Hard times and investment approaches

[Lsbcal]

I'm reading this book: The Great Depression: A Diary: Benjamin Roth, James Ledbetter, Daniel B. Roth: Amazon.com: Books

It's in diary form with comments by the author's son. The author was a thoughtful man who lived out the Great Depression in Youngstown, Ohio. He was a lawyer who knew many people in the town. He comments on what happened to banks, real estate, stocks, etc. from 1931 to 1941. Lots of insights into what really happened to a prosperous part of the community.

I think it's worthwhile reading to consider if your investment approach would survive such a scenario. Much worse then our present times. If you are an older investor you might have less time to see any recovery.

Here is a chart I've posted elsewhere that kind of goes along with the book's narrative:

BTW, I'm a nervous optimist with an AA of 65/35 stocks/bonds.

 

[ERhoosier]

Often forgotten is dividend stream of the strongest US companies was pretty well-maintained. For those fortunate enough to have funds to invest wisely, financial survival was possible. What always amazes me about the Great Depression is that, by and large, civil US society continued & the Nation did not unravel into complete anarchy.

 

[heeyy_joe]

If you had access to cash you were OK. Too many people with too much cash and way too many people with too little.

 

[AndrewJackson]

Often forgotten is dividend stream of the strongest US companies was pretty well-maintained. For those fortunate enough to have funds to invest wisely, financial survival was possible. What always amazes me about the Great Depression is that, by and large, civil US society continued & the Nation did not unravel into complete anarchy.

queue Hank Paulson.

 

[Lsbcal]

The author in multiple places in The Great Depression: A Diary mentions some investment mistakes people made that cost them dearly and in many cases led to total ruin:
1) Not being diversified in equities
2) Not having a good percentage of high quality bonds in the portfolio
3) Buying back into the market too soon. This would have been a tough call in the 1930's.
4) Not being able to carry real estate through hard times

#3 can be thought of as the rebalancing bonus risk.