What's your one big takeaway from the Crash of 2008?

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VictoriaF
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Re: What's your one big takeaway from the Crash of 2008?

Post by VictoriaF » Tue Jan 21, 2014 12:18 pm

garlandwhizzer wrote:
VictoriaF wrote:I have more than 3 years of projected expenses in accessible cash. My highest priority for the initial years of retirement is to engage in many activities I can't do while working. I don't want to curtail my activities and related expenses if the markets drop. If I wanted to have more money I would continue working. Right now I want more experiences--and adequate funds to pay for them.

Victoria
Me too. Three years of cash on hand reduces anxiety greatly during a market crash and allows you, I believe, to be less emotionally driven and to make more rational decisions like not selling into panic. The downside, zero return on a sum equal to 3 years of living expenses, is annoying during a bull market but during difficult times it seems a small price to pay for those of us without ongoing income streams who are forced to meet living expenses solely from selling investments.

Garland Whizzer
I deal with this annoyance by looking at my overall portfolio return rather than its parts and by planning fun things that I'll do with the cash.

Victoria
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Re: What's your one big takeaway from the Crash of 2008?

Post by travellight » Tue Jan 21, 2014 12:28 pm

I pretty much stayed the course and only sold one holding which was significantly poorly performing in its class. Everything recovered and the one I sold is doing fantastic. My main lesson is stay the course better.

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Re: What's your one big takeaway from the Crash of 2008?

Post by 500Kaiser » Tue Jan 21, 2014 12:36 pm

Harold wrote:
Rodc wrote:And yet in the end (or at least so far) buy and hold, rebalance, keep plowing new money into your portfolio, worked pretty well.
As true as that turned out to be, people tend to forget how precarious of a situation that was.

The outcome could easily have been otherwise. We were on a precipice, and could have gone straight over the edge. Good fortune and prudent central bank decisions led the way from disaster.

The message most people received is that diversification works and markets always recover, when the real message should be that risk is real and needs to be gravely respected.
+1000
Higher risk = higher HOPEFUL returns, not expected returns.

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Re: What's your one big takeaway from the Crash of 2008?

Post by montanagirl » Tue Jan 21, 2014 12:44 pm

In sept of 2007 I discovered a housing bear site and grew so alarmed at all the local news stories and on-the-ground observations by the commenters that I put everything in cash equivalents in November. It seemed like a no brainer.

I hung out like that nearly 3 years, and kick myself for now for not jumping back in sooner, but it was so hard to figure out just how close we were to the edge. I knew I didn't have the risk tolerance.

Every time an opportunity like that arises, I bug out. So I guess my take-away is what a coward I am.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Ron » Tue Jan 21, 2014 12:44 pm

Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

2008?

Lived through 1987 (started investing for retirement in 1982).

Lived through 2001-02

Lived through 2008 (retiring in 2007).

Same old - same old; live goes on. During these downturns, I did no adjustments (buy/sell) of my long term portfolio holdings.

If you're old enough, you will find that 2008 was nothing more than a "burp" in long term investment history. I had nothing to learn, since I've "been there" before :mrgreen: ...

- Ron

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Re: What's your one big takeaway from the Crash of 2008?

Post by VictoriaF » Tue Jan 21, 2014 12:52 pm

Ron wrote:
Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

- Ron
Never taking the pants off?

Victoria
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Re: What's your one big takeaway from the Crash of 2008?

Post by terrabiped » Tue Jan 21, 2014 1:13 pm

VictoriaF wrote:
Ron wrote:
Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

- Ron
Never taking the pants off?

Victoria
I have no idea how to translate this metaphor into an actionable IPS.
As for me, in 2008 I thought the sky was falling and the entire global economy was about to collapse into an epic, world wide depression. Lesson learned: Don't believe everything my brain thinks!

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Re: What's your one big takeaway from the Crash of 2008?

Post by Ged » Tue Jan 21, 2014 1:19 pm

caroljm36 wrote:In sept of 2007 I discovered a housing bear site and grew so alarmed at all the local news stories and on-the-ground observations by the commenters that I put everything in cash equivalents in November. It seemed like a no brainer.

I hung out like that nearly 3 years, and kick myself for now for not jumping back in sooner, but it was so hard to figure out just how close we were to the edge. I knew I didn't have the risk tolerance.
I had a similar reaction in 2007 - I went 100% fixed income. After the markets went down 25% I started DCAing back in - a bit too soon.

I learned timing the market requires that you be right twice.

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Re: What's your one big takeaway from the Crash of 2008?

Post by VictoriaF » Tue Jan 21, 2014 1:20 pm

terrabiped wrote:
VictoriaF wrote:
Ron wrote:
Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

- Ron
Never taking the pants off?

Victoria
I have no idea how to translate this metaphor into an actionable IPS.
As for me, in 2008 I thought the sky was falling and the entire global economy was about to collapse into an epic, world wide depression. Lesson learned: Don't believe everything my brain thinks!
But what if your brain was right and the recovery of the global economy was a fluke? Keeping the pants on is having enough safe income sources so as not to depend on the markets--no matter what they do.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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Re: What's your one big takeaway from the Crash of 2008?

Post by manwithnoname » Tue Jan 21, 2014 1:57 pm

"Be greedy when others are fearful. "

I began buying depressed financials, muni bonds, value funds and other out of favor investments in Feb 09 and never looked back. I ignored all the doomsday prophets because I believed that US would continue to be a capitalist economy where buying low, selling high is rewarded. Last 5 years have proved that my vision was correct.

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Re: Valuations Matter

Post by HomerJ » Tue Jan 21, 2014 2:16 pm

Jay69 wrote:
grayfox wrote:There are so many lessons to learn from this economic crisis and this bear market. Even restricting it to only the stock market or S&P 500, there are still many many lessons.

So I will just choose one big one. There have about a billions words of debate about whether valuations matter or not. Well now the matter has been has been settled once and for all by the market. Valuations Matter.

When valuations are very high, reduce your stock allocation. When we are setting new all time highs on the index, reduce your stock allocation. When we are in a bubble, reduce your stock allocation. When Bogel says be cautious, reduce your stock allocation.
Going back and reading some of these life lessons, not picking on grayfox but being I still see grayfox posting I wonder if he/she stills feels the same from 2008? In other words have some rethought about 2008 and look at it in a different light today?
Buy and hold works even if you ignore valuations. Every cent invested when valuations were considered "high" in the past are worth more today. Pick an AA you can live with at ALL times. Don't try to change it based on predicting the future.

Market timing is a dangerous game. You may make more than the market, but you may make less. Market returns are good enough. No need to try to beat the market.

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Re: What's your one big takeaway from the Crash of 2008?

Post by technovelist » Tue Jan 21, 2014 2:23 pm

VictoriaF wrote:
terrabiped wrote:
VictoriaF wrote:
Ron wrote:
Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

- Ron
Never taking the pants off?

Victoria
I have no idea how to translate this metaphor into an actionable IPS.
As for me, in 2008 I thought the sky was falling and the entire global economy was about to collapse into an epic, world wide depression. Lesson learned: Don't believe everything my brain thinks!
But what if your brain was right and the recovery of the global economy was a fluke? Keeping the pants on is having enough safe income sources so as not to depend on the markets--no matter what they do.

Victoria
And what would those "safe income sources" be that could withstand an "epic, world wide depression"?
In theory, theory and practice are identical. In practice, they often differ.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Ken. » Tue Jan 21, 2014 2:35 pm

The crash of 2008 reminds me that anything can happen in the stock market.

Also forget what happens in the short term as it is totally unpredictable. Keep your eye on the long term in which case stocks are the best investment. I was 100 percent in stocks then and the crash didn't worry me a bit, since I suffered much worse losses in 2000-2003. In hindsight I should have been more worried as we were really close to a depression if the Fed didn't make the right moves.

But now I'm getting close to retirement, the short term does matter more, so I have to sacrifice long term returns for short term stability.

The crash also reminds me that buy and hold is the only way to go, but it can be a rough ride.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Sriracha » Tue Jan 21, 2014 2:53 pm

My takeaway: That, while I like investing a whole lot better when it's as boring as watching paint dry, I've proven to myself that I can ride out a panic without selling.
Last edited by Sriracha on Tue Jan 21, 2014 5:49 pm, edited 1 time in total.
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Re: What's your one big takeaway from the Crash of 2008?

Post by TheTimeLord » Tue Jan 21, 2014 3:47 pm

Just because something is big and scary doesn't mean it is all that bad. Or betting on the end of the world is still a sucker's bet because who want to win that one.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: What's your one big takeaway from the Crash of 2008?

Post by Clearly_Irrational » Tue Jan 21, 2014 4:00 pm

1) If you're going to short the market, options can give you a bigger return than inverse ETFs
2) Cramer's wife is one smart lady, she was right that when he throws in the towel then you know the bottom is in
3) I can successfully market time since I'm now 2/2 on crashes (what a terrible lesson to learn since I'm probably wrong and just got lucky)
4) Even if you're not afraid of a 50% market crash, you can still start to panic if it looks like the whole economy is going to collapse
5) When you're scratching your head wondering why your asset is worth more than you think it is, you're probably right
6) No one is ever "safe" in their job, even if it seems like you're critical and both your boss and his boss think you're great
7) As markets drop towards zero, correlations climb towards one

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Re: What's your one big takeaway from the Crash of 2008?

Post by Rodc » Tue Jan 21, 2014 4:28 pm

VictoriaF wrote:
Ron wrote:
Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

- Ron
Never taking the pants off?

Victoria
Or don't put them on.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: What's your one big takeaway from the Crash of 2008?

Post by dh » Tue Jan 21, 2014 4:55 pm

What I took away was a piece of advice written by someone in the form of a letter from self in 2009 to future self (2014?). I sincerely apologize for not recalling the author, but I appreciate the words of wisdom:

"Dear Future Self -

This is your Past Self. It's January 21, 2009 and we have just completed one of the worst years ever in the market. The S&P 500 was down 37% in 2008 and the pain was bad. 2009 has not provided much relief so far. ...
The reason I am writing you this note is that I am afraid that you will forget this pain at the next market highs. I do not want you to be caught up in the euphoria again. I want to remind you to not be so greedy next time. I want you to be sure to take something off the table. I want you to follow your asset allocation and when your stock percentage exceeds your target, I want you to sell. It is not a sin to sell, it is not a bad thing to pay taxes - but it is a bad thing to lose your big gains. Remember the pain and do not let it happen again.

Good luck -
Your Past Self"

Again, thank you to whoever wrote this in 2009. I just decided that I would rather take some of those gains off the table and park it in Prime Money Market earning 0.01%. Yes, I risk missing out on even bigger gains in stocks, a potential better return from Total Bond Market, and "losing" to inflation. Yet I appreciate having a hedge that perhaps, both stocks and bonds decline this year. I don't know the future, but at this point I am willing to accept that big gains are "enough" (satisficing) and no police will be coming after me for hedging against loss.

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Re: What's your one big takeaway from the Crash of 2008?

Post by VictoriaF » Tue Jan 21, 2014 5:14 pm

dh wrote:What I took away was a piece of advice written by someone in the form of a letter from self in 2009 to future self (2014?). I sincerely apologize for not recalling the author, but I appreciate the words of wisdom:

"Dear Future Self -

This is your Past Self. It's January 21, 2009 and we have just completed one of the worst years ever in the market...
The letter is fine, but an even more powerful reminder of the 2008-2009 period is older threads, like this one. Here you can see different people's questions and answers, worry and calm, fear and courage--and complete uncertainty at the time when it was completely uncertain.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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Re: What's your one big takeaway from the Crash of 2008?

Post by 500Kaiser » Tue Jan 21, 2014 5:42 pm

The actionable item for me is to

1). Bookmark this thread and list it as a must read in my IPS every year during my annual review.
2). I re-read Dr. Bernstein's Deep risk booklet to better understand what i can learn from him on this topic.
Higher risk = higher HOPEFUL returns, not expected returns.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Clearly_Irrational » Tue Jan 21, 2014 5:46 pm

VictoriaF wrote:Here you can see different people's questions and answers, worry and calm, fear and courage--and complete uncertainty at the time when it was completely uncertain.
I was doing fine even after the Lehman Brothers bankruptcy and some of the investment banks had to be bought up, but when the Money Market funds started to break the buck I was like "holy &%$#! the wheels are going to come off this sucker". I started to get seriously worried about bank runs. I was about two days away from withdrawing everything when they announced the big bank bailouts and the backstop of the MM funds.

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Re: What's your one big takeaway from the Crash of 2008?

Post by jeffyscott » Tue Jan 21, 2014 6:04 pm

YDNAL wrote:What is most interesting is that this thread started 11/21/2008 and posters were active through 12/15/2008.
  • From this point, the S&P 500 continued diving approximately 22% by 3/9/2009*.
  • Not ONE single soul posted, and the first post after December 2008 was in September 2009.
Perhaps everyone claiming to have a plan, the right AA, stay the course, etc., were scared silly and running for the hills. :)

* closed 868.67 on 12/15/2008 and 676.53 on 3/9/2009.
Yes, with S&P 500 at 800 it turned out to be very early for calling an end to the crash, my "takeaway" at that time was:
jeffyscott wrote:I'm hoping it won't be that a post titled: What's your one big takeaway from the Crash of 2008?, ensures that this is not over yet.
Sat Nov 22, 2008 8:16 am
press on, regardless - John C. Bogle

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Re: What's your one big takeaway from the Crash of 2008?

Post by Dandy » Tue Jan 21, 2014 6:14 pm

You don't know your real risk tolerance until the black swan hits.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Toons » Tue Jan 21, 2014 7:15 pm

Biggest Takeaway?
"Wealth Is Created During Bear Markets You Just Don't Know It At The Time"(As long as you stick to your discipline and continue buying shares in your equity index funds :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: What's your one big takeaway from the Crash of 2008?

Post by JW-Retired » Tue Jan 21, 2014 7:30 pm

My big takeaway is that sometimes the stock market recovers darn fast. We should not plan for being that lucky next time.
JW
Retired at Last

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Re: What's your one big takeaway from the Crash of 2008?

Post by manwithnoname » Tue Jan 21, 2014 7:35 pm

Dandy wrote:You don't know your real risk tolerance until the black swan hits.

Been there, done that. 1987, 1998, 2000-3, 2008-9 to name a few.

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Re: What's your one big takeaway from the Crash of 2008?

Post by TheTimeLord » Tue Jan 21, 2014 8:32 pm

Toons wrote:Biggest Takeaway?
"Wealth Is Created During Bear Markets You Just Don't Know It At The Time"(As long as you stick to your discipline and continue buying shares in your equity index funds :happy )
How does that work when you are past the accumulation phase?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: What's your one big takeaway from the Crash of 2008?

Post by Ron » Tue Jan 21, 2014 10:48 pm

technovelist wrote:And what would those "safe income sources" be that could withstand an "epic, world wide depression"?
An SPIA? :oops:

BTW, purchased one in early 2007 when I retired...

Also, retirement income was provided by 4-5 years in cash (at the time) because I did not want to sell if the market were to drop (no, I had no idea it would in '08).

After almost seven years in retirement (and as I get closer to SS), I hold less cash - but enough to still not having to worry about another reversal. While cash really isn't an investment, it still holds value to me in the overall scheme of things.

- Ron

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Re: What's your one big takeaway from the Crash of 2008?

Post by Will do good » Tue Jan 21, 2014 11:23 pm

This is a good reminder for some of us. :happy

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Re: What's your one big takeaway from the Crash of 2008?

Post by sambb » Wed Jan 22, 2014 12:04 am

I just find this thread so interesting because so many people mention timing and to not stay the course. And there is little criticism of these ideas. Whereas now, people talk about lump sums, not DCA, no timing, and stay the course.

Clearly the culture of advice may be different then compared to now.

AN interesting study would be to see how the culture looks at market tops vs bottoms on message boards.

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Re: What's your one big takeaway from the Crash of 2008?

Post by littlebird » Wed Jan 22, 2014 12:45 am

StarbuxInvestor wrote:
Toons wrote:Biggest Takeaway?
"Wealth Is Created During Bear Markets You Just Don't Know It At The Time"(As long as you stick to your discipline and continue buying shares in your equity index funds :happy )
How does that work when you are past the accumulation phase?
By rebalancing (and if you have the stomach for it, maybe even a little "rebalancing plus")

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Re: What's your one big takeaway from the Crash of 2008?

Post by scotthal » Wed Jan 22, 2014 1:36 am

Opportunity knocks, but rarely? My AA includes a bit of hysteresis for the bumps - mix gets a bit more aggressive on the down ticks.
Growtch, grinch; paranoid contrarian

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Re: Valuations Matter

Post by grayfox » Wed Jan 22, 2014 9:16 am

Jay69 wrote:
grayfox wrote:There are so many lessons to learn from this economic crisis and this bear market. Even restricting it to only the stock market or S&P 500, there are still many many lessons.

So I will just choose one big one. There have about a billions words of debate about whether valuations matter or not. Well now the matter has been has been settled once and for all by the market. Valuations Matter.

When valuations are very high, reduce your stock allocation. When we are setting new all time highs on the index, reduce your stock allocation. When we are in a bubble, reduce your stock allocation. When Bogel says be cautious, reduce your stock allocation.
Going back and reading some of these life lessons, not picking on grayfox but being I still see grayfox posting I wonder if he/she stills feels the same from 2008? In other words have some rethought about 2008 and look at it in a different light today?
I've learned a lot since 2008. In 2012/2013 I took several finance courses, like modern portfolio theory, financial econometrics, retirement planning, etc. so I have a slightly different outlook.

One thing I learned is that the mainstream thinking in modern finance is, wait for it, that valuations matter. :D

Yep, if you read the Cochrane's summary paper from 2011, the main theme is:

High valuations forecast low returns. Low valuations forecast high returns.

Now that doesn't mean that when CAPE > 25 that a crash is imminent. You have to think of future stock returns over some holding period, say 20 years, as a distribution of possible outcomes that depends on the future state of the world. In one state, stocks may return 10% per annum. In another state, stocks may return 0% per annum. The value of your investment at the end is a random variable.

We do not know the exact shape of the distribution or the exact mean or the exact variance. These are unknowns. But we do know that higher valuations move the distribution of possible outcomes to the left. (Bad). Even if the risk has not gone down, the potential reward is less.

:?: Now right now, U.S. stocks are about at all time highs. My portfolio is at an all time high. Valuations are elevated and expected return is below the historical average.
wbern wrote that if you already won the game, why keep playing?
Am I taking any action? What do you think?
Last edited by grayfox on Wed Jan 22, 2014 9:23 am, edited 1 time in total.

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Re: What's your one big takeaway from the Crash of 2008?

Post by ThatGuy » Wed Jan 22, 2014 9:22 am

My takeaway is that being 100% stock during a major crash didn't phase me in the slightest. I was puzzled why everyone else was running around going crazy, because I just didn't believe that the economy, as intertwined as it is, would really implode the way it did in the 30's.

I'm either naive, or Superman :D
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Re: What's your one big takeaway from the Crash of 2008?

Post by Will do good » Wed Jan 22, 2014 10:06 am

ThatGuy wrote: Re: What's your one big takeaway from the Crash of 2008?
by ThatGuy » Wed Jan 22, 2014 8:22 am

My takeaway is that being 100% stock during a major crash didn't phase me in the slightest. I was puzzled why everyone else was running around going crazy, because I just didn't believe that the economy, as intertwined as it is, would really implode the way it did in the 30's.

I'm either naive, or Superman
Maybe you are much younger than others who might not have time for the recovery. Specially those already retired?
Or Your are super wealthy and it doesn't matter. :sharebeer

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Re: What's your one big takeaway from the Crash of 2008?

Post by HomerJ » Wed Jan 22, 2014 11:33 am

sambb wrote:I just find this thread so interesting because so many people mention timing and to not stay the course. And there is little criticism of these ideas. Whereas now, people talk about lump sums, not DCA, no timing, and stay the course.

Clearly the culture of advice may be different then compared to now.

AN interesting study would be to see how the culture looks at market tops vs bottoms on message boards.
Actually, this thread is an outlier... I remember MANY MANY threads back in 2008-2009 where people were asking about bailing out, and almost everyone on these boards responded with "stay the course".

Here's an example

http://www.bogleheads.org/forum/viewtop ... =1&t=28015

Titled - "Is it time to bail?" from Nov 2008... 80%-90% of the responses tell the OP to "stay the course"

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Re: What's your one big takeaway from the Crash of 2008?

Post by Grt2bOutdoors » Wed Jan 22, 2014 8:33 pm

People can make irrational decisions, no matter what the circumstances.

Markets can stay down for long periods of time - while the equity markets have come back, one can not say the same of real estate or of the employment market.

If you want to sleep well at night, keep 2 pillows under your head.
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Re: What's your one big takeaway from the Crash of 2008?

Post by MathWizard » Wed Jan 22, 2014 11:58 pm

Mine was how inter-twined the financial sector is.

My wife an I were certain that there were problems with mortgages and housing.
We could see all the new construction,
could see that all loans were in the secondary market, and
saw the adjustable rate mortgages and 103% loans ( minus 3% down)
so we figured that the housing market would burst a bubble with a loud pop.

We expected great pain in the housing and house construction business, but did not
know about the over-leveraging and the credit default swaps, and how much like a
house of cards the whole financial sector was.

Instead of things dampening out as the moved outside of the housing market, they were
amplifying due to the high leveraging.

I'm not sure what we can do about it though.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Runalong » Thu Jan 23, 2014 4:19 am

Investing is all about temperament.

I was all out B&H. Went down, down, down.

Stopped reading or looking at the market for about 6 months. Didn't do a thing.

Lost over 50%. Today I'm way up from where I was in 2008. Part of that is for reasons that totally contradict much of the Bogleheads' philosophy (i.e., you can't beat the market) but anyone who just held on would have done fine in the end. But most people can't hack that emotionally. I know a lot less about all the technical stuff than most people on this forum do but I've had great success because I seem to have the kind of (rare) temperament that doesn't do dumb things at the wrong times (mostly). I can't explain it but it's nice that I'm good at something. Beats working for a living.

trasmuss
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Re: What's your one big takeaway from the Crash of 2008?

Post by trasmuss » Thu Jan 23, 2014 5:48 am

Only regular treasuries were a safe haven. My TIPS fund was the biggest surprise (I stayed with it but sold it last year). Today my only bond fund is Total Bond (although Short Term Investment Grade is still appealing). I do wish Vanguard had a stable value fund or that CD's were easier to purchase (without a brokerage account).

The good news is I did tax loss harvesting at the bottom and have been enjoying the $3,000 deduction every year since (and will for quite some time to come).

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meowcat
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Re: What's your one big takeaway from the Crash of 2008?

Post by meowcat » Thu Jan 23, 2014 8:33 am

My one big takeaway is that I proved to myself that I am a disciplined investor. I stayed the course and did not waver once. That's pretty impressive when you consider that my portfolio was, and still is 100% equity. It's even more impressive that I am now 50. I just kept buying in on DCA and just kept going. Is it dangerous? perhaps, but I'll be changing to a more comfortable allocation when I'm 60!! :shock:
More people should learn to tell their dollars where to go instead of asking them where they went. | -Roger Babson

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Re: What's your one big takeaway from the Crash of 2008?

Post by technovelist » Thu Jan 23, 2014 10:25 am

JW Nearly Retired wrote:My big takeaway is that sometimes the stock market recovers darn fast. We should not plan for being that lucky next time.
JW
+1
In theory, theory and practice are identical. In practice, they often differ.

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Re: What's your one big takeaway from the Crash of 2008?

Post by technovelist » Thu Jan 23, 2014 10:28 am

Ron wrote:
technovelist wrote:And what would those "safe income sources" be that could withstand an "epic, world wide depression"?
An SPIA? :oops:

BTW, purchased one in early 2007 when I retired...

Also, retirement income was provided by 4-5 years in cash (at the time) because I did not want to sell if the market were to drop (no, I had no idea it would in '08).

After almost seven years in retirement (and as I get closer to SS), I hold less cash - but enough to still not having to worry about another reversal. While cash really isn't an investment, it still holds value to me in the overall scheme of things.

- Ron
An SPIA is fine if the insurance company that issued it survives, and if the currency in which it is denominated retains most of its value. Many insurance companies did not make it through the 1930's if I recall correctly (from reading about it; I wasn't alive then), and some currencies didn't either.
In theory, theory and practice are identical. In practice, they often differ.

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Re: What's your one big takeaway from the Crash of 2008?

Post by technovelist » Thu Jan 23, 2014 10:29 am

trasmuss wrote:Only regular treasuries were a safe haven. My TIPS fund was the biggest surprise (I stayed with it but sold it last year). Today my only bond fund is Total Bond (although Short Term Investment Grade is still appealing). I do wish Vanguard had a stable value fund or that CD's were easier to purchase (without a brokerage account).

The good news is I did tax loss harvesting at the bottom and have been enjoying the $3,000 deduction every year since (and will for quite some time to come).
There was one other asset class that ended 2008 and 2009 in the black. It's a shiny metallic element... :mrgreen:
In theory, theory and practice are identical. In practice, they often differ.

ntsantak
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Re: What's your one big takeaway from the Crash of 2008?

Post by ntsantak » Thu Jan 23, 2014 4:39 pm

I changed my allocation to OVERWEIGHT and buy more equities. After all there was a huge SALE on WALL STREET.

I mean if the department or grocery store has a sale shouldn't you take advantage of the cheap prices?

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SnapShots
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Re: What's your one big takeaway from the Crash of 2008?

Post by SnapShots » Sat Jan 25, 2014 10:26 am

Ron wrote:
Gekko wrote:my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
And how exactly, are you going to do that :oops: ?

2008?

Lived through 1987 (started investing for retirement in 1982).

Lived through 2001-02

Lived through 2008 (retiring in 2007).

Same old - same old; live goes on. During these downturns, I did no adjustments (buy/sell) of my long term portfolio holdings.

If you're old enough, you will find that 2008 was nothing more than a "burp" in long term investment history. I had nothing to learn, since I've "been there" before :mrgreen: ...

- Ron
Ron, we, also, lived through all those up and down years but it was during our work years. Much easier to take if you're still working. In July 2008, although DH was at typical retirement age (65) he was forced into retirement due to a disability. Fortunately, we had expensive disability insurance that supported us and paid the bills for the next four years, keeping us from having to tap our IRA at the worst time. We were self-employed and paid disability insurance premiums for 32 years ... we ended up collecting much more than we paid in. Without the disability insurance during that period, today we would be in deep financial trouble.

We learned we need a cash cushion to stay the course and have 3-4 years of cash in a CD ladder and sitting in little to no interest bank accounts. I had no idea it would take so long to recover. It was a very scary time and I didn't open our Vanguard statements until 2012.
the best decision many times is the hardest to do

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Re: What's your one big takeaway from the Crash of 2008?

Post by HomerJ » Sat Jan 25, 2014 11:04 am

meowcat wrote:My one big takeaway is that I proved to myself that I am a disciplined investor. I stayed the course and did not waver once. That's pretty impressive when you consider that my portfolio was, and still is 100% equity. It's even more impressive that I am now 50. I just kept buying in on DCA and just kept going. Is it dangerous? perhaps, but I'll be changing to a more comfortable allocation when I'm 60!! :shock:
I am definitely impressed that you did not waver once... I was 60/40 and even though I talked a good game on these boards, I was freaking out a little inside (The reason I was so steady was that both my wife and I kept our jobs)

Anyway, I sure hope we don't see another crash when you're 59. Maybe you should start gliding down to a more comfortable allocation now...

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HomerJ
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Re: What's your one big takeaway from the Crash of 2008?

Post by HomerJ » Sat Jan 25, 2014 11:12 am

ntsantak wrote:I changed my allocation to OVERWEIGHT and buy more equities. After all there was a huge SALE on WALL STREET.

I mean if the department or grocery store has a sale shouldn't you take advantage of the cheap prices?
Absolutely... I couldn't do it though...

I never came close to selling my stocks, and all my new contributions were 100% stock during that period. That was fairly easy... But I couldn't bring myself to rebalance back to my normal AA, let alone change my AA to be more aggressive.

We had 750k at the time (450k stocks/300k bonds) and our portfolio dropped to 550k or so at the low (250k stocks/300k bonds). I could not make myself sell those 300k bonds to buy stocks... I wanted that 300k safe (we still owed 200k on the house)... We did have fairly substantial contributions during that time period... My wife actually got a very nice bonus in March 2009... pure luck.. Again, it was easy to put NEW money into stocks... I did feel like I was buying on sale... I just couldn't make myself throw the old "safe" money into the churning maelstrom as well.

I worked us back to 60/40 over the next couple of years with new contributions and the stock market rising, and then dropped to 50/50 where I plan to stay until retirement in 10-15 years.
Last edited by HomerJ on Sat Jan 25, 2014 11:14 am, edited 1 time in total.

greetje
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Re: Keep cash for a down period

Post by greetje » Sat Jan 25, 2014 11:12 am

retiredjg wrote:
Sheepdog wrote:If you are retired and are selling investments for expenses, have at least three years of your normal distribution needs in cash accounts so that you don't have to sell when the markets, both stock and bonds, are low.
Me too.[/quot

We do 5-7 years.

HenryPorter
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Re: What's your one big takeaway from the Crash of 2008?

Post by HenryPorter » Sat Jan 25, 2014 12:05 pm

Ken. wrote: In hindsight I should have been more worried as we were really close to a depression if the Fed didn't make the right moves.
That quote bothers me.

The USA and rest of the world depends on a bunch of guys at desks that push papers. OK, you can probably say the same thing to some degree, about how our military and resource acquisitions are orchestrated, but the marketplace is weighted by interest rates truly IMHO. Like Archimedes and his lever moving the world. Give the market its interest rates of such proportion and watch the results.

I was paralyzed a bit for a while in the autumn of 2008 when I heard daily news of the market dropping. It did not help much later on in early 2009 that I had lost my job and had little persuasion to think about loading up on stocks that had been cut in half nearly. My current employer's stock was at about 10% then of what it trades today. My mundane company's market cap has grown 1000% since the lows of 2009.

I think we have had a lost decade since 2000. The inflation adjusted value of equities is about break even at best IMHO. The lesson simple to me, I can not think much about stocks being anything more than just another asset that money chases as it looks to compound and/or leverage via the marketplace supply and demand. Life is more than money. It sucks not having enough of it though when you see everyone around you with it.

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