How did you react to the crisis?

[ejman]

Quote:

Originally Posted by Moemg The only way I regained a chunk of my portfolio was to stay at 70% equities and ride it up . I have now rebalanced down to 65% and that is where I will stay . I've read that the number should match your comport level not your age and that is my comfort level .

I've been struggling with the allocation % to equities and most sources I've read ( Bogle et al) indicate my 55-65% equities is way to high at my age (59). Your comment on matching your comfort level not your age is "comforting"

[audreyh1]

Quote:

Originally Posted by Moemg The only way I regained a chunk of my portfolio was to stay at 70% equities and ride it up . I have now rebalanced down to 65% and that is where I will stay . I've read that the number should match your comport level not your age and that is my comfort level .

I didn't have as high an allocation to equities (55%), but I rebalanced on the way down to maintain it, and so things have recovered very well (so far! - knock on wood).

It was very scary last Nov and March. Terrifying really. I don't know how I hung in there and my peers will probably say the same. Sure, we've been rewarded by seeing our portfolios recover tremendously. But things could have gotten worse - there was no clarity at the time, you just didn't know.

Audrey

[Moemg]

Quote:

Originally Posted by audreyh1 ). It was very scary last Nov and March. Terrifying really. I don't know how I hung in there and my peers will probably say the same. Sure, we've been rewarded by seeing our portfolios recover tremendously. But things could have gotten worse - there was no clarity at the time, you just didn't know. Audrey

It was terrifying . The only thing that kept me somewhat sane is my house is still worth a huge chunk of money even with the drop in Florida prices so for me the worse scenario was I'd sell the house (which I'd like to do any way ) and replenish my damaged portfolio .

[W2R]

Quote:

Originally Posted by audreyh1 It was very scary last Nov and March. Terrifying really. I don't know how I hung in there and my peers will probably say the same. Sure, we've been rewarded by seeing our portfolios recover tremendously. But things could have gotten worse - there was no clarity at the time, you just didn't know.

It was absolutely terrifying. At the time it seemed pretty much impossible that by September we would be doing this well and discussing who had regained everything and who hadn't.

And yet, here we are.

Seldom am I inspired to quote a Democrat, much less FDR, but he really nailed it when he said in his 1932 inaugural address

Quote:

This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

[Dennis]

using what your comfort level in Bonds, maybe good for some that KNOWS what their real comfort level is, but for others, not so much..
Why?
1. Most levels are based upon past performance and can be misleading, such as Bonds were great in 00-02', but not so much in 08'..
2. Inflation and Increased rates to pay taxes is comming.. an the last time this has happened? ( Think Carter -80's) Bonds were the worse to be in. Except of course Treasuries.. an How did bonds do most recently in 1999?
3. Traditional Bonds are what I'm talking about an why doesn't Vanguar have Global an EMD bonds? Those ade to one's Bond Portfolio would have boosted it by 2-3% apy...!
4. Then we have the Have Nots, or those that Aren't able to save enough that a 7% apy rtn will get the job done for them an thus they have to own more Equities, if they are going to Have a Chance..
5. If one is Saving Enough to More than enough an a 6-7% apy will get the job done? More power to you, you're among the Rich or you have Other Sources, such as Pensions an Max SS to Get the Job done..an your Still Considered Rich..
6. On the Otherhand? If One Truly wants to "Make as Much as they can" with their $? Then they shoul not own Any Bonds and just Learn and Invest into Equities, Leveraging, Options, etc.., Then an only after then they have made enough? Move the $ into safer ports..and go Sailing, fishing and golfing..

The Ave. savings a Senior has today is about only $50,000 per AARP and living on their SS and a Pension... Using 4% WD out of that $50k is only $2k yr to supplement your income.. But Invested into Small Caps for example? You can take out upto 8% WD and double that Supp. Income ..So, bonds in this case are a Determent an not an asset.. Others Opt to use Stock an Divs's instead of a Mutual Fund and are doing very well with them..Inspite of the 08's losses..their Divs/Ylds are paying the bills , while the Stocks Nav is recovering..

Bottom Line: I think, IAD.. ItAllDepends how much you have vs how much you need.( not want) should lead one towards what % in Bonds they should have..
and Guessing you feel comfortable at any level is strictly conjecture and a guessing game until the worse case happens and by then, it's usually too late to change things..

My Comfrot level? Is Making what I need and "0" Downside Risk..and I could care less if everyone else/ Wall Street or otherwise, is making + or - 40%..

;>)

[Dawg52]

Quote:

Originally Posted by Moemg The only way I regained a chunk of my portfolio was to stay at 70% equities and ride it up . I have now rebalanced down to 65% and that is where I will stay . I've read that the number should match your comfort level not your age and that is my comfort level .

And I stayed at 50% stocks and rode it up to the DOW 9,500 level. I regained a good chunk as well, but certainly not all of it. But comfort levels are quite different for most. I'm probably too conservative for my own good, but that's OK.

[Moemg]

Quote:

Originally Posted by Dawg52 And I stayed at 50% stocks and rode it up to the DOW 9,500 level. I regained a good chunk as well, but certainly not all of it. But comfort levels are quite different for most. I'm probably too conservative for my own good, but that's OK.

I 'm probably way too aggressive for my own good so we balance out !

[HFWR]

55, with 4-7 years left in the w*rkforce...

At first, I tried to stay the course. But as the "crash" unfolded, I had an "oh, sh*t" moment, or two...

Last fall, I reduced my positions in what I considered the most risky stuff, namely REIT, commodities, and emerging markets. Then, the volatility was killing me, so I widened the rebalance bands from 1%/10% to 5%/25%. I rode that until the first of the year, then bought HYG and TIP, while reducing my equity allocation some more. Have made good money from the HYG/TIP moves.

I've been ignoring the bands on the way back up, trying to keep the bond/cash portion topped off, for the inevitable "correction".

I'm now at 40% equity (SP500-15%, Russ2000-10%, VGK-7.5%, VPL-7.5%), 40% bonds (HYG-10%, TIP-15%, ST fund-10%, and total-5%), REIT-5%, CCF-5%, and cash eq-10%.

Still down 14%, which is a major improvement from down 34%...

So, reduced risk, and did some DMT, but didn't freak out totally...

[bbbamI]

Ok...I'll be honest. At first I ...then, later on .
It got to the point when I felt like . However, I didn't .

[kumquat]

Crisis? What crisis?

[dgalbraith100]

I went back to work in the middle of the crisis... not because I needed to (wife is still working a very stable job), but because an interesting opportunity found me.

Since our cash flow almost doubled, I bought a new car, finished a solar hot water project 1-2 years sooner, started eating out alot more, doing alot of house upgrades, and in general being completely opposite of what most people did. Basically I am trying to do my part of spending our way out of this downturn ) (We are saving 30% of my income and 10% of my wifes, so I didn't completly stop saving )

My thinking is, I have the cash flow right now, prices on cars, construction are very good... I might as well buy the things I would normally have waited a few more years to buy. I feel like I can spend a bit more when "times are rough" since when "times were good" I was saving like crazy. (we have savings of 12 times our expenses at 37, so I think we are plenty on track in the savings department. I expect FI to be 7-10 years out at my current pace if things don't take another huge crash.

Laters,
-d.

[M Paquette]

I retired in March 2008. so seeing this recent fluctuation made me a bit nervous. I'm only too well aware of how the first several years of retirement on a portfolio can put the rest at risk.

Anyway, I stayed the course, did some rebalancing early this year, and also did a considerable chunk of tax loss harvesting. I can comfort myself by knowing I won't pay capital gains taxes for the next decade or two. (Assuming I have gains...)

[chinaco]

No Major changes... sticking with the plan. In hind sight, the plan could have been better, but it is good and has done its job

We did not make any major changes to the portfolio related to the crisis. It did cause some minor behavior adjustments.

In 2006 I did a major change to our portfolio to prep for ER. Since we were about 5 years from the date, I allocated a sufficient amount to fixed securities (mainly Intermediate Bond funds). I was going to further change the allocation over 2007 and 2008 to put a bit more in bonds... but did not because of the market crash. I decided to sit tight since my allocation (due to stock market) went to 50/50. That 2006 reallocation saved our bacon... although we suffered like everyone else.

I made some minor portfolio changes that were related to particular funds. When I sold the funds, I put it temporarily in a MM and averaged the money back into the stock market.

DW ERd in 2007, so our earnings have dropped since the crisis (about 40%). Since all of the money she earned was being saved, we have not changed our living standard. We have a LBYM lifestyle and we still are saving (on my salary).

DW has been a bit more careful of expenditures since her ER, loss of paycheck, and crisis.

Since the market has recovered, I am letting the equity side of the portfolio heal.

Hey folks... a balanced portfolio of stocks and bonds works!

[freebird5825]

Quote:

Originally Posted by IndependentlyPoor Anyone else care to share how they responded to the crisis? Would you do it again? Are you readjusting now?

I started out in 2007 (FIRE year) with a 50/50 AA and ongoing DCA. I wanted to see how that would go with my personal risk comfort level. 4Q08 left me with a 45/55 AA, and a -25% loss YTD 2008, including new 2008 money. Not too horrible but more than I was willing to see disappear. Theoretically assessing your risk is one thing, living it is another. A good lesson learned.
Hmmmmmm... was my overall reaction. So I waited until 1Q09 to do a few minor changes to go for a 2009 starting 40/60 AA and let it ride. I made a few small "buy into equities funds" moves at a pretty good time. I continued my DCA as usual towards the more favorable targets.

I also went on a cruise that had been pre-planned since April 2008. We had the $$ earmarked and saved for it for over a year. We decided we weren't going to back out, no matter what Mr. Market or the current exchange rates were doing. We were dealing with an American company, so we did most of our trip related spending (USD) with them as opposed to onshore (euros). We kept our expenses low on the trip and have zero debt coming out of it.

[Bimmerbill]

I didn't change much, but really stepped up my "pay off my debt" idea, ala Dave Ramsey (I didn't budget, so not really the whole DR plan). I reduced my 401K from 18 to 5% (the match) and paid off all consumer debt from about OCT08 to this month.

Left my 401k allocation roughly the same, never rebalanced. Just bumped 401K back up to 12%, not sure I'll be able to sustain that.

I have a stable gov't job, so little risk of losing it. Will save up a good EF, then see what's happening.

ETA: I've been trying to get some contractors interested in taking my money. 1 showed up 2 days late to meet me (at least he called) and the other never showed up. I have to call a few more!

[CuppaJoe]

After 35 years in the market and having reacted to many downturns, I started seriously planning retirement in the summer of ’07 and got into a “transitional” AA, extremely conservative. Of course, that kind of AA did okay and I don’t believe there was much in paper loses, unless you separate out the part that remained it equities. I didn’t keep track of PF progress until I actually retired in Aug. ’08. I have been gradually increasing equities at a mere 1% here and there and now keep an EOM record which shows PF has fluctuated roughly 4% upward and 3.5% downward, not counting the 4% withdrawals; it is currently at it’s highest point ever. I'm as concerned as anyone here about the next shoe to fall, bond exposure and future inflation potential.

[ESRBob]

Great posts. Reads like people comparing notes after a battle. We don't seem to be hearing from any casualties, though. Wounded, sure, but I wonder if there were people who threw in the towel, sold all their stocks in a panic, and if they ever got back into equities this year. They might not be on ER forums anymore...

Our own situation can be summed up as "dull pain": we didn't sell much of anything except to harvest tax losses, immediately re-buying the same asset types. (Sometimes I swapped to higher quality debt and took some losses in the process but all in the 5% range)

That meant I wasn't doing any rebalancing at the bottom. So I definitely did not have the nerve to add to stocks through this process (as some here did, to their credit). But I didn't sell them either. Portfolio losses for 2008 were in the 20% range.

This year has just been riding things back, but we're still not back to the late 2007 peak (about 10% below Oct 2007 now). I keep telling myself I need to calculate my asset allocation and do a new rebalancing but keep putting it off. Denial was my faithful companion this past year.

One other thing we did was to switch about 10% of the portfolio into a TALF hedge fund this Spring, switching out of traditional FI funds and into this TALF fund which invested in credit card receivables, car loans, farm equipment loans etc. This was done with lots of cheap govt lending through that Treasury program and locked in 19-20% for three years assuming the recovery stumbles along and defaults on these receivables don't exceed 50%. I don't think we'll see anything else like it maybe in our lifetime, but it is an example of how even with a clear plan and formula we bent it to take advantage of an unexpected opportunity.

[Dennis]

Well, I found that
1. A Balanced Port is Only good for reducing Exposeur an lowering Risk in Bear markets, it does not Capitalize on recovery or Bull Markets
2. Be FLEXIBLE .. just use your common sense. have a nice Bal. Port but rebalance an Move 10-20% of your Bond $ into your equity or aggressive Equities when the 200 MA tells you ( which was in Feb/March) an Prev it was in Oct/Nov of 08'
3. At the Least ? DCA since the Bottom..in 5-10% increments..
4. History Does Repeat> Just have to look at the Past to plan your Future.. LOok at 02'/03' for your guide which Funds/stocks to have more into..
5. Market timing will also work, but you best be a Full Time investor..not just spend a few hours a week on it..
6. Equities made over +61% on ave in 03', + 30% in 04'..after loosing over -40% ave btwn them in 00-02'.. sound familar?
7. Example Many Vanguard people have just used their VWELX and VWINX funds and Move more into VWLEX in recovery and Bulls and Less in VWINX and Vice Versa when Bull markets run longer than 3 yrs.. They just Watch the Dollar Volumes of those Funds and Just Follow the Leaders..
8. There are other Funds to do the same , that are even better, but can't disclose whom they are , it would cause too much trouble for Wall Street if everyone Knew what to do an when an Since The House controls everything an Just gets the SEC to Keep it Rigged? ( Just like Vegas does with the State).. the Odds R Against you Otherwise..Eventually The House Always wins..

You Don't have to go Reinventing the Wheel.. KISS..

[FUEGO]

I ramped up spending and got way more aggressive with my asset allocation. I also completed some tasks to facilitate a career change "just in case" the current job/career starts going down hill.

Between December 2008 and March 2009, we booked and went on a week long cruise to the Caribbean, two weeklong trips to Vegas, and booked a beach house rental for a week (the beach trip is next week). Prices probably averaged half of what they usually are. The cost was so low that it just came out of our normal monthly cashflow without really changing how much we save or spend. I'm glad we did all that stuff. It was really fun and inexpensive to boot ($2600 total??).

We were 100% equities going into the Great Recession. So no bonds or cash sitting on the sidelines that we could plunk into equities. But I did have a lingering actively managed fund that was a big chunk of my portfolio. This was from my pre-vanguard/boglehead enlightenment days back when I was with Edward Jones. I was slowly getting rid of this fund. And I really wanted to get into some more risky and hopefully non-correlated asset classes (REITS, small cap international, international REITS) as part of my long term asset allocation, but these asset classes had been very pricey or unavailable before when I was setting up my asset allocations.

In late November 2008 at the bottom of the market in 2008, we sold most of that actively managed fund and a little of some other stuff that represented approximately 25% of our portfolio. With the proceeds, we bought REITS, small cap intl, and intl REITS. These investments are up in the 65-80% range today from where I bought them. I also made some more switches from the actively managed fund into small cap value in Mar 2009, along with plunking some more from the actively managed fund liquidation into a triple leveraged financial ETF within 2 days of the absolute bottom in March. As a result, we have done well investment wise by taking on more risk when risk premiums got out of whack.

On the job front, I applied to take a professional exam in January 2009 and spent months studying and subsequently passing the exam, and just yesterday I was fully admitted to practice in this new profession. Starting to put out feelers for new job opportunities. The salary bump may be 50-150% from where I am now. My current job is tightly connected to residential and commercial real estate development, which is not doing so well today. So far this year we have laid off 25% of the workforce, had our 401k match taken away, received no raises, no bonuses, had the health insurance premiums foisted completely onto the employer, and most recently we all enjoyed across the board pay cuts. Needless to say, job prospects at the current employer aren't great, even though I have survived the first 2 rounds of layoffs. I certainly feel like this is a sinking ship, I'm just trying to jump off before it slides under the water.

DW's job is rock solid, as she works for the one of the best capitalized and solvent investment banks out there.

All of this is in the context of our well-managed expenses. We figure that we could rather easily live off of either DW or my salary. Or we could live off of two unemployment checks if it came to it. I think our state pays 79 weeks of unemployment benefits right now, so we would be set for at least 18 months or so while still saving money from the unemployment checks.

In the meantime we are living life and enjoying ourselves. It is hard to really get down during these difficult economic times when you feel a little smug for having made sound financial decisions when others around you weren't necessarily paying much attention to their finances.

What, me worry?

[audreyh1]

Way to go FUEGO!

Audrey