my money in the 2005 fund (don't think it is available now). It still has a higher percent of stocks than the next one up, which is income fund I think.
The thing to do is pick the fund you want based on the % of stocks, bonds and your risk tolerance. Don't pay any attention (or very little) to the year/date numbers. I learned that lesson the hard way.
Steve

 

[unclemick]

Question to Uncle Mick, or anyone else in a "Target xxxx" fund. What are you planning to do with those funds when the target year is reached?

omni

Nothing. Expect to spend the money as needed.

However since I'm in 2015 and will be 70 1/2 by then - guess who shall 'make me an offer I can't refuse' RMD wise?

heh heh heh - ok so I lied about my age - targetly speaking. But I will let the asset mix vary and RMD take effect on full auto. Note that I have SS and pension as a 40% of 'average year' expenditure as a back stop.