I can't believe I am thinking this [Panic and Survival 2008-09]

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TheTimeLord
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Re:

Post by TheTimeLord » Sat May 28, 2016 1:21 pm

Sheepdog wrote: When a person must take distributions to meet expenses, and I do monthly, an adequate "cash" account should be maintained so that they don't "have to" sell at market lows. Keep a sizeable cushion. I am doing what I said I would do.....I maintain the "cash" account from which I take distributions at a minimum of 3 years of needs.
As I near retirement but still quite a ways from SS, I have begun buying CDs in the Amount of 3 or 4 months expenses and charting when they will mature and how many months they cover between now and the sweet bosom of Social Security. Essentially pre-planning or scheduling my withdrawals. I also buy some I-Bonds just in case for some reason I would need a little spackle here or there. In my case this has calmed my nerves and helped reinforce in my mind that when I do retire I will indeed have enough.

Sheepdog this is an awesome thread and we should all be grateful you shared your experience. :sharebeer
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itsmeagain
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Re: I can't believe I am thinking this

Post by itsmeagain » Sat May 28, 2016 2:20 pm

For some context, Sheepdog's opening post followed a day when the total stock market (using VTSAX) fell from 20.44 to 18.90, a stomach-churning 7.5% drop in a single day.

The market had already fallen from a high of 37.80 one year earlier on October 9, 2007. So with that day's drop included, the market lost a horrific 50% (about 47% with four dividends paid) over one year.

But there were more painful losses to come, as VTSAX would drop further to 16.43 on March 9, 2009, another 13% or so lower (12% with one dividend) in the next 5 months after Sheepdog's distressed post.

Yesterday, VTSAX closed at 52.28. That's an astounding 218% gain in price (268% with dividends) in the 7+ years since that terrible low. However, it's a much more modest 38% gain (64% with dividends) over that October 2007 high in about 8.5 years.

The stock market can give an investor one heck of a wild ride. The market came roaring back after the Great Recession.

Next time? Who knows.

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Taylor Larimore
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How to behave in market turbulence

Post by Taylor Larimore » Sat May 28, 2016 2:24 pm

If there was one thing to tell a younger man about how to behave through those periods of market turbulence - what would that one thing be?
If Taylor Larimore sees this....I hope he answers this last question. What is 'the one thing'?
JCE66:

I agree with our mentor, Jack Bogle, who wrote in Common Sense on Mutual Funds:
Stay the course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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dodecahedron
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Re: I can't believe I am thinking this

Post by dodecahedron » Sat May 28, 2016 2:35 pm

Sheepdog wrote: I had written this in the opening thread in 2008
Today did it. I am just starting to be scared so that I won't tell my wife what happened today
and just a couple of days ago I told my wife for the first time about what had happened then...yes, not then, but just now. I didn't want her to feel the pain of the time. I read to her what I wrote then and told her about what happened and about the so called "cash" accounts which were setup. She knew about them, of course, but just didn't know what instigated them She said she had no idea of the panic I was feeling at that time.
Reading passage is sobering to me. My late husband was managing our portfolio back then. (He consulted with me on big picture investment policy stuff but I didn't deal with monitoring the market, opening statements, etc.) Since he was a finance professor and consultant, he had to stay on top of the markets ups and downs anyway for professional reasons, so I figured there was no need for me to deal with the nuts and bolts on any everyday basis. Reading sheepdog's account of what he kept from his wife now makes me wonder how much stress that I didn't know he was dealing with that he just kept to himself. (Though I will say there was that one harrowing week in September 2008 where he enlisted me in helping to park all our money market funds in federally insured bank accounts of the appropriate size. I remember driving around with him after normal bank closing hours looking for supermarkets that housed bank branches with evening hours.)

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fortyofforty
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Re: I can't believe I am thinking this

Post by fortyofforty » Sat May 28, 2016 5:02 pm

dodecahedron wrote:
Sheepdog wrote: I had written this in the opening thread in 2008
Today did it. I am just starting to be scared so that I won't tell my wife what happened today
and just a couple of days ago I told my wife for the first time about what had happened then...yes, not then, but just now. I didn't want her to feel the pain of the time. I read to her what I wrote then and told her about what happened and about the so called "cash" accounts which were setup. She knew about them, of course, but just didn't know what instigated them She said she had no idea of the panic I was feeling at that time.
Reading passage is sobering to me. My late husband was managing our portfolio back then. (He consulted with me on big picture investment policy stuff but I didn't deal with monitoring the market, opening statements, etc.) Since he was a finance professor and consultant, he had to stay on top of the markets ups and downs anyway for professional reasons, so I figured there was no need for me to deal with the nuts and bolts on any everyday basis. Reading sheepdog's account of what he kept from his wife now makes me wonder how much stress that I didn't know he was dealing with that he just kept to himself. (Though I will say there was that one harrowing week in September 2008 where he enlisted me in helping to park all our money market funds in federally insured bank accounts of the appropriate size. I remember driving around with him after normal bank closing hours looking for supermarkets that housed bank branches with evening hours.)
The fact that a severe market downturn can shake the faith of a finance professor is a testament to the power of fear and panic that besets investors at the worst times. It just goes to show that there's a big difference between reading and studying (and teaching about) bear markets and actually living through them while managing a meaningful portfolio*. When the next one comes, we will all be here figuratively holding each other's hand and talking each other off the ledge. Stay the course! Thanks for the reminder Taylor.

* By that I mean a portfolio that is significant in terms of dollar value and a person's financial stability.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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BlueEars
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Re: I can't believe I am thinking this

Post by BlueEars » Sat May 28, 2016 5:19 pm

dodecahedron wrote:...
Reading passage is sobering to me. My late husband was managing our portfolio back then. (He consulted with me on big picture investment policy stuff but I didn't deal with monitoring the market, opening statements, etc.) Since he was a finance professor and consultant, he had to stay on top of the markets ups and downs anyway for professional reasons, so I figured there was no need for me to deal with the nuts and bolts on any everyday basis. Reading sheepdog's account of what he kept from his wife now makes me wonder how much stress that I didn't know he was dealing with that he just kept to himself. (Though I will say there was that one harrowing week in September 2008 where he enlisted me in helping to park all our money market funds in federally insured bank accounts of the appropriate size. I remember driving around with him after normal bank closing hours looking for supermarkets that housed bank branches with evening hours.)
One of the reasons I have my own strategy is to deal with such stress. I think many on this forum don't quite know their stress capacity. And it can be a function of your age and circumstances at the time. If possible best to deal with this up front, before a crisis.

For me, I did not sell in the 2008-2009 crisis (see some of my posts in the darker days of this thread). But changed my strategy well after the crisis passed. I appreciate posts on this forum a lot but I do not rely on them for my strategy because there is really no strength in herds. Or should I say heard's? :happy

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fortyofforty
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Re: I can't believe I am thinking this

Post by fortyofforty » Sat May 28, 2016 8:22 pm

BlueEars wrote:For me, I did not sell in the 2008-2009 crisis (see some of my posts in the darker days of this thread). But changed my strategy well after the crisis passed. I appreciate posts on this forum a lot but I do not rely on them for my strategy because there is really no strength in herds. Or should I say heard's? :happy
There is strength in a herd, here. A Bogleherd, if you will.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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BlueEars
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Re: I can't believe I am thinking this

Post by BlueEars » Sat May 28, 2016 8:49 pm

fortyofforty wrote: There is strength in a herd, here. A Bogleherd, if you will.
Well yes, there are some interesting and worthwhile ideas here. But in the end we are each going to have to make up our own minds. Just repeating a mantra or following a leader... not for me.

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Johnnie
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Re: I can't believe I am thinking this

Post by Johnnie » Sat May 28, 2016 9:04 pm

New member, just opened this thread at random, read the OP and both smiled and grimaced.

I've been doing this stuff well or badly for a long time and here is my immutable key to non-failure: Never over the statements when markets are down. Period.

It's getting harder now with electronic, that takes more discipline, but it will pay off.

For example, while the bedraggled author of this thread was panicking in the fall of '08, I had a stack of happily unopened brokerage statements. I knew darn well what was going on, but not knowing my own numbers made it more academic than personal. Like being wounded in battle and not looking at the gory wound. By the time I looked months later it was getting better.
"I know nothing."

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fortyofforty
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Re: I can't believe I am thinking this

Post by fortyofforty » Sat May 28, 2016 9:09 pm

BlueEars wrote:
fortyofforty wrote: There is strength in a herd, here. A Bogleherd, if you will.
Well yes, there are some interesting and worthwhile ideas here. But in the end we are each going to have to make up our own minds. Just repeating a mantra or following a leader... not for me.
I don't think anyone here "just repeat a mantra or follow a leader" blindly. Jack Bogle preached simplicity, low costs, staying the course, and owning the market. Each and every one of these ideas has merit, no matter how hard we try to pick them apart or critique them. Nothing done without thought, here, or just doing something because someone else says it. But we've all come to the conclusion that this is the right path, more or less, with subtle variations on the overarching principles.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Sheepdog
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Re: I can't believe I am thinking this

Post by Sheepdog » Sun May 29, 2016 12:02 am

I thank those here for what you have said about my contributions in this forum. So many here have assisted me with their advice and wisdom that if I said some things which rings bells with some, i am pleased, even though i am amazed.
I'll try to make a few additional comments using JCE66's questions, some of which may be in this thread from years back.
JCE66 wrote: Looking back, and knowing what you know now - would you have done the same thing (sell off assets to cover 3 years of expenses)?

(1)Looking back, would you have had enough cash assets to 'ride out' the worst of the market storm? I define market storm as September 2008 through April 2009. I am asking if you had enough cash to meet expenses had you done nothing back in 2008.

(2)Looking back, and knowing what you know now - what would you have done differently, and why? I am not talking about market timing, but I am wondering about things like, 'when I saw that things were starting to head south, I started making sure my asset allocation was X' or something similar. I am interested in how you as a retiree and investor 'thought and acted'. We can be our own worst enemy, right? So from a behavioral perspective, I am interested in the 'thoughts' and 'behaviors from those thoughts' as you recall them.

(3)Now for the big question. I am 15-20 years from retirement (age 50) - maybe sooner if I get a little lucky. It is highly likely that I will experience 1-2 'big bears' in this time. And after I retire, 1-2 more 'big bears'. If there was one thing to tell a younger man about how to behave through those periods of market turbulence - what would that one thing be?
Answers and comments.
(1)In this circumstance I would not change. My cash accounts were gone. I was meeting monthly expenses from SS and investments. I was taking distributions monthly from the investment accounts, so I was already selling off assets monthly. With my decision of selling it all at once that was actually making it easier for me in the future.....get it over with and done rather than suffering every month. I was actually comparatively relaxed afterwards. When you look back you will see the market continued to drop after I sold off, so, as it worked out I did not sell at the bottom
I should note that I had planned the 3 year or so cushion when I retired, but greed got to me, as I did not keep it up and instead invested it.


(2) and (3) comments will be in one paragraph, I think. Here goes. (It is after midnight again...2 nights in a row, but this time I did not wake up to make comments as I was away grocery and other shopping, planting flowers, cleaning, eating out, and seeing a movie and so on....it was a nice day.) so let's see what comes out of these typing fingers.

I made a fundamental cash-flow error when I retired. I took my pension as a lump sum. The lump sum or pension annuity question comes up here so often. The lump sum idea seemed like the right thing...i would have the money in my hand to invest and could have a nice remainder for someone or some group to inherit. Actually that is working out quite well, so why was that an error? In 2008, I had nothing coming in monthly along with SS and SS is not enough for me. Everything I had was invested. If I had had that pension, I would not have had to sell anything. I would have been much less stressed having to sell as the market dropped. Sure, a major market collapse would still hurt somewhat as the nest egg drops in value, but it would not have felt like a disaster as there would be enough money coming in every month. So, I would not take a lump sum today for that reason, plus it would have made it so much easier for my wife to receive monthly cash after I passed on.
I changed something In the last 3 years, in my 80s, and that was I purchased SPIAs from which the payouts will cover all of our normal distributions for spending, so, in effect, I funded my own new "pension plan". (Actually my SS and SPIAs have excess over normal expenses so I am able to have several thousand annually for some larger purchases and donations.

So, what is the one thing I would recommend to help a young person through market turbulence? Don't be greedy in good times. Don't invest money that you will "need" in the next 3 to 5 years. Need might mean that you want to buy a new house or auto or take that big cruise in that period, but it also would mean, especially in retirement, what you will need for monthly expenses.
Just because it isn't your fault doesn't mean it isn't your responsibility....Josh Reid Jones

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empb
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Re: Re:

Post by empb » Sun May 29, 2016 4:46 am

dbr wrote:
empb wrote:
PlainJane wrote:
I hear it's amazing how much a small part-time job will do for you in situations like yours. Even $5000 a year is the equivalent of having an extra $125,000 in your portfolio, cash-flow-wise. Not talking CEO here, maybe small retail store, greeter, light maintenance, whatever.
That is an amazing statement and one I had never really thought of before. Somehow it gives me a lot of comfort. I am going to add this to my list of things I am learning during this adventure.

-Jane
The above is a real gem that may have been lost in this discussion. Obviously, it takes a little bit of mental chicanery, but the notion that earning $10,000 is putting $250,000 'back' into your portfolio just when you need it most I also find very comforting.
That looks like a mathematical fallacy to me. The extra income is only equivalent to that large an increment to the portfolio if that income is sustained for an entire retirement, thirty years time or more. I don't think the suggestion is to work part-time from age 65 to age 95. It would be true if it really were sustained income, such as a higher Social Security benefit or obtaining a larger pension payout. What would also have that effect would be reducing expenditures by that amount for the entire thirty years.
Well, yes, of course it is. That's where the chicanery comes in.

It is, in essence, recouping an unrealized loss, albeit only from a cash flow perspective, for the period you've taken the employment. When the market (hopefully) recovers, you're free to discontinue.

Presumably this could prevent someone from making an actual change to their portfolio exactly when they least should.

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zaboomafoozarg
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Re: I can't believe I am thinking this

Post by zaboomafoozarg » Sun May 29, 2016 9:06 am

Sheepdog wrote:So, what is the one thing I would recommend to help a young person through market turbulence? Don't be greedy in good times. Don't invest money that you will "need" in the next 3 to 5 years. Need might mean that you want to buy a new house or auto or take that big cruise in that period, but it also would mean, especially in retirement, what you will need for monthly expenses.
That makes me feel a little better about keeping at least $50k in savings, CDs and I Bonds.

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Re: I can't believe I am thinking this

Post by dbr » Sun May 29, 2016 9:22 am

zaboomafoozarg wrote:
Sheepdog wrote:So, what is the one thing I would recommend to help a young person through market turbulence? Don't be greedy in good times. Don't invest money that you will "need" in the next 3 to 5 years. Need might mean that you want to buy a new house or auto or take that big cruise in that period, but it also would mean, especially in retirement, what you will need for monthly expenses.
That makes me feel a little better about keeping at least $50k in savings, CDs and I Bonds.
Don't invest? That makes no sense. Those ARE investments.

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Re: I can't believe I am thinking this

Post by oldcomputerguy » Sun May 29, 2016 9:25 am

fortyofforty wrote: There is strength in a herd, here. A Bogleherd, if you will.
:oops:
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: I can't believe I am thinking this

Post by david99 » Sun May 29, 2016 9:31 am

Sheepdog,

Thank you for your honest account of how you experienced the Great Recession. I found it very helpful. This is a lesson for all of us approaching retirement to have CD's, Treasuries, and possibly SPIAs. This way we can re-balance during a bear market and buy stocks on sale, instead of selling stocks when they hit bottom.
Thanks again for your contribution to this forum.

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Re: I can't believe I am thinking this

Post by magneto » Sun May 29, 2016 10:44 am

Hi Sheepdog,

We retired in 1992 and we do not have a set allocation % planned out year by year!
Such an approach would assume knowledge of the future and the Sequence of Returns awaiting around the corner!
OK to use Constant Ratios in accumulation, but potentially dangerous in retirement as per your (albeit temporary) experience, unless the investor errs on the side of an unduly low allocation to stocks.
There is a failure rate with Constant Ratio Formula Plans in retirement and we do not want to be part of that group!

Ideally in retirement the goal should be to live within the ‘natural yield’ of the Investment Portfolio.

However if this is not the case, and capital has to be drawn-down in retirement, then one of the better plans is outlined in Frank Armstong’s book ‘The Informed Investor’, see chapter 18. Frank draws our attention in this chapter that investing in retirement is very different than from when accumulating.
His solution, if drawing down from capital?
That old favorite the simple two bucket approach.
Bucket 1 : 5 years (better 7 years) of income needs in cash and/or short term bonds.
Bucket 2 : Global Stocks
Designed to prevent selling stocks at distressed prices ($ cost ravaging) while maximising reasonable exposure to the long term outperformance of stocks.
When stocks are hitting a rough patch the retiree draws from Bucket 1.
When stocks are surging (e.g. hitting all-time highs) the retiree draws income from stocks and replenishes Bucket 1.
Very few of the other retirement plans seem to offer as satisfactory a solution to the Sequence of Returns problem.

Frank has a (new?) on-line book ‘Investment Strategies for the 21st Century’ at ‘Investorsolutions.com’, from which below are extracts.

“I assumed that the investor would re-balance the portfolio so that in good years he would replenish his hoard of short-term bonds, and in bad years he would draw it down. This idea isn’t entirely new. A similar technique was used by Pharaoh about 3,000 years ago with some notable success.”

“How the Rich Do It. If you are fortunate enough to be very well off, you might consider withdrawing only your stock dividends."

Hopefully Frank's book(s) may assist.

Good Luck to us All
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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AtlasShrugged?
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Re: I can't believe I am thinking this

Post by AtlasShrugged? » Mon May 30, 2016 5:49 am

Sheepdog, Mr. Larimore.....Thank you so much for your time and your answers.

Sheepdog...I especially appreciated the timely advice regarding cash flow as you enter retirement, and maintaining a good cash flow while in retirement. Your advice about not being greedy during good times is one I will take to heart. I think the behavioral challenge for me is knowing when to take the proverbial chips off the table. Perhaps the 'Bucket' system from Christine Benz (M-Star) might partially address this.

Mr. Larimore....I have 'Stay the Course' on my summary tab of my IPS. It is the first thing I see when I open the workbook and the last thing I see when I save and close the excel workbook. I also made that phrase into a note when I log into my Fidelity account. I said that a lot last year (Aug-Sept) and earlier this year (Jan-Feb). It saw me through.
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: I can't believe I am thinking this

Post by obgyn65 » Mon May 30, 2016 11:43 am

I don't handle financial stress very well. This is why the majority of my investments are still in CDs and some real estate now.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell

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Re: I can't believe I am thinking this

Post by mmcmonster » Mon May 30, 2016 3:50 pm

Thank you, Sheepdog, for this extremely valuable thread.

I'm still in the accumulation phase and can only minimally understand the visceral apprehension regarding 2008-2009. Just reading the thread, I'm reminding myself that I have to still move some money into fixed income to adhere to my AA.

I hope that when the next crash comes I will remember to come back and re-read this thread.

And if I do, I'll remember to do as our mentor always reminds us: Stay the course!

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Re: I can't believe I am thinking this

Post by nedsaid » Tue May 31, 2016 1:24 am

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.
Jim
I was 49 years old when the financial crisis hit. I was pretty scared myself, it wasn't fun seeing my retirement portfolio drop by about 35%. Two things really helped. First, I had 28% in bonds before the crash hit. That cushioned my losses a bit. Secondly I knew that if I sold at the bottom that I would never have the retirement that I wanted. I knew that I had to stay the course.

Sheepdog articulated what we all feel during times of market distress. We are all human.
A fool and his money are good for business.

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Re: I can't believe I am thinking this

Post by fortyofforty » Tue May 31, 2016 9:12 pm

nedsaid wrote:I was 49 years old when the financial crisis hit. I was pretty scared myself, it wasn't fun seeing my retirement portfolio drop by about 35%. Two things really helped. First, I had 28% in bonds before the crash hit. That cushioned my losses a bit. Secondly I knew that if I sold at the bottom that I would never have the retirement that I wanted. I knew that I had to stay the course.

Sheepdog articulated what we all feel during times of market distress. We are all human.
nedsaid,

What strategy did you use to rebalance as the market plunged, and inched back up, if any?
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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nedsaid
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Re: I can't believe I am thinking this

Post by nedsaid » Wed Jun 01, 2016 6:45 am

fortyofforty wrote:
nedsaid wrote:I was 49 years old when the financial crisis hit. I was pretty scared myself, it wasn't fun seeing my retirement portfolio drop by about 35%. Two things really helped. First, I had 28% in bonds before the crash hit. That cushioned my losses a bit. Secondly I knew that if I sold at the bottom that I would never have the retirement that I wanted. I knew that I had to stay the course.

Sheepdog articulated what we all feel during times of market distress. We are all human.
nedsaid,

What strategy did you use to rebalance as the market plunged, and inched back up, if any?
I have to admit I was pretty scared. I did not rebalance from bonds to stocks, I kept what I already had. What I did do for a year was direct 100% of my new monies for investment into the stock market. Previously, I had been putting new funds for investment in at 60% stocks and 40% bonds. After a year, I went back to the 60/40 program for new monies.
A fool and his money are good for business.

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Re: I can't believe I am thinking this

Post by fortyofforty » Wed Jun 01, 2016 2:24 pm

nedsaid wrote:
fortyofforty wrote:
nedsaid wrote:I was 49 years old when the financial crisis hit. I was pretty scared myself, it wasn't fun seeing my retirement portfolio drop by about 35%. Two things really helped. First, I had 28% in bonds before the crash hit. That cushioned my losses a bit. Secondly I knew that if I sold at the bottom that I would never have the retirement that I wanted. I knew that I had to stay the course.

Sheepdog articulated what we all feel during times of market distress. We are all human.
nedsaid,

What strategy did you use to rebalance as the market plunged, and inched back up, if any?
I have to admit I was pretty scared. I did not rebalance from bonds to stocks, I kept what I already had. What I did do for a year was direct 100% of my new monies for investment into the stock market. Previously, I had been putting new funds for investment in at 60% stocks and 40% bonds. After a year, I went back to the 60/40 program for new monies.
Thanks.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Leif
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Re: I can't believe I am thinking this

Post by Leif » Wed Jun 01, 2016 3:41 pm

nedsaid wrote:
I have to admit I was pretty scared. I did not rebalance from bonds to stocks, I kept what I already had. What I did do for a year was direct 100% of my new monies for investment into the stock market. Previously, I had been putting new funds for investment in at 60% stocks and 40% bonds. After a year, I went back to the 60/40 program for new monies.
Me too. Its hard to imagine the impact on someone retired, but Sheepdog did help bring that home. I rebalanced a couple of times, but then got tried of catching the falling knife, throwing good money after bad, etc. etc. However, one thing I did stick with was tax loss harvesting. I'm still enjoying that harvest to this day.

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Re: I can't believe I am thinking this

Post by Snowjob » Mon Jul 11, 2016 2:29 pm

What a walk down memory lane. I remember reading this nearly a decade ago (wow its been that long????)

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Re: I can't believe I am thinking this

Post by Toons » Mon Jul 11, 2016 2:46 pm

Just Goes To Show...

"It Is Darkest Before The Dawn,
This Too Shall Pass"

:happy :happy
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soboggled
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Re: I can't believe I am thinking this

Post by soboggled » Mon Jul 11, 2016 3:08 pm

All those blithely espousing a very high equity allocation should read this thread.
It turned out well, but that doesn't mean it will always do so for all time periods.
The trick is to find an AA that allows you to stay the course while not losing any sleep.
For most people - certainly those who rely on their investments for much of their current income - that is usually less in equities than they think.
(But it also pertains in lesser degree to accumulators, where the risk is not running out of money but panicking and selling.)

dbr
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Re: I can't believe I am thinking this

Post by dbr » Mon Jul 11, 2016 3:17 pm

soboggled wrote:All those blithely espousing a very high equity allocation should read this thread.
It turned out well, but that doesn't mean it will always do so for all time periods.
The trick is to find an AA that allows you to stay the course while not losing any sleep.
For most people - certainly those who rely on their investments for much of their current income - that is usually less in equities than they think.
(But it also pertains in lesser degree to accumulators, where the risk is not running out of money but panicking and selling.)
You really have to show that high equity allocations carry a high risk of running out of money other than selling out in a panic. It does seem 100% equity is not optimum, but it is not a known disaster. Too low an equity allocation is a known disaster. There may be some subtleties in how the failures at too high equities develop, but it is just not true that high equity allocations have high failure rates at reasonable withdrawal rates compared to more balanced allocations.

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Kevin M
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Re: I can't believe I am thinking this

Post by Kevin M » Mon Jul 11, 2016 3:26 pm

dbr wrote: You really have to show that high equity allocations carry a high risk of running out of money other than selling out in a panic.
Difficult to do unless you can predict the future.
dbr wrote:It does seem 100% equity is not has not been optimum, but it is not has not been a known disaster.
Fixed this for you.
dbr wrote:Too low an equity allocation is a known disaster.
Aside from the tense problem, this has a lot to do with your wealth relative to your residual expenses in retirement; i.e., your withdrawal rate. At a low enough withdrawal rate, 100% in safe assets can be very safe. Of course in that situation you probably also can afford to take a certain amount of equity risk and also be very safe. With enough wealth, you probably are just fine with 100% stocks or 100% safe assets, as long as either one does not cause you to lose sleep.
dbr wrote:There may be some subtleties in how the failures at too high equities develop, but it is just not true that high equity allocations have high failure rates at reasonable withdrawal rates compared to more balanced allocations.
Again, the tense problem. We can only say what has been so in the past, not what will be so in the future.

Kevin
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Taylor Larimore
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Stay the course

Post by Taylor Larimore » Mon Jul 11, 2016 3:58 pm

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.
Jim:

The closing price of the S&P 500 Index was 969 on the last day in October, 2008 (the month you posted your message). Today the S&P 500 Index hit an all-time high of 2,137.
Jack Bogle: "Stay the Course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
I am sorry for your loss, but we thank you for sharing a lesson for others.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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czeckers
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Re: I can't believe I am thinking this

Post by czeckers » Mon Jul 11, 2016 7:08 pm

I didn't notice the date the thread started when I began reading it. I was scratching my head as to what portfolio loss Sheepdog was talking about. :oops

I remember that period vividly. There were many 'plan B' threads. The panic was palpable.

This thread made me consider that the experience of a large market downturn for a retiree is much much worse than for a saver.
The Espresso portfolio: | | 16% LCV, 16% SCV, 16% EM, 8% Int'l Value, 8% Int'l Sm, 8% US REIT, 8% Int'l REIT, 20% Inter-term US Treas | | "A journey of a thousand miles begins with a single step."

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Re: I can't believe I am thinking this

Post by abuss368 » Mon Jul 11, 2016 8:30 pm

We stay the course and did not sell anything. All new contributions were directed towards stocks. That mist have been for a year or more.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: I can't believe I am thinking this

Post by Johnnie » Mon Jul 11, 2016 9:26 pm

None of my accounts were online then, and many months went by before I ever opened a statement. They stacked up in piles. Probably in early 2010 I peeked, after the bleeding was staunched and healing begun. Not gruesome anymore. It's harder not to peek now.
"I know nothing."

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Re: Stay the course

Post by Sheepdog » Mon Jul 11, 2016 9:45 pm

Taylor Larimore wrote:

I am sorry for your loss, but we thank you for sharing a lesson for others.

Best wishes.
Taylor
Thank you, Taylor. That means a lot.
Jim
Just because it isn't your fault doesn't mean it isn't your responsibility....Josh Reid Jones

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Leif
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Re: I can't believe I am thinking this

Post by Leif » Tue Jul 12, 2016 10:31 am

abuss368 wrote:We stay the course and did not sell anything. All new contributions were directed towards stocks. That mist have been for a year or more.
You were probably not retired like Sheepdog. I'm not retired. I can guess the world is different once you are retired.

The real trick was not just directing new contributions toward stocks. The real trick was actively rebalancing - selling bonds and buying stocks. I did it a few times, but got tired of catching the knife. After that I only did some TLH which I'm still using those losses today to offset capital gains and $3,000/year in income.

The people with the real guts are those that changed their AA. Some to 100% stocks. It was a dangerous game, but if they held it turned into a profitable move. I would still not up my stock AA. I still view it as very dangerous.

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Re: I can't believe I am thinking this

Post by corwin » Tue Jul 12, 2016 1:26 pm

I am a newbie. Reading through this thread has caused me to re-evaluate how to invest a recent inheritance. DW and I are 5-10 years from retirement. We have always been very passive (lazy) investors, just contributing to 401k's. The inheritance has allowed us to fully fund our daughter's college starting in 3 years. With the left over money (10% of NW) I was going to DCA it into 50/50 VBTLX and VTSAX. I am concerned about dropping the whole amount at once when the market is at a new high.
We could retire now, if we absolutely had to, but cash flow would be an issue. Given that, I'm not sure we have the stomach to wait out another big drop like 2008. Our current plan is to set aside more cash from the left-over inheritance:
- 40% TIPS
- 30% VBTLX
- 30% VTSAX
It's very conservative but it's something we can stick to. (Pre-Tax accounts are in 2020 and 2025 target index funds.) We also plan to start saving over and above the 401k max and add that to the post-tax accounts.
Any comments or advice?

[Moved this to Investing - Help]
Last edited by corwin on Tue Jul 12, 2016 4:47 pm, edited 1 time in total.

soboggled
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Re: I can't believe I am thinking this

Post by soboggled » Tue Jul 12, 2016 1:41 pm

dbr wrote:
soboggled wrote:All those blithely espousing a very high equity allocation should read this thread.
It turned out well, but that doesn't mean it will always do so for all time periods.
The trick is to find an AA that allows you to stay the course while not losing any sleep.
For most people - certainly those who rely on their investments for much of their current income - that is usually less in equities than they think.
(But it also pertains in lesser degree to accumulators, where the risk is not running out of money but panicking and selling.)
You really have to show that high equity allocations carry a high risk of running out of money other than selling out in a panic. It does seem 100% equity is not optimum, but it is not a known disaster. Too low an equity allocation is a known disaster. There may be some subtleties in how the failures at too high equities develop, but it is just not true that high equity allocations have high failure rates at reasonable withdrawal rates compared to more balanced allocations.
I was speaking of retirees. 100% equities may well be a disaster for many retirees when the market tanks 50%, as it has three (3) times since 1973. None of us remember the Great Depression when stocks were depressed for a couple decades but we almost had another one. In 1930-1932, stocks dropped 70%. After 2007, we happened to escape either through luck or emergency actions, you can argue that, but it was a very close thing. For most retirees, the primary goal should be preservation of capital. If you have enough money - say several times your expected life-time income needs - there may not be too low an equity allocation. Common sense tells us that 100% in short term Treasury bonds is probably the safest viable allocation for those with adequate capital, not that I advocate such extreme measures.

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What it's like to be in a bear market

Post by Taylor Larimore » Tue Jul 12, 2016 2:08 pm

None of us remember the Great Depression when stocks were depressed for a couple decades.
soboggled:

I will never forget.

Our family owned "Larimore's Diner" in Foxboro, Mass. in 1929 (I was 5 years old at that time). When the Great Depression hit, we lost the Diner and in 1930 we moved into my grandfather's home in Miami. Grandfather, who was a millionaire investor and chief executive of an investment trust company, lost everything--including the Miami home we lived in.

BEAR MARKET OF 1929-1937 (Dow plunged 89%)
-1929--1930--1931--1932
(-31%)(-25%)(-43%)(-08%) Large Cap Stocks
(-34%)(-35%)(-47%)(-06%) Mid/Small Cap Stocks
(-47%)(-38%)(-50%)(-05%) Micro Cap Stocks

(+04%)(+07%)(-02%)(+09%) 5-Year Treasury Bonds

BEAR MARKET OF 1973-1976 (S&P fell 43%)
-1973--1974
(-15%)(-26%) Large Caps
(-39%)(-29%) Micro Caps

---(-70%) Coca-Cola
---(-82%) Intel
---(-73%) McDonald's
---(-86%) Merrill Lynch
---(-86%) Walt Disney
---(-71%) Xerox

Figures cannot convey the horrifying and debilitating effects of a bear market. You watch in agony as month after month your life savings evaporate before your eyes. Gloom and doom talk is everywhere. Nearly everyone else is selling. You have no idea when, or if, your portfolio will stop losing money.

Your friends and relatives urge you to sell. Nearly all financial experts recommend "sell". You are ridiculed for trying to hold on. You begin to have self-doubt. Despair sets in. Buying stocks is unthinkable. Suicides increase. That's a REAL bear market.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

soboggled
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Re: What it's like to be in a bear market

Post by soboggled » Tue Jul 12, 2016 3:31 pm

Taylor Larimore wrote:
None of us remember the Great Depression when stocks were depressed for a couple decades.
soboggled:

I will never forget.

Our family owned "Larimore's Diner" in Foxboro, Mass. in 1929 (I was 5 years old at that time). When the Great Depression hit, we lost the Diner and in 1930 we moved into my grandfather's home in Miami. Grandfather, who was a millionaire investor and chief executive of an investment trust company, lost everything--including the Miami home we lived in.

BEAR MARKET OF 1929-1937 (Dow plunged 89%)
-1929--1930--1931--1932
(-31%)(-25%)(-43%)(-08%) Large Cap Stocks
(-34%)(-35%)(-47%)(-06%) Mid/Small Cap Stocks
(-47%)(-38%)(-50%)(-05%) Micro Cap Stocks

(+04%)(+07%)(-02%)(+09%) 5-Year Treasury Bonds

BEAR MARKET OF 1973-1976 (S&P fell 43%)
-1973--1974
(-15%)(-26%) Large Caps
(-39%)(-29%) Micro Caps

---(-70%) Coca-Cola
---(-82%) Intel
---(-73%) McDonald's
---(-86%) Merrill Lynch
---(-86%) Walt Disney
---(-71%) Xerox

Figures cannot convey the horrifying and debilitating effects of a bear market. You watch in agony as month after month your life savings evaporate before your eyes. Gloom and doom talk is everywhere. Nearly everyone else is selling. You have no idea when, or if, your portfolio will stop losing money.

Your friends and relatives urge you to sell. Nearly all financial experts recommend "sell". You are ridiculed for trying to hold on. You begin to have self-doubt. Despair sets in. Buying stocks is unthinkable. Suicides increase. That's a REAL bear market.

Best wishes.
Taylor
Ah, the good old days!

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Re: I can't believe I am thinking this

Post by 209south » Tue Jul 12, 2016 6:10 pm

This thread is a fantastic resource. It is important to 'stay the course' but equally important to be sure your portfolio fits your personal circumstances so that you CAN stay the course through a prolonged downturn. I semi-retired last year with a strong portfolio but a large annual burn rate...weeks ago I decided that with equity and bond markets at or near all-time highs I should take some chips off the table and build my cash/CD position...I'm up to 2+ years heading to 5 and feel far more comfortable about my ability to maintain my target asset allocation with the remaining, somewhat smaller investment portfolio. This thread has reinforced my conviction in this strategy and I'll be aggressively taking another year's worth of spending off the table this week - the bottom line is that if long-term bond returns are in fact predicted by current yields, then with the marginal cash I'm just as happy holding 1-5 year CDs at 1-2%, and similarly with lower expected returns on equities.

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Re: What it's like to be in a bear market

Post by Leif » Tue Jul 12, 2016 8:11 pm

Taylor Larimore wrote:
I will never forget.
...

Taylor
Taylor, thanks for sharing that story. It is quite a reversal in fortune. It certainly gives pause for thought. Despite all of that history you invested with great results. Most, in your shoes, would probably stay all cash.

Thanks again.

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Re:

Post by BogleBoogie » Tue Jul 12, 2016 8:13 pm

White Coat Investor wrote:Move enough that you feel you did something, but not so much that your course is dramatically changed. Small course changes are much better than abandoning the ship.
Wise advice by the White Coat Investor in the midst of chaos...

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Thank you, Jack!

Post by Taylor Larimore » Tue Jul 12, 2016 8:59 pm

Despite all of that history you invested with great results.
Leif:

My early attempts to invest were a disaster (no overall plan, buying what's hot, individual stocks, market-timing, high costs, etc.). Fortunately, I discovered Jack Bogle in the early 80s. He changed our financial life and gave me the comfortable retirement I now enjoy.

Thank you, Jack!

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: I can't believe I am thinking this

Post by Driver » Tue Jul 12, 2016 10:19 pm

Snowjob wrote:What a walk down memory lane. I remember reading this nearly a decade ago (wow its been that long????)
Wow, I remember the 08-09 crash like it was yesterday. Time sure flies. This thread brought a smile to my face seeing the names of posters I haven't seen for years. The forum definitely helped me get through the "great recession" and ease some of my fears and anxiety. I still remember being comforted when I'd see the avatars of Sheepdog, Taylor and the others pop up on my screen. A sense of calm and familiarity is how I'd describe it.

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Re: I can't believe I am thinking this

Post by grap0013 » Wed Jul 13, 2016 3:19 pm

This thread reinforces my beliefs. I think most people should have 60 to 70% 5 year treasury bonds who are near/at retirement.

A 30:70 mix of global cap weighted stocks with treasuries lost less than 3% in 2008. Talk about sleeping well at night. I know total bond is yielding something like double that of 5 year treasuries right now but one should not buy treasuries for the yield. Let the portfolio growth come from a 30-40% slug of stocks.
There are no guarantees, only probabilities.

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Re: I can't believe I am thinking this

Post by Snowjob » Fri Jul 15, 2016 9:18 am

Driver wrote:
Snowjob wrote:What a walk down memory lane. I remember reading this nearly a decade ago (wow its been that long????)
Wow, I remember the 08-09 crash like it was yesterday. Time sure flies. This thread brought a smile to my face seeing the names of posters I haven't seen for years. The forum definitely helped me get through the "great recession" and ease some of my fears and anxiety. I still remember being comforted when I'd see the avatars of Sheepdog, Taylor and the others pop up on my screen. A sense of calm and familiarity is how I'd describe it.
The perspectives were fascinating given the different ages and financial positions and employment prospects everyone had. Many were willing to share their experiences, who could forget the Market Timer thread? I was a young kid leveraging into individual stocks and bonds at starting summer of 08 myself (talk about being early LOL) -- Certainly a time of immense growth for me personally and intellectually. Watching the chaos unfold daily was riveting. Heck even C-Span became a great source of entertainment for a while. Living through this and having a collective diverse set of shared experiences has been very valuable

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Re: I can't believe I am thinking this

Post by Engineer250 » Fri Jul 15, 2016 11:41 am

Snowjob wrote:
Driver wrote:
Snowjob wrote:What a walk down memory lane. I remember reading this nearly a decade ago (wow its been that long????)
Wow, I remember the 08-09 crash like it was yesterday. Time sure flies. This thread brought a smile to my face seeing the names of posters I haven't seen for years. The forum definitely helped me get through the "great recession" and ease some of my fears and anxiety. I still remember being comforted when I'd see the avatars of Sheepdog, Taylor and the others pop up on my screen. A sense of calm and familiarity is how I'd describe it.
The perspectives were fascinating given the different ages and financial positions and employment prospects everyone had. Many were willing to share their experiences, who could forget the Market Timer thread? I was a young kid leveraging into individual stocks and bonds at starting summer of 08 myself (talk about being early LOL) -- Certainly a time of immense growth for me personally and intellectually. Watching the chaos unfold daily was riveting. Heck even C-Span became a great source of entertainment for a while. Living through this and having a collective diverse set of shared experiences has been very valuable
I agree it's interesting where people were definitely impacted what you did. I was like you, about 3 years into investing my 401k. Watched it go from a measly $14k to an even more measly $7k. My reaction was to increase my 401k contribution from 8% to 12%. Many of my colleagues in their 40s increased their allocation to bonds or moved out of stocks and waited to get back in. I don't think I was uniquely clever, I'm sure being 35-40 years away from retirement had more to do with my calm and cool than my intelligence.

If you want to relive 2007-2008, I recommend re-watching Frontline's Inside the Meltdown. I just did, and watched The Big Short (currently streamable on Netflix). The palpable fear of both sides, and Brad Pitt's character reminding some of the guys who were shorting the market that if they were right tons and tons of people were going to lose their homes and their jobs was a good reminder. I kept my job at the time being in an unaffected industry and bought a house after the downturn so I was blessed not to be in the direct blast of how bad it was to the economy. Sometimes I think I forget it wasn't just a stock / home value crash, but so much worse for so many people.

The thing I keep thinking about from 2007 was the savings interest rates. I set up my first online savings account in May 2007 and if I remember correctly it was earning around 4%. It's hard to comprehend what was a completely accessible, FDIC insured, liquid and "safe" investment making that much money in today's world. It's been so long since rates were much higher.
Where the tides of fortune take us, no man can know.

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Re: I can't believe I am thinking this

Post by Toons » Fri Jul 15, 2016 11:52 am

" I was like you, about 3 years into investing my 401k. Watched it go from a measly $14k to an even more measly $7k."

You jogged my memory ,,,,
I had to go to Quicken to take a look.
Vanguard Lifestrategy Growth value in our Roth Ira's
topped at 98,000 bucks,2007
by the time the bear market was over in 2009 the balance
was 53,000.I was steady maxing out the Roth as it was trending down.
Financial Opportunity of a lifetime :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: I can't believe I am thinking this

Post by garlandwhizzer » Fri Jul 15, 2016 1:09 pm

grap0013 wrote:
A 30:70 mix of global cap weighted stocks with treasuries lost less than 3% in 2008. Talk about sleeping well at night. I know total bond is yielding something like double that of 5 year treasuries right now but one should not buy treasuries for the yield. Let the portfolio growth come from a 30-40% slug of stocks.
30:70 worked very well in 2008 and it also works well on backtesting for longer periods in the past. No doubt it helped you to sleep at night during the 2007-9 crisis. For longer time periods going forward, however, like the next 30 - 40 years returns may not be as good as long term backtesting statistics of 30:70 would suggest. The last 34 years has witnessed the greatest bull market in Treasuries in history with 10 year Treasuries going from 15% to less than 1.4% and inflation doing almost likewise. Three decades plus of declining interest rates and declining inflation has artificially inflated Treasury returns on backtesting. Going forward from here with Treasuries at the lowest yields in history, lower than at the depths of the Great Depression or the horrors of WW2, it is not realistic to assume generous returns from the 70% of the portfolio dedicated to Treasuries whose yield is laughably low. 30:70 is safe at preserving principal (unless inflation rears its ugly head in which case purchasing power is relentlessly lost as in 1940 - 1980), but it is not safe at producing significant portfolio growth over a long period of time. In my view, 30% equities is insufficient to produce significant portfolio growth load no matter how sophisticated the factor approach one uses with 30%. It seems to me a reasonable choice for those who are already quite rich with a portfolio perhaps somewhere around 50 times anticipated annual living expenses going forward. One has to take into account increasing longevity in financial planning these days. For the majority of investors who need long term portfolio growth in order to meet financial goals like retirement 30:70 may shifting too many assets to safety and not enough toward asset growth. Backtesting such a portfolio produces more optimistic results than the future in likely to deliver and in my opinion should not be fully trusted for those who need substantial portfolio appreciation.

This is a lot like a Larry portfolio which makes a lot of sense for the very wealthy who will do just fine with preserving their wealth and taking very limited risk. Those who aren't so fortunate, those who need significant portfolio growth and who have a long time frame should at least consider a higher equity allocation with present market conditions.

Garland Whizzer

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