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

Post by abuss368 » Thu Sep 26, 2019 7:12 pm

No one knows what the future holds or what the crystal balls says!

The best investors can do is to buy lost cost and diversified funds and stay the course.

Tune out the noise!
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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

Post by Independent George » Thu Sep 26, 2019 7:55 pm

I really wish I kept better records of my finances back then, but really, it's much easier to keep detailed notes when your finances are in good shape. Having purchased my condo in June 2007, I was deep underwater by the end of 2008. At the trough, I remember going from a net worth of around 100k to -15k. Partly out of luck, and partly out of foresight, my situation was not nearly as bad as many experienced.

First, and most importantly, I stayed employed throughout the crash. I did take a major pay cut in 2010 or 2011 (I can't remember exactly which year it was - again, I wish I kept better records) which I only recently surpassed in nominal dollars (and am still slightly below according to CPI), but I stayed employed the entire time. I was extremely lucky in this.

Second, though I clearly overpaid for my condo (even now, it's worth about 25% less than what I paid for it), I didn't overbuy. I put down 20% and didn't overextend myself. I never missed a payment, and managed to stay in the black with only modest cuts to my monthly spending. I will chalk this one up to foresight - buying was a bad decision, but knowing how much I could afford to borrow was a good one.

Third, I never stopped saving or contributing to my retirement funds, even after I was down 50%. I had to cut my 401k contribution when my salary dipped, but even at my lowest point, I still contributed enough for my company match, and I still maximized my Roth IRA every year. It was also around then that I learned about the Bogleheads, and switched to a 4-fund Portfolio (3-fund plus REIT index). I went from 100% stocks to 90/10, as per my brand new IPS.

Twelve years later, my net worth stands at approximately $475k. I have both a 6-month emergency fund and some additional money set aside for some long-overdue renovations to the condo I bought at peak bubble 2007. The only change I made to my IPS was to revise my financial goals upwards; so far, it looks like I'm on track to reach my first financial milestone at age 45.

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Re: Re:

Post by Kevin M » Thu Sep 26, 2019 8:21 pm

X528 wrote:
Thu Sep 26, 2019 6:03 pm
Even with low bond yields, bond funds can still give decent returns.

The TSP F fund (total bond fund) is up +7.96% YTD.
In the short term, sure. Longer term, you're not going to make much more than the initial yield. All that 8% return did is "front load" the returns for the next 10 years, so the return over the next 10 years will be that much lower--unless you believe yields can go deeply negative, but that would just further front load the returns, and lower the expected returns going forward from there.

It cracks me up. Yields go down, and people post about all the money they've made recently in bonds (ignoring the lower expected returns going forward). Yields go up, and they post about all the money they'll make in the future in bonds due to the higher yields (ignoring the recent losses).

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

Post by spammagnet » Fri Sep 27, 2019 7:39 pm

Independent George wrote:
Thu Sep 26, 2019 7:55 pm
... I did take a major pay cut in 2010 or 2011 (I can't remember exactly which year it was - again, I wish I kept better records) which I only recently surpassed in nominal dollars (and am still slightly below according to CPI) ...
Your earnings history at My Social Security (SSA.gov) should provide some information on that topic, if interested.

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

Post by NearlyRetired » Sun Sep 29, 2019 7:16 am

xxd091 wrote:
Thu May 16, 2019 11:56 am
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
I have recently done something similar - well currently dis-invested a years worth of expenses, and kept in cash within the pension pot. Out of interest where did you place your expenses - is it in cash, or some other vehicle. I would be interested to know if there is somewhere better to place this money.
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Re: I can't believe I am thinking this [Panic and Survival 2008-09]

Post by BlueEars » Sun Sep 29, 2019 7:48 am

NearlyRetired wrote:
Sun Sep 29, 2019 7:16 am
xxd091 wrote:
Thu May 16, 2019 11:56 am
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
I have recently done something similar - well currently dis-invested a years worth of expenses, and kept in cash within the pension pot. Out of interest where did you place your expenses - is it in cash, or some other vehicle. I would be interested to know if there is somewhere better to place this money.
You might try short term bond funds like VFSUX. It is true that VFSUX went down somewhat in 2008 but over the years it nicely outperforms money market funds like VMMXX. Or you could opt for somewhat less volatility with short term bond index fund VBIRX.

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

Post by xxd091 » Sun Sep 29, 2019 11:28 am

This is cash for day to day expenses so Bonds not much use
I just bite the bullet and keep in a Bank Cash Savings Scheme-instant access-currently 1.4% tax free
I used to have I years expenses only for a long time but in current situation gone to 2 years expenses Brexit etc
Do I need this much? -very personal decision-this amount lets me sleep at night-about 5% of Portfolio
xxd09

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

Post by anon3838 » Sun Dec 22, 2019 1:40 pm

Whew...what a read.

Thank you, Sheepdog for starting this thread and being so honest, open, and humble. And especially, for the updates over the years...the more I read, the more I craved updates on your life, and how things are going. You'll never know the ripple of your generosity towards others.

I remember 2008 well. I stayed the course, but only because I had a major life event that required ALL of my attention.

I found this thread because I was thinking I should stash some cash to live on for 3-5 years instead of relying on drawing off my all-time-high portfolio. I was searching around to see how others plan for short-term living expenses in retirement, and stumbled upon this thread.

I'm planning to retire in the next year or two (I'm mid-40's)...this thread was all the confirmation bias I needed to take action on my cash savings plan before I will green-light my retirement.

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

Post by 1210sda » Sun Dec 22, 2019 2:50 pm

What an incredible history lesson. This was sort of like in "Back to the Future". It's particularly pertinent now that we are experiencing record markets.
1210

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

Post by vipertom1970 » Sun Dec 22, 2019 3:16 pm

wow, what an awesome thread and so many uplifting words from many wise people. All young and new investors should read this thread and learn to stay the course and mentally be prepared for it. Thanks God I did stay the course in the market at the time.
Last edited by vipertom1970 on Sun Dec 22, 2019 5:02 pm, edited 1 time in total.

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Re: Staying the course

Post by hightower » Sun Dec 22, 2019 4:27 pm

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.
Wow, this post is really telling. Hearing him talk about the actual numbers that were making people so nervous. Dow at 14k was the high point then? It reached 8500 on this particular day. It's over 28,000 now! I bet no one then would have believed that to be possible just 11 years later. Stay the course and keep on buying, all the way down, and all the way up. This proves it.

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Re:

Post by hightower » Sun Dec 22, 2019 4:31 pm

Raybo wrote:
Thu Oct 09, 2008 8:05 pm
I've been retired for 8 years and am only in my mid-50s. It is hard to watch years of expenses evaporate in one day, day after day. The only thing that makes this palatable is that I have several years expenses in cash or equivalents (Cash, CDs, or I-bonds). While I hate seeing my retirement pile ooze money, I know that I can hold on for several years before I have to even consider selling mutual funds.

I keep this much cash precisely for this reason.

Ray
This is also a good post to remember. This poster was hurting, but didn't feel the need to sell because he had held on to enough cash that he knew he didn't NEED to sell...yet. Wonder if he stayed the course. Still here Raybo?

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Re: Re:

Post by Raybo » Sat Jan 04, 2020 10:58 pm

hightower wrote:
Sun Dec 22, 2019 4:31 pm
Raybo wrote:
Thu Oct 09, 2008 8:05 pm
I've been retired for 8 years and am only in my mid-50s. It is hard to watch years of expenses evaporate in one day, day after day. The only thing that makes this palatable is that I have several years expenses in cash or equivalents (Cash, CDs, or I-bonds). While I hate seeing my retirement pile ooze money, I know that I can hold on for several years before I have to even consider selling mutual funds.

I keep this much cash precisely for this reason.

Ray
This is also a good post to remember. This poster was hurting, but didn't feel the need to sell because he had held on to enough cash that he knew he didn't NEED to sell...yet. Wonder if he stayed the course. Still here Raybo?
I am still here.

In fact, I am still tax gain harvesting from the profits I earned by buying on the way down. It was hard to do this, but the cash cushion allowed me to keep buying stocks without worrying about having to sell at a loss to fund my expenses. When the market turned around, I was in a good position to recapture my losses and then earn major gains.

This year, the gains I sold were about 70 cents on every dollar sold, or over triple of my lowest purchase price.

I should note that at the very bottom of the market, I could no longer rebalance and actually sold some stock to bolster my cash position. That bit of capitulation probably cost me $100K in profits!
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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

Post by jebmke » Sat Jan 04, 2020 11:32 pm

Raybo wrote:
Sat Jan 04, 2020 10:58 pm
In fact, I am still tax gain harvesting from the profits I earned by buying on the way down. It was hard to do this, but the cash cushion allowed me to keep buying stocks without worrying about having to sell at a loss to fund my expenses. When the market turned around, I was in a good position to recapture my losses and then earn major gains.
We were also in mid-50s, retired December, 2007 right before the bottom fell out. But had purposely glided our allocation to 40/60 - much lower equity than we needed to be -- for the express purpose of avoiding feeling nervous when the bottom eventually did fall out and failing to re-balance. I didn't want a down turn to become a distraction during early retirement. It worked. We actually increased our spending in 2009-10 on some home improvement and travel expense because the prices were do attractive.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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

Post by oken » Sun Jan 05, 2020 6:03 pm

Thank you sheepdog and everyone who posted.
Great read for someone who has not experienced the real thing before...

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

Post by Horton » Sun Jan 05, 2020 6:31 pm

jebmke wrote:
Sat Jan 04, 2020 11:32 pm
We were also in mid-50s, retired December, 2007 right before the bottom fell out. But had purposely glided our allocation to 40/60 - much lower equity than we needed to be -- for the express purpose of avoiding feeling nervous when the bottom eventually did fall out and failing to re-balance. I didn't want a down turn to become a distraction during early retirement. It worked. We actually increased our spending in 2009-10 on some home improvement and travel expense because the prices were do attractive.
Thanks for sharing. In a sense, it sounds like you developed your willingness to take risk in 2007 with a level of conservatism. That seems wise, and timely for us all.
🏃 since 2005

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

Post by Mactheriverrat » Sun Jan 05, 2020 9:10 pm

Great thread!

Sounds like millions of other 401-k holders that didn't have a idea other than to stay the course through the thin days of the great recession. I was one of them. I have since pared my 401-k holdings down to two funds.
TRLGX
PMEGX

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

Post by NearlyRetired » Mon Jan 06, 2020 10:35 am

jebmke wrote:
Sat Jan 04, 2020 11:32 pm
But had purposely glided our allocation to 40/60 - much lower equity than we needed to be -- for the express purpose of avoiding feeling nervous when the bottom eventually did fall out and failing to re-balance.
This was something that wasn't immediately obvious to me when I first started on this journey of educating myself with BH help. I just thought my portfolio would drop by 50% rather than 50% of the % invested in equities! Just stating the obvious (for me now) if it helps anyone else
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Re: I can't believe I am thinking this

Post by anakinskywalker » Sun Jan 12, 2020 2:12 pm

Sandtrap wrote:
Mon Oct 23, 2017 4:37 pm
Sheepdog wrote:
Mon Oct 23, 2017 12:27 pm
Sandtrap wrote:
Mon Oct 23, 2017 10:14 am

Short Term Investment Grade Bond Fund . . as in Vanguard VFSUX ?
Do you consider Vanguards money market, VMFXX to fit the category of "safe accounts"?

I'm not as versed in the practicalities of "fixed term" SPIA vs (forever with "mortality credits") non-fixed SPIA's
but I think that's another thread to post.
thanks,
j
Sandtrap,
My short term bond fund is (are) VFSTX and VFSUX (Admiral)

I'll make my comment on fixed term SPIAs rather than necessarily a new thread. I was taking monthly fixed amount withdrawals (occasionally more for a large expenditure). I decided to go to fixed term SPIAs (5 and 10 year) about age 80 to take care of that. They are not high interest earning, but neither are my "safe" savings. Since I was taking automatic monthly withdrawals from the "safe" investments anyway, for me these eliminated that need and these are automatic and safe. (And will simplify things for my wife when I can't handle things.) Actually, they are giving me more than I normally need, but I am and will be using that extra for some higher, not everyday needs, such as small vacations and not everyday dental/hearing/medical expenses, or just send them back to the investment pile (but that hasn't happened.). When they reach their full maturity in a couple of years, I may replace them with new fixed term policies. Meanwhile, my low stock allocation investments are still growing more than I am spending and giving away. :D
Appreciate your insight.
I take it that VFSTX (investor) makes up for the uneven, less than 50k, for VFSUX (admiral).
Question on the fixed term SPIA's. DW and I were looking at laddering in long term (till death) SPIA's but did not consider fixed term. Are there advantages to the fixed term SPIA's? And by 5 and 10 year do you mean duration of the SPIA's or period of time when they are laddered in?
Reason for asking is I have a substantial amount in "safe savings" and have been exploring ways to diversify within it as you have.
You have my attention.
Thanks for your help.
j :D
Sheepdog and others who have shared your thoughts here:

Would you consider VUSXX (Treasury money market) a place suitable for "safe savings"?

I'm trying to understand the need for SPIAs, bank CDs, etc which seem to increase complexity. Also, wouldn't there be significant credit risk with SPIAs?

Is there some risk I'm not seeing, to just putting the safe savings into VUSXX in one's Vanguard mutual fund account (not brokerage) and being done with it? (With no brokerage risks, there should be no SIPC insurance limits to worry about)

Thanks for your insights.

Anakin

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Re: I can't believe I am thinking this

Post by Sandtrap » Sun Jan 12, 2020 4:54 pm

ooops. :oops:
Last edited by Sandtrap on Sun Jan 12, 2020 4:57 pm, edited 1 time in total.
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Re: I can't believe I am thinking this

Post by Sandtrap » Sun Jan 12, 2020 4:57 pm

anakinskywalker wrote:
Sun Jan 12, 2020 2:12 pm
Sandtrap wrote:
Mon Oct 23, 2017 4:37 pm
Sheepdog wrote:
Mon Oct 23, 2017 12:27 pm
Sandtrap wrote:
Mon Oct 23, 2017 10:14 am

Short Term Investment Grade Bond Fund . . as in Vanguard VFSUX ?
Do you consider Vanguards money market, VMFXX to fit the category of "safe accounts"?

I'm not as versed in the practicalities of "fixed term" SPIA vs (forever with "mortality credits") non-fixed SPIA's
but I think that's another thread to post.
thanks,
j
Sandtrap,
My short term bond fund is (are) VFSTX and VFSUX (Admiral)

I'll make my comment on fixed term SPIAs rather than necessarily a new thread. I was taking monthly fixed amount withdrawals (occasionally more for a large expenditure). I decided to go to fixed term SPIAs (5 and 10 year) about age 80 to take care of that. They are not high interest earning, but neither are my "safe" savings. Since I was taking automatic monthly withdrawals from the "safe" investments anyway, for me these eliminated that need and these are automatic and safe. (And will simplify things for my wife when I can't handle things.) Actually, they are giving me more than I normally need, but I am and will be using that extra for some higher, not everyday needs, such as small vacations and not everyday dental/hearing/medical expenses, or just send them back to the investment pile (but that hasn't happened.). When they reach their full maturity in a couple of years, I may replace them with new fixed term policies. Meanwhile, my low stock allocation investments are still growing more than I am spending and giving away. :D
Appreciate your insight.
I take it that VFSTX (investor) makes up for the uneven, less than 50k, for VFSUX (admiral).
Question on the fixed term SPIA's. DW and I were looking at laddering in long term (till death) SPIA's but did not consider fixed term. Are there advantages to the fixed term SPIA's? And by 5 and 10 year do you mean duration of the SPIA's or period of time when they are laddered in?
Reason for asking is I have a substantial amount in "safe savings" and have been exploring ways to diversify within it as you have.
You have my attention.
Thanks for your help.
j :D
Sheepdog and others who have shared your thoughts here:

Would you consider VUSXX (Treasury money market) a place suitable for "safe savings"?

I'm trying to understand the need for SPIAs, bank CDs, etc which seem to increase complexity. Also, wouldn't there be significant credit risk with SPIAs?

Is there some risk I'm not seeing, to just putting the safe savings into VUSXX in one's Vanguard mutual fund account (not brokerage) and being done with it? (With no brokerage risks, there should be no SIPC insurance limits to worry about)

Thanks for your insights.

Anakin
Think of the various financial instruments as a toolbox with something in it for each need that arises.
And, that's different for everyone.
The variables being; age, size of assets, size and diversity of income streams, debt level, etc.
So, "complexity" is a relative term. What is complex to one person is not really if it addresses all his financial needs.
On the other hand, there's a point where things are made more complex than they need to be.

That said, there's a role for SPIA's, Treasury Money Market (I use for short term), CD's and CD ladders.

"Safe Savings" are emergency funds, short term funds (3-5 years), etc.
They can be put where there is:
1. Security of Principal
2. Liquidity
3. Accessibility.

I think, at present, FDIC insurance is $250,000 per account and per beneficiary. So, for example, if one had a trust account with 4 beneficiaries, that's 1 million. Also, if a brokered CD ladder, then $250k per institution/per CD. So, one can easily have $5 million over several brokerage accounts and have things FDIC insured. Depends on the setup.

You mentioned, why not put all of your "safe savings" in a treasury money market. Yes. Why not. If it is "safe savings" as defined above.

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

Post by sport » Sun Jan 12, 2020 5:00 pm

Sandtrap wrote:
Sun Jan 12, 2020 4:57 pm
Also, if a brokered CD ladder, then $250k per institution/per CD.
Are you sure about this? My understanding is that all the CDs at a given bank would be combined for FDIC insurance purposes, even if some of the CDs are at another broker or are direct CDs.

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Re: I can't believe I am thinking this

Post by smectym » Sun Jan 12, 2020 8:58 pm

Appreciate your insight.
I take it that VFSTX (investor) makes up for the uneven, less than 50k, for VFSUX (admiral).
>>>>>Question on the fixed term SPIA's. DW and I were looking at laddering in long term (till death) SPIA's but did not consider fixed term. Are there >>>>>advantages to the fixed term SPIA's? And by 5 and 10 year do you mean duration of the SPIA's or period of time when they are laddered in?
Reason for asking is I have a substantial amount in "safe savings" and have been exploring ways to diversify within it as you have.
You have my attention.
Thanks for your help.

Just pitching in on fixed term SPIA vs. life: fixed term can be appropriate if the annuitant needs more money per month than a life SPIA would provide, but only for a fixed term of years.

A classic example would be, Joe retires at 60. Joe plans to start SS at 70. Joe funds a 10-year SPIA to bridge the gap. For the same capital outlay, the monthly income for the 10-year product of course will be much higher than if a 60-year-old takes a life SPIA.

You can always argue against the SPIA by suggesting the investor instead just leave the money in taxable to let it grow as the market grows, and take withdrawals as needed. Maybe. But the SPIA is a risk-shifting mechanism. Some investors want to off-load some of the risk. These same investors may have additional assets exposed to the risk markets.

It's a tool we have used successfully. We still are taking plenty of risk with other assets, but the predictable monthly checks coming does reduce overall market-related stress. In fact, derisking in some aspects of the portfolio can make the investor more comfortable with taking more risk elsewhere in the portfolio.

As the annuitant gets older, taking the fixed term makes less and less sense. Eventually, the insurance company will pay you more per month on a life SPIA than 10-year guaranteed. Can you guess why?

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

Post by MadHungarian » Mon Jan 13, 2020 2:41 am

Don't scare me like this! For some reason i hadn't seen this thread before -- saw it & clicked on it for the first time today and read the OP's first post there without noticing the date. Then had to go check the market, saw everything was fine, and eventually noticed the OP date. Got my heart rate up for a minute there though...

Let's see, back in 2008-9, i was doing the same investment plan as today -- Vanguard total market index funds, auto investments, auto rebalancing.
Yes, my portfolio dropped by 40% for awhile, but I just ignored things for a couple years, didn't make any changes, and when i looked at it again a couple years later, everything had recovered fine, and the auto investing/balancing had even give me a nice little cherry on the cake as well.

Of course i'm a little older now and much closer to retirement, so i can't be so cavalier now as i was back when retirement was some distant undefined future event. So i've been slowly & gradually increasing my bond percentage. Despite the pain of the low bond rates. Sometimes i'm tempted to just drop everything into Vanguard Balanced Index and call it a day. Probably should've just done that 20+ years ago actually, but i don't think i could've handled the boredom.

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

Post by Kevin M » Mon Jan 13, 2020 8:19 pm

sport wrote:
Sun Jan 12, 2020 5:00 pm
Sandtrap wrote:
Sun Jan 12, 2020 4:57 pm
Also, if a brokered CD ladder, then $250k per institution/per CD.
Are you sure about this? My understanding is that all the CDs at a given bank would be combined for FDIC insurance purposes, even if some of the CDs are at another broker or are direct CDs.
You are correct. What broker you hold a CD at has nothing to do with FDIC insurance coverage.

However, I believe that the ownership category of the brokerage account applies to the FDIC coverage for the owner(s) and the bank that issued the CD. So for a single owner of a trust or TOD brokerage account with four beneficiaries, for example, the owner's brokered CDs for a particular bank would be combined with any trust or POD accounts that owner might hold directly at the bank, for a total of up to $1M coverage in the revocable trust ownership category at that bank for that owner.

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

Post by anakinskywalker » Mon Jan 13, 2020 10:06 pm

Thanks for the insights. Any pointers on how to buy SPIAs (can one buy them in a regular brokerage account) and some good recommended issuers, and any pointers on what financial health metrics to look for and where, would be much appreciated.

For example: for bank CDs all one needs to do is verify the bank's insurance on the FDIC website. What's the analogous set of checks to verify safety of SPIAs?

Many thanks,
Anakin

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