Author Topic: How did you fare during the 2000/2008 stock crashes? Regale this stocks noob  (Read 21774 times)

shanghaiMMM

  • Stubble
  • **
  • Posts: 171
Morning all,

I was looking at my index funds this morning. I started them around 6 months ago I guess and they've been up and down and currently are up a whopping 1.5% or so. So far I obviously haven't been in long enough to have any big gains or painful losses.

This got me wondering. If a big crash were to happen next week and say, and my stocks went down 40%, my reaction would be unknown. Obviously I'd stick with them if I listened to my head.

Anyway, I was thinking many people on here have probably experienced the dot com bubble and the 2008 crash (and past crashes too!) - I was wondering if anyone had any tales they would like to share about dramatic losses and the subsequent gains... did anyone make a killing buying cheap stocks? Did anyone do anything daft and sell low? Did seeing your net worth plummet and the uncertainty cause much mental anguish?
 
Very curious about the emotional ride a crash might send people on!

MDM

  • Walrus Stache
  • *******
  • Posts: 9730
Wished I had free cash but it was pretty much all invested so I left things alone.  Kept investing with salary cash flow but otherwise rode the dip down and then back up.

See also http://forum.mrmoneymustache.com/investor-alley/how-did-you-react-to-the-2008-09-stock-crash/

nereo

  • Senior Mustachian
  • ********
  • Posts: 11130
  • Location: Just south of Canada
    • Here's how you can support science today:
Ok - so here was my experience.

I got my first real "job" and started avidly plugging money into my index fund in 2004.  I had a few good years until BAM!...  the bottom dropped out.  Suddenly, despite 5 years of constant and un-interrupted automatic contributions, I now had less than I had put in. several thousand $ less, which was a lot for someone in a fairly low income job who was also in grad school at the time.

But I did the smartest thing I have ever done (financially) and I stayed the course.  I got a raise and I kept my plan for continuously increasing my monthly contributions.  In 2009 I invested more money than I ever had before, and in 2010 I invested even more than that.

Now I look back and I can scarcely believe that I got to buy shares of my index fund - an SP500 index - when it was sitting below 800. Unbelievable. 

Today, by simply dollar-cost-averaging (DCA) and steadingly increasing my savings that crash was the best thing that could have happened to my portfolio.  But it did take some will-power to stay the course.
good luck
« Last Edit: January 22, 2015, 04:40:06 PM by nereo »

shanghaiMMM

  • Stubble
  • **
  • Posts: 171
Thanks for the link MDM - I'll be sure to have a look.

Nereo - Good for you for sticking it out. Hopefully I'll be able to look back in 10 years and say 'Ah, I remember when I bought into S&P 500 at only 2000!'

ysette9

  • Walrus Stache
  • *******
  • Posts: 5704
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
I was young engineer just plugging away and making weekly contributions to my 401(k) without reallyunderstanding what this investing thing was all about. I distinctly remember looking at my statement and seeing that after contributing close to the max, my balance was the same as it had been a year earlier. It sure was fun to watch the ride up in subsequent years though!

deborah

  • Walrus Stache
  • *******
  • Posts: 8946
  • Location: Australia or another awesome area
Due to the way things worked I got out in 2007 and put my money back in in 2010. Wasn't like I tried to avoid the crash, it just happened that way.

surfhb

  • Guest
I was young engineer just plugging away and making weekly contributions to my 401(k) without reallyunderstanding what this investing thing was all about. I distinctly remember looking at my statement and seeing that after contributing close to the max, my balance was the same as it had been a year earlier. It sure was fun to watch the ride up in subsequent years though!

Me too.    I was basically clueless about investing and just didnt care at the time.   I was too busy spending all my money on needless crap.

My parents lost everything I'm afraid since they freaked and sold at the bottom.    It taught me a huge lesson in life.

Its nice to know Ive figured it out after reading the Boglehead Wiki and a couple books on their reading list.         

surfhb

  • Guest
Due to the way things worked I got out in 2007 and put my money back in in 2010. Wasn't like I tried to avoid the crash, it just happened that way.

Wow! Good for you!  :)

h2ogal

  • Stubble
  • **
  • Posts: 232
  • Location: FingerLakes
This was my balance each Jan since 2006
2006      115465
2007      157164
2008      151000 - left old job - options also underwater - lost them - downturn also
2009      103834 - at one point even lower like 70K
2010      161963
2011      200238
2012      227610
2013      301356
2014      413847
2015      510000

During the downturn I watched it tank but held and bought at sale prices.  When it dipped below 80K I closed my eyes and didn't look for several months.  Since I was working as an IT PM working for big bank at the time, I also had my hours cut due to budget cutbacks.  Kept investing in S+P 500 index, maxing out 401K as much as job rules would let me.  Really enjoyed watching the rise. 

Rural

  • Magnum Stache
  • ******
  • Posts: 4860
"Somebody told us Wall Street fell / We were so poor that we couldn't tell."


In the 2000 crash, anyway.

NinetyFour

  • Walrus Stache
  • *******
  • Posts: 6653
  • Location: Southwestern US
I didn't have any choice (and I'm glad), as my employer sets the amount we contribute to our 401a.  So, month in, month out, 19.4% of my salary was invested.  I didn't look at my accounts for many months after either crash.

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Be careful. Most people end up selling. This is a self-selected bunch. Discipline is extremely hard. It's very easy to feel like you have iron discipline in a bull market.

SaintM

  • Guest
Two morals to these stories:

1. If you want to buy more of something, you want the price to stay low. Who wants to see gas at $4 /gal? This concept goes for dollar cost averaging, dividend reinvestment, and even occasional stock buyers.

2. Crashes are very profitable for those with strong hands or those that don't pay attention (yet have investing on autopilot). The weak hands will sell, thinking the are cutting their losses, to the strong hands. Out of the game and missing the rebound, the weak hands complain about manipulation, greed, the Wall Street casino, etc.

ToeInTheWater

  • Stubble
  • **
  • Posts: 138
  • Location: Central Indiana
we've always taken the long view on what we have in stocks.  didn't panic out of the market, just stayed the course. 

through the 2000 fall (age 40), we pretty much held even for a couple years.  we weren't much in tech - which took the bigger fall - more broad based funds, so what we were adding (ours + company match) was offsetting the fall

our net worth then peaked in May-08, and over the next 10 months (Mar-09) dropped by over 30%.  again, stayed the course
we'd recovered what we'd lost by Dec-09. 

we're now appr 3x that amount in net worth (lots of gains + lots of savings/company matching)

and while i watch this "closely" - it's more of a monthly update than a daily look at the mkt and trying to out guess where it's going next.

and fwiw, i'm in the "index fund" camp

b

shanghaiMMM

  • Stubble
  • **
  • Posts: 171
Thanks for the stories.

I quite like the 'stick my head in the sand and not look for months' approach. There was a mini-correction recently and my UK based index fund went down 8-10% in a week (I'm British). I was checking rather obsessively during that time. A New Year's Resolution is to cut back on the amount of checking I do!

johnny847

  • Magnum Stache
  • ******
  • Posts: 3196
    • My Blog
This got me wondering. If a big crash were to happen next week and say, and my stocks went down 40%, my reaction would be unknown. Obviously I'd stick with them if I listened to my head.
This is why Bogleheads advocate writing an IPS (investment policy statement).  http://www.bogleheads.org/wiki/Investment_policy_statement
You should write one with a cool head before a market crash, and follow it to the letter during and after a market crash.

wtjbatman

  • Handlebar Stache
  • *****
  • Posts: 1313
  • Age: 36
  • Location: Missouri
Be careful. Most people end up selling. This is a self-selected bunch. Discipline is extremely hard. It's very easy to feel like you have iron discipline in a bull market.

Classic bearish talk.

choppingwood

  • Pencil Stache
  • ****
  • Posts: 531
In 2000, I has just moved funds out of my defined pension plan, because I didn't trust the employer. Left things alone, and kept buying when my income allowed monthly investments. Always had a percentage in a bond index fund, so that my losses weren't as big as many (and my gains not as big). It all came back and kept growing.

I moved some of the money out of the funds I got from the defined pension plan and bought a house. It has saved me twice as much rent as the defined benefit plan would ever have paid, as well as some investment earnings along the way.

Lots of friends sold in a panic in 2008, and realized their losses. The first round, it took nerves of steel to leave it where it was. Now I know that works. As does some basic diversification.

The only investment I hung onto far too long was a technology index fund that tanked when Nortel crashed, and crashed and crashed. I just couldn't believe a technology fund couldn't come back and make money.
« Last Edit: January 23, 2015, 08:22:44 AM by choppingwood »

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Be careful. Most people end up selling. This is a self-selected bunch. Discipline is extremely hard. It's very easy to feel like you have iron discipline in a bull market.

Classic bearish talk.

I'm about 100% net long in stocks and have been for some time. But I'm realistic about most people's ability to do this. Look at the Bogleheads forum in 2008-2009. These were people who had been talking the talk for many years. But when it came time to walk the walk, many couldn't do it. Some could. But a sizable portion could not, despite previously thinking they could.

In bull markets, everyone thinks they can. But history, which is the best evidence, not some ideal in your mind, shows that only some portion of the population can.

TreeTired

  • Bristles
  • ***
  • Posts: 451
  • Age: 135
  • Location: North Carolina
  • I think we can make it
In 1987 I had just started investing.   I had $10k in the Vanguard Index 500 mutual fund!   I had another 10K in a much riskier offshore fund.  I liquidated both right after the crash,  took my losses and stayed in Tbills for the next 10 years.   I got back into the stock market.... yep, in the late 90s,  and then things started to go down.   I had among other investments,  a chunk in Janus 20 mutual fund and the other in a Vanguard index value fund.  Strangely, both were going down at the same rate.  At some point  - probably near the lows -  I said to myself,  "Self, what are you going to do, watch this stuff go to zero?"   So I sold those 2 funds which were most of my stock holdings outside of retirement accounts.  I had $3000 of carryover losses to deduct every year for the next 10 years.  So after those two disasters I built a diversified portfolio a little bit tilted towards fixed income,  maybe 30%,  and too much cash,  but I was determined to ride out the next storm,  which I did in 2008/2009.   I watched my portfolio value shrink dramatically but I didn't panic sell anything, even though I had recently stopped working.  I slowly added some dividend paying stocks on the way up and now 8 years after my last job I am in pretty good shape!

Daisy

  • Handlebar Stache
  • *****
  • Posts: 2141
I was in an investment club with fellow engineers in the 90s. We all thought we were so smart picking stocks to invest in and doing well. Well, almost anyone could have done well during that time. We disbanded towards the end of the decade because people were moving away and our returns started to suck...but can't remember if it was pre or post crash. I invested my own money in some individual stocks and had some great winners and some great losers as well.

Then, I switched jobs in 2008 so I rolled over my 401k to an IRA right about that time. I wasn't keeping great records, so I don't know if I saved myself some losses by "selling" in the summer/fall of 2008, but I probably did (by accident). I then remember being really scared of what to do with the money after that.

I put a lot into international investments that did well for a few years and have stalled in the past few. I'm holding on to those now for a rebound. I've learned it's all cyclical so I don't want to sell on the downside. Man, a few years ago I thought I was really ready for FIRE and then that hit.

It teaches me to not be too cocky about my net worth as the downshifts always happen after a good bull run.

aspiringnomad

  • Pencil Stache
  • ****
  • Posts: 828
I lucked out in that I didn't have much invested in 2008 and between upping my 401k contributions after the crash and stock picking (silly I know), I did very well in the aftermath and recent run up.

Speaking of which, it is genuinely wonderful that we can reminisce with smiles and healthy retirement accounts so soon after. Because the shock that hit the US economy in late 2008 was stronger than the shock that caused the Great Depression. If not for the decisions made in the aftermath, the result probably would have been similar or worse (this is a nonpartisan assertion, or perhaps bipartisan, because those fortuitous decisions cut across party lines).

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
I lucked out in that I didn't have much invested in 2008 and between upping my 401k contributions after the crash and stock picking (silly I know), I did very well in the aftermath and recent run up.

Speaking of which, it is genuinely wonderful that we can reminisce with smiles and healthy retirement accounts so soon after. Because the shock that hit the US economy in late 2008 was stronger than the shock that caused the Great Depression. If not for the decisions made in the aftermath, the result probably would have been similar or worse (this is a nonpartisan assertion, or perhaps bipartisan, because those fortuitous decisions cut across party lines).

In hindsight, everyone is wishing they had been more aggressive in taking advantage of that "obvious" opportunity, but from the viewpoint of that time, the entire nature of the financial system was in question. You had people like Bill Gross telling their wives to take out $10,000 in cash from their bank accounts just in case.

Everyone these days is saying they wish there was another big drop like that so that they can take advantage, but they need to realize that if a drop were to be that big, it would also likely look system-threatening at that moment.

I'm not saying it's not the right course of action to be a disciplined, long-term investor that takes advantage of these temporary fluctuations. It's obviously the best course of action. But it's not as easy to do as it seems to be at this moment in time.

nereo

  • Senior Mustachian
  • ********
  • Posts: 11130
  • Location: Just south of Canada
    • Here's how you can support science today:
I quite like the 'stick my head in the sand and not look for months' approach. There was a mini-correction recently and my UK based index fund went down 8-10% in a week (I'm British). I was checking rather obsessively during that time. A New Year's Resolution is to cut back on the amount of checking I do!

Food for thought:  Most people will say their time-frame for retirement funds is measured in decades.  Companies only report their earnings quarterly.  So why the hell do people obsessively check their balances daily (if not hourly)? 

I'd argue that >99% of people would be best served if they put contributions on auto-pilot and checked their portolios no more than 4 times a year.  But human nature makes this almost impossible to do. Ironically, if everyone did this we'd have less severe crashes and less ridiculous run-ups. 

TN_Steve

  • Bristles
  • ***
  • Posts: 257
  • Age: 59
  • Location: fly-over country
TreeTired's post is thought provoking and well worth pondering.  His/her experience in 1987 (when Dow went down 22% in a single day) and 2000 is not unusual.  Luckily s/he learned from the experience; many don't, and TreeTired should be applauded.  Someone else mentioned the Boglehead Investment Policy Statement; that is probably worth considering for those who haven't lived TreeTired's experience.

Our story is different.  We were 100% equities (save for cash-type account between owning two houses and a very small emergency fund) from 1984 through 2013.  From the beginning, we've been shooting for a fancy-pants retirement, so we didn't even think about pulling money out.  Blindered, I suppose--or maybe too dumb for our own good?  Feels really strange to be putting money into non-equity funds now, but a drop of the type we are discussing would hurt much more now than they did at the time....


Caoineag

  • Pencil Stache
  • ****
  • Posts: 534
  • Age: 38
  • Location: Denver
    • My Journal
I got to experience the 2008-2009 roller coaster. I remember watching for nearly a year every contribution was instantly of less value the day after putting it in. So I definitely watched it drop. I didn't have much to invest at the time but kept trying to add as much as I could because I figured I would benefit in the long run. I purposely watched as I "lost" money because I was testing how aggressive an investor I was. I believe 2/3 of my main account during that period ended up being market gains so I definitely benefited from buying low. Now I am just on autopilot because I am reaching the limits of my tax advantaged space and starting on taxable.

I would like to see how I react to the next drop though, I have a lot more at stake this time. Once the next drop is over, I may decide on a less aggressive AA.

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3532
  • Age: 36
  • Location: Madison Heights, Michigan
I remember being quite amused as everything plunged.  I got my first engineering job in October 2006.  I spent the first year to year and a half paying off my remaining student loans ($11k) and saving up to buy a car and house while living at home with my parents.  My 401k was pretty paltry at the time of the crash, as I was only putting in 20% of my starting salary (I thought 20% was pretty bad ass considering all the advice I got was to do 10%).  I felt a little disheartened watching my 401k balance essentially remain flat even as I was pumping in 20% of my salary.  I stopped watching it, and just went on auto pilot with the 20% until I found MMM.  I had no other retirement investments as I thought 20% in my 401k was more than sufficient. My coworkers were panicked though.  Many of them lost hundreds of thousands in their portfolios during the crash, and were constantly watching the markets and talking about it.  Everyday was a new record low.  I don't know if they sold, or held the course like me.

Looking back on it I wish I would have ramped up my savings to max out my contributions.  I would have made a killing and be much further along my path to FIRE.  Even though I held the course and did alright, it was still a huge missed opportunity.  I am hoping for another major crash in the next 7 years or so.

PathtoFIRE

  • Pencil Stache
  • ****
  • Posts: 681
  • Age: 40
  • Location: Dallas
DW and I started paying employment mid-2006, and set some automatic contributions to our 403(b)s and 457s, not much. We were in residency, and so just a tad distracted during the GFC of 2008-09, but we never considered withdrawing or altering our contributions, but neither did we think of increasing either. Basically, we were oblivious, which made holding the course easy. Fast forward to today, and our perspective is so much different. I am watching my accounts like a hawk (bad habit, I know), I understand what I'm investing in and not just picking what looks good on the summary prospectus of the account, we have a _lot_ more money exposed to the markets, and our monthly savings is far beyond what is was in those days.

So I do wonder how I will react to the next downturn. We are actually in the prime position right now for another large drop in the markets, as we are still several years away from FIRE and are essentially at our likely peak earnings, so I'm rooting for a drop every month even as I celebrate the gains. So I think we would handle a market pullback now. However, in about 3-5 years, I expect our perspective to again be very different, with twice as much exposure to the markets, on the eve of retirement, and dulled by what could be 10 years of no significant prior market losses. In that context, a drop would be much more painful, but hopefully we can all reassure each other that this too will pass.

BarkyardBQ

  • Pencil Stache
  • ****
  • Posts: 667
I took out 90% of my taxable portfolio, which is the only account I had, just after I lost my Lehman Bros holdings to get a down payment for a house. Recognized the housing market was about to pop, didn't buy the house, bought a 40k truck, it's paid off now, and will keep this forever.

Here's how my portfolio faired. What was left in the account, wasn't touched or looked at until April 2014 when I opened the 401k with my part time job, and started evaluating and researching wealth building for my new wife and future family. I logged in to find that what was there which was decently diversified had grown 66%. This fact alone is why I will never, ever, for the rest of my ever, take money out of any account unless it is the small portion required to fund our COL.

partgypsy

  • Magnum Stache
  • ******
  • Posts: 3535
Since I knew that a bust would be scary to me, I agreed to to let myself swing 10% (5% in either direction) my investments in common stocks from my goal amount, rather than pulling out money altogether. So when I was scared I dialed down, but never more than my lowest bound (55% stocks). And I tried to remind myself, I don't have control over which way stocks go, but I do have control in the amount of money I contribute to stocks. And yes it has rebounded and then some!   
It wasn't too hard to do as I don't have a huge amount invested yet and my horizon in far away. My idea when I am at retirement to have at least 40-50% in stocks. 

I got into this pretty late, but my great grandfather got interested in stocks and regularly bought blue chip stocks way before the average person did, and I believe he did quite well. I think each of his grandchildren when he died got around 40-50K in stocks. 

 
« Last Edit: January 23, 2015, 11:19:47 AM by partgypsy »

FarmFam

  • 5 O'Clock Shadow
  • *
  • Posts: 63
I have a question.  What if the down happened right before you were ready to retire?  From what I am reading, it seems that your diversification should be in safer options the closer you are to retirement.  Is this right?

I am asking because while it seems great to have a down while you are starting to put more money in, I am worried about a down right before retirement.  Or do you time your retirement for when the portfolio recovers from a down?

PathtoFIRE

  • Pencil Stache
  • ****
  • Posts: 681
  • Age: 40
  • Location: Dallas
I have a question.  What if the down happened right before you were ready to retire?  From what I am reading, it seems that your diversification should be in safer options the closer you are to retirement.  Is this right?

I am asking because while it seems great to have a down while you are starting to put more money in, I am worried about a down right before retirement.  Or do you time your retirement for when the portfolio recovers from a down?

Note, my opinion is based on soaking up early retirement advice and blogs, and not actual experience yet.

The trinity study, the fundamental study that helped spawn the 4% withdrawal rate and the increasing interest in retirement research, simply looked at the ratio of stash to needed expenses for the first year of retirement, and then adjusted expenses with inflation for every year after for 30 years. So that study didn't care whether your stash was up or down 10% or whatever in the prior year, it only mattered what is was when you started withdrawing. So if you retire during a dowturn, and your withdrawal rate is above 4%, then you had an increased rate of failure. However, even with withdrawal rate at 5, 6, or even 7%, many of the years in the past still suceeded in staying above $0 after 30 years.

So while we can't predict where the market will go or what point in the cycle we are actually in at the moment we retire, it would not be unreasonable to assume that after many years of positive gains, you are likely to see some negative years during your first 10 years of retirement, and those are the most important in determining whether your stash will last. So if you are able, maybe start off retirement with a little less spending, maybe stay at home or travel locally or cheaply, put off major renovations or expenses, etc. OTOH, you could just go ahead and spend your planned spend, even if it's 5%, and then reevaluate each year, and if subsequent years recover and show gains, you are probably good, and if not, maybe you should pull back a little.

Regarding safer options right before FIRE, that's the conventional wisdom, to increase the bond % as your approach and then achieve retirement, and it will certainly even out both the ups and downs. However, Wade Pfau and Michael Kitces, two of the more active researchers in this area, have an interesting study that shows the opposite, that retirement risk is decreased by what they call a Rising Equity Glide-path. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930
And here is Pfau's blog post about the same topic http://wpfau.blogspot.com/2013/09/reducing-retirement-risk-with-rising.html


JustPlainBill

  • Guest
Been investing since the very late 80's.  So I've been through the two "crashes" since then.  Markets go up, markets go down.  Sometimes enough in one day when I'd lose $10K or more (on paper) in a single day.  A good excuse to have more than a few beers.

But I ignored the noise, knowing that I had a few years ahead of me until I had to tap those dollars.  Every paycheck, a few more bucks in the 201(k).

Made a few bad calls moving dollars from one sector to another over the years, but since I've started socking money away 25 years ago I've averaged an 8.3% annual return.  I'm happy with that.

John Bogle once said, "Don't just do something, stand there".  The old coot was right.  Patience, and Intestinal Fortitude, will pay off in the long run.

Unless, of course, the Zombie Apocalypse actually happens. In which case, trade in your 101(k) for a Remington shotgun.

Best of luck to all in the long haul.

JPB
« Last Edit: January 23, 2015, 04:01:24 PM by JustPlainBill »

TN_Steve

  • Bristles
  • ***
  • Posts: 257
  • Age: 59
  • Location: fly-over country
I have a question.  What if the down happened right before you were ready to retire?  From what I am reading, it seems that your diversification should be in safer options the closer you are to retirement.  Is this right?

I am asking because while it seems great to have a down while you are starting to put more money in, I am worried about a down right before retirement.  Or do you time your retirement for when the portfolio recovers from a down?

This is "Sequence of Return risk" and is a huge topic in the planning/academic arena.  PathtoFIRE, in a nice responsive post, points to Wade Pfau, who is probably doing among the most cutting edge work here (and is a MMM fan, to a certain extent).  The common advice is precisely what you mention.  Bear in mind, however, that the advice is based on a strict SWR spending pattern, and never going back to work, no matter what.  Neither of those is applicable to early retirement people.

Speaking solely for myself, this is why I finally started putting $$ into nonequity accounts last year or two.  I'm old for this forum, and being 100% in equities less than 5 years before planning to retire can be dangerous. Nonetheless, neither DW nor I is thrilled with going this investment route; sort of like taking medicine, I guess.  :-)

someday

  • 5 O'Clock Shadow
  • *
  • Posts: 16
I had just began my first job out of college in 2007.  Under the guidance of my parents (and the fact that I lived at home to save money), I maxed out my 401k.

2007 contribution - $15,500
ending balance = $15,627

2008 contribution - $15,500
ending balance = $20,973 (loss of 77% when factoring in employer contribution)

At that age, there was nothing really to do except continue to max out my 401k.  My Roth IRA (had I known what I know now, it would be a Trad IRA) experienced roughly the same fate.   I remember having a convo with my dad when the DJIA was at 6,000.  I remember saying that it would be a smart move to push all in (I had a substantial down payment saved up) at that time because if you were to make a bet that the DJIA would be back above 10,000 within 10 years, would he take that bet.  The answer was yes, but of course at that time, the news every day was grimmer and grimmer and who knew what was going to happen.  Then came the fears of a double dip, continued high unemployment, continued foreclosures, etc etc.

The younger you are, the more you can shrug off the market dips because while the sum of money you have in the market may be relatively a large amount for you yourself, you know that you won't be touching that money for MANY MANY years to come, and plus the absolute amount you have invested really isn't that much in the grand scheme of things (sorry to burst your bubble if you think your $30k 401k is hot sh!t).

Remember that the biggest enemy to investing is yourself - the more you can remove yourself from the equation, the better you will do in the long run.

Catbert

  • Handlebar Stache
  • *****
  • Posts: 1732
  • Location: Southern California
I started investing in the stock market shortly after the 1987 crash because I knew theoretically it was a great time to invest.  The market bounced back pretty quickly which reinforced the notion of "staying the course".

Fast forward to the late 1990's.  Monthly swings in my portfolio were sometimes as much as I made in a yea.  Usually, but not always up.  Then 2000 and the swings were just as large, but mostly down.  Every month when I open the statement there would be 5 minutes of elation or despair.  And then I went on with my life and investing.

I retired in early 2009.  I was busy in the months leading up to retirement and barely noticed the "dip" in my investment accounts. I did harvest some losses for income tax purposes. The fact that the previous 2 "crashes" worked out fine helped me.       

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 720
I was in the midst of a divorce so neither of us touched yhe 401k which was to be divided. I did sleep a little bit better knowing it was invested in a balance of stocks and bonds.  It eventually rebounded nicely.

The next couple years I kept my new contributions to my IRA in cash, thinking I would buy stocks if the market crashed again. Missed out on a lot of gains there.

mozar

  • Magnum Stache
  • ******
  • Posts: 3065
I graduated in 2008 from grad school. I took the only job offered to  me. I was so clueless I actually turned downed their 401k! Lehman Brothers collapsed a month later and I literally understood nothing. I didn't know why everyone was freaking out or why so many people were losing their jobs. For the next 18 months I just focused on student loans. I was laid off in 2010 and took my severance to New Zealand for three months.
I got a job in the fall of 2010 at which point I started a 401k. I remember looking at it regularly and thinking wow, does it usually go up that fast? I couldn't invest more than the match because I was paying off my student loans. Once I paid those off I found MMM in in early 2014. And after paying off 135k in loans, and buying a house, my 401k of 30k is hot shit OK!

For me what helped me the most is that I have a relatively lucrative skill set, so recruiters kept calling me even in the pit of the recession. Part of why it took me so long to get a job is that I used to be that terrible of an interviewer.
From what I've read whether or not a country "bounces back" has a lot to do with fundamentals like immigration, demographics, debt etc. I try to follow Japan and Europe as well. The USA has relatively strong immigration, and a whole generation of millennials who haven't reached peak spending yet. We make really dumb mistakes (like allowing banks to trade sub-prime mortgages as "no risk" equities) but we will do crazy things to get our economy growing again. But eventually we will become a post growth society like Japan.

JetBlast

  • Bristles
  • ***
  • Posts: 342
At the beginning of 2008 I had about $6k in a rollover IRA from previous employers, which stayed invested and rode the whole roller coaster of crash and rebound. I was on first year pay at a regional airline (gross pay was $22k in 2008), trying to stash away whatever I could manage. January 2009 I got a big pay raise at my one year anniversary, along with now getting the company match to my 401k. Talk about lucky timing. I doubled my contributions and started getting the match near the bottom of the worst market crash since 1929.

One Noisy Cat

  • Stubble
  • **
  • Posts: 221
2008, 2000 and 1987 didn't frighten me into massive shifts, in fact I upped my percentage to S & P 500 fund in 2008.  Not very nice to see the Money Honey talk about 800 point drops in the Dow. You know the old saying that Wall Street pros know the market is at a top when taxi cab drivers are giving stock tips? In 2009 I knew the crash was over when "USA Today" quoted a 34 year old as money his money out of stocks and to a GIC.  Hope that individual learned.

    When I did get scared was in the early 1970s when I first got interested in stocks.  At the time the market and economy were expected to expand with the "peace dividend" from the end of the Vietnam War. Didn't happen and was too stupid to properly see the 1970s as a buying opportunity, so I stop after $150 purchase.

Capsu78

  • Pencil Stache
  • ****
  • Posts: 708
  • Location: Chicagoland
in 1987 I had been in my 401K for only 3 years, so the value was too small to understand what the fuss was- I let it ride.
Dec 2000- I'm in NY at a convention and see the new NASDAQ board for the first time.  Over the course of a 3 day stay, my investments go up 8%.  I said "wow, maybe I won't have to retire in a trailer with a vegatble garden"... That was my burning bush moment that said " pull back winnings now" . I didn't.
Aug 2007, at a Cubs game, on a rooftop shared with an ING customer appreciation party.  An ING guy strikes up a conversation and I wave him off- No financial talk today OK?  He says cool, mind if I just sit here and look like I am chatting you up?  Fine!  We go a few innings and I bring it up- Where do you have your Dads money right now?  He laughs and says "He does his own stuff- he is an advisor too!   He moved to all cash in June"   Another burning bush I didn't respond to.   By now our assets were more significant and the hit was deep...after the hit I stopped opening statements.  2 weeks after the crash, my "FA" who managed a portion of my assets calls to rub my shoulder and say looks bad now but we will be OK- just stay in the markets.  I asked why didn't he call 3 weeks ago and tell me he was keeping my powder dry...  He has no answer.  I stopped tracking statements until Jan 2010.  @009 too busy looking for a new position for my wife and customers for me.  Relieved my FA of responsibility last January.  Now we think that with most of the major life expenses behind us- educations, weddings, house paid off in another 18 month, we figure we are in for at least one more correction in between now and touching our retirement funds.  Will breath deep, pray TEOTWAWKI has not arrived and hopefully recover at least up to todays levels. 

morning owl

  • Stubble
  • **
  • Posts: 231
  • Location: Canada
I had a portfolio of stocks and bonds at the time that I picked over the years without really knowing what I was doing. I remember watching the stocks plummet to the point where my portfolio dropped around 20% as a whole, most of the fall coming from stocks, of course. I saw this and thought, that's it, I'm never investing in stocks again! Only bonds from here on in. I didn't know what to do, so stopped all investment purchasing.

As I watched the stocks go back up, I started to regain trust and bought a few more. Thankfully I didn't sell anything at the low point. But when things stabilized I decided to research and take investing more seriously. I came across dividend investing, and that approach made the most sense to me. With dividend growth stocks, dips in the market become a sale on dividend producing funds. The div rates are more appealing. And hopefully the monthly dividends will stay relatively constant through those times. In fact a test for buying div growth stocks for me is looking at the div history for that period. What did the company do with their dividends between 2008-2009? If they kept constant without cutting them, then this might be a relatively stable company to invest in.

Eta: it was a really scary time for me. It honestly felt like the world as we know it was coming to and end and that we'd be eating squirrel meat on an outdoor fire pit soon. Totally impossible to imagine beforehand. as solid as I may have thought my stomach was for investing, I really was losing my shit at that point. Very thankful that I stuck it out.
« Last Edit: January 24, 2015, 01:19:52 PM by morning owl »

John74

  • 5 O'Clock Shadow
  • *
  • Posts: 92
In 2008 we started to get spooked so we cut back on spending (no changes to investments though). That year was actually pretty good income-wise (our industry was not much impacted by the recession) and so, combined with lower spending, we were able to plow a lot more cash than usual into new investments. At the end of 2008, our net worth was only slightly down for the year. But all that buying was a great setup for the recovery that was to follow. Without the 2008/2009 stock crash we'd probably be much worse off.

NoraLenderbee

  • Handlebar Stache
  • *****
  • Posts: 1255
In 2000 I mostly ignored it and left my 401k alone. I lost some money in taxable investments, but I had a bond fund that did really well, so I didn't get too overwhelmed.

In 2008, I clenched my teeth, squeezed my eyes tightly shut, and bought a little. Couldn't bring myself to buy more.

I can tolerate a down market fairly well because I hate, hate, hate locking in losses.

lhamo

  • Walrus Stache
  • *******
  • Posts: 9972
  • Location: Seattle
In 2000 we had only recently started our first professional jobs (had been in grad school before that) and retirement investment.  We also had just bought our first individual stocks.  Those were a mixed bag.  I had WorldCom, and didn't sell when the troubles started.  Lost some on that.  But DH had Ebay, which we still have, and which has done well for us.  We have not bought any individual stocks since our initial purchases of around $20k in 1999-2000.    We were contributing monthly to our 403bs at that point, I don't think we were maxing, but just kept that up steadily and didn't worry much about the value going down.

We made out like bandits in the 2008 crash.  Didn't sell anything, and dumped a bunch of extra into the kids college funds as things were going down.  Bought an apartment in Beijing at the bottom of a market dip here in early 2009.  Once we knew what our mortgage was going to be, we upped our retirement investments to the max (could afford it then because kids were going to a cheaper school).  The timing was absolutely perfect for us -- we were plowing money into the accounts at the exact time when things were "on sale".  Didn't panic sell anything.  I started tracking daily net worth in October 2008 because I wanted to have a record of what happened, and am very glad I did.  I don't think I will ever panic sell.  I can see in black and white how the market fluctuates, and that it goes down and comes back up. 

Buy and hold, baby, buy and hold.  You can become very wealthy if you do.

mozar

  • Magnum Stache
  • ******
  • Posts: 3065
My uncle lost 250k picking IT stocks in 2000. Pets.com anybody?

mozar

  • Magnum Stache
  • ******
  • Posts: 3065
Well, at least it put him off stock picking and he only does index funds now.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 47
  • Location: Rice Lake, WI
I was given 10 shares of Yahoo for free way back when, and sold them at about $105 for a nice $1,050 profit before it tanked. Should have bought Apple shares with the profits... :D


I started investing serious money about 11 years ago, in a nice broad mix of mutual funds. I slowly converted to index funds over the years, and when the big drop came in 2008 I didn't watch my portfolio at all. I knew it was dropping roughly in line with the overall market, but I never once looked at how much I had "lost" or how much the value dropped. I just kept contributing as much as possible knowing my outlook was long term. My dad encouraged me to switch to silver, but thankfully I avoided most of that hype. I did purchase some with "spending money", but not really as an investment, just something to have.


Anyway, since I never sold or switched anything, I performed similar to the overall market. And since I was contributing every month, I picked some up during the low points as well. Unfortunately I had purchased a big house right before the crash, so I didn't have a dime extra to put in during the bottom, even though I knew it was a huge buying opportunity. Oh well... :)

clifp

  • Pencil Stache
  • ****
  • Posts: 540
I had been investing for about 5 years for my first crash in 1987. I got spooked and sold everything that weekend before the crash, unfortunately because of how mutual funds work got the lowest price in my Fidelity Magellan and other funds. I put the money back in that week, so no huge damage was done about 5%

I retired in 99  at 39 with 90% stock (heavily concentrated in Intel stock). By Jan 2000, I was sure that tech stocks were way overvalue so I sold all my tech stocks, and about 1/2 my Intel stock. I bought muni bonds and index funds.  I moved 2/3 of my IRA money in TIPs bonds which were at the time had real yield of almost 4%, making my AA a more sane 70/30.

The 2008 bear market pretty much took me by complete surprise, eventhough I knew the housing market was over valued. I just hadn't seen the connection between housing market and the stock market. Although one smart guy in the Early Retirement forum explained exactly what was happening in early 2008. I was smart enough to listen to what he was saying but not smart enough to act on it.

The only time I got scared was when the Congress rejected the first TARP program and the market melted down another 300 or so points.  I was never bearish but turned positively bullish, when Warren Buffet in Oct 2008 wrote and OP Ed in the NY Times telling people. to buy stocks. (Just FYI, if you had listened to Warren's relatively rare stock market calls over the last 40 years you'd have done very well or you could have just bought Berkshire Hathaway stock.) I was glued to CNBC and spent a lot time watching my Schwab account.  I sold a lot of stocks to take advantage of tax harvesting and bought a lot of others.   The market was falling so fast I ended up selling 3 batches of stocks and ETFs. On the Early Retirement forum in Dec 2008 with the Dow under 9,000 I predicted the Dow would hit 14,000 by Dec 31,2013. (turns out I was too bearish 16,500 by that date).   i had run out of cash so I wrote long terms puts (LEAPs) on stocks like Apple, and GE, people were so spooked they were willing to pay huge premiums for insurance against further market falls, so I sold them insurance.

I did cut spending during this period, because I really didn't want to go back to work. Mostly cutting out things like travel, and delaying all home improvement type stuff.

By Feb 2009, I totally run out of cash and discovered that would have some liquidity issues if the market didn't recover by Jan 2010 so I stopped trading. I still reminding pretty bullish and urges others even if they were not interesting in buying to at least not sell at those levels.

I am particularly proud of this post www.early-retirement.org/forums/f44/berkshire-hathaway-now-35239-5.html#post790278 I made a week before the market bottom in March 2009, explain why investment in Berkshire Hathaway was a good idea.
« Last Edit: January 24, 2015, 08:09:52 PM by clifp »

shanghaiMMM

  • Stubble
  • **
  • Posts: 171
Thanks for all the responses - I've read them all with interest. I guess it should come as no surprise that most on these forums held their nerve and didn't do anything daft when the markets plummeted (Or perhaps those who sold are not as eager to share their tales!).