How did you get through the market crash in 08-09

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dipsylala
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How did you get through the market crash in 08-09

Post by dipsylala »

I started investing at the beginning of 2013. It has been great so far. However, I read that it's very difficult to stay the course during a market crash. I don't think I will sell my shares in a market crash, but maybe it's easier said than done. I am sure that most of the bogleheads here did not panic and just held on to the their shares. I'd like to know how you got through the 08-09 market crash psychologically. I can imagine the following cases:

(1) It is so wonderful to pick up great businesses at such a bargain price. Please keep going down! (I guess most people here felt this way?)
(2) Oh, my 1 million just shrunk to half a million! I cannot sleep well at night, but I'll hold on to my shares.
(3) The world is going to end, so I'm going to sell everything.

Please comment on how you felt during the crash. I do think a lot of the newbies will benefit from your experience.
steve_14
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Re: How did you get through the market crash in 08-09

Post by steve_14 »

Asking folks how they felt after the fact is probably going to yield some less than accurate information. Fortunately, this forum was around during that period, so consider looking through the post archives to see how folks actually were feeling. I think what you'll find is: Some people "discovered their true risk tolerance" and dialed back the risk, while others stayed the course and profited from it. Very few people were excited to be buying stocks a bargain prices as the market dropped like a rock.
Rodc
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Re: How did you get through the market crash in 08-09

Post by Rodc »

steve_14 wrote:Asking folks how they felt after the fact is probably going to yield some less than accurate information. Fortunately, this forum was around during that period, so consider looking through the post archives to see how folks actually were feeling. I think what you'll find is: Some people "discovered their true risk tolerance" and dialed back the risk, while others stayed the course and profited from it. Very few people were excited to be buying stocks a bargain prices as the market dropped like a rock.
Great idea.

I would say I was very concerned, but I stuck to my plan and kept investing new money in stocks and rebalanced as I hit rebalance bands. That does not mean I was happy. It was a scary time.

Unlike 2001 which was nearly as bad I did not shut my eyes. :happy

In 2001-2002 I had all new money going into S&P 500, but I shut my eyes for at least a year and just hoped for the best. I did not look at my account until the markets were well along in recovery.
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steve roy
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Re: How did you get through the market crash in 08-09

Post by steve roy »

I sat tight*.

Because in 2003, I didn't sit tight, and lived to regret it.

* Not react to bad news by selling.
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Re: How did you get through the market crash in 08-09

Post by Harold »

Whether willing to admit it now or not, even the most diehard investors felt a variant between 2 and 3. Let's call it 2.5.

(2.5) The financial world as I knew it might be ending, but I can't do anything about it, so I'm going to hang on to my shares and hope for the best.
BerkeleyChris
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Re: How did you get through the market crash in 08-09

Post by BerkeleyChris »

i viewed it as a buying opportunity. everything was on sale and I bought as much as i could. and, when thinking about what i had that I "lost" in the crash, i thought about having another ~40 years to bounce back...
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cheese_breath
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Re: How did you get through the market crash in 08-09

Post by cheese_breath »

Historical perspective helps. I lived through the 1970s bear market, 1987 crash, 2001 crash, and everything in-between so I knew it would eventually come back and just stayed the course.
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Oicuryy
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Re: How did you get through the market crash in 08-09

Post by Oicuryy »

dipsylala wrote:(3) The world is going to end, so I'm going to sell everything.
IIRC, this was called "Plan B" around here. See, for example, this thread.
http://www.bogleheads.org/forum/viewtopic.php?t=30085

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arcticpineapplecorp.
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Re: How did you get through the market crash in 08-09

Post by arcticpineapplecorp. »

I realized that I didn't need the money for the next 30 years or so and my job at the time was fairly secure (processed benefits for unemployed/underemployed/disabled so my workload actually increased during the recession) so I felt no need to sell anything but kept buying and stayed the course. Had less money invested than now so the loss hurt, but not as much as it would now that assets have grown since then.

I remember sitting across a coworker at the time who had her "I can't stand it anymore" moment and sold everything and put her money in the stable value fund (that was in 2008 before the market went even lower in 2009). She may have thought she did the right thing considering what happened Jan-Mar 2009 (it wasn't the right thing since she obviously bought higher previously only to sell lower in 2008), but if she is still following the market, might feel foolish now.
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galectin
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Re: How did you get through the market crash in 08-09

Post by galectin »

Easy. I didn't do anything.

When my wife asked about it and was worried about the losses in her IRA and the presumably equal losses in my retirement accounts, I told her that our current contributions will show a significant appreciation when things go up again. I was working (still am) and had stable employment (tenured Ph.D. faculty member at a medical school). I figured that we had at least 8 years to go until would retire.

We were living on significantly less than what I was taking home. We still are.

So, stay the course. If things worry you, reduce your risk. I find myself considering that now, since I am much closer to retirement, have had recent health issues, and grow more concerned about national economic issues that ultimately may affect me in the future.
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hoppy08520
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Re: How did you get through the market crash in 08-09

Post by hoppy08520 »

I went back and looked at my records. At the peak before the crash, around October 2007, our balances climbed to $191,000, which at the time was our all-time high. At the nadir, in March 2009, we were at $109,000 -- and that was after contributing another $12,000 or so in my 401(k) and our IRAs. I remember being a bit depressed, but being in my 30s at the time, and having survived the dot com crash (albeit with a smaller portfolio), I felt confident the market would eventually come back. I never thought of selling. It was ingrained in me that you just didn't do that. I think I rebalanced, but honestly I can't even remember. Some of my funds were in target date funds so they rebalanced automatically. I believe my AA around then was around 85/15 or 90/10.

Also, at the time, I knew a fraction about investing then that I know now. I didn't really think you were supposed to sell, so I didn't. While I have an emotional side to me, I also have an empirical mathematical side as well and if someone asked me about selling in a downturn, I'd have responded, a la Spock, "But that is not rational."

Another point about that period of time is that I was going through some turbulence in my work and personal life and I was so wrapped up in those things that I didn't have the time or attention to pay to the stock market. I was probably better off for it.

Here we are five years later and our balances are around $460K thanks to investment returns and new contributions. As I've gotten five years older and a little wealthier, I've gradually dialed back my AA to 70/30 (but with an aggressive tilt in my stock allocation) over the past two years (which means that I've lost out a bit on the bull market). I still think I could bear a brutal bear market even with a 85/15 AA, but I don't think I really need to and from what I've read, the extra returns you get from going 70/30 to 85/15 aren't that dramatic anyway.

If you go back and read many posts from that time, you really have to look at each investor and where they are in their life. I was in my 30s and didn't have a ton of money saved. By contrast, my dad had just retired and he had FAR more than I did, and he had a high stock allocation (which I think was a mistake). For my dad, it was somewhere between anguishing and harrowing. He didn't bail out entirely, but I know that he did sell some stocks for cash, and he was also forced to "sell low" for some of his portfolio for his basic living expenses. He had to come back out of retirement to work on a part-time consulting basis to recover.

So, you really have to consider the age of each investor when you read what people say. The younger ones (like me) had less to lose and more time to make up for the losses, so it's easier for them to "stay the course".
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Re: How did you get through the market crash in 08-09

Post by Iorek »

I was, and am, still working, so what I did was stop opening my statements, or if I opened them, it was only to glance at them and make some joke about how much we had lost that quarter (and the extent to which our contributions for the quarter made up the difference).

I consolidated some investments this past summer and I was honestly shocked to see how low some of our funds (that did not have ongoing contributions) had gone in that time period. The good news/bad news is that they made up all of that ground and more, so now I owe taxes for selling them.
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Re: How did you get through the market crash in 08-09

Post by SDBoggled »

I think I'd have to go for the missing option

(4) Totally oblivious - better to be lucky than ???

I knew enough not to sell and didn't have any cash to invest:

This was years before I found Bogleheads or had any money for taxable... so in 2009, 401k was on automatic to front-end load into REIT :happy It wasn't until a year later and their pretty amazing runup, that I wondered if should sell REIT.

So even if this is far from an educated Boglehead experience... perhaps it does represent some of the principles: Don't sell low; stick to an investing plan (non-plan in my case) devised in non-crisis conditions; buy low.
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Re: How did you get through the market crash in 08-09

Post by Toons »

cheese_breath wrote:Historical perspective helps. I lived through the 1970s bear market, 1987 crash, 2001 crash, and everything in-between so I knew it would eventually come back and just stayed the course.
+1 just kept buying shares of index funds
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Re: How did you get through the market crash in 08-09

Post by peppers »

As the events of 2008-2009 played out, fellow coworkers would ask, "How's your 401k doing? I would reply, "It's about a 201k now."
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Re: How did you get through the market crash in 08-09

Post by sunnywindy »

I didn't do anything...and I wish I did! Let me explain. At that time I had most of my money in stocks (about 25) and a few funds like QQQ. I always bought these blue chip type companies with the goal of never selling them. So, when the market crashed I didn't even open my brokerage statements because I didn't need to see it and it never occurred to me to sell anything. Unfortunately, AIG - the largest insurance company in the world, and Fannie Mae/Freddie Mac -two quasi governmental companies - were in my portfolio. I never suspected that all three of these companies could go to zero (or effectively zero) and I also thought because of their size or function in the economy, etc...this would somewhat protect their value (sort of a rancid fantasy on my part!). These 3 tickers are still drastically under what I had paid for them and if I had paid more attention I could have sold them before they went to zero. oh well...

The good that came out of the Great Recession is I now pay more attention to my investments and have sold all of my individual stocks in a three year process and replaced them with a mostly Vanguard/iShares Boglehead type portfolio.
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Re: How did you get through the market crash in 08-09

Post by bertilak »

I worked two extra years before retiring. :(
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hoppy08520
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Re: How did you get through the market crash in 08-09

Post by hoppy08520 »

Similar thread started one year ago, with 128 posts: What did Bogleheads do when the stock market crashed?

Here are two illustrative threads from back in the day. You can read them like a horror novel. Read through these to get a sense of what people were thinking back then, before they knew there would be a 5-year bull market after the bottom of the crash:

I can't believe I am thinking this - a 130-post apocalyptic thread started in October 2008, when Bear Stearns and Lehman Bros went down, with this harrowing opening post:
Sheepdog wrote:I have been retired for 10 years. I am one who has said over and over again. Stay the course. Look for the long term. Yeah, sure. That's fine until today. Today did it. I am just starting to be scared so that I won't tell my wife what happened today...stocks down...bonds down...I'm down. Our retirement funds are sucking down the drain. I lost today alone a year's worth of normal distributions for expenses. I keep thinking tomorrow will be a turn around. I have said that for 30 days.
I am 25% capitulating tomorrow, maybe 50% to money markets....maybe all.

This is not me. I will see tomorrow.
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I can recall the fear of that era by reading this opening post above.

This is from a good 60-post thread Be greedy when others are fearful, posted Feb 21, 2009, just before the bottoming out:
deepdrive wrote:Be fearful when others are greedy.

- Warren Buffett

Anybody living by this mantra now?

I'm trying, but even being in my early 20's, this recession is scary. It's scary to hear countless comparisons to The Great Depression, many from valid sources and not just quacks on the internet.

However, every other recession/depression we've ever had has ended and stocks have always continued to rise. So, I'm trying to be greedy when others are fearful with the hopes that sticking with my plan will pay off. I just hope this isn't the next Japan and in 20 years my portfolio balance is less than my contributions.
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Re: How did you get through the market crash in 08-09

Post by dekecarver »

I was in Saskatchewan and happened to stop by a farm to ask permission to hunt. While talking with the farmer I noticed the TV on and the headlines were streaming. We had a cup of coffee, said "oh chit" and talked a few minutes about the market. I was a long ways from home, no phone and figured no sense in worrying at that point. I then gathered up the dogs and went out hunting for huns and sharptails. I was 90/10 in the market and it was a true test of risk tolerance. Got home a couple weeks later, re-evaluated the situation and made one change in my asset allocations going forward. I've kept up with monthly investments maxing out all accounts just as before. No regrets and honestly it was not really all that stressful being that I had an established plan with a solid core foundation and I tuned out all the noise.
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Re: How did you get through the market crash in 08-09

Post by JW-Retired »

I pretty much followed my pattern from the 70's and 1987 and 2001(or whenever it was), and did nothing. In 2008-09 I did nothing except increasing my 401k contributions to 100% equities. That and the market eventually got my equity AA back to normal. I don't believe in selling any bonds to rebalance.... we only do rebalancing on the high equity band edge.

I do admit to watching things closer than ever before because in 2007 I had found the Bogleheads, who watch and talk about everything. :D
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seeshells
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Re: How did you get through the market crash in 08-09

Post by seeshells »

As Livesofts sigline says, It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.........
Last edited by seeshells on Mon Mar 10, 2014 5:41 pm, edited 2 times in total.
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ogd
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Re: How did you get through the market crash in 08-09

Post by ogd »

I was between 1 and 2, closer to 2. I did not sell stocks, but neither did I rebalance, too scared to do it. Instead, I ramped up the 401k to 100% of salary until max in the first months of 2009, which is still the most rewarding 25K I've ever invested, all into stocks.

Not particularly proud of the no-rebalancing part, but I wanted my survival floor at that point. This floor is much higher now and I suspect there's plenty of psychological room to rebalance. But you never know. It's also my strong belief that we shouldn't assume that any 50% crash is shortly followed by a crazy bull market. The future might not be so kind.
sunnywindy wrote: never suspected that all three of these companies could go to zero (or effectively zero) and I also thought because of their size or function in the economy, etc...this would somewhat protect their value (sort of a rancid fantasy on my part!). These 3 tickers are still drastically under what I had paid for them and if I had paid more attention I could have sold them before they went to zero. oh well...
It's likely that it would have been too late. After all, the other market players are no dummies either. Furthermore, this is a slippery slope that does lead to you selling out of investments at the worst possible moments. "Less attention", or perhaps "enough attention but no action" is a much better idea.
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Re: How did you get through the market crash in 08-09

Post by sscritic »

ogd wrote:I was between 1 and 2, closer to 2. I did not sell stocks, but neither did I rebalance, too scared to do it.
Similar, but I sold stocks to tax-loss harvest (yes, some of us had taxable accounts), but that meant I bought "replacement" (but not replacement) shares on the other side, so there was no net selling. I didn't buy stocks, but I bought $130k worth of CA IT TE. That money was coming out of CDs, and I didn't have the nerve to put it into equities.
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Re: How did you get through the market crash in 08-09

Post by sometimesinvestor »

sunnywindy wrote: never suspected that all three of these companies could go to zero (or effectively zero) and I also thought because of their size or function in the economy, etc...this would somewhat protect their value (sort of a rancid fantasy on my part!). These 3 tickers are still drastically under what I had paid for them and if I had paid more attention I could have sold them before they went to zero. oh well...

I confess I owned aig and did not sell. For better or worse its higher than it was in nov 08 but about 25% of its value shortly before Lehman
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Re: How did you get through the market crash in 08-09

Post by cfs »

Good conversation.

Oh yes it was ugly and painful with stocks down, bonds down, money markets breaking the buck, at one point I stopped looking at our Vanguard accounts balance because every investment was going in the same direction. Investing is "an act of faith" and in 2008 a large percentage of individual investors "lost faith" in those institutions which were supposed to prevent such a debacle from happening. It was an eye opener, and thousands of workers (including this writer) placed their retirement plans on hold and continued working for a few more years in order to recover from the lost decade. On a personal note our boring SWAN (sleep well at night) portfolio was down in 2008 (not as much as the go-go portfolios but it was down) and it was our first down year. Oh yes we learned our lessons.

Thanks for reading.
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Re: How did you get through the market crash in 08-09

Post by heyyou »

Three years after 2005 retirement, I was stunned by the losses, so I didn't do anything. This forum was my support group. I salute those who rebalanced by purchasing more equities. I knew my no-COLA pension could eventually fail, but not immediately, and the insurance would cover some portion of it. DW and I continued with our plan to live on the pension until inflation shrank it, making no withdrawals from the portfolio. The recent low return decade helped my pension, see my luck in that. Live below your means for decades, invest, and you will be lucky compared to those who don't, including your co-workers who earned the same income over the same period.

Missed the '87 crash due to quarterly statements, and by working evenings and missing the financial news that was unimportant in those days. The Tech Crash hurt some, but the prior growth of 15 years was so large, as were my contributions, that my account merely shrank to a more normal size. I didn't like the losses but I knew that to keep contributing was my path to early retirement. The portfolio balance was less important than increasing my contributions in those years. That changed when I started counting in years of expenses after the recovery, just prior to retiring.
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Re: How did you get through the market crash in 08-09

Post by baw703916 »

For options 2 and 3, what's the point of selling after it's gone down?
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Re: How did you get through the market crash in 08-09

Post by Sconie »

For years and years now I have kept a weekly 'record'----in a bound financial-type book----of my weekly financial standing, investments, asset profile, and "thoughts" relative to the same. During the most recent bear market it was quite helpful to me to be able to look-back and see what happened and how I felt during the 2000-02 bear market-----which was a major 'down' of about 49%. Nothing like looking at the past to help give one a bit of perspective!
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Re: How did you get through the market crash in 08-09

Post by Harold »

baw703916 wrote:For options 2 and 3, what's the point of selling after it's gone down?
Because it could go down more. People whose life's savings had dwindled away couldn't necessarily withstand that.

We were facing a financial crisis of great depression proportions, and absolutely nobody knew that stock prices would return to their highs -- they could easily have gone the other way.
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Re: How did you get through the market crash in 08-09

Post by poker27 »

Unfortunately for me, I switched jobs within my company in 2008 and came with a pay cut up front. When the market was crashing so were my companies sales, so my pay crashed as well. Do I wasn't able to take advantage of any 'cheap' investing. That would be a perfect example of where bonds come into play for rebalancing. I was only a few years into my career.

If you want to think about it... If your current portfolio that you worked hard for is 100k, how would you feel if it fell to 50k. A bit scarey
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Re: How did you get through the market crash in 08-09

Post by nisiprius »

dipsylala wrote:I started investing at the beginning of 2013. It has been great so far. However, I read that it's very difficult to stay the course during a market crash. I don't think I will sell my shares in a market crash, but maybe it's easier said than done. I am sure that most of the bogleheads here did not panic and just held on to the their shares. I'd like to know how you got through the 08-09 market crash psychologically. I can imagine the following cases:

(1) It is so wonderful to pick up great businesses at such a bargain price. Please keep going down! (I guess most people here felt this way?)
(2) Oh, my 1 million just shrunk to half a million! I cannot sleep well at night, but I'll hold on to my shares.
(3) The world is going to end, so I'm going to sell everything.

Please comment on how you felt during the crash. I do think a lot of the newbies will benefit from your experience.
Well, we had a conservative asset allocation so our portfolio value did NOT shrink by 50%. Before the crash, I thought that our stock allocation might be too low, and I was sure that a 50% stock drop wouldn't be difficult to get through. When it happened, it was very hard to get through despite our low asset allocation.

We literally slept OK, though. It wasn't so bad we lost sleep.

When it happens, you don't have the benefit of knowing how low it will go or how long it will stay down.

The thing to understand is that, as I said in another post, when it happens, it is not like seeing that your gas tank is half empty. It is more like seeing that your house is burning down and it is half burned.

And you do not see it as a percentage. You see it as an absolute number of dollars, and you see it as the number of years it took you to save it up. Years and years and years of patient savings, foregoing nice vacations and new cars, to build our retirement, boom, shot to hell.

And, we thought of it in terms of "what are the chances of a complete financial collapse?" Lehman Brothers had been around before I was born, before my father was born, and before my grandfather was born. It had been around for 150 years. Its collapse was a once-in-150-year event. The eight or nine other collapses, so many I lost count, were also events, none of which I ever expected to see happen my lifetime. And when Bernanke and Paulson appeared on television, despite their best efforts, they looked scared to me--and Paulson has subsequently acknowledged that he was very scared, I was not projecting.

So, as I say. It's not "gas tank is half empty, wonder when I'll be able to refill." It's "house is half burned down." Its "years of patient savings, shot to hell in a few months." And it's "looks like the chances of the stock market going to zero might be about the same as the changes of rolling snake-eyes--I don't think it really will happen, but I'm starting to believe that it could."

Oh, and yes: I got laid off in late 2008. Company's sales dropped 70% between one month and the next. My employer is still in business, but has never recovered--the current head count is about 1/4 of what it was when I was let go.
Last edited by nisiprius on Sun Mar 09, 2014 9:51 pm, edited 1 time in total.
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Re: How did you get through the market crash in 08-09

Post by letsgobobby »

Here's what I wrote five years ago, on March 2, 2009:

" Stocks are well below their very long term averages in terms of prices. Period. Over the long run, this has been a good time to buy stocks...

At 35 years old, and hoping to not need stock-invested money for between 30 and 50 years, a diversified equity portfolio appears more and more attractive. It is certainly more compelling than at any time in at least 12 years, and possibly quite a bit before that. My average purchase price on all my stock holdings is around 10,000 on the Dow or a little less, almost all purchased in the last 13 months. It would certainly have been nice to have bought lower... but this is a marathon, not a 5k. The long-term prospects of global stock returns from these levels are favorable."

http://www.fatwallet.com/forums/finance ... #m13533896

So I'd say option 1.
Last edited by letsgobobby on Mon Mar 10, 2014 11:46 am, edited 1 time in total.
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Re: How did you get through the market crash in 08-09

Post by Desert »

Harold wrote:
baw703916 wrote:For options 2 and 3, what's the point of selling after it's gone down?
Because it could go down more. People whose life's savings had dwindled away couldn't necessarily withstand that.

We were facing a financial crisis of great depression proportions, and absolutely nobody knew that stock prices would return to their highs -- they could easily have gone the other way.
THAT is market risk. The market rewarded those who stayed the course in 2008; will it do so again during/after the next crash? It isn't guaranteed, and that's why the market is defined as risky. The risk isn't just an emotional reaction to temporary draw-downs. The risk is that we'll lose money and never get it back.
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Re: How did you get through the market crash in 08-09

Post by sscritic »

nisiprius wrote: And you do not see it as a percentage. You see it as an absolute number of dollars, and you see it as the number of years it took you to save it up. Years and years and years of patient savings, foregoing nice vacations and new cars, to build our retirement, boom, shot to hell.
This is why I don't understand why people think about asset allocations in terms of percentages. If you are 80% stocks, and stocks fall 50%, your stocks are now - pause for some math: new total 60, stocks 40 - 67%. 80% to 67%, not so bad, just a 13% drop (new math). But apply that to a $1 million portfolio, and you just lost $400,000.
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bengal22
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Re: How did you get through the market crash in 08-09

Post by bengal22 »

Unfortunately, market crashes are just a symptom of a real economic disaster. Yes, because I had a good job and had been through a major dip before in the 80's and other smaller dips, I had confidence that my portfolio would rebound and could ride it out. But the real pain was inflicted on those that lost their job, who lost their pensions, who had salary erosion, who lost their homes, who saw insurance rate skyrocket, who saw more jobs go off-shore. Yes, we survive and hold the course but it is hard to measure how the overall economy is affected and does it really bounce back to where it was. For those who see crashes as buying opportunities, I really wonder if they see how these super-recession inflict some medium to long term pain.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
thx1138
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Re: How did you get through the market crash in 08-09

Post by thx1138 »

I was at close to 100% equities and still 30 yrs from retirement. So I did nothing and didn't worry about it. Automatic 401k purchases of equity index funds continued as before.

Wasn't much of a test of willpower really. I had no bond allocation to need to rebalance from so I didn't need to buy consciously into the dip. And 30 yrs out from withdrawal crashes are actually kind of a nice thing.
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Ged
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Re: How did you get through the market crash in 08-09

Post by Ged »

Mostly sort of fatalism. I'd been through some other pretty bad markets so I was optimistic this too would pass.

It seems to me early on there is fear due to lack of experience, but in reality that is the best time to go through a down market because you are buying cheap.

Later on it's a lot more scary, but you have experience to help. The biggest worry I think is what happens if you get a crash when you have just retired. That I think is the real test of an investor. Can you handle that scenario?
Professor Emeritus
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Re: How did you get through the market crash in 08-09

Post by Professor Emeritus »

I took Emeritus Status in 2007. As part of that we moved major stock funds to bond type investments. Certainly made me look like a genius. Every cent we saved since 2007 (all in TSP) has been 100% index equities. Our asset allocation was based on DW's steadily increasing pension. Ive seen enough crashes to know that if you wait 10 years you will be fine. We had the 10 years. So it was mostly chance and a bit of strong stomach, DB pension and long view.
letsgobobby
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Re: How did you get through the market crash in 08-09

Post by letsgobobby »

bengal22 wrote:Unfortunately, market crashes are just a symptom of a real economic disaster. Yes, because I had a good job and had been through a major dip before in the 80's and other smaller dips, I had confidence that my portfolio would rebound and could ride it out. But the real pain was inflicted on those that lost their job, who lost their pensions, who had salary erosion, who lost their homes, who saw insurance rate skyrocket, who saw more jobs go off-shore. Yes, we survive and hold the course but it is hard to measure how the overall economy is affected and does it really bounce back to where it was. For those who see crashes as buying opportunities, I really wonder if they see how these super-recession inflict some medium to long term pain.
Yes but ideally our IPSs and AAs already take into account tail risk; so when it showed up in 08-09, even if it included personal economic pain, our AA should have been prepared to handle that. of course best laid plans of mice and men, yada yada. But that's the idea.
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whaleknives
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Re: How did you get through the market crash in 08-09

Post by whaleknives »

Continued to max my 60/40 stock/bond 401(k) with payroll deductions. I've shown this history to my kids, encouraging them to start early and not stop. :)

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FrugalInvestor
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Re: How did you get through the market crash in 08-09

Post by FrugalInvestor »

I was early retired living off my taxable account which represented 50% of my portfolio and was (and still is) 100% in stocks (IRAs are 100% bonds) - so the drop in the taxable account was severe. Did it bother me? Sure. Did I sell? No. As a matter of fact I re-balanced into stocks but couldn't quite bring myself to completely re-balance to my target asset allocation. The market ended up doing that for me but I didn't profit to the extent that I could have. I was able to sleep though.
Have a plan, stay the course and simplify. Then ignore the noise!
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wshang
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Re: How did you get through the market crash in 08-09

Post by wshang »

Well, the problem with reading history is we are naturally imbued with the idea that it must turn out this way and it is progressive. When you have just lived through ten years of crushing depression, Europe has fallen, the France has collapsed and Britain is losing ships faster than they can be built, you get the sense that maybe this time it is different. Imagine you hear the leader of an island nation vowing to, "shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender" and it is Tojo. It no longer sounds like brave words. It sounds like stamping 500,000 Purple Hearts is a prudent idea.

To your question, I can remember thinking that if this is what is going down, then what I have saved will make no difference anyway. I feel for those who are retired or lost their jobs. We are all toast. - Time to double down.

To the OP, I wouldn't think for a moment that the structural issues have been solved. I think there is an excellent chance we will get a chance to experience some major calamitous paradigm shift which we can't even begin to imagine or predict. At least you can vent those feelings and feel that you are in this flimsy lifeboat with the rest of the BH's!
The cure shouldn't be worse than the disease.
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John151
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Re: How did you get through the market crash in 08-09

Post by John151 »

i've always been a conservative investor. In the mid-1990's, when I had about 40% of my investments in stocks, I decided that I would gradually reduce my stock allocation to 35% by 2000, and then to 30% by 2010.

So in early 2008, I had about 35% of my investments in stocks. Then came the crash, and by the end of the year, my stocks had dropped to around 27% of my investments. It was obviously time to rebalance, but I had two rebalancing options: should I rebalance back up to 35%, or should I rebalance only to 30%, since my plan was to have only 30% in stocks by 2010?

In the end, I decided to split the difference and rebalance to 32%. Then, as the market recovered, my stocks rose to above 35% of my investments, so in late 2009 and 2010, I gradually reduced my stock allocation to 30%, as planned.

With hindsight, I can see that I would have been better off if I had rebalanced to 35% in stocks, and even better off if I had let my stocks ride ever since then. But I'm well ahead of where I was before the crash, so my plan worked out reasonably well. It also helped me to stay calm when I might otherwise have panicked and sold at the bottom.

I guess that means I'm between (1) and (2).
jackholloway
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Re: How did you get through the market crash in 08-09

Post by jackholloway »

Eh, I primarily dealt through sniveling and whimpering.

It truly looked like things were going to finally go bang, because people that should have been listening were instead hardening their positions and talking past each other, and mercy and gratitude were no longer fashionable. There was little trust, and few efforts to create consensus.

I responded much like I did in 2001 - do not sell, leave my auto purchases alone, and do not open the financial statements. At the time, I was 100% stocks, instead of my current 72/20/8, and it was painful losing an entire year's salary. I feared for my job because no company is immune, and so built a larger cash position than I truly needed until I felt safer. That was the start of my having a true EF that could hold me for a year, so I could afford to keep holding positions.

Fear is infectious, and anyone not in the market then should remember that the great depression's 90% drop looked like a 50% drop, followed by a recovery for a big chunk of a year...

As far as my own planning, I still have an EF, and I have an AA that matches my observed tolerance - mostly equities, and some FI.
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Re: How did you get through the market crash in 08-09

Post by epilnk »

I increased our allocation to long treasuries for a couple of years before the drop (starting in 05, I think), because I was worried about the looming mortgage crisis. In october of 08 after the big market drop I sold more than half of our VTSAX, parking it in an SP500 fund (I think) and booking a tax loss. I exchanged some of it back in March, booking another tax loss remarkably near the market bottom - this was a coincidence, I review the portfolio when I do our taxes. I was fully back into VTSAX by the end of the year. One day I startled myself by noticing how far the long treasuries had gone up (flight to quality, I assume), and cashed that in to drop it back to the starting allocation.

While I can't say I handled it at all optimally, I probably gained more than I lost from the market crash. I think not paying very close attention helped enormously. And the huge tax refund I got from the 08 TLH was exactly the positive reinforcement I needed to stay the course.
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sans souliers
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Re: How did you get through the market crash in 08-09

Post by sans souliers »

I watched nervously as my 25-years-to-build-it portfolio took the 50% dive. I work nights, so I was waking up to the market opening bell and listening to doom, gloom and flickers of hope mixed with despair. Knowing I was in with a large crowd all in the same boat lightened the load. NPR had Planet Money podcasts that helped make sense of the noise, too.

Cut out the cable in September 09, and the noise went down a whole lot.
In the whole time, my AA went untouched along with continued deposits to the 401k.

Tuning out the noise -- that saved me tons, 'cause when I stir the pot, I only burn myself.
Less noise and finding bogleheads.org -- recovery with learning.

What a resource, this forum is -- a treasure of wisdom, and worth supporting.
Sometimes pessimism leaves me pretty well prepared for when things don't go my way, and pleasantly surprised when they do.
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FrugalInvestor
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Re: How did you get through the market crash in 08-09

Post by FrugalInvestor »

I failed to mention above that I took the opportunity to do some major tax loss harvesting in my taxable accounts during the crash - thanks to the Bogleheads. I was able to correct some past fund selection and placement decisions as well, without suffering negative tax consequences. This provided huge tax benefits to us in early retirement and will continue to pay for years to come! So in that (large) respect the crash was a financial blessing in disguise for us.
Have a plan, stay the course and simplify. Then ignore the noise!
FedGuy
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Re: How did you get through the market crash in 08-09

Post by FedGuy »

It's weird how quickly your perceptions change. When I read CFS's post above and saw the reference to "lost decade," I realized that it's been a while since I've heard that term--but it wasn't that long ago that everyone was using it, all the time.

I kept maxing out my retirement accounts during the recession (well, until I lost my job, but I'll get to that in a minute). When the market first dipped, I bought a bunch of stock in my taxable account and congratulated myself on scoring a good deal before the inevitable bounce-back. That was before Lehman collapsed.

I lost my job a few years later. I had a larger emergency fund than I ever thought I'd need, but watching my savings decline month after month was really upsetting for me. I had a lot of money in equity funds, and, based on what I learned from this board, I took advantage of my low (unemployed) tax bracket to do some tax loss harvesting and to sell off something like a dozen funds with high ERs and consolidate down to three low cost index funds (it would have been two, but my S&P 500 fund, which I planned to sell and use the proceeds to buy more in a total stock fund, was still showing taxable gains. At one point, the gains were only a few hundred dollars, and I got ready to sell as soon as it went into the red, but then the market turned around and the thing's been going up ever since).

I was really worried that I'd burn through my emergency fund and I'd have to sell some equities and actually spend the money, rather than to just buy different equities, before they had recovered. I ended up getting a new job when I had just about two months of expenses left in my emergency fund; that was pretty terrifying.

All in all, I think my unemployment had a much stronger and longer-lasting impact on me psychologically than the decline in the market did, but it's hard to fully separate the two.
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Re: How did you get through the market crash in 08-09

Post by scrabbler1 »

The market crash in late 2008 was very helpful to the early retirement plan I had been putting together for over a year. I left my job at the end of October that year (2008) and was able to sell my company stock whose price had not yet taken a big hit and buy about 25% more shares of a bond fund I planned to use for my early retirement. The shares of that bond fund were greatly depressed so it presented a huge buying opportunity I did not anticipate I would have.

I did some small rebalancing measures, buying shares of two stock mutual funds (one in my rollover IRA and the other in a taxable account) in late 2008 and early 2009, both of which have rebounded nicely in the last 5 years.
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Scott S
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Re: How did you get through the market crash in 08-09

Post by Scott S »

I had some investments at the time, but I had also been studying Warren Buffett and was 28-29 at the time, so I was a solid (1). I began maxing out my 401(k) and Roth, and joined Bogleheads.

Thankfully, it seems to have worked out. 8-)
"Old value investors never die, they just get their fix from rebalancing." -- vineviz
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