How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

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Random Walker
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How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Random Walker »

I’m 57 years old and started investing for real in about 1996. I frequently tell people that between the tech bubble/crash 1996-2002, the financial crisis 2007-2008, and the real estate bubble/crash 2006-2008, that I’ve seen a lifetime’s worth of investing history in a decade. I’ve accumulate over the years, am closer to retirement, and am way more worried about losses. I’m curious how these big market events have affected others? I’ve become keenly aware that one would need to make 100% to recover from a 50% decline and make 50% to recover from a 33% decline.
For these reasons I’ve taken on the goal of hyperdiversification in addition to increasing the bond allocation with age. I diversify with factors, geographies, styles, alternatives, and safe bonds.
I wonder if many saw the “V Shaped Recovery” after 2008 and assume all recoveries will be so easy? Just stay the TSM course, or die others make adaptations?

Dave
btownguy
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by btownguy »

It changed my philosophy big time. It made me realize that at any point in time my portfolio needs to be able to withstand a 50% haircut to equities. Whatever asset allocation lets me sleep knowing a 50% haircut could come at anytime, well that's the asset allocation I need to be at. 60/40 for me all day long. I'm currently in my mid 40's shooting to retire early in 10 years.
Conch55
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Conch55 »

I worried about it more when I was working/accumulating but once I retired I now trust my AA. I might change that but am already close to 50/50 so I don't know what changes I would make. Where you are in the accumulation process is the determining factor in my opinion.
Shamb3
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Shamb3 »

The market drops / recoveries didn't really change my accumulation philosophy at all.
I already knew these things could happen so they were baked in the cake.

They did change my attitude about the job markets though. The 2000-2001 drop made getting a job as a new software engineer impossible.

I hunkered down 2007-2008 and did the needful, with only mild heartburn from the stress.

I don't know what it will be like when I am older, but I have heard too many times of older workers in tech getting the boot.
I decided then and there that I couldn't work until I was 70, I was going to have to be financially independent much sooner.

Reading has had a much larger impact than market events. It is why I don't invest in individual stocks or mutual funds anymore.
Mr.BB
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Mr.BB »

The biggest factor from the previous mentioned corrections is the time it takes to recover your equities percent from the crash. I can't even imagine what the people who retired in 2007 went through seeing their portfolios shrink; especially if they still had a high allocation to stock funds.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by dru808 »

I wasn’t investing at the time. I think about it often. I think to myself 2000-2002 would be worse than 2008, 3 years of negative returns. Which was worse for you people that went through both?
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livesoft
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by livesoft »

I've been saving money since 1973 and investing since 1982. 2000-2002 made me learn quite a lot about tax-loss harvesting, but also showed me again how the stock market recovers. 2007-2009 was more of the same ol' same ol' where I bought equities when they were on sale again. And again. And again. TLH was also happening for sure.

In other word, those years reinforced my fearlessness when it comes to my investing philosophy. I simply don't fear losses, but I do make use of them.
Last edited by livesoft on Fri Jan 24, 2020 5:11 pm, edited 1 time in total.
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MnD
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by MnD »

The US-led dot.com crash 2001-02 along with both employer plan and my favorite fund family rolling out international funds during that period influenced me to go global market cap on equity and I've never looked back. That's about the only major change I've made to my IPS 1986 to date.
Seeing what happened to several of my closest neighbors losing homes to foreclosure or forced sales of homes and autos to drastically downsize during and in the aftermath of 2007/8 reinforced my existing views what were appropriate levels of savings, investing and debt and prioritizing financial independence - but didn't really change anything.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by dru808 »

MnD wrote: Fri Jan 24, 2020 5:10 pm The US-led dot.com crash 2001-02 along with both employer plan and my favorite fund family rolling out international funds during that period influenced me to go global market cap on equity and I've never looked back. That's about the only major change I've made to my IPS 1986 to date.
Seeing what happened to several of my closest neighbors losing homes to foreclosure or forced sales of homes and autos to drastically downsize during and in the aftermath of 2007/8 reinforced my existing views what were appropriate levels of savings, investing and debt and prioritizing financial independence - but didn't really change anything.
Curious, what we’re your losses like in 2000-2002 compared to your previous allocation? I’m assuming you were all us?
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Unladen_Swallow
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Unladen_Swallow »

2001 was early in my career and all I focused was on keeping my job. I was a young engineer.

But 2008 influenced me significantly. Lessons I learnt through seeing the challenges faced by friends and colkeagues.

- We created a sizeable emergency fund.
- We intended to be debt free quickly. A home mortgage gave me no comfort.

We paid off our mortgage in 2014.

Investment wise, we increased our savings into retirement accounts. I was a always saver, got my spouse on same page as well. We have a stock heavy portfolio, and this suits us still.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Valuethinker »

Random Walker wrote: Fri Jan 24, 2020 4:36 pm I’m 57 years old and started investing for real in about 1996. I frequently tell people that between the tech bubble/crash 1996-2002, the financial crisis 2007-2008, and the real estate bubble/crash 2006-2008, that I’ve seen a lifetime’s worth of investing history in a decade. I’ve accumulate over the years, am closer to retirement, and am way more worried about losses. I’m curious how these big market events have affected others? I’ve become keenly aware that one would need to make 100% to recover from a 50% decline and make 50% to recover from a 33% decline.
For these reasons I’ve taken on the goal of hyperdiversification in addition to increasing the bond allocation with age. I diversify with factors, geographies, styles, alternatives, and safe bonds.
I wonder if many saw the “V Shaped Recovery” after 2008 and assume all recoveries will be so easy? Just stay the TSM course, or die others make adaptations?

Dave
Please

In retrospect the GFC began with Iceland in 2007 and the failure of the British mortgage lender Northern Rock in late 2007.

Markets were jumpy at that point but we did not realise we were in a crisis until at least the near failure of Bear Sterns in March 2008 and in some ways not until the bailout of Freddie and Fannie in summer 2008.

The Global Financial Crisis was not in any sense over by December 2008.

Markets did not bottom until March 2009.

And the Greek and Irish debt crises were in 2010-11 (first round).
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Valuethinker »

dru808 wrote: Fri Jan 24, 2020 5:08 pm I wasn’t investing at the time. I think about it often. I think to myself 2000-2002 would be worse than 2008, 3 years of negative returns. Which was worse for you people that went through both?
2008 was a genuine existential fear that we would repeat the 1930s. Wiped out for a generation.

I had friends who spent the weekends after Lehman opening up bank accounts and depositing 30k in each one (GBP 30k was the deposit insurance limit at that time in the UK). These are the sort of people who had several hundred k in their current accounts. Who work in financial services.

Personally I lost more money in 2000-03 but 08-09 was far more terrifying.

If Gordon Brown hadn't stood on the steps of Reuters in London and said he would bail out the banks thus giving the US Congress the top cover to bail out *their* banks, I don't know what would have happened. Total panic I imagine.

When the people at the centre of the worlds financial architecture start to look scared . .. when the people whose day job is to talk to Central Bankers and regulators and the CFOs of the worlds largest financial institutions start to worry about the safety of their current accounts...

Brown's basic line was "Things are bad. They may get worse. We shall do what is necessary. If that is insufficient we shall do more".

All British Prime Ministers seek to be Churchillian in a crisis. Brown managed it. You could almost hear the Spitfire engines coughing to life in the late summer morning air. Finest hour.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Broken Man 1999 »

It didn't affect us at all as we weren't using our retirement portfolio at the time.

We were living quite well on my SSDI and LTD benefit.

At the time I noted what was happening, but didn't change anything at all. We were heavily into equities, but made no sells.

Market recovered, so no lasting issues.

Today, since we are drawing from our portfolio, our AA is a conservative 50/50.

We will certainly go through another market decline sometime, but we are very well positioned today to weather even a long-term decline and recovery period.

Today we are mortgage free, so our needs are less than during the periods of time OP listed.

I don't think we could be better prepared than we are now. Hope my thought is correct. Time will tell. My crystal ball is always cloudy.

Broken Man 1999
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Artsdoctor »

I began investing in the mid-1980's so I experienced Black Monday in 1987, the bear market of 2000-2002, and the financial crisis of 2007-2008. I am very thankful to have experienced those periods and they certainly did influence my investment behavior. First, I learned a lot about my risk tolerance (real, not hypothetical). Second, I learned that markets inevitably go up and down, and that that is expected. Third, I learned that investing during accumulation years is very different than when your financial capital (earnings) period is limited. Finally, I learned that I have no desire to take risk that I don't need to take now that I've met my financial goals. I kept a diary during the 2007-2008 meltdown so that my future self could be reminded how awful a brutal bear market can be, and every few years I look at it to remind myself when I think I'm getting too big for my britches.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Portfolio7 »

dru808 wrote: Fri Jan 24, 2020 5:08 pm I wasn’t investing at the time. I think about it often. I think to myself 2000-2002 would be worse than 2008, 3 years of negative returns. Which was worse for you people that went through both?
I'm 53, and this answer will reflect my core Boglehead sin, though I'm entirely on board with low cost index funds and diversification, etc.

2000-2002 scarred me as an investor. I really, really wanted to sell in Feb 2000, but I'd absorbed the 'stay the course' type guidance from several sources. I was 100% equities (not Nasdaq, thankfully). The subsequent years were just painful, especially so because my intuition was confirmed. From that point on, I didn't realize it consciously, but in retrospect I understand that I was determined to find a way to avoid that experience again. This was not a rational response, though I found ways to frame it as such. My loss avoidance emotions were on adrenaline after that (though I also have a really high FOMO, so they kind of oddly counterbalance.)

In Nov 2007, at 100% equities, I decided risk was high, but that's a long story. I sold 10% of my equity index funds and bought bonds. I did this 4 of the next 6 months. I never really stopped, by the end of 2008 I was 100% bonds. I lost 12.7% that year, instead of 35%+ if I had still been 100% equities. In early 2009 I started selling bonds, buying stocks. I did this each month until I was 60/40. My 2009 returns were 17%, i.e fully recovered by the end of the year.

Those are the only two times since I started investing in 1996 that I wanted to sell equities. To be clear, what I did in 2008 was risky and the results would not have been so good in other crashes. Some of it is age, but I've become more conservative with my AA (70/30, roughly), and I've learned a bit more about asset allocation. I've incorporated a min volatility fund into my portfolio. Also since then I've worked to put some metrics around my investing to try to eliminate judgement calls.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Dottie57 »

Worked full time until 2018. I was absolutely terrified that there would be a depression diring 2008/2009. Gritted my teeth and kept investing.

The interesting question is whether this same scenario could come again.
Last edited by Dottie57 on Fri Jan 24, 2020 7:54 pm, edited 1 time in total.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by willthrill81 »

Since 1972, the longest it's taken U.S. stocks to recover from a drawdown has been 6 years. Does that qualify as a 'V-shaped' recovery?
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by smectym »

>>"It changed my philosophy big time. It made me realize that at any point in time my portfolio needs to be able to withstand a 50% haircut to equities."

We have sort of a 40/60 portfolio, and that conservative allocation is to some extent a legacy of the two crashes. For us, even a dramatic equity meltdown in excess of a 50% drawdown would probably not represent an existential threat; we just have too much in non-fluctuating assets such as savings bonds. And one hopes (no guarantee) that the balancing effect of a bond rally should benefit the portfolio in the event of a so-called "flight to safety."

However, I do watch the moving averages for SPX. Once the charts get near or into "Death Cross" mode, I admit I do start to get an itchy trigger finger. I held fire the last time, though, so maybe I'm getting more bogleheadian with time. Or more dangerously complacent...
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by averagedude »

It didn't influence me at all, as these bear markets helped me purchase more shares. The only thing that influences my investing philosophy is my age/time horizon.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by dru808 »

Portfolio7 wrote: Fri Jan 24, 2020 7:22 pm
dru808 wrote: Fri Jan 24, 2020 5:08 pm I wasn’t investing at the time. I think about it often. I think to myself 2000-2002 would be worse than 2008, 3 years of negative returns. Which was worse for you people that went through both?
I'm 53, and this answer will reflect my core Boglehead sin, though I'm entirely on board with low cost index funds and diversification, etc.

2000-2002 scarred me as an investor. I really, really wanted to sell in Feb 2000, but I'd absorbed the 'stay the course' type guidance from several sources. I was 100% equities (not Nasdaq, thankfully). The subsequent years were just painful, especially so because my intuition was confirmed. From that point on, I didn't realize it consciously, but in retrospect I understand that I was determined to find a way to avoid that experience again. This was not a rational response, though I found ways to frame it as such. My loss avoidance emotions were on adrenaline after that (though I also have a really high FOMO, so they kind of oddly counterbalance.)

In Nov 2007, at 100% equities, I decided risk was high, but that's a long story. I sold 10% of my equity index funds and bought bonds. I did this 4 of the next 6 months. I never really stopped, by the end of 2008 I was 100% bonds. I lost 12.7% that year, instead of 35%+ if I had still been 100% equities. In early 2009 I started selling bonds, buying stocks. I did this each month until I was 60/40. My 2009 returns were 17%, i.e fully recovered by the end of the year.

Those are the only two times since I started investing in 1996 that I wanted to sell equities. To be clear, what I did in 2008 was risky and the results would not have been so good in other crashes. Some of it is age, but I've become more conservative with my AA (70/30, roughly), and I've learned a bit more about asset allocation. I've incorporated a min volatility fund into my portfolio. Also since then I've worked to put some metrics around my investing to try to eliminate judgement calls.
Interesting, it worked out for you. What minimum volatility funds are you in and what percentage of your equity?
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by abuss368 »

Yes we stopped investing in individual stocks and selected low cost total market index funds.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by GerryL »

I decided to Embrace My Ignorance.
I didn't know what I could do that would be any better than what I was already doing, so I just kept investing. I did reduce the number of times I looked at my account balances each month, but other than that, no change.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by quantAndHold »

2000-2003 taught me to not to invest in my own company stock, no matter how strong the company looks. The company looked good, all the way up until the day it went bankrupt. I didn’t get hurt that bad, but I knew plenty of people, who were not young, who had to start completely over.

2008, in retrospect, taught me to stay the course. Because I did, and it’s the best thing that I could possibly have done. At the time, though, I was just quietly repeating the mantra “crashes are good for people who are still saving,” while I was plowing more and more money into my accounts to compensate for the losses. I also knew people in 2008 who had a bunch of company stock, lost all, and had to start over again, but by then, I’d already learned that lesson.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Regal 56 »

The 2007-2008 crash showed me that, in the accumulation stage, a precipitous market drop didn’t hurt me so much. (This is a strictly self-centered view—obviously the crash hurt a lot of people.) I stayed the course and kept maxing out my IRA contributions. I didn’t enjoy it, but I didn’t freak out.

It also taught me what long term investing really is. When one reads about investing, one often encounters a chart representing hypothetical portfolio growth over a period of decades. In the early years of this chart, the growth line is only slightly upward—indeed, it looks almost flat. But as the years go by, the line trends increasingly upward, until it’s closer to vertical than flat. The takeaway lesson is that, in the early years of investing, it’s easy to believe you’re getting nowhere. In fact, four years in, the return on my actual portfolio was negative. (I remember it ruefully well.) This is when patience and faith are sorely tested.

After the first decade, however, things look far better. Seeing my real portfolio mimic those ever rising hypothetical investing charts is heartening. Given enough time, one’s investment returns really do eventually exceed what one puts in.

An aside: For many on this board, investing is old hat. But thirteen years ago, I was a complete novice. I’d never invested a dime, and was facing a grim scenario for my declining years. Fortunately, I belatedly realized that a late start beats no start at all. On the advice of a retired friend who knew far more about investing, I discovered the likes of Jack Bogle and Burton Malkiel. That led me here, which helped me weather the storm of 2007-2008. Today, that vicious downturn looks like a mere blip on my thirteen year investment chart.

Staying the course works. It’s a lesson oft-repeated here, and is greatly needed by those like me. So I sincerely thank all of you for the good you’re doing here.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Big Dog »

Didn't invfluence me at all. My AA was 100%/0% before and 100%/0% after. (I was not yet on BH so I didn't know about tax loss harvesting, so I really missed out.)
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by flaccidsteele »

Random Walker wrote: Fri Jan 24, 2020 4:36 pm I’m 57 years old and started investing for real in about 1996. I frequently tell people that between the tech bubble/crash 1996-2002, the financial crisis 2007-2008, and the real estate bubble/crash 2006-2008, that I’ve seen a lifetime’s worth of investing history in a decade. I’ve accumulate over the years, am closer to retirement, and am way more worried about losses. I’m curious how these big market events have affected others?
I started investing in the 90s when I was in my 20s. I loved the 2002 and 2007 crashes. They set me up for life

Crashes always end. It’s never different this time

I retired in my 40s after those 2 crashes allowed me to buy into the US economy at crazy cheap prices

Buffett is right. It’s as easy as buying a low fee US index

I wouldn’t diversify with factors, geographies, styles, alternatives, and safe bonds. Waste of time and energy for me

The next crash will just be gravy. Money on top of money
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by ame »

Random Walker wrote: Fri Jan 24, 2020 4:36 pm I’m 57 years old and started investing for real in about 1996. I frequently tell people that between the tech bubble/crash 1996-2002, the financial crisis 2007-2008, and the real estate bubble/crash 2006-2008, that I’ve seen a lifetime’s worth of investing history in a decade. I’ve accumulate over the years, am closer to retirement, and am way more worried about losses. I’m curious how these big market events have affected others? I’ve become keenly aware that one would need to make 100% to recover from a 50% decline and make 50% to recover from a 33% decline.
For these reasons I’ve taken on the goal of hyperdiversification in addition to increasing the bond allocation with age. I diversify with factors, geographies, styles, alternatives, and safe bonds.
I wonder if many saw the “V Shaped Recovery” after 2008 and assume all recoveries will be so easy? Just stay the TSM course, or die others make adaptations?

Dave
I didn’t invest prior to 2008.

I graduated in 2007 with a bachelor’s degree. I got multiple job offers and got my first job soon after I graduated. I lost my job during the 2008 recession.

In 2009, the same employer reached out and I got my job back with a raise. 2008 left some negative memories. I only contributed enough to get my company 401K match and stayed all in bonds for years. I missed most of the recession recovery. I did increased my emergency fund north of $100K…I was preparing for the next recession.

I found bogleheads a few years back and began maxing out my traditional 401K and Roth IRA. I’m still working out my investing philosophy. I plan to invest no more than 1/3 of my portfolio on international and invest most of my equities in S&P 500.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by jebmke »

dru808 wrote: Fri Jan 24, 2020 5:08 pm I wasn’t investing at the time. I think about it often. I think to myself 2000-2002 would be worse than 2008, 3 years of negative returns. Which was worse for you people that went through both?
Always a tough comparison because one's situation may well be different in each of the two downturns.

I will say that my memory of the 2002-02 was more psychologically draining because it seemed like a long downward slog. The 2008-09 was more V shaped. Only considering the market impact and not the economic impact (potential job loss, impact on house price .....).

For a short period of time, 1987 was perhaps the most thrilling.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by garlandwhizzer »

I lost a lot in the tech bubble crash because I was 100% stocks and 100% of them were tech. It had been an amazing ride for years on the tech upswing and I suffered from a bad case of investor euphoria. Early along I refused to believe tech would continue to decline so I doubled down and even used leverage buying more beaten up tech stocks that continued to go down. I discovered margin calls. It was a horrible experience but that's the type of experience that teaches a lesson you don't forget. After the bloodletting I vowed never to have less than 30% quality bonds in my portfolio and never to use leverage again. I have gradually increased that bond number to 40% since. For most of us, increasing bond exposure as we age, especially approaching or in retirement, is rational. l do believe strongly in substantial equity exposure even in retirement and am not risk averse by nature. Hence even though I have won the game, I still enjoy playing it and am not tempted to put it all in TIPS ladder as the wiser than I Dr. Bernstein advises. Had I not been heavily exposed to equity all along I would not have been able to retire at 50 which I did in spite of those horrible tech bubble losses. I was willing to tolerate severe bear market anxiety and distress as long as I got paid sufficiently to hang on which has worked so far.

As the Great Recession started I had a strong feeling that a severe economic collapse was going to occur, worse than almost anyone imagined. I suddenly sold sufficient equity in my personal account to provide for all living expenses for 3 years without touching my bond holdings in the IRA. Living in California at the time and observing the ridiculously rapid appreciation in housing prices, and the fact that anybody off the street could get a huge home loan with just a signature, I had a Joseph Kennedy shoe-shine-boy moment. In retrospect it was probably more timing luck than insight. Many of my market timing decisions have erred but not this one. So I had plenty of cash and didn't panic during that 2007-9 collapse. It did however reinforce in my mind the necessity of holding quality bonds. Important to remember that if the market drops by 50%, your bonds at minimum hold their value as stocks collapse so what used to be 60/40 when it started is now 30/40, a bond heavy portfolio with a higher percentage of safe assets going forward. It works as long as you can make living expenses with a liquid emergency fund or other totally secure income stream until the market rebounds. Anything can happen but in the US since 1929 it has never taken more than 6 years for stocks to recover from their bear market loses with dividends reinvested and in most cases 3 years is adequate. The GR lasted 18 months and was followed by a V shaped equity recovery.

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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by RiskyStocksPlanB »

I wasn't investing in 2001, but 2008 and Mike Tyson taught me the same lesson.

Everybody has a plan until they get punched in the mouth - Mike Tyson

The lesson from 2008 was just as simple: Plan B.

I followed the Bogleheads philosophy in 2008 and I still do to this day, but 2008 shook me a bit when all of a sudden this board had a Plan B (I stuck with Plan A and ignored Plan B).

Before 2008 I blindly followed the recommendations of this board, but after 2008 I followed because I was educated enough to believe in the overall philosophy, even if I do stray a bit (thanks Hedgefundie).
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by dru808 »

garlandwhizzer wrote: Fri Jan 24, 2020 9:21 pm Important to remember that if the market drops by 50%, your bonds at minimum hold their value as stocks collapse so what used to be 60/40 when it started is now 30/40, a bond heavy portfolio with a higher percentage of safe assets going forward. It works as long as you can make living expenses with a liquid emergency fund or other totally secure income stream until the market rebounds. Anything can happen but in the US since 1929 it has never taken more than 6 years for stocks to recover from their bear market loses with dividends reinvested and in most cases 3 years is adequate. The GR lasted 18 months and was followed by a V shaped equity recovery.

Garland Whizzer

I hadn’t thought of the aa changing. So, when do you rebalance or how often during a crash? How often does a balanced fund say Wellington or life strategy moderate growth rebalance in a recession?
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Gnirk »

We retired in 2007 and before we knew of the Bogleheads forum. We learned a lot the hard way.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by TheLaughingCow »

flaccidsteele wrote: Fri Jan 24, 2020 9:01 pm
Crashes always end. It’s never different this time
I wonder if those investors in Japan 1992, Germany 1945, Argentina 2002, Iran 1979 felt the same way? I see a common sentiment these days that even if equities crash they will recover in a short period of time. This is not necessarily true.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Dottie57 »

RiskyStocksPlanB wrote: Fri Jan 24, 2020 9:37 pm I wasn't investing in 2001, but 2008 and Mike Tyson taught me the same lesson.

Everybody has a plan until they get punched in the mouth - Mike Tyson

The lesson from 2008 was just as simple: Plan B.

I followed the Bogleheads philosophy in 2008 and I still do to this day, but 2008 shook me a bit when all of a sudden this board had a Plan B (I stuck with Plan A and ignored Plan B).

Before 2008 I blindly followed the recommendations of this board, but after 2008 I followed because I was educated enough to believe in the overall philosophy, even if I do stray a bit (thanks Hedgefundie).
What was plan B in 2008?
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by JBTX »

For the most part, they didn't change my philosophy a lot. I stayed the course both times.

In 2000 and after, I had some tilts in small cap, international and REITS that helped fare the crash better. It made me feel smarter than the market.

In 2008, I had some different tilts, and was under weighted bonds (and much of my bonds were TIPS) so I got hit worse a typical age appropriate weighting. It made me realize I'm not smarter than the market. Nonetheless, I stayed the course, and moved towards a more typical asset allocation as the market recovered (which strictly speaking, I would have been better off not doing)

What they also taught me is that they are just data points along a long journey.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by LilyFleur »

I lost hundreds of thousands of dollars in 2008, in company stock. A close family member was a CFP and had studied my company. This person advised me to hang on, and not to lose any sleep, explaining that one invests in the stock market for the long run, and there are ups and downs. I slept just fine after that. A few years ago, I was severely under-employed. The year before I retired I would work my thankless job, and come home to sometimes see that my stock earnings in one day had exceeded my monthly or even my yearly earnings from my job. After I retired, I began worrying about the effect of tariffs on my stock, and I diversified to an age appropriate, Bogleheads AA. The stock has subsequently gone down in value and I think I kept only 3% of my portfolio in that stock. I am grateful.

Don't be like me. :mrgreen:
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by RiskyStocksPlanB »

Dottie57 wrote: Fri Jan 24, 2020 10:42 pm
RiskyStocksPlanB wrote: Fri Jan 24, 2020 9:37 pm I wasn't investing in 2001, but 2008 and Mike Tyson taught me the same lesson.

Everybody has a plan until they get punched in the mouth - Mike Tyson

The lesson from 2008 was just as simple: Plan B.

I followed the Bogleheads philosophy in 2008 and I still do to this day, but 2008 shook me a bit when all of a sudden this board had a Plan B (I stuck with Plan A and ignored Plan B).

Before 2008 I blindly followed the recommendations of this board, but after 2008 I followed because I was educated enough to believe in the overall philosophy, even if I do stray a bit (thanks Hedgefundie).
What was plan B in 2008?
Capitulate. If losses were bad enough, sell all the risky stocks (back then stocks were often referred to as risky).
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by watchnerd »

Valuethinker wrote: Fri Jan 24, 2020 5:53 pm

2008 was a genuine existential fear that we would repeat the 1930s. Wiped out for a generation.

.

Personally I lost more money in 2000-03 but 08-09 was far more terrifying.
Ditto.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by flaccidsteele »

TheLaughingCow wrote: Fri Jan 24, 2020 10:21 pm
flaccidsteele wrote: Fri Jan 24, 2020 9:01 pm
Crashes always end. It’s never different this time
I wonder if those investors in Japan 1992, Germany 1945, Argentina 2002, Iran 1979 felt the same way? I see a common sentiment these days that even if equities crash they will recover in a short period of time. This is not necessarily true.
US crashes always end. It’s never different this time

In the US it’s always true
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Independent George »

The biggest lesson was that I needed to hold more cash. I could live with my retirement accounts being down by 50%, but the fear of job loss was what kept me up at night.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by watchnerd »

Another reason 2008 was scarier to me (aside from the fear of Great Depression 2.0):

Everything except Treasuries cratered.

Ever since, I'm a "no corporate bonds for me" type.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by flaccidsteele »

People have been telling me forever how it’s different this time. I ignore them. US markets always recover. It’s never different this time

As a teenager Warren Buffett sold me on the idea that crashes are never permanent and to buy when others are selling. I invest during downturns because I was indoctrinated early

SunLife 13.9% all time average annual return (100% US index)

Manulife 14.8% all time average annual return (100% US index)

My “mistake” during the tech crash was fanboy buying Berkshire Hathaway class B stock. I should have stuck with a low fee US index. I fixed that mistake during the credit crisis. I went all-in in into the US index; increased buys as the market fell

The next downturn will be no different. Buffett and survivorship bias has taught me that it’s simple - buy more when US markets are down, and the inevitable recovery will make me wealthier

Rinse and repeat

To be honest, it’s mindless

To answer the OP’s question: the tech crash and credit crisis confirmed my investing philosophy and hardened my belief that Buffett is right - that the US index always recovers. It’s never different this time
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by watchnerd »

flaccidsteele wrote: Fri Jan 24, 2020 11:51 pm People have been telling me forever how it’s different this time. I ignore them. US markets always recover. It’s never different this time
The problem is that "always" can be about a decade.

The average time to recover for a stock that cratered in 1929 was 12 years.

During the Lost Decade from 2001-2009, US TSM CAGR was 0.95%. During this 8 year stretch, a 100% US TSM portfolio would have lost to a 100% TBM portfolio by 453 bps of CAGR.

Sequence of return risk is what happens in reality -- "always" doesn't exist in our limited lifetimes.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by TheLaughingCow »

flaccidsteele wrote: Fri Jan 24, 2020 11:32 pm
TheLaughingCow wrote: Fri Jan 24, 2020 10:21 pm
flaccidsteele wrote: Fri Jan 24, 2020 9:01 pm
Crashes always end. It’s never different this time
I wonder if those investors in Japan 1992, Germany 1945, Argentina 2002, Iran 1979 felt the same way? I see a common sentiment these days that even if equities crash they will recover in a short period of time. This is not necessarily true.
US crashes always end. It’s never different this time

In the US it’s always true
Nothing lasts forever. Someday the total value of all US equities will go to 0. Nobody knows when that day will be. But it will happen.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by watchnerd »

TheLaughingCow wrote: Sat Jan 25, 2020 12:19 am

Nothing lasts forever. Someday the total value of all US equities will go to 0. Nobody knows when that day will be. But it will happen.
There is a big difference between how long it takes markets to recover and going to 0.

The Amsterdam Stock Exchange has been running since 1602. Dutch stocks haven't gone to 0 yet.

There are two markets that have gone to zero, and both because of communist revolution: Russia, 1917. China, 1949.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by 1789 »

LilyFleur wrote: Fri Jan 24, 2020 11:00 pm I lost hundreds of thousands of dollars in 2008, in company stock. A close family member was a CFP and had studied my company. This person advised me to hang on, and not to lose any sleep, explaining that one invests in the stock market for the long run, and there are ups and downs. I slept just fine after that. A few years ago, I was severely under-employed. The year before I retired I would work my thankless job, and come home to sometimes see that my stock earnings in one day had exceeded my monthly or even my yearly earnings from my job. After I retired, I began worrying about the effect of tariffs on my stock, and I diversified to an age appropriate, Bogleheads AA. The stock has subsequently gone down in value and I think I kept only 3% of my portfolio in that stock. I am grateful.

Don't be like me. :mrgreen:
Thanks for sharing. Another example why one should say "NO" to holding company stock.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by lazyday »

flaccidsteele wrote: Fri Jan 24, 2020 11:32 pm
TheLaughingCow wrote: Fri Jan 24, 2020 10:21 pm
flaccidsteele wrote: Fri Jan 24, 2020 9:01 pm
Crashes always end. It’s never different this time
I wonder if those investors in Japan 1992, Germany 1945, Argentina 2002, Iran 1979 felt the same way? I see a common sentiment these days that even if equities crash they will recover in a short period of time. This is not necessarily true.
US crashes always end. It’s never different this time

In the US it’s always true
“There’s always plenty of food and never any predators. Not one of us have ever been hurt since the beginning of time.” said the Turkey on November 1.

Anyone who looks at Japan's stock market from 1/1/1990 or 12/1989 to today and uses some imagination understands that stocks are risky, even if you hold for decades.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by lazyday »

watchnerd wrote: Sat Jan 25, 2020 12:10 amDuring the Lost Decade from 2001-2009, US TSM CAGR was 0.95%. During this 8 year stretch, a 100% US TSM portfolio would have lost to a 100% TBM portfolio by 453 bps of CAGR.
And if you invested in the S&P 500 in March of 2000, after reinvesting dividends and adjusting for inflation, in March 2009 you would be down by more than 50% according to https://dqydj.com/sp-500-return-calculator/
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by harvestbook »

I didn't have a philosophy back then, and not much invested. I'd get paper statements in the mail and go "Hmm, this is not going up like they promised." Then toss it in the recycling bin. Retirement was such a distant concept that I didn't even connect those statements to an actual time in the future, so I didn't change anything and didn't even really know what I owned.

I was also blissfully ignorant of how vulnerable my job was in 08/09, when several people around me were let go. At the same time, I was tightening my belt and aggressively paying off my mortgage and always put in enough to get the 401k company match. They killed the match at some point but I kept contributing. I honestly didn't worry about it at all--it was so abstract. Today I'd probably worry about a 50 percent crash but I am pretty aggressive for my age (90/10 at 57) because it still feels abstract. A 50 percent crash would not change my life at all.
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Re: How Did 2001-2002 and 2007-2008 Influence Your Investing Philosophy? Or Did It?

Post by Mr.BB »

Artsdoctor wrote: Fri Jan 24, 2020 5:58 pm I began investing in the mid-1980's so I experienced Black Monday in 1987, the bear market of 2000-2002, and the financial crisis of 2007-2008. I am very thankful to have experienced those periods and they certainly did influence my investment behavior. First, I learned a lot about my risk tolerance (real, not hypothetical). Second, I learned that markets inevitably go up and down, and that that is expected. Third, I learned that investing during accumulation years is very different than when your financial capital (earnings) period is limited. Finally, I learned that I have no desire to take risk that I don't need to take now that I've met my financial goals. I kept a diary during the 2007-2008 meltdown so that my future self could be reminded how awful a brutal bear market can be, and every few years I look at it to remind myself when I think I'm getting too big for my britches.
"I kept a diary during the 2007-2008 meltdown so that my future self could be reminded how awful a brutal bear market can be, and every few years I look at it to remind myself when I think I'm getting too big for my britches."
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