2008 Net Worth Change and Years to Recoup Loss

[Notmuchlonger]

I'm not sure whether this is good news or bad news, but it already has gotten better. The S&P 500 is up ~24% from the November low.

Wow. Sure doesn't seem like it.

 

[Midpack]

Net worth down 19.2%, but I'm still working and my AA is probably more aggressive than most of the FIRE/SIRE crowd. History suggests projecting how long it will take to "recover" our NW is a waste of time - anything from 1 to 15 years or maybe never. But I'm still sleeping like a baby every night. Been here before, and will be here again.

Anyone who invested aggressively and thought a year like 2008 couldn't happen - has unfortunately learned a hard (but entirely predictable) lesson. 2009 could be as bad or worse...but hopefully we'll stabilize.

 

[bbbamI]

I'm not sure whether this is good news or bad news, but it already has gotten better. The S&P 500 is up ~24% from the November low.

Yeah, I guess it is kind of good news. For instance, I update our financial spreadsheet once a month. Last month we were down only $5k instead of five figures from earlier updates.....

 

[haha]

Ye of little faith. S&P +28 Dow +258 today, there are a twenty more trading days left in Jan, so we could easily erase 2088, with the Jan effect.

Waiting for my end of year statement to do my calculations, but I am liking 2009 so far.

Ha-for sure! I'm up $40,000+ today. Won't take too many more until I am well. But one swallow doesn't make a spring, does it?

BTW, when I said-"It may never [recover]"-I didn't mean the markets, I meant my own retirement. As we all know the unceasing drag of living expenses can sink one's porfolio even as market averages recover.

ha

 

[FurBall]

Net worth down 10%, investments down 13%. Part-time consulting accounts for the difference. Also, got lucky -- starting building up cash in fall 2007 -- started DCA'ing back into stocks in late Oct.

House not included -- prices stable here.

 

[ziggy29]

Wow. Sure doesn't seem like it.

Mostly because if you start at $1000, drop 48% and then come back 24% from the low, you still have (1000 * 0.52 * 1.24) = $644 -- still down 35.6% from the high. The problem is that if you lose X%, you have to come back a lot more than X% to get back to flatline.

In any event, it's nice to see some GREEN year-to-date numbers.

 

[NW-Bound]

In any event, it's nice to see some GREEN year-to-date numbers.

Well, the year is young, but ...

At close today (1/2/2009),

MF portion at 18% of portfolio, up 2.6%
Stock portion at 31% of portfolio, up 4.6%
MM + I-bond at 51% of portfolio, up 0%

Total : Up 1.9% while DJ up 2.9%, NASDAQ up 3.5%, SP500 up 3.2%.

Is it time to go full-bore from "fear mode" to "greed mode" yet?

PS. In case someone was thinking that I was reporting 2008 gains/losses, I was listing today's return (Year-to-date return !), not 2008 return that was -26% for me.

 

[Dawg52]

Portfolio down roughly 20%. Really a pisser. Have no idea if I will ever recoup it all.

 

[NW-Bound]

Portfolio down roughly 20%. Really a pisser. Have no idea if I will ever recoup it all.

Look, S&P500's up 3.2% today. How many days like today does it take for you to get your 20%? Take some meds, and cheer up.

 

[Frugality_of_Apathy]

A drop of 20% requires an increase of 30% within the year to break even with inflation.

 

[haha]

A drop of 20% requires an increase of 30% within the year to break even with inflation.

This is assuming 5% inflation. Any reason for choosing that amount? With no inflation, a 25% gain would make him flat.

Btw, his drawdown is not unusually large, very likely he will recoup it before long. A person must accept drawdowns if he invests in anything other than short term treasuries and CDs. And, since you introduced inflation into the equation, there are no "safe" investments available at this time which would even break even with 5% inflation.

Ha

 

[Frugality_of_Apathy]

It's actually 4% inflation.

100 * .8 * 1.3 = 104

And we've been averaging higher than 4% this whole year.

 

[haha]

It's actually 4% inflation.

100 * .8 * 1.3 = 104

And we've been averaging higher than 4% this whole year.

Well, it's you against the market. The rates being forecasted by t-bonds and tips are very much lower than this.

Ha

 

[Frugality_of_Apathy]

Well, it's you against the market. The rates being forecasted by t-bonds and tips are very much lower than this.

Ha

I'm getting a guaranteed 6.5% return on my investments at the moment. (the old mortgage or market debate)

Oh and by "we've been averaging over 4% all year" I was referring to the CPI inflation rate not my market returns which are actually -6% at the moment.

 

[gryffindor]

Last five year returns
2008 -20.8%
2007 14.3%
2006 13.9%
2005 11.9%
2004 19.2%
Total 5 year 2.6%, due to lots of adding of money in last few years, so more recent returns count more.

Net worth up by 3% due to new money in

 

[dex]

I just completed computed my 2008 net worth (excluding home value) versus 2007:

- Decrease of 16.1%

I'm estimating it will take 4 years to get back to my net worth as of 12/31/07.

That takes a little explaining on the computation for that. Basically the computation is:
1. 2008 net worth less living expenses versus grown by the estimated growth rates (varies) per year

Versus

2. the 2007 new worth less living expenses grown at 3% per year

I made an error in what I wrote. It should be:

Estimate to get back to 12/31/07 net worth - 4 years.
The formula is:

2008 Net Worth less living expenses/yr times the estimated growth rate/yr.

Estimate to get back to 12/31/07 if no decline with a 3% net increase (after subtracting living expenses) per year - 8 years.

Let's assume the 3% net increase includes estimated inflation.

The key as aspect to this thought exercise is that getting back on track to the pre decline net worth take a larger percentage than just reversing the market decline.

It needs to account for
Market decline
Inflation
living expenses

Something like this - assuming a 20% decline

25% Market increase
3% inflation/yr
4% living expenses/yr


So if it took the market 2 years to increase 25% - the total would approximate - actually a bit more with compounding
25% Market
6% inflation
8% Living expenses

39% total increase

 

[Architect]

+30% approximately and reached our FIRE number. Or at least a number that we can live off of dividends/coupon if I get laid off or otherwise want to change jobs. The increase was due to an all bond portfolio, with no substantial physical assets (sold house) presently.

 

[FIRE'd@51]

Let's look on the bright side. If the S&P 500 price is distributed approximately log-normally, as most academics believe, the probability of a 50% increase is the same as that of a 33% decline.

 

[piano88]

NW down 18% even with contributions to IRA and 403b. Too much in equities, and learned the hard way. But, not planning to retire for another 5 years. May take that long to get it back?

 

[putty]

My net worth more than doubled this year! This is only my second year investing so it's inflated.

 

[FUEGO]

I checked and our net worth is exactly where it was July 1, 2007. Until yesterday.

 

[Shawn]

My net worth dropped by 9.4% in 2008. That includes everything, including my house (which also dropped by ~10%). Disappointing, but hardly the end of the world. I'm still working, which helped cushion the blow. If 2009 is a normal year, I expect to recoup my losses in 6-12 months.

I used the market drop to simplify my taxable portfolio. I harvested significant capital losses, which will give me a nice tax break over the next 10-20 years.

 

[Meadbh]

I usually calculate my NW on March 31 when all the year end reconciliations are in. Right now, based on my long term equity portfolio YOY losses of 25%, I'm conservatively assuming NW will be approximately $2m, SWR $80K @4%. If I lost my job today, I would be able to survive, though not retire as comfortably as I would like. I am going to continue saving, let time heal my portfolio and not worry too much.

 

[pasadenaDC]

NW up 66% for the year, though admittedly I am nowhere near most of the heavyweights of NW on this board. My 401K is down 37% for 2008, though most of my NW is cash savings, currently saving for a 20% down on a house.

 

[Meadbh]

NW up 66% for the year, though admittedly I am nowhere near most of the heavyweights of NW on this board. My 401K is down 37% for 2008, though most of my NW is cash savings, currently saving for a 20% down on a house.

Well you didn't get there on investments, that's for sure! I envy young folks like you who have seen the worst so early and can make their first investments at (what we hope will be) the bottom. What's more, it should be a good time to buy a house.