Sixth anniversary of worst week ever for stocks

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letsgobobby
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Sixth anniversary of worst week ever for stocks

Post by letsgobobby » Thu Oct 09, 2014 1:46 pm

WSJ noted that this week marked the sixth anniversary of the worst week in the history of the Dow Jones Industrial Average:

http://online.wsj.com/articles/SB122368071064524779

Stocks dropped 18% in 5 days and 22% in 8 days.

It was a wild time. Definitely a time to test one's true risk tolerance.

With a recent uptick in market volatility, do you really know your risk tolerance?

Here's what some were saying that week (here or on other finance forums):

"just wondering if anyone still believes the asset allocation and market timing theories?"

"Those thinking we've bottomed here, or that U.S. equities will outperform over the next decade or so are going to be making two critical mistakes."

"When the PE drops below 10 I will start long term investing. Right now it is just like a casino."

"I would not touch any stock now because of over hanging fear that government may rob me blind"

" Good luck to anyone who thinks a fund or stock is cheap. We may not have a Wall Street to trade on..."

This is just a sampling of the rampant fear and pessimism that existed at the time.

So... what did you do in October 2008?

nordlead
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Re: Sixth anniversary of worst week ever for stocks

Post by nordlead » Thu Oct 09, 2014 2:22 pm

Absolutely nothing. At that point in time I had only been investing for 2 years and everything was set to the default retirement allocation (mostly TIAA-CREF Target Retirement date funds, some TIAA traditional, some CREF Stock, and some TIAA Real Estate).

I didn't adjust anything until 2013 after years of research and finally coming across bogleheads.org (prior to that I was interested in ETFs, just never learned enough to take action).

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Re: Sixth anniversary of worst week ever for stocks

Post by rkhusky » Thu Oct 09, 2014 2:36 pm

Every time the Dow would drop a 1000 or so points, I would buy more stocks, thinking "it must have hit the bottom by now".

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greg24
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Re: Sixth anniversary of worst week ever for stocks

Post by greg24 » Thu Oct 09, 2014 2:44 pm

I was buying and rebalancing like crazy.

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Phineas J. Whoopee
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Re: Sixth anniversary of worst week ever for stocks

Post by Phineas J. Whoopee » Thu Oct 09, 2014 2:50 pm

letsgobobby wrote:...
So... what did you do in October 2008?

Going in I didn't have nearly enough to retire on, so I wasn't in danger of having to wave off doing so any time in the foreseeable future.

It was about a year after my 40% decrease in living expenses without decline in lifestyle I'd engineered for the purpose of saving more and not needing to accumulate as large a portfolio. I kept right on saving and investing the excess I'd freed up, at my then-70/30 allocation, into my 401(k), Roth IRA, and taxable account. I rebalanced into stocks per my plan. I remember one day starting to feel a little panicky, which I used as a contrarian indicator, so I rebalanced then even though it was still a couple of weeks before my next planned evaluation.

It set the stage for my meeting my multiple-of-expenses target, then reducing risk to my planned 40/60, which I achieved early last month. The fact it happened so quickly after the decline was luck. The fact I survived two layoff rounds was mostly luck. Following my IPS was fortitude.

Hearing my market-timing, Elliott-wave theorizing, everything-is-rigged-so-I'll-get-in-on-the-rigging-and-cheat-everybody-else colleague talk, incessantly, helped me keep focused. I feel sorry for his mother, whose investments he was managing, but so far as I know he only locked in a 10% loss for her (over the course of just one weekend - out on Friday and back in on Monday), so it probably wasn't life changing.

And yes, I do have the year-end Vanguard and 401(k) statements to prove it, and no, I didn't need to beat the market, I just needed to be the market, less the 30% allocation to fixed income.

PJW

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mickeyd
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Re: Sixth anniversary of worst week ever for stocks

Post by mickeyd » Thu Oct 09, 2014 3:28 pm

So... what did you do in October 2008
?



I must have been asleep that week. Took no action, once again.
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Re: Sixth anniversary of worst week ever for stocks

Post by gkaplan » Thu Oct 09, 2014 6:47 pm

letsgobobby wrote:....So... what did you do in October 2008?


I can't remember, but I do remember the next month I took Amtrak up to Sacramento to spend Thanksgiving with friends.
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grabiner
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Re: Sixth anniversary of worst week ever for stocks

Post by grabiner » Thu Oct 09, 2014 8:18 pm

letsgobobby wrote:So... what did you do in October 2008?


The stock market drop moved my portfolio from the target of 10% bonds to 14% bonds. This is beyond my rebalancing band, so I sold some bonds in my retirement account to buy more stock and get back to 10% bonds.

I also did some very large tax loss harvesting, selling stock to buy other stock but not changing my stock allocation. I still haven't used up those losses, and have used them to take $3000 a year off my taxable income for six years, and cancel out the capital gains from selling some stock last year.
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bru
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Re: Sixth anniversary of worst week ever for stocks

Post by bru » Thu Oct 09, 2014 8:29 pm

I don't even remember it.

I suppose if I look at my records I probably did some buying during that week.

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Ged
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Re: Sixth anniversary of worst week ever for stocks

Post by Ged » Thu Oct 09, 2014 8:31 pm

I was posting things like this on the company refrigerator:

Image

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cfs
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Re: Sixth anniversary of worst week ever for stocks

Post by cfs » Thu Oct 09, 2014 8:34 pm

Did nothing.

I just took a look at what I had on my imperfect SWAN portfolio on 31 December 2007 and on 31 December 2008 and I see no difference, of course there is a value difference on each mutual fund and individual stock.
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Re: Sixth anniversary of worst week ever for stocks

Post by dolphinsaremammals » Thu Oct 09, 2014 8:39 pm

mickeyd wrote:
So... what did you do in October 2008
?

I must have been asleep that week. Took no action, once again.


I think I was asleep too.

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Re: Sixth anniversary of worst week ever for stocks

Post by nisiprius » Thu Oct 09, 2014 8:40 pm

letsgobobby wrote:...So... what did you do in October 2008?...
Filed for unemployment benefits.
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Re: Sixth anniversary of worst week ever for stocks

Post by patrick » Thu Oct 09, 2014 8:41 pm

letsgobobby wrote:So... what did you do in October 2008?


I was becoming a boglehead in my 401K with these trades (buy/sell totals don't match due to new contributions):

bought 18400 of stock index funds
sold 17300 of active stock funds ... I think this was probably my last active stock fund ever :D
sold 100 of bond funds

For taxable accounts:

bought 10900 in stock index funds
sold 4000 in individual stock (employer stock sold right after acquiring at a discount)

A brief search fails to locate the IRA statements ...

livesoft
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Re: Sixth anniversary of worst week ever for stocks

Post by livesoft » Thu Oct 09, 2014 8:52 pm

I checked my transactions for October 2008. I tax-loss harvested VBR and bought IJS. I tax-loss harvested DLS and bought GWX. I also was a net buyer of VEA and equity funds in my 401(k).
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Re: Sixth anniversary of worst week ever for stocks

Post by david99 » Thu Oct 09, 2014 9:03 pm

I tax-loss harvested a couple of funds in Oct. 2008-- I got lucky in that I stayed out for 30 days while stocks were dropping. I rebalanced in December of 2008. I needed to rebalance again in February of 2009 but I didn't because I had just rebalanced in December --- bad idea since stocks were cheap.

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Re: Sixth anniversary of worst week ever for stocks

Post by Toons » Thu Oct 09, 2014 9:04 pm

2008-2009 Steadily buying equity mutual funds one good day after another as we were in a one of the best declining markets in history :happy ,more shares for the money.Those shares have over doubled in value.
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Re: Sixth anniversary of worst week ever for stocks

Post by bhsince87 » Thu Oct 09, 2014 9:08 pm

Sixth anniversary of the best week ever for buying stocks

Just a matter of perspective! :)
BH87

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black jack
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Re: Sixth anniversary of worst week ever for stocks

Post by black jack » Thu Oct 09, 2014 9:46 pm

I did nothing - but that's more because I was incredibly fortunate than that I have huge ... amounts of fortitude.

As a federal employee, I wasn't concerned about losing my job in the crash (as so many did), and with retirement being 15+ years away, I wasn't worried about the fall in the value of my investments. So I kept putting money in the TSP every other week - in stock funds.
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Re: Sixth anniversary of worst week ever for stocks

Post by LongerPrimer » Thu Oct 09, 2014 10:55 pm

Like I said on another thread;
I got an older bro, PhD econ, who had worked at FRB-NY then to C level at Big Banks. He went dark for a few months. Later saw him in the Spring 09 who he came to visit Mom. If you mention this time period, it was truly awesome to see him turn White, then Blue, and then to Red.

Me, I threw out AA, started to trade stocks, and moved eventually 50% of retirement and non retirement liquid assets to protected products. :annoyed I figured that if our USA and the World's major Governments/Reserve Banking/Politics couldn't pull the economies out, it really didn't matter if I shoot for the Moon. And the system worked, then being aggressive would make my financial recovery that much faster and secure. :beer :greedy

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Re: Sixth anniversary of worst week ever for stocks

Post by baw703916 » Thu Oct 09, 2014 11:31 pm

Six years ago today (10/10/2008), Lbill started a thread titled Will the last diehard please shut up? saying that the signal for the market to recover would be that the denizens of this board needed to start panic selling.

I posted the following

I'm terribly sorry, I went ahead and bought some stocks this morning before I read this thread. I'm afraid I might have caused the bear market to keep on going for a while by not capitulating. :(

Sorry, my bad.


I have no idea what I bought, but I did do some portfolio simplification (from European and Pacific Index Funds to FTSE--there was at one time a foreign tax credit reason to not hold Total International, and from S&P 500 index to TSM). Also, quite a bit of tax loss harvesting.
Most of my posts assume no behavioral errors.

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Re: Sixth anniversary of worst week ever for stocks

Post by jebmke » Fri Oct 10, 2014 12:17 am

letsgobobby wrote:So... what did you do in October 2008?


Checked my Google Calendar. Got a haircut on Oct 9 and went to the Annapolis Boat Show on the 10th.

I do recall buying a bunch of 3% 2025 TIPS in October but it might have been later in the month. Records indicated major TLH transactions in September and again in late October.
When you discover that you are riding a dead horse, the best strategy is to dismount.

peddler12
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Re: Sixth anniversary of worst week ever for stocks

Post by peddler12 » Fri Oct 10, 2014 12:42 am

Looking in Quicken at the end of the first week in October I bought the L2030 fund in my TSP account, but I did not stay the course. I was out of the fund by the end of December which is when I bailed on stocks in my ROTH accounts in both my wife's account and my account. It was December the 8th that I bailed on the funds. Lesson learned I guess. Never again. I've learned my lesson. I'm about 57/43 right now. As Total International continues to fall my plan will be to buy more. I will make money. If I don't that's the risk right?

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market timer
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Re: Sixth anniversary of worst week ever for stocks

Post by market timer » Fri Oct 10, 2014 12:54 am

Yes, I remember that week well. It was life changing. Can't believe I managed to retire less than six years later. Here's one from the archives.

Image

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Re: Sixth anniversary of worst week ever for stocks

Post by z3r0c00l » Fri Oct 10, 2014 6:16 am

Wow so close to breaking even!

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baw703916
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Re: Sixth anniversary of worst week ever for stocks

Post by baw703916 » Fri Oct 10, 2014 10:40 am

Also, in Oct. 2008 I rather enjoyed watching CNBC, especially when they set up one entire weekend on the street across from Lehman. It was kind of entertaining in an odd sort of way, like a really campy reality show.
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Re: Sixth anniversary of worst week ever for stocks

Post by MathWizard » Fri Oct 10, 2014 1:16 pm

Kept plowing money in, & rebalanced, didn't panic.
I was more worried about our jobs than the stock market.

letsgobobby
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Re: Sixth anniversary of worst week ever for stocks

Post by letsgobobby » Fri Oct 10, 2014 3:20 pm

I did expect the Bogleheads to evoke Lake Woebegone in their responses and you have not disappointed.

Anyone else care to admit to panicking? or, not following his IPS and failing to rebalance? Or failing to invest new money per IPS?

I did not have an IPS at the time, so nothing to not follow. I did buy stocks, however, increasing my stock allocation between January 2008 and May 2009 from 30% to 70%. About 10-15% increase during the first week of October.

Since then I developed an IPS, thanks to the Bogleheads, and it is nice not to have to think about these things any more. Though I still hate buying stocks when they've gone up 100-200%.

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Re: Sixth anniversary of worst week ever for stocks

Post by Sbashore » Fri Oct 10, 2014 3:27 pm

I had other more pressing things to think about. I did nothing. Ultimately I ended up rebalancing in early 2009 because my AA was out of sync.
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Re: Sixth anniversary of worst week ever for stocks

Post by technovelist » Fri Oct 10, 2014 3:33 pm

I didn't do anything, but then I don't have any stocks, so 2008 was a non-event for me.
However, 2013 was pretty bad for my portfolio, so what did I do then?
Nothing.
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Re: Sixth anniversary of worst week ever for stocks

Post by Stonebr » Fri Oct 10, 2014 3:40 pm

letsgobobby wrote:
So... what did you do in October 2008?



This was about the time I'd decided to convert to a total BH portfolio, and I used the down market as an opportunity to sell all of our individual stocks and active mutual funds. I picked up a war chest of tax loss carry forward. I'm very grateful to the BH community for the wisdom and encouragement, especially posts by Taylor Larimore. It's one of the reasons I was able to retire early.
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Re: Sixth anniversary of worst week ever for stocks

Post by Sidney » Fri Oct 10, 2014 3:45 pm

Sbashore wrote:I had other more pressing things to think about. I did nothing. Ultimately I ended up re-balancing in early 2009 because my AA was out of sync.

Used to happen to me a lot - last 2008/9 downtick and 2001-3. I traveled a lot and by the time I got home, the panic was over. 1987 was particularly exciting. Dropped like a stone and then back by the end of the year. Blink and you missed it.
I always wanted to be a procrastinator.

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Re: Sixth anniversary of worst week ever for stocks

Post by retirehappy2014 » Fri Oct 10, 2014 3:52 pm

I was lucky enough to be sitting on some idle cash. So I finally took my Roth IRA seriously and started buying deep discounted, dividend paying stocks I could not have afforded earlier. I have ridden the bull upwards. My 401K recouped my loses fairly quickly, mostly the company matching dollars, very few mine. So I was a lucky one, along with my husband who did the same. Only regret we have is not taking a second mortgage to buy more. I had also missed the company's work force reduction, so I knew my job was ok for a few more years.

I have now retired and am learning all I can about index funds, as I think that is the way to go, going forwards. We have always lived frugally, just didn't always invest. Since I won't be able to invest in tax deferred instruments, I plan to save from our pension and SS monies, and keep investing via indexes. That is why I joined this board recently. Lots of great info. floating around in here. I am a firm believer that you need to keep growing a nest egg, even after retirement, since we can live 20+ more years. Took me a long time to learn that lesson, but it finally sunk into my brain. :mrgreen:

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Re: Sixth anniversary of worst week ever for stocks

Post by technovelist » Fri Oct 10, 2014 4:05 pm

retirehappy2014 wrote:I was lucky enough to be sitting on some idle cash. So I finally took my Roth IRA seriously and started buying deep discounted, dividend paying stocks I could not have afforded earlier. I have ridden the bull upwards. My 401K recouped my loses fairly quickly, mostly the company matching dollars, very few mine. So I was a lucky one, along with my husband who did the same. Only regret we have is not taking a second mortgage to buy more. I had also missed the company's work force reduction, so I knew my job was ok for a few more years.

I have now retired and am learning all I can about index funds, as I think that is the way to go, going forwards. We have always lived frugally, just didn't always invest. Since I won't be able to invest in tax deferred instruments, I plan to save from our pension and SS monies, and keep investing via indexes. That is why I joined this board recently. Lots of great info. floating around in here. I am a firm believer that you need to keep growing a nest egg, even after retirement, since we can live 20+ more years. Took me a long time to learn that lesson, but it finally sunk into my brain. :mrgreen:


I'm not sure that is really the lesson to take away from 2008...
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Re: Sixth anniversary of worst week ever for stocks

Post by sls239 » Fri Oct 10, 2014 4:58 pm

Other than being short on money, I can't tell I did anything differently with the accounts.

But as you can see, I joined Bogleheads on October 23rd, 2008. I clearly wanted a steadying influence.

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Re: Sixth anniversary of worst week ever for stocks

Post by Toons » Fri Oct 10, 2014 7:26 pm

Sidney wrote:
Sbashore wrote:I had other more pressing things to think about. I did nothing. Ultimately I ended up re-balancing in early 2009 because my AA was out of sync.

Used to happen to me a lot - last 2008/9 downtick and 2001-3. I traveled a lot and by the time I got home, the panic was over. 1987 was particularly exciting. Dropped like a stone and then back by the end of the year. Blink and you missed it.


+1 :happy
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Re: Sixth anniversary of worst week ever for stocks

Post by retirehappy2014 » Fri Oct 10, 2014 8:55 pm

technovelist wrote:
retirehappy2014 wrote:I was lucky enough to be sitting on some idle cash. So I finally took my Roth IRA seriously and started buying deep discounted, dividend paying stocks I could not have afforded earlier. I have ridden the bull upwards. My 401K recouped my loses fairly quickly, mostly the company matching dollars, very few mine. So I was a lucky one, along with my husband who did the same. Only regret we have is not taking a second mortgage to buy more. I had also missed the company's work force reduction, so I knew my job was ok for a few more years.

I have now retired and am learning all I can about index funds, as I think that is the way to go, going forwards. We have always lived frugally, just didn't always invest. Since I won't be able to invest in tax deferred instruments, I plan to save from our pension and SS monies, and keep investing via indexes. That is why I joined this board recently. Lots of great info. floating around in here. I am a firm believer that you need to keep growing a nest egg, even after retirement, since we can live 20+ more years. Took me a long time to learn that lesson, but it finally sunk into my brain. :mrgreen:


I'm not sure that is really the lesson to take away from 2008...


Sorry kind of an inside joke. My husband's workmate did take out a small mortgage and used the money to feather his nest VERY WELL. And paid off the mortage easily when he did his sell offs. We kept thinking we should have done the same. We did fine but he really made a killing 8-)

My take away lesson was to continue studying, reading, and learning about how to invest, so I can keep that nest egg from shrinking too fast. I saw Bogle on one of the pbs finance shows and really got what he was saying about index funds. I have made most of my money just picking stocks that pay dividends. It is a time consuming second job when you are still working, now that I am retired I want something more along the lines of being on autopilot :)

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Re: Sixth anniversary of worst week ever for stocks

Post by Texas hold em71 » Fri Oct 10, 2014 10:31 pm

We continued to make bi-weekly 401(k) contributions. It fell so fast that by the time we noticed / got out of denial, we just said "Oh well, too late to sell now even if we wanted to." We stayed the course, but we both lost a lot of sleep. I'm not gonna lie. Told a lot of stories about how our grandparents survived a Depression - so could we - gulp - if we had to. We had been poor before, could be again. Very scary and depressing time. We came out the better for it but I know so many people who did not.

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Re: Sixth anniversary of worst week ever for stocks

Post by frugalhen » Sat Oct 11, 2014 2:47 am

nisiprius wrote:
letsgobobby wrote:...So... what did you do in October 2008?...
Filed for unemployment benefits.



True story.....got a raise in October because I was paid commission and the market for my industry was going down. Then first week of November was laid off for the first time in my life.

In December I looked at my portfolio, which was 100% stocks and thought, "so this is why you should have some money in fixed income"

Had I been exposed to boglehead asset allocation prior I likely would not have listened anyway. And I really thought I understood investments. :oops:
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Re: Sixth anniversary of worst week ever for stocks

Post by truenorth418 » Sat Oct 11, 2014 3:13 am

I said good-bye to 30% of my department who were laid off that month.

As for my investments, I remembered audibly crying out an expletive in my car one evening when I happened to check my Charles Schwab account on my smartphone. However, I didn't do anything about it except hunker down.

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Re: Sixth anniversary of worst week ever for stocks

Post by dumbbunny » Sat Oct 11, 2014 3:58 am

letsgobobby wrote:So... what did you do in October 2008?

I was on a mission trip in Managua, Nicaragua during the fall. Believe it or not, money wasn't the first thing on my mind at the time. And I couldn't do anything about it anyway.
“It’s the curse of old men to realize that in the end we control nothing." "Homeland" episode, "Gerontion"

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Re: Sixth anniversary of worst week ever for stocks

Post by theplayer11 » Sat Oct 11, 2014 1:20 pm

I remember luckily having cash on hand and buying stocks like GE, AA and DOW in the single digits. Sitting on a bunch of cash again after cashing everything out of Janus in Aug. I was going to move to Vanguard index funds right away, but held off. Wouldn't mind a crrection at this point. :D

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Re: Sixth anniversary of worst week ever for stocks

Post by placeholder » Sat Oct 11, 2014 2:13 pm

My Bogleheads portfolio was relatively new so I did a bunch of TLH and rebalancing in about that time frame.

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Re: Sixth anniversary of worst week ever for stocks

Post by Toons » Sat Oct 11, 2014 2:56 pm

October 2008
Purchased
30 shares of Fidelity Spartan 500 Index fund @35.28
150 shares of Vanguard Star Fund @15.32
50 shares of Janus Balanced Fund @20.51
120 shares of Vanguard lifestrategy Growth @16.73
Steadily bought during the decline ,sold nothing. 8-)
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Re: Sixth anniversary of worst week ever for stocks

Post by sschullo » Sat Oct 11, 2014 3:59 pm

Nothing but enjoyed our fourth trip to the Grand Canyon.
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Re: Sixth anniversary of worst week ever for stocks

Post by nwffdiver » Sat Oct 11, 2014 4:53 pm

Wish I had a neat story, I was dumb during 2000-2002 and got out. Luckily for me I didn't want to miss out on our departments match so I stayed in. My dad unfortunately got sick and had to retire with his 401k down around 45%.

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Re: Sixth anniversary of worst week ever for stocks

Post by Tecktser » Sat Oct 11, 2014 6:16 pm

About that time I remember getting a 401K statement and starting a challenge at work for someone to beat a 43% drop in 401K value. I could not re balance (even if I had known what rebalancing was back then) as I was 100% equities.

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Re: Sixth anniversary of worst week ever for stocks

Post by letsgobobby » Wed Oct 15, 2014 12:57 pm

octobers... nasty months for stocks they are.

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Re: Sixth anniversary of worst week ever for stocks

Post by ShadyH » Wed Oct 15, 2014 2:15 pm

It was a turning point for me, just like a lot of other folks have said. I had even less of a grasp of the basic principles of macro econ then than I do now, but I figured that, at the rate the world was collapsing around us, the financial markets really only had two options: (1) eventually they would recover, or (2) they wouldn't. If scenario (2) came to pass, it wouldn't matter if I had purchased stocks or not, because I'd be back home on the farm, gradually depleting my dad's massive stockpile of .223 ammo, whiskey and diesel (post-apocalypse commodities).

So, feeling very brave, I bought an ETF that tracked the S&P 500 (sidenote: this was my first-ever purchase of a passively managed, low fee fund. My broker strongly discouraged this, and wanted me to buy one of his actively-managed products. That conversation left a bad taste in my mouth, and it ended up being the catalyst that led me to fire that broker a year later, and move everything to the basic three-fund portfolio via Vanguard.)

I can't remember if all this happened in September or October. All I remember was that I bought this S&P 500 ETF, feeling so brave, and then I watched it continue to hemorrhage. In the short-term, it was gut-wrenching. But now, even with the last couple of weeks of market correction, that little holding in the S&P 500 ETF (I still have it as a distinct holding, it's a convenient benchmark for me) has doubled its money since I bought it. Will that still be the case in six months? We'll find out when we get there.

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HomerJ
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Re: Sixth anniversary of worst week ever for stocks

Post by HomerJ » Wed Oct 15, 2014 2:24 pm

letsgobobby wrote:I did expect the Bogleheads to evoke Lake Woebegone in their responses and you have not disappointed.

Anyone else care to admit to panicking? or, not following his IPS and failing to rebalance? Or failing to invest new money per IPS?


I didn't rebalance even though I was supposed to... But I had no problem putting NEW money in, and I never thought about selling.

But I had $300k in bonds, and decided I wasn't going to part with that... That money is the reason I didn't panic, because I knew we had a good nest egg that would feed my family for a while, even if the Great Depression II DID happen, and stocks dropped 90% or something.

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