What have we/I learned from the recent events?

[doxeyweb]

What have we/I learned as investors from the recent events in the financial markets?

Well, personally i concider"ed" myself fairly well educated before the recent events, but i think i learned the following.

*FDIC & SPIC insurance limits.(I should have known..but didnt)
*Which of my accounts are covered by FDIC or SPIC and which are not.
(The difference between an MM "fund" and a MM "account")
*That i do have the nerve to weather the tough times...no changes to portfolio to date. yippee!!!
*That i personally will open and keep a little more "safe" money at my local bank and mabey even at home...just for real emergencies. I've always had a good confort level with my MM because i could write checks against it...but when accounts get frozen from runs on funds...it would be nice to get cash if needed until things pass over. I'm used to running to the bank for extra cash before a trip..or hurricane. But some things cannot be planned.
*That i keep way too much money in my MM funds. I need to put my money to work for me..instead of sitting around.

We'll thats it for now...im sure i'll think of more later.
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Just wanted to say thanks for all the member comments on my previous post...i've been looking for a site with members that have the same concerns and FIRE planning. Looks like i've found it!!

 

[Rambler]

I'm buying a new mattress...

R

 

[Helen]

Helicopter Ben seems true to his word.

 

[doxeyweb]

So much for serious answers...

So much for serious answers...

 

[dm]

That my grandfather was right. Bury your gold and silver in the backyard and become as self sufficient as you can be. And never trust any of the polititians.

 

[Dawg52]

That my grandfather was right. Bury your gold and silver in the backyard and become as self sufficient as you can be. And never trust any of the polititians.

If our politicians let this sucker go down, I'll probably follow your grandfathers advice in the future. He's totally right about not trusting politicians.

 

[ziggy29]

That we have forgotten the lessons from the Great Depression -- now that almost everyone who remembered it are no longer with us to repeat their warnings. We've forgotten the lessons that they warned us about and relived a lot of the excesses that they saw in the irrational exuberance of the 1920s.

 

[TromboneAl]

That i keep way too much money in my MM funds. I need to put my money to work for me..instead of sitting around.

Although I agree with this, I would think that recent events would teach you the opposite.

 

[W2R]

I haven't learned anything yet.

Seriously, I guess the only thing I can list is that these events have confirmed to us once again that in the end we are on our own as investors.

The responsibility to gather information and make decisions, and the opportunity to bear the results of these decisions, is ours alone.

I haven't made any changes but my hair is still standing on end and I have been suffering with a nervous stomach all week. I am not worried but I feel the above responsibility extremely intently and it weighs on me. So, although I listen to news broadcasts, I have been also taking some intentional time away from the news media now and then in an attempt to maintain an objective and sane outlook from which I can make these decisions. I try to avoid Cramer completely.

I am not at all concerned about what HAS happened, so much as what might happen. I am also not much of a proponent of taking huge actions such as this bailout in such a precipitous manner, when there is some uncertainty as to the wisdom of doing so. And yet, we have no control over this so that is stressful. We must rely on politicians who have messed us over in the past, to look out for our best interest. Here in Louisiana we are not accustomed to trustworthy politicians and my "stress-o-meter" is off the charts.

My decisions up to now have been much the same as yours, doxeyweb, except that I have an unusually large amount in a treasury money market fund where it has been since early July. I am OK with that. I also have a year's living expenses in my bank account, and a decent job, so now it is time to hold on to my hat, stay the course, and hope for the best.

 

[maddythebeagle]

Avoid individual stocks...esp. those related to a bubble....I guess most people knew there was something wrong in housing as far back as a couple of years ago...

 

[Canadian Grunt]

What has been reinforced for me?

Asset allocation is key

Opportunities exist in all markets

Don't panic....

Stay the course and don't be swayed by media sensationalizing

 

[CompoundInterestFan]

I'm not sure if this has been a true test of whether I could weather a serious market downturn. I'm still smack dab in the middle of the accumulation phase (15+ years away from retirement), so I don't think I'd be too freaked out if my portfolio lost 40-50%. It would suck, but I know I'm not retiring anytime soon, so I wouldn't change anything.

However, if I were less than 5 years away from retiring, I'd be crapping my pants on a 40% drop. But, I would hope that my asset allocation then would be such that I wouldn't see 40-50% drops. So, I guess if anything, this has reinforced the importance of asset allocation changing depending on where you are in life.

 

[W2R]

However, if I were less than 5 years away from retiring, I'd be crapping my pants on a 40% drop. But, I would hope that my asset allocation then would be such that I wouldn't see 40-50% drops. So, I guess if anything, this has reinforced the importance of asset allocation changing depending on where you are in life.

Exactly. I am retiring in November, 2009, but my asset allocation is really conservative at this point. That is why the market drops so far really haven't bothered me much.

Now, total economic collapse would be a real bummer. But that has not happened and probably won't.

 

[Gotadimple]

I'm not sure if this has been a true test of whether I could weather a serious market downturn. I'm still smack dab in the middle of the accumulation phase (15+ years away from retirement), so I don't think I'd be too freaked out if my portfolio lost 40-50%. It would suck, but I know I'm not retiring anytime soon, so I wouldn't change anything.
quote]

Absolutely. And if you have an asset allocation plan and it includes a several years expenses in cash/short-term investments, you can stay the course. Of course, you'll be nervous, but your near-term expenses will be covered.

Now we have to see what progresses from Congress and how well that AA plan works as we move to normalcy. If I'm remembering from the early '80's it could be awhile before things settle down.

-- Rita

 

[soupcxan]

As brewer says: you pays your money and you takes your chances...

 

[jIMOh]

Taught me to make sure I can live off interest and dividends
Taught me that no sector is invincible (financial services funds had been having a good 5-10-15 year run)
Taught me to be diversified (already was, but reminders are good)

I think most important thing I will share with others is that the government does little to help the good guys. I pay my mortgage (I bought at top of bubble) and my house is worth less than the mortgage I pay. No help coming for me. I can pay the mortgage I have, but seeing the principal amount drop would sure be nice.

 

[haha]

What I "learn" will depend heavily on what happens to a rescue plan. If the pols behave even semi-sensibly I will have learned that even in hairy times my plans were not too bad. If not, and markets crater 20% over the weekend, I will have learned that I was an idiot to buy anything other than CDs.

Ha

 

[harley]

Opportunities exist in all markets

Don't panic....

Stay the course and don't be swayed by media sensationalizing

I concur with the above, except that I am swayed by media sensationalizing. If they say things are great, circle the wagons. If they say the sky is falling, look for buying opportunities. Assume they get it wrong every time and I think you'll do pretty well.

 

[Nords]

What have we/I learned as investors from the recent events in the financial markets?

I've learned that after >25 years of a cumulative APR in double digits, despite a 40% drop for a while after 9/11, it's not worth getting excited about being down 4% YTD. It's probably not even worth getting excited about being down 40% YTD.

...i've been looking for a site with members that have the same concerns and FIRE planning. Looks like i've found it!!

So much for serious answers...

You're gonna have to decide which of these statements is more important to you. If you're serious about the second comment (and not making a tongue-in-cheek observation), then you seriously need to find another discussion board...

 

[Milton]

I'm not sure if this has been a true test of whether I could weather a serious market downturn. I'm still smack dab in the middle of the accumulation phase (15+ years away from retirement), so I don't think I'd be too freaked out if my portfolio lost 40-50%. It would suck, but I know I'm not retiring anytime soon, so I wouldn't change anything.

That's probably fair enough, if you're lucky enough to hold a secure government job. But if you are employed in the private sector, any recession serious enough to cause a prolonged 50% drop might cause you to become ER'd on an involuntary basis.

 

[ziggy29]

That's probably fair enough, if you're lucky enough to hold a secure government job. But if you are employed in the private sector, any recession serious enough to cause a prolonged 50% drop might cause you to become ER'd on an involuntary basis.

Or not able to ever be R'd at all, E or not...

 

[Dog]

Reinforced diversification
Having an emergency cash reserve
Living with your means (and knowing what that is)
Be self sufficent - don't expect others to look out for you
Politicians take care of themselves and not us (regardless of what they say)

 

[Free To Canoe]

Not out of the woods yet...

What I "learn" will depend heavily on what happens to a rescue plan. If the pols behave even semi-sensibly I will have learned that even in hairy times my plans were not too bad. If not, and markets crater 20% over the weekend, I will have learned that I was an idiot to buy anything other than CDs.

Ha

Ha is right that we are not done learning lessons yet. We still need to see how this concludes.
This is a good thread and I will take this opportunity to come up with the lessons. More later.

 

[Sevo]

Relearning some old lessons
The laws of economics are just like the laws of physics. You ignore them at your own peril. The lever in finance and physics work both ways. No matter how big you are even if you are a giant bank, corporation or government , leverage out too far and when the tide turns you are going to get crushed.

People never change. They will jump on the next great thing that is going to make them rich whether it is tulip bulbs, the internet, or derivatives. It does not matter whether they carry the title janitor or chief executive officer of a multinational corporation, they are all susceptible to some slick talking salesman who is going to make them rich beyond their wildest dreams.

All governments regardless of what name they operate under are forced to look out for the power brokers in their society and will leave the bill for the workers pay one way or the other.

 

[lazygood4nothinbum]

"give me a leverage long enough and a fulcrum on which to place it and i shall move the world."~~archimedes

i have learned that money is so corrupting that even good people will trade their integrity for revenge. and so you see those who have never gone into debt, those who save, those who normally live by good rules entertaining thoughts on how they will max out their credit cards and mortgage their paid-off homes so that they can get their fair share too. you see people say that you only have to have integrity in personal life but not in business, as if you can separate your business from your person.

i have learned that even though i might have lost a little respect for such people, perhaps i have gained a bit more compassion; for myself as well, as i can see that i am more affected by money than i ever thought possible, not in terms of greed but in terms of security. and not that money makes me happy, but i have learned that the threat of losing it worries me so that i have let it interfere with my happiness.

as an aside, i have learned that capitalism is not always wielded best by democracies.