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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
blackholescion
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by blackholescion » Tue May 14, 2019 10:51 am

randomguy wrote:
Sun Jan 27, 2019 1:36 pm
02nz wrote:
Sun Jan 27, 2019 12:49 pm
staycalm wrote:
Sun Dec 23, 2018 2:43 pm
2. I'm feeling comfortable holding 3 years spending in Cash to be used for spending during down markets. The longest bear market was 2.8 years.
Not clear exactly how they define the length of a bear market, but keep in mind that just because a bear market is over in 2.8 years doesn't mean that your equities have recovered to pre-bear values, merely that it's bottomed out and started to recover. Depending on when you bought, you may have a lot longer to go before being able to sell at a profit. From the Oct 2007 peak to March 2009 bottom it was only about 1.5 years, but it was another 3 years (spring 2012) before the S&P 500 recovered to Oct 2007 levels (including returns from dividends).
Yes but the idea that you need to only sell when the market is at all time highs is a bit questionable. Selling at 10-20% off of peaks isn't the end of the world. Being 100% stocks and having to sell when the market is off 30%+ for 3 years though is pretty bad.

In the end we are basically talking about some bucket system variation. Research has shown it does pretty much nothing to help portfolio surviability. If you hold say 80/20 (5 years in cash) or 100% stocks with 5 years in CDs, you end up in just about the same spot. Some times one approach does slightly better than the other but not by much. And holding more bonds/CDs doesn't change the numbers much either. Now this mental accounting might help you sleep better at night. Can't discount that.
80/20 would allow you to sell the 20 portion after your 5 years of cash have run out to continue riding out the storm for several more years. Unless you're saying the 20 is your cash, in which case, yes, that's identical but I wouldn't call it 80/20 vs 100/0 since the CDs in the 100/0 would be your 20. Then again, if we are taking a holistic approach, it's not an 80/20 + 5 years of cash, but more like 60/40, depending on how the cash bucket adds up as % of total portfolio.

When we get to retirement age, we are mulling a slightly more aggressive AA coupled with this cash reserve, using the cash in place of a more conservative AA. Something like 70/30 with cash that amounts to 3 years of expenses + current year to date. This will let us keep the returns going but also give us a sleep an night cushion in the short term and more fixed income in the long term if necessary.

DB2
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by DB2 » Tue May 14, 2019 10:28 pm

Fascinating thread...especially reading those Oct 2008 posts.

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

Post by Benosis » Tue May 14, 2019 10:42 pm

This was a great thread to read as a younger investor in early 20’s

sd323232
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by sd323232 » Wed May 15, 2019 4:10 am

you learn alot, reading those old threats from terrible times 2008-2009, what people went through, i hope to never go through it. i was young when it happened.

sd323232
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Re: I can't believe I am thinking this

Post by sd323232 » Wed May 15, 2019 4:31 am

Sheepdog wrote:
Sat May 28, 2016 12:42 am
I awoke at 1 am, turned on the computer, and opened this continued thread of mine from 2008. It must have been buzzing around to get me to look at it at this time of night.
There is this little new story to tell:
I must have been having a premonition that this was coming back a few days ago.
I had written this in the opening thread in 2008
Today did it. I am just starting to be scared so that I won't tell my wife what happened today
and just a couple of days ago I told my wife for the first time about what had happened then...yes, not then, but just now. I didn't want her to feel the pain of the time. I read to her what I wrote then and told her about what happened and about the so called "cash" accounts which were setup. She knew about them, of course, but just didn't know what instigated them She said she had no idea of the panic I was feeling at that time.
Anyway, I am ready for the next time with plenty of safety, especially plenty for this 83 year old. I really don't have "cash" other than our checking account, but instead 1.5 years of equivalent normal distributions in the short term investment grade bond fund available when needed and about 1 year of normal distributions in 5 year 3% CDs which I should not now need for expenses (except for maybe a new auto when they mature in Jan. 2019) because I purchased in 2012 and 2013 SPIAs from the "cash" accounts which along with SS are covering all of our normal annual spending. That is great for us, especially, my lady's future well-being if I become incapacitated. We are all set.
this was painfull for me to read. i hope never to be in this situation. How can anyone carry all this weight alone for so many years, why? Is not your wife/husband/significant other there for support? Why not share this with them and go through tough times together? Keeping it all inside, i could never do that, i listen to Dave Ramsey alot, and he is right, financial success is a team effort, whether going through bad or good times, just like he did when he went through bk. Just my opinion

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

Post by investingdad » Wed May 15, 2019 8:03 am

We were mid 30s during this whole mess.

Both gainfully employed. We continued to max 401k accounts and I made no changes to my portfolio. I admit I was not maxing my IRAs out of concern.

Our decision to buy less house than we could afford in 2002 was suddenly looking pretty smart.

Otherwise, we just rode it out. We probably had ~500k net at the time and no doubt it swung wildly.

alexfoo39
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by alexfoo39 » Wed May 15, 2019 8:12 am

my theory is that risk can't be personally measured until one is really put to the test. The idea that we should invest based on our ability, need, and willingness to risk is true. But this thread proves it.

Now go back and read. OH NO CRASH AGAIN~

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

Post by Sheepdog » Wed May 15, 2019 8:16 am

sd323232 wrote:
Wed May 15, 2019 4:31 am
this was painfull for me to read. i hope never to be in this situation. How can anyone carry all this weight alone for so many years, why? Is not your wife/husband/significant other there for support? Why not share this with them and go through tough times together? Keeping it all inside, i could never do that, i listen to Dave Ramsey alot, and he is right, financial success is a team effort, whether going through bad or good times, just like he did when he went through bk. Just my opinion
All couples are different. Our marital relationships are different. Telling her then would have done nothing constructive, for me or my wife. There was nothing she could do except worry needlessly....and I don't want her to and I never have. For her, just having me around for nearly 60 years has been more than enough to worry about.....
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

alexfoo39
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Re: Staying the course

Post by alexfoo39 » Wed May 15, 2019 9:16 am

Jeremiah wrote:
Thu Oct 09, 2008 6:43 pm
I feel exactly like sheepdog does. I have stayed the course since 1987 and I don't know how much of my money other people have gotten by the shares I have bought, but I have been good for them. (Note: I just now joined this forum so I am sure all this has been discussed to death, but I still need to vent, sorry). Why didn't I cash out at DOW 14K? I guess I thought it would go higher....duh. Or why not in December? Or March? Or May? In May I bought the International Stock Index in my IRA from my pension money that I moved from Nationwide. I have now lost 1/2 of it. I also bought Inflation Protected Securities which have dropped in value. I thought bond funds should be safe. I am 65 and wonder if I will ever get my money back or will end up depending on SS for my retirement. If so, it will be a short one. I am about ready to follow the panic crowd and save what I can. I can always buy back in later. (When I sell, I always wonder who is buying?) I earned good money over my career, I wish now I would have just kept it in a money market, so much of it is gone. This unprecedented worldwide crises is scary beyond belief, and if anyone thinks a worldwide depression is impossible, consider that when the Fed runs out of money, the Treasury will have to start printing it, and the U.S. credit rating will drop. Then what? The DOW hit 8500 today, and tomorrow it should drop to 8,000 or less. I guess if you are willing to wait 5 years for a DOW of 10,000 this is the time to buy. We are a long ways from the market bottom. As a Boglehead newbie, prove to me my fears are groundless....make me feel better.
why didn't I all in at dow 8500?

B. Wellington
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by B. Wellington » Wed May 15, 2019 9:21 am

Benosis wrote:
Tue May 14, 2019 10:42 pm
This was a great thread to read as a younger investor in early 20’s
I am not sure how much I have shared on other threads over the years....?

However, I watched as 100's of fellow employees were let go during that difficult time. Many never returned and I was very, very lucky to have stayed on until the recovery. The DW works for a small employer who could no longer fund their 401(k) accounts. Those employees also lost their health insurance. My brother sold ALL of his retirement funds and also lost his house.

That said, I can relate to sheepdogs concerns facing retirement and what that would look like for us.

I have been somewhat of a conservative investor (note signature) for various reasons and have a good grasp on how much risk I can take. Jack Bogle's advice to "be balanced" kept us from selling at the worst possible time.....As Always, YMMV. :beer

deltaneutral83
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Re: Staying the course

Post by deltaneutral83 » Wed May 15, 2019 11:05 am

alexfoo39 wrote:
Wed May 15, 2019 9:16 am
why didn't I all in at dow 8500?
Because the Dow went to 6,600 in March 2009 before it bounced back and if you don't know how an additional 22% fall feels like after a prior massive fall, well....Several people who pulled the plug at 9k would have had fabulous and numerous opportunities to get back in below 7k and make a correct generational bet and allow themselves incredible choices today. Most didn't though. Dow raced by 10k by Thanksgiving 2009 and it really didn't stop much until later in Summer 2010. In fact, those that saw it race past 10k were delighted when it came back below 10k in the Summer of 2010 (during the World Cup I recall) and were given the chance to only have very small losses and learn the greatest lesson in market timing. But didn't take it because the pundits were saying Dow 4000 is next. Dow raced past 10k shortly thereafter for good. I just wouldn't have any money in the market I can't stomach to be halved for 5 years. 2009 recovery was actually pretty swift. Seemed like it was forever (especially if you lost your job) but it was less than 24 months that we were below 20% (11,360) off highs.

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

Post by HomeStretch » Wed May 15, 2019 11:23 am

During the Great Recession, spouse and I were both working jobs with long hours, raising a family and fully contributing to our retirement plans. We did not have any free time to really focus on (and thus worry about) our investments and falling house prices in our area.

We were lucky that our retirement accounts were in target date funds which rebalanced for us. If I really understood at the time how much our investments declined in value, I never would have had the nerve to rebalance into equities.

At the time we were grateful to be a 2-wage-earner family with a paid off mortgage and no debt. We saw many around us losing jobs, sale signs due to house foreclosures, etc.

Next downturn, we will be retired most likely. Not having a paycheck during a downturn will be scary. Thankfully we found this forum which has instilled the “stay the course” philosophy in us. Plus we will understand how to rebalance and the TLH and Roth conversion opportunities available during a downturn.

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

Post by Atilla » Wed May 15, 2019 11:30 am

It was a depressing period, but looking back at our net worth back then, it looks like a blip.

12/31/2007 net worth was $409,000.
12/31/2008, net worth $347,000 - down 15%.
Of course it got worse through early March, but then...
12/31/2009, net worth $430,000 - up 24%
Fully recovered and then some by doing absolutely nothing except continuing to invest.
Moderator Warning-Free Since 2017.

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

Post by Laika » Wed May 15, 2019 4:38 pm

I remember reading this thread in real time. It laid bare the despair that I and so many others were feeling, perhaps more than any other. In my case, I had started investing only a few months before the recession started, just at a moment when I had nearly "won the game," hence my losses felt very, very real. Among my feelings and reactions:

* Obsessively reading this board (including checking on this thread).
* Involuntarily waking up super-early to anxiously watch the opening bell.
* Feeling crushed at how my early-retirement dreams were evaporating.
* Summoning super-human strength to ignore the urge to sell.
* Tax loss harvesting like mad, and then doing it again, and again.
* Throwing out my intended asset allocation and "buying all the way down" (too early, and distorting my asset allocation).
* Watching in despair as everything I bought crashed and burned too.

My last purchase was three days from the bottom. I despaired at that moment too, not because of the losses, but because that was about the last of my dry powder. Then, during the recovery:

* Not retiring early (too scared and scarred).
* Feeling stunned when I found I had made up my losses and broke even.
* Selling all the way up (also too early), ordered so as to minimize taxable gains and stretch out the harvested losses (unfortunately further distorting my asset allocation).
* More recently, marveling at how the recession appeared in my performance graph as a relatively minor downturn compared to the recovery - how did that happen!?

Now, having done reasonably well and approaching retirement for real, out of an over-abundance of caution I have about 10 years of spending at a 3.5% SWR in cash and near-cash vehicles, amounting to roughly 20% of my net worth.

Was it worth the pain? I don't think so, but I'll take it. I expect many folk here feel the same.

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willthrill81
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by willthrill81 » Wed May 15, 2019 5:40 pm

Laika wrote:
Wed May 15, 2019 4:38 pm
I remember reading this thread in real time. It laid bare the despair that I and so many others were feeling, perhaps more than any other. In my case, I had started investing only a few months before the recession started, just at a moment when I had nearly "won the game," hence my losses felt very, very real. Among my feelings and reactions:

* Obsessively reading this board (including checking on this thread).
* Involuntarily waking up super-early to anxiously watch the opening bell.
* Feeling crushed at how my early-retirement dreams were evaporating.
* Summoning super-human strength to ignore the urge to sell.
* Tax loss harvesting like mad, and then doing it again, and again.
* Throwing out my intended asset allocation and "buying all the way down" (too early, and distorting my asset allocation).
* Watching in despair as everything I bought crashed and burned too.

My last purchase was three days from the bottom. I despaired at that moment too, not because of the losses, but because that was about the last of my dry powder. Then, during the recovery:

* Not retiring early (too scared and scarred).
* Feeling stunned when I found I had made up my losses and broke even.
* Selling all the way up (also too early), ordered so as to minimize taxable gains and stretch out the harvested losses (unfortunately further distorting my asset allocation).
* More recently, marveling at how the recession appeared in my performance graph as a relatively minor downturn compared to the recovery - how did that happen!?

Now, having done reasonably well and approaching retirement for real, out of an over-abundance of caution I have about 10 years of spending at a 3.5% SWR in cash and near-cash vehicles, amounting to roughly 20% of my net worth.

Was it worth the pain? I don't think so, but I'll take it. I expect many folk here feel the same.
Thanks for so very frankly sharing your experiences. I really think that many who didn't go through that period or else did so with significantly less assets than they do today should carry examine your message and that of others. Seeing half or more of your money in stocks just go poof with no assurance that the losses would stop soon nor that a quick recovery would occur was gut wrenching for many. I really don't think that many here have as high of a tolerance for risk as they think that they do. I perfectly understand why after 2000-2009, many investors threw up their hands in despair and swore off stocks forever.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

sd323232
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Re: I can't believe I am thinking this

Post by sd323232 » Wed May 15, 2019 6:01 pm

Sheepdog wrote:
Wed May 15, 2019 8:16 am
sd323232 wrote:
Wed May 15, 2019 4:31 am
this was painfull for me to read. i hope never to be in this situation. How can anyone carry all this weight alone for so many years, why? Is not your wife/husband/significant other there for support? Why not share this with them and go through tough times together? Keeping it all inside, i could never do that, i listen to Dave Ramsey alot, and he is right, financial success is a team effort, whether going through bad or good times, just like he did when he went through bk. Just my opinion
All couples are different. Our marital relationships are different. Telling her then would have done nothing constructive, for me or my wife. There was nothing she could do except worry needlessly....and I don't want her to and I never have. For her, just having me around for nearly 60 years has been more than enough to worry about.....
Understood, thank you for sharing.

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Toons
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Re: Staying the course

Post by Toons » Wed May 15, 2019 6:29 pm

alexfoo39 wrote:
Wed May 15, 2019 9:16 am
Jeremiah wrote:
Thu Oct 09, 2008 6:43 pm
I feel exactly like sheepdog does. I have stayed the course since 1987 and I don't know how much of my money other people have gotten by the shares I have bought, but I have been good for them. (Note: I just now joined this forum so I am sure all this has been discussed to death, but I still need to vent, sorry). Why didn't I cash out at DOW 14K? I guess I thought it would go higher....duh. Or why not in December? Or March? Or May? In May I bought the International Stock Index in my IRA from my pension money that I moved from Nationwide. I have now lost 1/2 of it. I also bought Inflation Protected Securities which have dropped in value. I thought bond funds should be safe. I am 65 and wonder if I will ever get my money back or will end up depending on SS for my retirement. If so, it will be a short one. I am about ready to follow the panic crowd and save what I can. I can always buy back in later. (When I sell, I always wonder who is buying?) I earned good money over my career, I wish now I would have just kept it in a money market, so much of it is gone. This unprecedented worldwide crises is scary beyond belief, and if anyone thinks a worldwide depression is impossible, consider that when the Fed runs out of money, the Treasury will have to start printing it, and the U.S. credit rating will drop. Then what? The DOW hit 8500 today, and tomorrow it should drop to 8,000 or less. I guess if you are willing to wait 5 years for a DOW of 10,000 this is the time to buy. We are a long ways from the market bottom. As a Boglehead newbie, prove to me my fears are groundless....make me feel better.
why didn't I all in at dow 8500?
Fear
:mrgreen:
"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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BlueEars
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by BlueEars » Wed May 15, 2019 6:34 pm

You can see my posts during that scary market. I was not a happy camper but hung in there. Rebanced July 2009.

Now I employ a trend following approach which has had identical returns as buy-hold up to now.

I’m wondering if this thread is a good indicator. Always seems to get bumped when stocks decline. Maybe it’s a coincident indicator? :happy

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

Post by AerialWombat » Wed May 15, 2019 6:58 pm

Wow. One of the best threads on this board. Thanks for bringing it back for us newbies to read through.

I went bankrupt in the 2007-08 real estate crash, and spent a full year homeless. It wasn’t really that bad, though, because it was just me and I was 30, so I had plenty of time to recover.

I couldn’t fathom being in the OP’s shoes, already in retirement and with a spouse to support.

Thanks to Sheepdog and everyone else that shared on this thread. I am bookmarking this to revisit occasionally, as a reminder.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

Grundy53
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by Grundy53 » Wed May 15, 2019 11:56 pm

Great thread. It's a real eye opener. I was just getting started with my retirement savings. I was young and dumb so I wasn't investing much. Therefore I wasn't hurt too much by the recession other than overtime was all but stopped at my work. This thread definitely is a testament to the need to have 3-5 years of expenses outside of the market. Thank you for sharing your experiance during that troubling time.

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willthrill81
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by willthrill81 » Thu May 16, 2019 12:03 am

Grundy53 wrote:
Wed May 15, 2019 11:56 pm
Great thread. It's a real eye opener. I was just getting started with my retirement savings. I was young and dumb so I wasn't investing much. Therefore I wasn't hurt too much by the recession other than overtime was all but stopped at my work. This thread definitely is a testament to the need to have 3-5 years of expenses outside of the market. Thank you for sharing your experiance during that troubling time.
3-5 years? Usually people recommend 3-6 months, maybe a year. If you had a 20% savings rate, it would take you 12 years to save 3 years of expenses at a 0% real return.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by randomguy » Thu May 16, 2019 12:40 am

blackholescion wrote:
Tue May 14, 2019 10:51 am
randomguy wrote:
Sun Jan 27, 2019 1:36 pm
02nz wrote:
Sun Jan 27, 2019 12:49 pm
staycalm wrote:
Sun Dec 23, 2018 2:43 pm
2. I'm feeling comfortable holding 3 years spending in Cash to be used for spending during down markets. The longest bear market was 2.8 years.
Not clear exactly how they define the length of a bear market, but keep in mind that just because a bear market is over in 2.8 years doesn't mean that your equities have recovered to pre-bear values, merely that it's bottomed out and started to recover. Depending on when you bought, you may have a lot longer to go before being able to sell at a profit. From the Oct 2007 peak to March 2009 bottom it was only about 1.5 years, but it was another 3 years (spring 2012) before the S&P 500 recovered to Oct 2007 levels (including returns from dividends).
Yes but the idea that you need to only sell when the market is at all time highs is a bit questionable. Selling at 10-20% off of peaks isn't the end of the world. Being 100% stocks and having to sell when the market is off 30%+ for 3 years though is pretty bad.

In the end we are basically talking about some bucket system variation. Research has shown it does pretty much nothing to help portfolio surviability. If you hold say 80/20 (5 years in cash) or 100% stocks with 5 years in CDs, you end up in just about the same spot. Some times one approach does slightly better than the other but not by much. And holding more bonds/CDs doesn't change the numbers much either. Now this mental accounting might help you sleep better at night. Can't discount that.
80/20 would allow you to sell the 20 portion after your 5 years of cash have run out to continue riding out the storm for several more years. Unless you're saying the 20 is your cash, in which case, yes, that's identical but I wouldn't call it 80/20 vs 100/0 since the CDs in the 100/0 would be your 20. Then again, if we are taking a holistic approach, it's not an 80/20 + 5 years of cash, but more like 60/40, depending on how the cash bucket adds up as % of total portfolio.

When we get to retirement age, we are mulling a slightly more aggressive AA coupled with this cash reserve, using the cash in place of a more conservative AA. Something like 70/30 with cash that amounts to 3 years of expenses + current year to date. This will let us keep the returns going but also give us a sleep an night cushion in the short term and more fixed income in the long term if necessary.
I wasn't clear enough. 80/20 doesn't have 5 years of cash. It has 5 years of bonds instead of cash and they rebalance instead of doing some bucket system.

Is holding 70/30 with 3 years in cash any different than holding say (assuming 4% SWR) just say 60/40? At the start not really. But you end up having to make choices like when to spend and replenish those years of cash and over time hopefully your AA will get more aggressive (i.e. as the portfolio grows AA will trend up from 60/40 to 70/30 as your cash buffer shrinks as a percentage of portfolio value). In the end you are going to end up in roughly the same spot. Unfortunately keeping (or not keeping) a couple years of cash just doesn't help.

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

Post by blackholescion » Thu May 16, 2019 6:46 am

randomguy wrote:
Thu May 16, 2019 12:40 am
blackholescion wrote:
Tue May 14, 2019 10:51 am
randomguy wrote:
Sun Jan 27, 2019 1:36 pm
02nz wrote:
Sun Jan 27, 2019 12:49 pm
staycalm wrote:
Sun Dec 23, 2018 2:43 pm
2. I'm feeling comfortable holding 3 years spending in Cash to be used for spending during down markets. The longest bear market was 2.8 years.
Not clear exactly how they define the length of a bear market, but keep in mind that just because a bear market is over in 2.8 years doesn't mean that your equities have recovered to pre-bear values, merely that it's bottomed out and started to recover. Depending on when you bought, you may have a lot longer to go before being able to sell at a profit. From the Oct 2007 peak to March 2009 bottom it was only about 1.5 years, but it was another 3 years (spring 2012) before the S&P 500 recovered to Oct 2007 levels (including returns from dividends).
Yes but the idea that you need to only sell when the market is at all time highs is a bit questionable. Selling at 10-20% off of peaks isn't the end of the world. Being 100% stocks and having to sell when the market is off 30%+ for 3 years though is pretty bad.

In the end we are basically talking about some bucket system variation. Research has shown it does pretty much nothing to help portfolio surviability. If you hold say 80/20 (5 years in cash) or 100% stocks with 5 years in CDs, you end up in just about the same spot. Some times one approach does slightly better than the other but not by much. And holding more bonds/CDs doesn't change the numbers much either. Now this mental accounting might help you sleep better at night. Can't discount that.
80/20 would allow you to sell the 20 portion after your 5 years of cash have run out to continue riding out the storm for several more years. Unless you're saying the 20 is your cash, in which case, yes, that's identical but I wouldn't call it 80/20 vs 100/0 since the CDs in the 100/0 would be your 20. Then again, if we are taking a holistic approach, it's not an 80/20 + 5 years of cash, but more like 60/40, depending on how the cash bucket adds up as % of total portfolio.

When we get to retirement age, we are mulling a slightly more aggressive AA coupled with this cash reserve, using the cash in place of a more conservative AA. Something like 70/30 with cash that amounts to 3 years of expenses + current year to date. This will let us keep the returns going but also give us a sleep an night cushion in the short term and more fixed income in the long term if necessary.
I wasn't clear enough. 80/20 doesn't have 5 years of cash. It has 5 years of bonds instead of cash and they rebalance instead of doing some bucket system.

Is holding 70/30 with 3 years in cash any different than holding say (assuming 4% SWR) just say 60/40? At the start not really. But you end up having to make choices like when to spend and replenish those years of cash and over time hopefully your AA will get more aggressive (i.e. as the portfolio grows AA will trend up from 60/40 to 70/30 as your cash buffer shrinks as a percentage of portfolio value). In the end you are going to end up in roughly the same spot. Unfortunately keeping (or not keeping) a couple years of cash just doesn't help.
Stocks and bonds can go down at the same time and have before. Having the cash is a hedge against that so that you can weather a few years. You’re right that you have to make decisions on when to replenish in a crash scenario but you also have to make decisions on rebalancing vs keeping your money in the bonds. For example if you have 80/20 and withdrawal plus rebalance puts you at only having a few years (say...5?) worth of bond expenses left, you may consider not rebalancing in order to maximize your fixed income withdrawals that you need in the short term while markets are down. Hopefully an IPS takes care of both of these scenarios (and your new AA ha) and gives some clear guidelines (ex: if bond market is down 20%, use reserve funds else you can sell the bonds or don’t rebalance if only x years of bonds remaining and market down).

Cash may result in the same outcomes but I think it gives a lot of people some peace of mind in the case everything goes down all at once which isn’t unheard of.

alexfoo39
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Re: Staying the course

Post by alexfoo39 » Thu May 16, 2019 7:48 am

deltaneutral83 wrote:
Wed May 15, 2019 11:05 am
alexfoo39 wrote:
Wed May 15, 2019 9:16 am
why didn't I all in at dow 8500?
Because the Dow went to 6,600 in March 2009 before it bounced back and if you don't know how an additional 22% fall feels like after a prior massive fall, well....Several people who pulled the plug at 9k would have had fabulous and numerous opportunities to get back in below 7k and make a correct generational bet and allow themselves incredible choices today. Most didn't though. Dow raced by 10k by Thanksgiving 2009 and it really didn't stop much until later in Summer 2010. In fact, those that saw it race past 10k were delighted when it came back below 10k in the Summer of 2010 (during the World Cup I recall) and were given the chance to only have very small losses and learn the greatest lesson in market timing. But didn't take it because the pundits were saying Dow 4000 is next. Dow raced past 10k shortly thereafter for good. I just wouldn't have any money in the market I can't stomach to be halved for 5 years. 2009 recovery was actually pretty swift. Seemed like it was forever (especially if you lost your job) but it was less than 24 months that we were below 20% (11,360) off highs.
Looks like it really validates what's been preached over the forum for so many times, that one who got out of market never know when to get back in. And when they did, it's always higher than their initial price.

Thank you for sharing =) These memories are golden for young punter like me who have not seen a real recession. It should keep my ego and overconfidence in check.

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

Post by 272 Sheep » Thu May 16, 2019 8:00 am

Much like when expecting a Nor'easter.
Before it hits:
1. Go to store and buy goodies.
2. Pull down all the shades in the house.
3. Eat goodies during storm.
4. Storm over.
Why some of us weigh a little more than we should! :shock:
Carl W.

alexfoo39
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Re: Thank you all..this is what I am doing

Post by alexfoo39 » Thu May 16, 2019 8:02 am

Sheepdog wrote:
Fri Oct 10, 2008 1:32 pm
Thank you all so very much for talking to me. It helped being reminded what I have said in the past.
This is what I did and why. If I had followed the advice of many here, and sometimes myself, I would have kept 3 to 5 years of normal annual distribution for expenses in cash so that when times like this occur, I would not have to sell. I had mostly depleted my cash account last year. I had not kept it up. I just could not expect a 1929 type drop, not today.... So, I exchanged 3 years of our normal annual needs from my stock and bond funds to money market. This amount is 20% of our present IRA stock and bond investments. (It would have been a much less percentage a year ago....even a month ago.) This cash will remain in my IRAs and some will be pulled out monthly beginning in January. When the market improves I will replenish the cash account fully. I hate selling today, but I would have to sell some in January anyway and there is no way to expect things to improve by then, or even next year.
With luck I won't have to sell anymore stock or bond funds for three years.
Thanks again.
so....does sheepdog's theory suggest that we should have min 3 years expense in cash?

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Sheepdog
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Re: Thank you all..this is what I am doing

Post by Sheepdog » Thu May 16, 2019 9:02 am

alexfoo39 wrote:
Thu May 16, 2019 8:02 am
Sheepdog wrote:
Fri Oct 10, 2008 1:32 pm
Thank you all so very much for talking to me. It helped being reminded what I have said in the past.
This is what I did and why. If I had followed the advice of many here, and sometimes myself, I would have kept 3 to 5 years of normal annual distribution for expenses in cash so that when times like this occur, I would not have to sell. I had mostly depleted my cash account last year. I had not kept it up. I just could not expect a 1929 type drop, not today.... So, I exchanged 3 years of our normal annual needs from my stock and bond funds to money market. This amount is 20% of our present IRA stock and bond investments. (It would have been a much less percentage a year ago....even a month ago.) This cash will remain in my IRAs and some will be pulled out monthly beginning in January. When the market improves I will replenish the cash account fully. I hate selling today, but I would have to sell some in January anyway and there is no way to expect things to improve by then, or even next year.
With luck I won't have to sell anymore stock or bond funds for three years.
Thanks again.
so....does sheepdog's theory suggest that we should have min 3 years expense in cash?
also
willthrill81 wrote:
Thu May 16, 2019 12:03 am
Grundy53 wrote:
Wed May 15, 2019 11:56 pm
Great thread. It's a real eye opener. I was just getting started with my retirement savings. I was young and dumb so I wasn't investing much. Therefore I wasn't hurt too much by the recession other than overtime was all but stopped at my work. This thread definitely is a testament to the need to have 3-5 years of expenses outside of the market. Thank you for sharing your experiance during that troubling time.
3-5 years? Usually people recommend 3-6 months, maybe a year. If you had a 20% savings rate, it would take you 12 years to save 3 years of expenses at a 0% real return.
Note that I did NOT suggest that I would have in cash or cash equivalents, i.e. , money market, short term bond funds, CDs, etc. in an amount of at least 3 to 5 years of expenses, but 3 to 5 years worth of normal withdrawals from savings and investments. Normal withdrawals are considerably less than expenses. In addition to these withdrawals, expenses are also funded partially from Social Security, pensions, annuities, etc..

The goal for me, in retirement, is to not have to sell stocks or stock containing funds in a stock market downturn. (I was having to sell some stocks when this thread started.) You should realize that a 50% drop in stocks, S&P 500 for example, may take several years to return to the original evaluation. 3 to 5 years worth of normal withdrawals is not an excessive amount. For me 3 to 5 years of normal withdrawals is less than $90,000 to $120,000. Many investors here already keep- money markets, CDs, short term bond funds as part of their investment allocations. In a major downturn those "safe" investments are where I withdraw. Hopefully the stock market will fully recover in those years and then it would be safe to start withdrawing from them again.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

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

Post by dknightd » Thu May 16, 2019 9:20 am

I vaguely remember those years. I sold some stock when I thought things were getting frothy. Probably too early. Then the market tanked, and I put some money back into stocks. Again probably too early. I was disciplined. I never put back in at a level above what I took out. I only moved small amounts. I probably gained only small amounts.

I will be retiring in a few months. To me the market looks frothy, again.

I started taking out a year or two ago. Again too early, but small adjustments. This was part of my plan.
I'm 61. Will likely claim SS at 70. I'll take out some SPIA so that together with SS we'll be comfortable enough. My plan is to to move back to 50/50 over the next 9 years. Who knows what might happen. Not me . . .

xxd091
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by xxd091 » Thu May 16, 2019 11:56 am

I had been retired 5 years(62 years old) -fully Bogleheaded ie Global Index Trackers-40% Equities/60% Bonds and Cash
Thanks Jack!
In the Arabian Desert for 3 weeks over the critical period-no phones,newspapers etc
Came back to all sorts of horror stories but the immediate crisis had passed
Would I have left things alone-I like to think so but I was not tested
I did have my Portfolio set right so made no changes-all came right quite quickly
I am starting to keep more than a years expenses now in Cash-Brexit plus another Crash?
Sheepdog taught us a lot-so glad he made it
xxd091

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

Post by Leif » Thu May 16, 2019 12:09 pm

During the great recession Sheepdog was already in retirement. So bare that in mind when discussing how much cash to hold. During the 08-09 period I was feeling the stress and yet I still had a stable job. I wondered the stress of being in retirement at that time. That would step it up several notches (at least for me).

Partly due to this post I decided I would like to have a CD ladder to carry me from retirement to age 70 when my SS and RMDs start. This was also the time I decided to reduce my equity AA from 70% to 50% when entering retirement adding the proceeds to CDs. So it turns out my CD ladder is giving me more cash than I need. I'm using the excess to de-risk my tax deferred accounts, which will be subject to RMDs.

Thanks Sheepdog for sharing.

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

Post by Ben Mathew » Thu May 16, 2019 12:43 pm

Leif wrote:
Thu May 16, 2019 12:09 pm
During the great recession Sheepdog was already in retirement. So bare that in mind when discussing how much cash to hold. During the 08-09 period I was feeling the stress and yet I still had a stable job. I wondered the stress of being in retirement at that time. That would step it up several notches (at least for me).

Partly due to this post I decided I would like to have a CD ladder to carry me from retirement to age 70 when my SS and RMDs start. This was also the time I decided to reduce my equity AA from 70% to 50% when entering retirement adding the proceeds to CDs. So it turns out my CD ladder is giving me more cash than I need. I'm using the excess to de-risk my tax deferred accounts, which will be subject to RMDs.

Thanks Sheepdog for sharing.
The sentiments you expressed reminds me of the argument for adopting a lifecycle investing perspective--an underappreciated strategy that is usually misconstrued as overly aggressive, when in fact it reduces risk. The reason you felt safer than Sheepdog during the recession was that all your savings were not in your portfolio yet. You were only risking a part of your lifetime portfolio (the part that's already saved up), whereas in early retirement you would be risking the whole of your lifetime portfolio. A 100% stock allocation in early years might be equivalent to less than 50% stock allocation in early retirement. People should maintain an unusually high stock allocation (likely 100% stock in their 20s, and maybe their 30s as well, depending on risk tolerance) because they are not risking the whole of their portfolio. They can then switch to a lower than normal stock allocation in retirement. That would lead to less lifetime risk, and a greater sense of security as long as young people remember that large losses in their savings account is really only a small portion of their lifetime wealth.

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Re: Staying the course

Post by deltaneutral83 » Thu May 16, 2019 2:24 pm

alexfoo39 wrote:
Thu May 16, 2019 7:48 am
Looks like it really validates what's been preached over the forum for so many times, that one who got out of market never know when to get back in. And when they did, it's always higher than their initial price.

Thank you for sharing =) These memories are golden for young punter like me who have not seen a real recession. It should keep my ego and overconfidence in check.
If the nine week 20% fall that ended Christmas Eve gave you any heartache whatsoever I'd probably think about a substantial re allocation to bonds. The swings only get more magnified as your portfolio grows. You will see 20% swings probably twice every three years over a 40 year investing career and there will most assuredly be a 30-40% decline two or three times. No one can say for certain about the black swans of 50+ % as I think those are just too random to predict but I would bake that in to your risk tolerance for certain as much as you can mentally as I believe there's just no way to know what it feels like until you go through it. You put a 40% and a 50% decline back to back and that makes for a lost decade (2000-2009) and a lousy 19 year CAGR today (5.xx%).

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

Post by crossbow » Thu May 16, 2019 7:01 pm

What a great thread. This has got me thinking I should increase my emergency fund, and I will. I don't foresee any immediate need to convert investments to cash, but I will stop contributing to the taxable account for a while.

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