how you weathered the 2008 financial downturn

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heater
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Re: how you weathered the 2008 financial downturn

Post by heater »

EmergDoc wrote:...Overall the movement was down, but you couldn't tell that from day to day. Up 3%, down 2%, up 4%, down 5%, up 1%, down 1%, down 2%, down 2.5%, down 0.5%, up 2.5%, down 2%. etc. If you started trying to time things, it would have been VERY easy to get whipsawed.
You completely nailed it...I had almost forgotten that part of the decline. Very gut wrenching. I can't remember how many times that I thought, on one of those up 5% days, that this bear market is over...and it wasn't.
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burt
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Re: how you weathered the 2008 financial downturn

Post by burt »

The only reason I didn't freak out on investment losses was because I was preoccupied with the potential loss of my job. My Fortune 100 company darned near went under. Sold my home in the summer of 2008, with only a 10% loss, so that provided some relief. I did blink...went from 60/40 to 50/50 in Oct. 09. Sold most of my company stock in April 2011. I guess I survived, but my 5 year ROR of 2.3% is not all that comforting.

burt
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DaleMaley
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Re: how you weathered the 2008 financial downturn

Post by DaleMaley »

My asset allocation was 100:0 stocks-to-bonds from 1979 until 2000. In 2000, I switched to 90:10.

In January 2008, after doing my annual financial review in December of 2007, I decided to switch to 60:40, primarily because I no longer needed to take so much risk. At each annual financial review, I try to apply Larry Swedroe's 3 factors to my AA (need, ability, and willingness to take risk). I had no idea the market would crash in the Fall of 2008.

I was on vacation in Colonial Williamsburg when Lehman Bros went down. I remember being nervous the whole financial system would collapse, but I stayed the course.

My 60:40 AA made it a lot less painful to stay-the-course versus my previous 90:10 AA :D
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SteveB3005
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Re: how you weathered the 2008 financial downturn

Post by SteveB3005 »

I took it as a buying opportunity and tax loss harvested all I could. Whilst not as certain of rosier days ahead as Adrian and some others on the board who went all in on equities, I increased my exposure to a 50/50, from a prior 40/60, to which it remains.
Sam I Am
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Re: how you weathered the 2008 financial downturn

Post by Sam I Am »

Message deleted.
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Johm221122
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Re: how you weathered the 2008 financial downturn

Post by Johm221122 »

I also seen it as a buying opportunity,just remember to pick AA that fits your situation and risk tolerance.When your in the accumulation stage market drops are good.Make a plan and stay the course
smpatel
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Re: how you weathered the 2008 financial downturn

Post by smpatel »

I realized how human I was in 2008 when my 80:20 allocation took a nose dive, I got whipsawed while being indecisive and my portfolio was down -43.26%. I learned a lot in the process and now has 50:50 AA, the main learning was "Do not count on the paper earnings while making life plans/decisions". There are too many important things in life than just money.
It gave me the perspective and I wish I could some how pass this experience to my kids when they grow up, just not sure how though!

This experience seems unique compared to other folks on the thread as they seem incredibly disciplined to stay the course and rebalance, kudos to all of you!

BTW, I have followed low cost index funds portfolio and read all the books necessary (Bogle, Bernstine etc.) but still!
SteveB3005
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Re: how you weathered the 2008 financial downturn

Post by SteveB3005 »

^ They were scary times, people were tense and there was a fair amount of capitulation, even in these hallowed halls. Go back and read if you get a chance, interesting stuff.
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ruralavalon
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Re: how you weathered the 2008 financial downturn

Post by ruralavalon »

We started the downturn with a 65/35 asset allocation.

In December 2008 we sold some treasury bonds and bought more Total Stock Market to rebalance, which only brought the asset allocation back to 50/50 (where we have kept it since).

Also during the downturn we put new investment money into equity mutual funds, whenever we had the money available to invest (12/08, 2/09, 4/09, 7/09, 9/09, etc.).

Edit: Our portfolio was back above water by September 2009.
Last edited by ruralavalon on Sun Jan 29, 2012 9:46 am, edited 1 time in total.
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Peter Foley
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Re: how you weathered the 2008 financial downturn

Post by Peter Foley »

I will retire this year so I had a lot at stake in 2008. As one poster mentioned, going through the 2000 dip was a helpful experience psychologically. I began reading the forum in 2007 and took the advice to have a written plan to heart. That made all the difference to me in terms of staying the course. Seeing what I had written during non stressful times allowed me to rebalance as the market fell and then again as it recoved. Still - it was tough and it was emotional when the S&P dropped below 800.
RobertAlanK
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Re: how you weathered the 2008 financial downturn

Post by RobertAlanK »

The experience was difficult and stressful. I remember my emotional reaction first thing in the morning listening to the radio as they reported that global markets were down big with futures indicating US stocks were ready to follow. I lost about a third of my portfolio value from June 2008 thru March 2009.

But it was so helpful to me at the same time. This forum was instrumental. I realized my AA was too aggressive for my risk tolerance. I've since reduced from 65/35 to 55/45 with a small value tilt and more conservative bond investments. I've also simplified by portfolio, cut the number of funds in half to virtually all index options.

More importantly I realized I needed to significantly increase by retirement contributions. I am thankful for the steady job that allowed me to take advantage of the lower prices as the markets came back. My portfolio is now well over double its value at the bottom. I'm just hoping it will be quite some time before I have another opportunity to determine how well I learned the lessons of 2008-09.
SGM
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Re: how you weathered the 2008 financial downturn

Post by SGM »

It was very stressful to me. I lost about 35% in value, and was 95% in stocks. I did not panic. I got myself deeper in a hole with Wamu and National Bank. I had a bank inspector friend who in 2008 said, in general terms, you wouldn't believe how bad things are for the country, but I did not take heed. I have relations who seem to have been forewarned by bank trustees who changed their asset allocation and they missed the downturn.

Some financials and a few shares of GM bonds went to zero. I decided to align myself closer to Bogle principles. When in doubt, read. I busied myself reading about financial history and index investing. More recently, I have been reading about the psychology of decision making. Fortunately, I did not panic. Most of my new money went into bond funds. When my investments recovered, I moved slowly into bond funds so that my allocation is closer age in bonds.

I am not 100% aligned with the Bogle philosophy, but it does make up a significant amount of my portfolio now.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
SamB
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Re: how you weathered the 2008 financial downturn

Post by SamB »

I watched my assets decline considerably, about 40% at the trough. However, the biggest annoyance was the 529 plan. I had to start the college outlays just as the world came to an end. Fortunately, and through a great deal of luck, as bond prices dropped over the next two years I recovered about 80% of the earnings in the 529 plan that were wiped out by the overall market blowout. However, I certainly did not end up where I would have been if the markets had not imploded. My capital gains in the bonds were not in the 529 plan, but in much larger holdings outside of the plan. I reduced the stock holdings in the 529 plan just after the 2008 crash so the recovery in the stock market did not show up in the plan. If I had not had a plan B with the 529 plan, things would have been much worse.

The Fed bailed out the capital markets and it all came back. The losses overall appear to be permanent, however, as far as the economy goes. I certainly did better than a lot of people.

I compare the situation to the late 70's and early 80's. I went completely into the stock market then as I was starting my career. It worked out well. Now is the time for young people to either take the plunge or sit on the side lines. Of course, you never can tell how it will turn out. Forget the long term averages. No one is average. I have been very lucky.
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VictoriaF
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Survivorship bias

Post by VictoriaF »

All comments in this thread are influenced by the knowledge of how the 2008-2009 crisis has turned out. At the time, nobody knew how it would turn out.

My main lesson learned is to follow Zvi Bodie's recommendation to have the money needed for living in the safest securities.

During the crisis I:
1. Visited this Forum often for "moral support." I was not looking for an explicit advice or market cheer-leading, but I needed to read reasoned discussions to balance the news coming from elsewhere.
2. Attended the 2008 Bogleheads reunion.
3. Bought some TIPS at high real rates.

Since the crisis I:
1. Buy I-Bonds in maximum amounts allowed.
2. Buy TIPS when the real rates are reasonable (the last time it was in February 2011).

We know how the markets behaved between 15 September 2008 and 27 January 2012. We have no idea how they will behave from 30 January 2012 going forward.

I act accordingly.

Victoria
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chaz
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Re: how you weathered the 2008 financial downturn

Post by chaz »

I stayed the course.
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smpatel
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Re: how you weathered the 2008 financial downturn

Post by smpatel »

VictoriaF wrote:Since the crisis I:
1. Buy I-Bonds in maximum amounts allowed.
2. Buy TIPS when the real rates are reasonable (the last time it was in February 2011).

Victoria
Very well said, Re TIPS, as people say you can't buy yesterday's yields, what is reasonable real rates for you?
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DiscoBunny1979
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Re: how you weathered the 2008 financial downturn

Post by DiscoBunny1979 »

Nothing changed as far as my weekly contributions to my ROTH IRA to the STAR Fund. What did change was at the bottom, particiating in COP's DRIP program (again) and later selling around the high of 4/2011. I also decided that since the stock market is unpredictable due to greed of anyone that participates in the market, it's best that I spread out my non ROTH IRA spending into other areas never before considered, such as Gold, shorting foreign currency through ETFs or contributing more to my mortgage principal each month. The best move has been paying down my mortgage with extra principal payments as my mortgage is at 5.5% and I really can't get that rate anywhere, not on most Dividend Paying stocks, not on CDs, not on Treasuries (except my older I Bonds) and only on my most successful Stock Picks - which is more or less a BIG gamble.
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BHCadet
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Re: how you weathered the 2008 financial downturn

Post by BHCadet »

We lost 40 to 50% of our investments.
It was painful to watch.
My office mate was talking about double dip recession.
Because my wife and I have good jobs and we've seen the internet bubble in 2001
and knowing the stock market would eventually bounce back
and we know we have time to recover,
we stay the course and didn't sell any investment.
We continued max out our contributions plus sending extra after tax money to our 401k.
Last edited by BHCadet on Sun Jan 29, 2012 9:23 pm, edited 1 time in total.
scrabbler1
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Re: how you weathered the 2008 financial downturn

Post by scrabbler1 »

The 2008 financial downturn was a huge benefit to me.

I had been planning my early retirement for over a year prior to my resignation at the end of October, 2008. I plannd to cash out my hugely growing shares of company stock and buy into a corporate bond fund at that time. My company's stock (ESOP) was evaluated only every quarter, so the last evaluation was at the end of September and its value was still strong, having taken only a 1% hit from its previous quarterly evaluation. [It would expectedly fall more in its 4th quarter 2008 evaluation.]

But the NAV of the bond fund I planned to buy had been falling rapidly throughout 2008 and had nearly bottomed out by early November after I received the proceeds from the ESOP sale. Therefore, I was able to buy about 25% more shares than I had planned to buy with those proceeds, basically buying those shares at bargain-basement prices. Terrific chain of events.

As for the 401(k) I had to rollover into an IRA, I used the same AA as I did in the401(k) so I sold low and bought low, breaking even there although the value has risen considerably since that time (as it would have in the 401(k).
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Whiggish Boffin
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Re: how you weathered the 2008 financial downturn

Post by Whiggish Boffin »

I was, and am, using the David Swensen default allocation: 30% US stock, 20% real estate, 15% developed international stock , 5% emerging international stock, 15% intermedidate Treasuries, 15% TIPS. The real estate got hammered first, then the stock market.

I had an investment policy statement. I made a spreadsheet with cells that turn red when an asset gets out of whack by 5% absolute or 20% relative. I gritted my teeth and did nothing, with all my might, until cells turned red. Then I rebalanced -- from bonds and int'l to REITs in Jan 2008; from REITs and bonds into US and int'l stock in Oct. 2008; from int'l into bonds in Apr 2010.

This was the first bear market where I'd been paying attention and trying to handle it right. I had read some books, but hadn't actually done rebalancing in a falling market. I didn't lose sleep, but I felt grim gnawing foreboding feelings about how much Kool-aid I was drinking. Looking back, that's when I made some money, but I didn't know it then. Looking back, I see that one of my motives was not to be wrong. I had talked about investments with co-workers and relatives, and I may have kept to my IPS rather than admit that I was all talk. This is dangerous.

I am paying attention to Zvi Bodie's viewpoint that you shouldn't put survival money at risk, ever. That is, none of this age-in-bonds stuff -- put all savings into TIPS and annuities until you accumulate enough to support you for life, and take stock-market risk only with the excess above that. If you really want to. I am not persuaded, but I'm listening, and buying all the I-bonds I can get.
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Re: how you weathered the 2008 financial downturn

Post by Fallible »

lovenox11 wrote:I'm a new investor, and started in 2009 after things already hit bottom. For me my portfolio always grows, and its hard to imaging seeing week after week of losses as happened in 2008. I remember listening to NPR back then and financial "advisers" talking about hanging on to stocks/funds, but things just kept getting worse.

My question is how did some of you weather this market downturn? Did you shift a big chunk to Bonds/MoneyMarket to avoid losses OR did you ride it out? What were the losses like for those with 20% bonds vs those with 30-40% bonds in their portfolio?
Wow, you started investing at the bottom of the market, with no where to go but up. I started investing a few months before the great crash of '87, so learned an early lesson in handling panic and staying the course. Still, I panicked during the 2002 bear market and sold some of my good index funds, only to suddenly realize my mistake (thanks to a wise friend and a WSJ column by Jonathan Clements), and get back in in late October, just a few weeks after the bear hit bottom. I felt ready for anything after that and, sure enough, although the '08 crisis terrified me more than '87 and '02 combined, I stayed the course.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Kenkat
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Re: how you weathered the 2008 financial downturn

Post by Kenkat »

I rode it out.

At the end of October, 2008, I set up automatic rebalancing tranfers at Vanguard such that I would be back to my target allocation within 18 months barring any further drops or advances. It was a pretty scary time and I could not bring myself to rebalance all at once. As the market recovered in 2009, I was able to cancel a few of those transactions early.
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bob90245
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Re: how you weathered the 2008 financial downturn

Post by bob90245 »

Whiggish Boffin wrote:I am paying attention to Zvi Bodie's viewpoint that you shouldn't put survival money at risk, ever. That is, none of this age-in-bonds stuff -- put all savings into TIPS and annuities until you accumulate enough to support you for life, and take stock-market risk only with the excess above that. If you really want to. I am not persuaded, but I'm listening, and buying all the I-bonds I can get.
Just be aware that even Bodie admits his plan will be difficult to pull off. As with most things in life, there are trade-offs. From a recent thread:
bob90245 wrote:Working longer is part of the Bodie plan. Bodie concedes it may not be possible for the average worker to save for their base retirement needs using only TIPS with their low expected returns.

Robert Powell was kind enought to put together a writeup from his interview with Bodie. Here is the relevent excerpt:
To be sure, there’s a cost associated with implementing the risk less and prosper strategy. And it might mean work longer rather than saving more. “If you are not saving enough to cover your [base] needs in retirement, I would say for most people, the easiest thing to do, instead of changing your savings rate is to plan to work longer … even if that means part-time,” said Bodie. “That will add an awful lot to your human wealth.”

Saving more is important, but he said the vast majority of American might not be able to do that. “It’s hard to do,” he said.
Source: http://www.marketwatch.com/story/how-yo ... 2011-12-22
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
lazyfabs
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Re: how you weathered the 2008 financial downturn

Post by lazyfabs »

I remember looking at our portfolio in Quicken and it was glowing red, significant other got 'downsized', babies were being born, and our house was under construction. We continued to put money into our 401k as allotted, rebalanced annually, and made sure our wine cabinet was never empty.

We sat and watched in disbelief, but in the end stayed the course and now the portfolio is humming along and in the black.

salud :beer
"I think the best way to find happiness is to stop looking so hard." - Kermit the Frog
jwtietz
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Re: how you weathered the 2008 financial downturn

Post by jwtietz »

Went down 400k rebalancing all the time and am now up 800k from the low.
KlangFool
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Re: how you weathered the 2008 financial downturn

Post by KlangFool »

TS,

Lost half of my while life savings in tech bubbles.. Then, I took a few years to learn asset allocation and move to 65/35 portfolio. By 2008, the worst that I ever get is 30% loss.. I slept through it. Continue to invest and re-balance as per my allocation. 2008 does not even register in my financial life. Too busy living my real life and no time for financial noise...

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ofcmetz
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Re: how you weathered the 2008 financial downturn

Post by ofcmetz »

It's pretty weird, but I really wasn't that tuned in to what was happening financially in 2008. We had our second child in mid 2008 and she kept us very busy. Then on labor day of 2008 our city got smashed by Hurricane Gustav which kept me distracted from the worst of the crisis. When you don't have power for two weeks and you work a month of straight 12 hour shifts, you don't really think about financial stuff too much. I just read To Big to Fail and I kept thinking, oh on such and such date we were getting hit by that hurricane and on this date the lights came back on, etc. :D http://en.wikipedia.org/wiki/Hurricane_Gustav

The wife and I had been investing pretty heavily since the beginning of 2005 and we were 100% in stocks. I think the only two books on finance that I had read prior to this point were Investing for Dummies and Mutual Funds for Dummies. I knew you weren't supposed to sell when things were going down in value and that you should continue to keep buying. I think the only change I made was to stop looking at my retirement account balances.

We starting adding bond funds to our portfolio in early 2010. I'm not sure how I would of reacted if I had a life time worth of savings disappearing or if I had been more in tune to what was happening.
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nisiprius
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Re: how you weathered the 2008 financial downturn

Post by nisiprius »

Another observation is that just three years later, I have, really, forgotten how bad it seemed and how long it seemed. I am already starting to consider it as "no big deal" because the recovery--of the stock market, not, alas the economy--now seems quick. A little two-year episode, down then up again, all better now. There were times during the dip that I yearned for the Dow to get back to 10,000 and I "swore" that if it ever got up to 10,000 again that was good enough and I'd sell everything and call it quits. I didn't actually write that down as an intention so I didn't feel obliged to act on it.

I think people forget how much ink was spilled on whether it was going to be a "V-shaped recovery" or an "L-shaped recovery."

Currently, I have a feeling of false security, as if Dow 12,000 were a given that could be relied on.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: how you weathered the 2008 financial downturn

Post by Sidney »

nisiprius wrote:Another observation is that just three years later, I have, really, forgotten how bad it seemed and how long it seemed.
Interesting. My perception was that it seemed shorter but a bit deeper than the 2000-2003 decline. That one seemed to be a long grind downward.
I always wanted to be a procrastinator.
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papito23
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Re: how you weathered the 2008 financial downturn

Post by papito23 »

I came out of college ('07) with $20K+ in the bank, no student loans, and my new wife and I with good jobs. For 1.5 years we banked one salary and lived off the other. We have always lived on the cheap and worked hard. But having this relatively easy/lucky/providential situation, I think we didn't (and still don't) appreciate how hard it is for 90% of people to save money. This actually made handling the downturn easier! Easy come, easy go.

Right before the crisis we quit our jobs for an internship in Bolivia (you only live once!). The internet headlines in Sep/Oct were scary to read from South America, so I tried to stay off the computer. It helped that there was another crisis occupying us at the time (the U.S. ambassador was kicked out and we were going over evac plans). I managed to move some cash savings into equities. Like everyone else, I'd like to call my former self from the future and urge me to "MOVE EVERYTHING INTO STOCKS!" :) but at least I avoided a stupid mistake and even made a little money. I was 94% equities and couldn't have told you my asset allocation if you had asked. So thankful I learned this hard market lesson by my 25th birthday.

Wife and I spent 2 great years in Bolivia on ~$800 / month, and lived more lavishly than 95% of the population. We know what necessities are now.

Now I'm in grad school, with a crappy income and a beautiful baby, so the fat times are over. It sure was nice to end each month with a huge surplus (live it up while you can DINKs), but at least I still have the bank account today to show for it. Frugal living (and staying the course) will allow us to spend the next two years living partially off savings, instead of running around working 3 jobs and missing our daughter growing up. Via ObliviousInvestor.com (which led me here), I've learned about asset allocation, reducing costs, and index funds.

The best things in life are still free. And sometimes staying the course makes it more likely you will be able to still pursue the best things. Thanks Bogleheads!

(sorry for the autobiography, but the context affected our reactions)
A thing is right when it tends to preserve the integrity, stability, and beauty of the biotic community. It is wrong when it tends otherwise. -Aldo Leopold's Golden Rule of Ecology
nonnie
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Re: how you weathered the 2008 financial downturn

Post by nonnie »

nisiprius wrote: There were times during the dip that I yearned for the Dow to get back to 10,000 and I "swore" that if it ever got up to 10,000 again that was good enough and I'd sell everything and call it quits. I didn't actually write that down as an intention so I didn't feel obliged to act on it.
May I call that the "nisiprius" rule--unless you first write it down?
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bob90245
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Re: how you weathered the 2008 financial downturn

Post by bob90245 »

Sidney wrote:
nisiprius wrote:Another observation is that just three years later, I have, really, forgotten how bad it seemed and how long it seemed.
Interesting. My perception was that it seemed shorter but a bit deeper than the 2000-2003 decline. That one seemed to be a long grind downward.
I'm with Sidney. 2000-2003 felt r e a l l y bad. And this despite the fact that my portfolio was much smaller in 2000 than in 2008. Maybe you always remember your first bear market with higher intensity. :wink:
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
Badinvestor
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Re: how you weathered the 2008 financial downturn

Post by Badinvestor »

I acted on Saint Jack's market call in late 2007 and cut back equities. I wish I had zeroed them out.

The week of the nationalization of AIG, I froze and did not sell anything further as I should have. This has made me think that I should never have invested in equities, since I lack the basic skills needed to be an equity investor.
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GregLee
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Re: how you weathered the 2008 financial downturn

Post by GregLee »

I recall mentioning to my wife that it seemed we had lost a lot of money, but it didn't make much impression on us. We were still focused on work. I recall wondering whether I should do anything about the worsening state of our (rather modest) portfolio, but nothing came to mind. So I pretty much forgot about it. Que será será.
Greg, retired 8/10.
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John151
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Re: how you weathered the 2008 financial downturn

Post by John151 »

I've always been a conservative investor. In the mid-1990's, when I was in my forties and 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, as planned, 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 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 perhaps 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.
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zzcooper123
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Re: how you weathered the 2008 financial downturn

Post by zzcooper123 »

Saw the downturn as "The Mother of all Buying Opportunities" and shoveled as much money in as possible. Can't say it wasn't scary, tho. Read Bogleheads everyday. Made a ton in munis. My HELOC went to an incredible low rate and is locked in until 2014 per Mr. Bernanke.
KlangFool
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Re: how you weathered the 2008 financial downturn

Post by KlangFool »

TS,

By the way, at that time, I was trying to survive the 50% layoff of my location. So, pretty much no time for financial noise...

2 year of emergency fund helps too...

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rexy
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Re: how you weathered the 2008 financial downturn

Post by rexy »

My portfolio has always been dominated by income. I just sat back and let it ride............all the way back up.
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nisiprius
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Re: how you weathered the 2008 financial downturn

Post by nisiprius »

Around summer of 2008 we were visiting friends, the wife says to us something about being worried about her 401(k) what with the stock market and all. I sort of shrugged and said, "I don't pay much attention, sure, the Dow's been jinking up and down, but really, the big picture is, it's just jinking around in the 12,000's." She looks at me and says: "But, it's in the 11,000's."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
RenoJay
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Re: how you weathered the 2008 financial downturn

Post by RenoJay »

Great question. I was about 85% stocks at the time and I remember hanging in and continuing to buy on the way down, but feeling very queasy and anxious much of the time. As the market recovered, I started selling around March/April 2011 and changed my allocation to 70% stocks with which I now feel more comfortable. Long story short, I didn't sell in a panic (and in fact bought more) but I took the opportunity to re-evaluate how I would do things under more normal circumstances. As opposed to perhaps some of the other posters, I already had enough money in my accounts to retire, so I was probably taking more risk than I should have.
susanw
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Re: how you weathered the 2008 financial downturn

Post by susanw »

We followed the Decision Moose model from Bill Durlam and got out in cash when the market lost about 10%. We ended up losing about 10% during the 2008 market crash. Thanks goodness for Bill Durlam and his Decision Moose model!
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Re: how you weathered the 2008 financial downturn

Post by bungalow10 »

My son was born in September 2007. My husband lost his job in November 2007. The balance of our portfolio was not my first priority, but it was out there on the list of things that needed my attention. Fortunately, we stayed the course (which wasn't the best course - 100% equities), and kept investing. We didn't sell a thing.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
nonnie
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Re: how you weathered the 2008 financial downturn

Post by nonnie »

susanw wrote:We followed the Decision Moose model from Bill Durlam and got out in cash when the market lost about 10%. We ended up losing about 10% during the 2008 market crash. Thanks goodness for Bill Durlam and his Decision Moose model!
Hmmmm--never heard of the Decision Moose market timing model. When did you get back in?

http://www.decisionmoose.com/

The market timing aspect of this takes me waaaaay back to a forum I was on for a few years in the late 90s--Fund Vision (which is no more) where folks basically tried to do momentum investing with mutual funds. Bill Bernstein used to post there and as I recall (my memory is a bit hazy on this and I could be wrong) used to run contests with some of the folks on the board on buy-and-hold vs their strategies.

http://www.fundvision.com/wwwboard/arch071899.shtml
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Re: how you weathered the 2008 financial downturn

Post by Gordon »

I had been waiting for some time for an opportunity to buy equities. My living experses were covered by immediate annuities so I was able to sell my bonds and invest in equities. I increased my allocation for domestic equities and dove into foreign equities with ETF's

I am now reaping the results of this move that tested my courage. I have been an indexer now for 42 years. Recently my portfolio has been seeing some large increases on a daily basis. I follow my portfolio every day, primarily to show the wife how it changesw every day: up or down.

With this latest experience I keep looking for another stock sale.I am slowly moving into immediate annuities that pay at my age (84) in excess of 14% for a single male. They are in the only AAA insurance company with that rating : advise from Bernstein.

At present I am over allocated with foreign securities (Euope) I may take some profits and off set them with some losses in foreign ETF's.

I recently joined the AAII . wish I had joined years ago, but I am not to keen on idea of ignoring index funds.

Gordon
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Re: how you weathered the 2008 financial downturn

Post by jginseattle »

I was not very well diversified at the time and held a lot in equities. But I was honestly occupied with other matters. My job was very demanding, and I bought a new home in 2008 and sold the old one. So I really didn't pay much attention to my investments until I opened a statement one day and discovered I was down over 50%. But I knew that one does not sell "low." I felt confident things would eventually come back. As things recovered and I learned more about investing, I moved to a more reasonable (for me) AA.

The thing about 2008 is the fast recovery. And some people may think that all future bear markets will behave in such fashion. Just wait a year and everything's reasonably well again. And, of course, things may be very different next time.
durazno

Re: how you weathered the 2008 financial downturn

Post by durazno »

This is a good question. My answer is long. I guess I feel the need to tell my story, so to speak. Here goes.

I'm 30. I put about 15k in mutual funds in a taxable account at the end of college in 2004. I let it sit untouched. Shortly thereafter I started investing in a 401k at my first job, and a Roth but just a few thousand dollars in each per year. I hadn't really thought too hard about investing for the future at the time, and I had planned to go back to school so most of my savings was in CDs. I had received a 100k windfall in college and that was going to afford me my master's degree. So in 2009, I had over 100k in CDs, about 30k in a 75/25 taxable portfolio, and another 35k or so in my retirement accounts when everything fell.

I don't know how many percentage points my portfolio fell, but I recall my taxable AA dropping to 67% equities before I rebalanced the first time. Shortly after rebalancing, my AA was on the cusp of another rebalance, but I let it sit and then went on vacation. I got back 2 weeks later. In that time, the market had hit what we now know was the bottom, and shot up again pretty fast. My AA was at 69% equities. I rebalanced immediately.

I was really slow to start buying in my taxable during the downturn and upswing. I max'd my 401k and Roth but didn't put anything into taxable 'till we'd seen a good bounce back, in July/Aug.

Even though looking back it would seem unwise not to take advantage of the prices out there, I still had my mind set on going back to school. I wasn't about to put much money into the market if I needed it in 3-5 years, despite the relatively low prices. I ended up putting in little bits - as in a few 100 dollars at a time -- into my taxable for the rest of 2009. By 2010, as I accumulated more savings from work, I started putting larger chunks -- 1-2k at a time -- into my taxable month by month, in addition to maxing my 401k/Roth.

All my accounts are in the black now. I still have over 120k in cash. Between the gains in the market and my ability to live comfortably but modestly and save my earnings, my total portfolio is worth about 360k. I haven't made huge returns to date in my investment career but I have continued to save, so I'm in a good place.

At this point, I still haven't ruled out the possibility of getting an MBA and/or buying a home, so my cash remains. There are days where I kick myself for not investing some/most of this money (minus an emergency fund) in the market, especially with the recovery we've seen. But I still feel like, with my career path as it is, I'm likely to want to get the degree relatively soon, and being able to put a fair amount down on a home would be nice. (I'm sure some of you may have suggestions for my approach -- I have read comments on the forum about how to prepare to buy a home, using Roth money, etc. -- so email me if you have any thoughts. I'm always glad to hear advice on the forum, especially if you disagree with me.)

To sum it up, though most of my money was in cash, the downturn still took a big emotional toll on me. I wasn't prepared for it, and I had little confidence we'd see the recovery we've seen. As you can see, my anxiety resulted in some not-so-great investment decisions. Ie. Rebalancing late, not buying more as prices fell, etc. Still, I did some good things. Ie. I never sold my funds, I did rebalance (after all), and I joined this forum.

Baby steps.

-Iced Tea
MWCA
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Re: how you weathered the 2008 financial downturn

Post by MWCA »

We followed our plan and kept buying throughout the year. We didn't like it. What is it 3 or 4 years already? Hard to believe that happened ha. Anyways we did quite well from it.
We are all worms. But I believe that I am a glow-worm.
Valuethinker
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Re: how you weathered the 2008 financial downturn

Post by Valuethinker »

lovenox11 wrote:I'm a new investor, and started in 2009 after things already hit bottom. For me my portfolio always grows, and its hard to imaging seeing week after week of losses as happened in 2008. I remember listening to NPR back then and financial "advisers" talking about hanging on to stocks/funds, but things just kept getting worse.

My question is how did some of you weather this market downturn? Did you shift a big chunk to Bonds/MoneyMarket to avoid losses OR did you ride it out? What were the losses like for those with 20% bonds vs those with 30-40% bonds in their portfolio?
Better title 'How have you whethered the 2000 downturn?'

For many of us we are, now, about where we were in 2000.

The point being, pace Japan, bear markets can last a *long* time.
Valuethinker
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Re: how you weathered the 2008 financial downturn

Post by Valuethinker »

Gordon wrote:
With this latest experience I keep looking for another stock sale.I am slowly moving into immediate annuities that pay at my age (84) in excess of 14% for a single male. They are in the only AAA insurance company with that rating : advise from Bernstein.


Gordon
Gordon

Excellent strategy.

However you mention a spouse.

I would be sure to have at least a 50% survivor benefit in favour of your spouse?
Valuethinker
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Re: how you weathered the 2008 financial downturn

Post by Valuethinker »

frose2 wrote:I acted on Saint Jack's market call in late 2007 and cut back equities. I wish I had zeroed them out.

The week of the nationalization of AIG, I froze and did not sell anything further as I should have. This has made me think that I should never have invested in equities, since I lack the basic skills needed to be an equity investor.
The market bottomed in March 2009 but, from memory, the week AIG was nationalized (2nd week of October 2008?) was pretty close to a bottom. You would, in effect, have panicked out, missing the huge rally of Q2 2009.

It's not that you lack skill to invest in equities. It is that you lack temperament or rather the ability/ will to bear risk.

No one else can decide that for you, but, generally, I would say to such people: stick 20% in a US TSM index fund, and forget about it. The rest you keep in CDs, bonds, annuities etc.

That may just not be feasible, but one way of having the 'stomach' for equity gyrations (and to ignore market calls) is to have just enough to benefit from rising stock markets, but in a 'on Red at Vegas' type attitude to it: ie it's gambling money.
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