What was max drop in 2000 and 2008?

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kayanco
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What was max drop in 2000 and 2008?

Post by kayanco » Tue Oct 16, 2018 6:25 pm

For those who witnessed the 2000 and 2008 market crashes, what was the max drop in US (e.g VTSAX) and International (e.g. VTIAX) market?

For instance if you had $10,000 in each (at the start of the crash), what would be the balance at the lowest point in the crash?

Thanks.

Tamales
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Re: What was max drop in 2000 and 2008?

Post by Tamales » Tue Oct 16, 2018 6:39 pm

3/24/00 to 10/9/02: -49.1%
10/9/07 to 3/9/09: -56.8%

(S&P500 from the highest all-time-high before the decline to the lowest low before recovery)

MotoTrojan
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Re: What was max drop in 2000 and 2008?

Post by MotoTrojan » Tue Oct 16, 2018 6:56 pm

Tamales wrote:
Tue Oct 16, 2018 6:39 pm
3/24/00 to 10/9/02: -49.1%
10/9/07 to 3/9/09: -56.8%

(S&P500 from the highest all-time-high before the decline to the lowest low before recovery)
Don't forget those dividends :).

kayanco
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Re: What was max drop in 2000 and 2008?

Post by kayanco » Tue Oct 16, 2018 7:03 pm

Tamales wrote:
Tue Oct 16, 2018 6:39 pm
3/24/00 to 10/9/02: -49.1%
10/9/07 to 3/9/09: -56.8%

(S&P500 from the highest all-time-high before the decline to the lowest low before recovery)
Thanks. I assume VTSAX would match what you listed? What about VTIAX please?

kayanco
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Re: What was max drop in 2000 and 2008?

Post by kayanco » Tue Oct 16, 2018 7:05 pm

MotoTrojan wrote:
Tue Oct 16, 2018 6:56 pm
Tamales wrote:
Tue Oct 16, 2018 6:39 pm
3/24/00 to 10/9/02: -49.1%
10/9/07 to 3/9/09: -56.8%

(S&P500 from the highest all-time-high before the decline to the lowest low before recovery)
Don't forget those dividends :).
I'm sorry I didn't follow, can you please explain? Thanks.

Tamales
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Re: What was max drop in 2000 and 2008?

Post by Tamales » Tue Oct 16, 2018 7:09 pm

For comparison purposes, if you had a 60/40 portfolio of VTSMX/VBMFX (total stock/total bond), the peak and bottom, as well as the extent, was different in the first case:
9/1/00 to 10/9/02: -24.2%

same date range but less severe outcome in the 2nd case:
10/9/07 to 3/9/09: -33.9%

That's why we love our bond funds around here.

---------------
VTSAX:
3/24/00 to 10/9/02: -48.5%
10/9/07 to 3/9/09: -55.3%

VTIAX:
3/28/00 to 10/9/02: -49.5%
10/31/07 to 3/9/09: -61.5%

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arcticpineapplecorp.
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Re: What was max drop in 2000 and 2008?

Post by arcticpineapplecorp. » Tue Oct 16, 2018 9:02 pm

Tamales wrote:
Tue Oct 16, 2018 7:09 pm
---------------
VTSAX:
3/24/00 to 10/9/02: -48.5% confirmed here: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D
10/9/07 to 3/9/09: -55.3% confirmed here: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

VTIAX:
3/28/00 to 10/9/02: -49.5% confirmed here (close enough) https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D
10/31/07 to 3/9/09: -61.5% confirmed here (close enough) https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D
A picture's worth a 1000 words. The links above show you what the losses looked like (what $10,000 became worth at the bottom).
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Tamales
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Re: What was max drop in 2000 and 2008?

Post by Tamales » Tue Oct 16, 2018 10:14 pm

arcticpineapplecorp. wrote:
Tue Oct 16, 2018 9:02 pm

A picture's worth a 1000 words. The links above show you what the losses looked like (what $10,000 became worth at the bottom).
Thanks for the links to the graphs a.p.
It paints an even more striking picture of the losses your brain would have to come to grips with if you had just reached a $1 million portfolio value at the start of the carnage.

I think, for many people, the concept of "risk tolerance" is dependent on your portfolio value, so it evolves/shrinks over time. It's one thing to say you have a high risk tolerance in percentage loss terms when you're young and have a $50k portfolio, but quite another to maintain that mindset later in life, only to be shocked at how panic-stricken you might become at age 60 when your $1 million portfolio that you've saved your whole life for gets cut in half. A risk tolerance re-evaluation later in life, where you switch to a dollar loss tolerance level, may be a good thing to consider.

MotoTrojan
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Re: What was max drop in 2000 and 2008?

Post by MotoTrojan » Tue Oct 16, 2018 11:08 pm

kayanco wrote:
Tue Oct 16, 2018 7:05 pm
MotoTrojan wrote:
Tue Oct 16, 2018 6:56 pm
Tamales wrote:
Tue Oct 16, 2018 6:39 pm
3/24/00 to 10/9/02: -49.1%
10/9/07 to 3/9/09: -56.8%

(S&P500 from the highest all-time-high before the decline to the lowest low before recovery)
Don't forget those dividends :).
I'm sorry I didn't follow, can you please explain? Thanks.
Total return includes your price appreciation plus dividends, which are in the realm of 2%/year for equity funds. If the price of the S&P500 dropped 50% over 2 years, your actual "loss" was more like 48-49% :). Doesn't make a big difference on sudden crashes' values, but over longer periods of time (whether the market is going up, down, or flat) it is a huge contributor.

texasdiver
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Re: What was max drop in 2000 and 2008?

Post by texasdiver » Wed Oct 17, 2018 10:59 am

Tamales wrote:
Tue Oct 16, 2018 10:14 pm
arcticpineapplecorp. wrote:
Tue Oct 16, 2018 9:02 pm

A picture's worth a 1000 words. The links above show you what the losses looked like (what $10,000 became worth at the bottom).
Thanks for the links to the graphs a.p.
It paints an even more striking picture of the losses your brain would have to come to grips with if you had just reached a $1 million portfolio value at the start of the carnage.

I think, for many people, the concept of "risk tolerance" is dependent on your portfolio value, so it evolves/shrinks over time. It's one thing to say you have a high risk tolerance in percentage loss terms when you're young and have a $50k portfolio, but quite another to maintain that mindset later in life, only to be shocked at how panic-stricken you might become at age 60 when your $1 million portfolio that you've saved your whole life for gets cut in half. A risk tolerance re-evaluation later in life, where you switch to a dollar loss tolerance level, may be a good thing to consider.
That's a pretty good argument for not having a 100% equity portfolio at age 60. Someone with a 50/50 portfolio at age 60 would have only seen a 25% loss (or even less of a loss if the fixed portion of the portfolio increased in value during the same period). In fact, when you count dividends and earnings on the fixed portion of the portfolio, a 50% drop in the stock market might only produce a 25% drop in a typical 60/40 index fund portfolio.

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arcticpineapplecorp.
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Re: What was max drop in 2000 and 2008?

Post by arcticpineapplecorp. » Wed Oct 17, 2018 5:16 pm

texasdiver wrote:
Wed Oct 17, 2018 10:59 am
Tamales wrote:
Tue Oct 16, 2018 10:14 pm
arcticpineapplecorp. wrote:
Tue Oct 16, 2018 9:02 pm

A picture's worth a 1000 words. The links above show you what the losses looked like (what $10,000 became worth at the bottom).
Thanks for the links to the graphs a.p.
It paints an even more striking picture of the losses your brain would have to come to grips with if you had just reached a $1 million portfolio value at the start of the carnage.

I think, for many people, the concept of "risk tolerance" is dependent on your portfolio value, so it evolves/shrinks over time. It's one thing to say you have a high risk tolerance in percentage loss terms when you're young and have a $50k portfolio, but quite another to maintain that mindset later in life, only to be shocked at how panic-stricken you might become at age 60 when your $1 million portfolio that you've saved your whole life for gets cut in half. A risk tolerance re-evaluation later in life, where you switch to a dollar loss tolerance level, may be a good thing to consider.
That's a pretty good argument for not having a 100% equity portfolio at age 60. Someone with a 50/50 portfolio at age 60 would have only seen a 25% loss (or even less of a loss if the fixed portion of the portfolio increased in value during the same period). In fact, when you count dividends and earnings on the fixed portion of the portfolio, a 50% drop in the stock market might only produce a 25% drop in a typical 60/40 index fund portfolio.
plus the recovery can be quicker. I believe I remember a Vanguard paper showing a 50/50 investor would have gotten back to break even in 2010 (with rebalancing) whereas it would have taken a 100% equity investor until 2012 to have broken even.

Tamales...what does "a.p." stand for?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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nisiprius
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Re: What was max drop in 2000 and 2008?

Post by nisiprius » Wed Oct 17, 2018 5:26 pm

I found in 2008-2009, with retirement less than ten years away, that I processed the loss in terms of years. That is, the number of years it had taken me to save the amount that I had just lost.

Throughout my retirement savings journey I also found that I didn't mind losses too much as long as the total of my retirement savings, including all of my monthly contributions, was higher at the end of the year than at the beginning. It was when the boat seemed to be sinking faster than I could bail that I felt panicky.

Finally, the actual number of dollars I was saving did not rise at the same rate as the total. That is, at the point where I had $200,000 I was saving more than when I had $100,000, but not twice as much. So, my ability to "bail" declined with age, and thus my willingness to take risk and see losses also declined.

I am not saying either that this is rational or that I am recommending it. I'm saying that's how it took me emotionally. It's my opinion that a rational person should take their emotions into account. All the questions we get on this forum about "ignoring emotion, how should we invest" seem ill-conceived to me.
Last edited by nisiprius on Wed Oct 17, 2018 6:02 pm, edited 1 time in total.
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.

Tamales
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Re: What was max drop in 2000 and 2008?

Post by Tamales » Wed Oct 17, 2018 5:37 pm

arcticpineapplecorp. wrote:
Wed Oct 17, 2018 5:16 pm
Tamales...what does "a.p." stand for?
It's my lazy way of not typing your long screen name ;)

WhiteMaxima
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Re: What was max drop in 2000 and 2008?

Post by WhiteMaxima » Wed Oct 17, 2018 5:38 pm

If you sold then you will loose about 50%. What if you hold it through until now? So buy and hold and stay in course.

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arcticpineapplecorp.
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Re: What was max drop in 2000 and 2008?

Post by arcticpineapplecorp. » Wed Oct 17, 2018 6:22 pm

Tamales wrote:
Wed Oct 17, 2018 5:37 pm
arcticpineapplecorp. wrote:
Wed Oct 17, 2018 5:16 pm
Tamales...what does "a.p." stand for?
It's my lazy way of not typing your long screen name ;)
ah thanks. now I get it. Advanced Placement really wasn't making any sense.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

2015
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Re: What was max drop in 2000 and 2008?

Post by 2015 » Wed Oct 17, 2018 8:18 pm

nisiprius wrote:
Wed Oct 17, 2018 5:26 pm
...

Throughout my retirement savings journey I also found that I didn't mind losses too much as long as the total of my retirement savings, including all of my monthly contributions, was higher at the end of the year than at the beginning. It was when the boat seemed to be sinking faster than I could bail that I felt panicky.
...
I am not saying either that this is rational or that I am recommending it. I'm saying that's how it took me emotionally. It's my opinion that a rational person should take their emotions into account. All the questions we get on this forum about "ignoring emotion, how should we invest" seem ill-conceived to me.
This first paragraph has proven to be quite true for me. I assume everything I do is always in danger of being irrational as far as not reflecting reality goes. I also agree that everything I and all other humans do is 100% emotional (as reflected in the pleasure principle), whether we admit it or not.

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