Did you learn anything from 2008?

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yogiyoda
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Did you learn anything from 2008?

Post by yogiyoda »

Hello,

What did you learn from the 2008 market downturn? Will you do anything differently during the next bear market?

-yogi
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Taylor Larimore
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Re: Did you learn anything from 2008?

Post by Taylor Larimore »

yogiyoda wrote:Hello,

What did you learn from the 2008 market downturn? Will you do anything differently during the next bear market?

-yogi
Yogi:

I learned the importance of Mr. Bogle's experienced advice: Stay the Course. (Vanguard's S&P 500 Index Fund is up more than 200% since the bottom of the 2008-2009 market downturn.)

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
poker27
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Re: Did you learn anything from 2008?

Post by poker27 »

While I did not sell stuff at a loss, I like to think now that I am more wise, or aware of what happens in the market, since I've experienced it first hand.

I was having anxiety daily about the country falling apart, losing my job and not finding another, and the dollar losing its power. All in all I was reading to many blogs from the people wearing the tinfoil hats
Grt2bOutdoors
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Re: Did you learn anything from 2008?

Post by Grt2bOutdoors »

It's nice to have cash in the bank.
That came in handy during the 2009 lows during March.
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papiper
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Re: Did you learn anything from 2008?

Post by papiper »

I didn't learn anything I didn't already know - which is why I just kept buying.
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greg24
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Re: Did you learn anything from 2008?

Post by greg24 »

I learned that I had my asset allocation set correctly, and just kept buying.
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GerryL
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Re: Did you learn anything from 2008?

Post by GerryL »

I learned that when it comes to personal finance, otherwise smart people can do dumb things.
I remember talking with a friend (who was very accomplished in her field) about retirement, which was just a few years in the future for us. She told me that she couldn't even think about it because their investments had dropped 40% so they sold the remainder and were sitting on cash. How many times was that story repeated? How many times was that OMG SELL action recommended by financial advisors?

Key lesson in life: There are some things you can't control (e.g., economic cycles, a parent's Alzheimer's diagnosis), but you can control how you prepare for them or react to them.
joebh
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Re: Did you learn anything from 2008?

Post by joebh »

I learned that lots of my friends panic more than I would have thought.
I learned that what they termed "being too passive" and "just procrastination" worked fine for me (at least that time).
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Re: Did you learn anything from 2008?

Post by baw703916 »

I learned that CNBC can make for a surprisingly entertaining reality show when everyone starts having a meltdown. I also learned that value of Treasury bonds (accept no substitutes) as an insurance policy against a financial panic.
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yogiyoda
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Re: Did you learn anything from 2008?

Post by yogiyoda »

Personally, I give myself a grade of C- during the crash.

The good: I didn’t sell my stocks at the bottom.

The bad: I didn’t rebalance or put a small inheritance into the market until 2010. I was about too do both completely by chance in March of 2009. ...but then my financial advisor uncle (who never contacts me) started forwarding me these “end of the world” emails from some “expert” he respected. It put just enough doubt in my mind to delay rebalancing and investing the lump sum.

Lesson: When your taxi driver and long lost relatives start advising you to get out of the market, the bottom can’t be far.

This is the opposite of the lesson learned from 2000. When your taxi driver and long lost relatives start giving advice on which stocks to buy, the top can’t be far away.

But better yet... Stick to your guns and don’t worry about any of it.
IlliniDave
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Re: Did you learn anything from 2008?

Post by IlliniDave »

That was a strange time for me investment-wise because of some things happening in my personal life. But from that time, and from 2000-2002, I learned that:

-things happen when you don't expect them to
-when people are fleeing at the highest rate, it's best to either sit tight or wade in a little more (what I did in early 2009).

I do react to things like valuations and their historical implications, but I limit myself to doing so on the margins (overall stock/bond AA tactical shifts limited to 10%). I'll never divest fully from the stock market because of what's going on in the wider world. I'll also never jump 100% into the stock market (again, I was essentially 100% equities from the early 90s up until the latter mid-2000s).

Like Taylor said above, it's mostly about staying the course.
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FreeAtLast
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Re: Did you learn anything from 2008?

Post by FreeAtLast »

I learned that during a severe bear market in my accumulation years.....that I had a "cast iron stomach" for stocks investing and did not panic at all (temporary paper loss of 43%).....now let's see how I will react during a similar debacle in my retirement years.
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camden
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Re: Did you learn anything from 2008?

Post by camden »

I learned three things:

Fortunately, my nerves are good enough to hold tight and stay the course at a time when others are panicking.

Unfortunately, my nerves are not good enough to start getting aggressive and buying as others are panicking.

At times like that, the less financial news you watch on TV the better your decisions are likely to be.
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SmileyFace
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Re: Did you learn anything from 2008?

Post by SmileyFace »

I learned three things:
1) Learned that staying the course works. Didn't change my investment strategy - just kept investing. Didn't pull anything out.
2) Was happy to have an Emergency Cash Account. My company went through some serious issues and was close to shutting down. I was at least secure in knowing that I could get by for a period of time. Will never live without one.
3) Don't over-react about your outlook. My neighbor who is similar in age to me freaked out and was saying at the time that he'd have to work an extra 10 years before retirement from his original plan...and yet we were both about 20-25 years away from retirement (he was projecting typically returns from the market bottom assuming no rebound). He now acknowledges he is back on plan.
livesoft
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Re: Did you learn anything from 2008?

Post by livesoft »

Taylor Larimore wrote:I learned the importance of Mr. Bogle's experienced advice: Stay the Course. (Vanguard's S&P 500 Index Fund is up more than 300% since the bottom of the 2008-2009 market downturn.)
Whenever I see it written that stocks are up more than 300%, I look at my own portfolio and ask myself, "Why does my index fund portfolio lag so far behind what others seem to be getting?"

Yes, stock market indexes have more than tripled since the lows in March 2009, but that doesn't mean they are up more than 300% since the first 100% is something you start with. Morningstar says that Vanguard's S&P500 index fund is up about 240% since March 6, 2009.
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chessmannextmove
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Re: Did you learn anything from 2008?

Post by chessmannextmove »

Nothing.
Sagenick48
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Re: Did you learn anything from 2008?

Post by Sagenick48 »

Yes, it got even worse in early 2009, the bottom as I recall, was in March/April of 2009 and it looked pretty bad again in 2011.

I bought in in late 2008 and was regretting it in early 2009 but in the end it turned out ok. Took my losses in December of 2008, offsetting gains earlier in the year, so that by end of year had only gains in the portfolio.

Now I am rich, Rich, RICH, :happy,

What did I learn? The market goes up, the market goes down,cash lets you sleep at night, at least until money market funds "break the buck."
The market goes up, the market goes down.
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Re: Did you learn anything from 2008?

Post by rustymutt »

baw703916 wrote:I learned that CNBC can make for a surprisingly entertaining reality show when everyone starts having a meltdown. I also learned that value of Treasury bonds (accept no substitutes) as an insurance policy against a financial panic.
Agreed. I was glad I listened to the experts on which type of bonds to hold. Treasuries came through well, and at a unseen time in the future, will again provide some who listen the ability to sleep at night.
Even educators need education. And some can be hard headed to the point of needing time out.
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Taylor Larimore
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Re: Did you learn anything from 2008?

Post by Taylor Larimore »

livesoft wrote:
Stock market indexes have more than tripled since the lows in March 2009, but that doesn't mean they are up more than 300% since the first 100% is something you start with. Morningstar says that Vanguard's S&P500 index fund is up about 240% since March 6, 2009.
livesoft:

Thank you for catching my mathematical error. What did you expect from a former government accountant? :happy

I edited my post.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Toons
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Re: Did you learn anything from 2008?

Post by Toons »

Yes ,it reaffirmed what bear markets in the past taught me.
If you were purchasing shares of equity funds according to your asset allocation prior to 2008,then consider increasing the amout you were allocating to equities as the market continued to head "South".It was a great period in financial history to pick up more shares for your money.I believe the S&P has tripled since then.
Bear Markets(Opportunities) of that magnitude may occur once or twice in one's life time.
You don't want to miss it. :happy
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Re: Did you learn anything from 2008?

Post by beyou »

Confirmed the teachings of the "Hitchhiker's Guide to the Galaxy".
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Re: Did you learn anything from 2008?

Post by sschullo »

I learned all about AA and proper diversification with the stock/bond split after 2000. No problems with 2008.
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columbia
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Re: Did you learn anything from 2008?

Post by columbia »

The same I learned in 2000: don't do anything and certainly don't panic.
countofmc
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Re: Did you learn anything from 2008?

Post by countofmc »

Simply, to see times like that as an opportunity and act accordingly.

I was in my mid 20s and just graduated from grad school. The good thing is I didn't really have any money in the market to panic sell. But I also didn't have the guts to utilize the income from my new job to invest or buy a home.

I have peers that have built small fortunes just by having the stones to max out retirement accounts at 100% stock starting from around 2008-2009, and also by buying homes (which here in Silicon Valley have generally appreciated 100% or more since then).

In hindsight, I don't know what I was so afraid of. If things got worse from that point we were probably looking at revolution or some kind of Mad Max style blow to civilization. In which case money as we thought of it then probably wouldn't have mattered anyways.
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Re: Did you learn anything from 2008?

Post by malabargold »

[OT comments removed by admin LadyGeek]
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baw703916
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Re: Did you learn anything from 2008?

Post by baw703916 »

Taylor Larimore wrote:I learned the importance of Mr. Bogle's experienced advice: Stay the Course. (Vanguard's S&P 500 Index Fund is up more than 200% since the bottom of the 2008-2009 market downturn.)

Best wishes.
Taylor
Taylor,

I have a hunch you knew the importance of staying the course long before 2008! :)

Brad
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goingup
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Re: Did you learn anything from 2008?

Post by goingup »

I learned a lot during the 2008-2009 time frame.

A diverse portfolio means stocks and bonds. I wasn't diversified with small, medium, large and international equity funds. They all went down together. Bonds and cash were the only things to stay afloat.

I learned how to tax loss harvest. Something about lemonade from lemons. :)

Learned stalwart institutions like Washington Mutual Bank and General Motors could be brought to their knees almost overnight, and even shutter their doors.

Learned new phrases like Plan B and Lost Decade.

I read this forum daily (Was it Morningstar then?) and was heartened by the humorous words from folks here like Nisiprius who said, "Be paralyzed when others are fearful and sleepy when others are greedy".

It was painful and scary and I knew people who lost their jobs and some who lost their homes.
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Re: Did you learn anything from 2008?

Post by itstoomuch »

keep an open mind. :beer
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Miriam2
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Re: Did you learn anything from 2008?

Post by Miriam2 »

We learned that money market mutual funds can "break the buck."
In 2008, we used the Reserve Fund at TD Ameritrade as our money market fund. I always thought worrying about money market mutual funds dropping their NAV below $1 per share was unrealistic fear. When the SEC froze the Reserve Fund in September 2008, our money was frozen solid immediately at 97 cents per share. We have received distributions over the years, but to this day about 7-10% is still frozen.
I look at my statement and it reads: "Reserve Fund in Liquidation."
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Taylor Larimore
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It finally got though my think skull.

Post by Taylor Larimore »

Brad wrote:
I have a hunch you knew the importance of staying the course long before 2008! :)
Brad, your "hunch" is correct.

I started investing in 1950 when the S&P 500 Index was about 20. Today it is 2199 (not including dividends).

It took me awhile (a long while) before it finally got through my thick skull that instead of trying to beat the market, it was much smarter, easier, and more tax-efficient to simply own the market.

Thank you, Mr. Bogle.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Did you learn anything from 2008?

Post by pennstater2005 »

I learned that not knowing what the hell I was doing worked out well. Sure, I owned an over priced Franklin Templeton fund but I didn't sell, I just kept making my small monthly contributions.

I knew the market was dropping daily in big chunks but I didn't really know what that meant. I was pretty naive.
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wshang
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Re: Did you learn anything from 2008?

Post by wshang »

As one nears the magic number, one needs to gradually ratchet down risk. It is one thing to hit the number with a portfolio of equities. It is absolutely necessary to practice a form of dynamic asset allocation as one nears the number.

I was very fortunate to have begun the process of balancing into bonds prior to the downturn and beginning to think about buckets of decreasing liquidity in withdraw mode.

A friend wisely counseled me prior to the meltdown that cash was also an asset class. As a result, I had the good fortune of having dry powder to partake at the most desperate moments of the crisis. Nonetheless, being down slightly more than 30% was no fun.
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John151
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Re: Did you learn anything from 2008?

Post by John151 »

I learned that I could stomach a stock market meltdown, and I learned that I could handle buying stocks even as they plunged. I also learned that I don't want to do that again.
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in_reality
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Re: Did you learn anything from 2008?

Post by in_reality »

I learned that on my Net Worth spread sheet I should include an entry for a 10%, 25%, 50% and 70% equity loss with the 25% equity loss in larger font. If stocks go over a 70% loss, I won't be psychologically prepared.
skylar
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Re: Did you learn anything from 2008?

Post by skylar »

I found this forum, which taught me to keep it simple, stay the course, and ignore the noise.
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steve roy
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Re: Did you learn anything from 2008?

Post by steve roy »

What did I (re)learn?

Don't freak out.
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Re: Did you learn anything from 2008?

Post by dewey »

I learned that I was able to strap myself in and go along for the ride. I stayed the course--and rebounded on my feet, and then some. Stay the course. And read this forum when the downturn comes. Bogleheads will help with that queasy feeling you get.
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Re: Did you learn anything from 2008?

Post by noyopacific »

I can eat raw fish without any problem but I learned that a 40%+ drop in my portfolio does result in some excess stomach acid. I also learned that my wife and I could handle it; in fact I think we were both pleasantly surprised with our ability to accept (endure) risk. My wife's brother was incredulous when she told him we we were buying more equities (rebalancing.) He is a Stanford MBA & a great guy too but 2008-9 was too much for him.
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Dale_G
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Re: Did you learn anything from 2008?

Post by Dale_G »

I learned (after the fact) that my rebalancing bands were too narrow. I bought all of the way down and rebalanced back to target equity allocation. It was painful to sell bonds in an amount equivalent to 5 years of my last salary to buy equities, but one committed I didn't quit.

The good news is that, as best as I can calculate it, I reaped a rebalancing bonus of about 1/2 year's salary compared to doing nothing. I am not looking forward to a repeat performance however.

2008/2009 was also great for tax loss harvesting. I still have 6 figures of tax loss carry-forward. For the last few years, I have been using some of it by selling domestic equities and rebalancing into international equities at zero tax cost. 99% of my equities are in taxable accounts so domestic/international rebalancing has to be done in taxable.

My new rebalancing spreadsheet shows that I will only have to use 3 salary years equivalent in bonds in the event that equities decline by 57% peak to trough! and the wider bands should make for a larger rebalancing bonus.

No, please don't bring it on. :twisted:

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duffman12
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Re: Did you learn anything from 2008?

Post by duffman12 »

For the people that sold in 2008, when did you re enter the market?
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JLJL
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Re: Did you learn anything from 2008?

Post by JLJL »

I learned one day in 2009 when I logged onto vanguard after at least a year or two since the previous login that my 401k (target date fund) had about half of what I expected. I thought to myself "hmm, I must have remembered it wrong" until I noticed that lifetime contributions were greater than the balance. But then the next time I logged in it was more than double and I could stick a ruler on the pre-2008 trend line and it reconnected. And today it is 4X that first expected figure.

Ignorance is bliss but now I've gone the other way with it... I blame you people. :wink: Next time I'll be watching, so hopefully I'll remember the lesson well.
Day9
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Re: Did you learn anything from 2008?

Post by Day9 »

Mine was first university class to graduate after the 2008 crisis. I learned I am going to have to face different challenges than my parents' generation.
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DualIncomeNoDebt
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Re: Did you learn anything from 2008?

Post by DualIncomeNoDebt »

Don't believe people when they tell you they can "stay the course." Look up "Plan B" and related Boglehead posts from around that time. Eye-opening.
sambb
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Re: Did you learn anything from 2008?

Post by sambb »

that when people market time correctly, they make or save a lot more money than staying the course. Unfortunately, i stayed the course and saw stocks go down. A lot. Could've been worse had i sold at lows however. Some people did far better than me by getting out earlier, and back in once information was transparent (housing crisis implications priced into market) and stocks were down.
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Re: Did you learn anything from 2008?

Post by sambb »

DualIncomeNoDebt wrote:Don't believe people when they tell you they can "stay the course." Look up "Plan B" and related Boglehead posts from around that time. Eye-opening.

+1. Staying the course worked out ok for the US, but hasn't really worked for the japanese market historically. This is why asset allocation and risk tolerance are important. No guarantee at all that stocks will come back to old highs. Glad they did. Not guaranteed at all.
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fourwedge
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Re: Did you learn anything from 2008?

Post by fourwedge »

A friend and I were not buy and hold investors at the time. He had a pretty good "gut" feeling for the market and he and I both got out around March of 2008 and we were pretty proud of ourselves. We went from 100% small cap agressive equity(T Rowe Price New Horizon Fund) to 100% in the stable fund with the entire balance of our retirement accounts.

The only real problem was that we had no idea when to get back in.

I missed 80% of the gains on the way back up and he missed ALL of the gains.


What did I learn then...nothing. I learned that I didn't time getting back in well enough. That set me off on my market timing escapades. Since then I love when the market goes down and I can only hope we have another epic crash to buy more stock and rebalance back into equities from bonds and new money! Since then I have also learned to be TOTALLY DEBT FREE.
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heartandsoul
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Re: Did you learn anything from 2008?

Post by heartandsoul »

I learnt a lot. Not that markets can crash and recover, that much I knew already from 2003 and, earlier, 1987. Nor that I can stomach a big fall, again I knew that from previous experience. Nor that asset allocation and staying the course are important. Again, I knew that already.

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leo383
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Re: Did you learn anything from 2008?

Post by leo383 »

duffman12 wrote:For the people that sold in 2008, when did you re enter the market?
My neighbor and his wife sold near the bottom in 2009 and bought into a stable value fund and are still in it. He now considers the stock market to be "gambling". I guess it will take a bull much larger than the post 2009 one to get him back in.
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Re: Did you learn anything from 2008?

Post by leo383 »

There will be a time when the market crashes and doesn't recover.

I would caution against the "I knew all along it would come right back" line of thinking. No one knew at the time anything of the sort.
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Re: Did you learn anything from 2008?

Post by gd »

I learned to trust my common sense and pay attention to specific financial/economist public figures who most accurately analyzed circumstances before, during, and since.
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