Author Topic: How did you fare during the 2000/2008 stock crashes? Regale this stocks noob  (Read 21159 times)

aspiringnomad

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There is no immutable law of physics that US equities must increase in value over time. That's just what we've seen for as long as anyone here cares to consider. I think 2008 was a 100-year flood scenario. The very good news is that we had the political will and technocratic ability in the US to fight it (Europe was maybe not so fortunate, except to benefit from a surprisingly quick US rebound). The bad news is that I'm not so sure we could muster it all again if it struck in the near future, which brings me back to the extremely good news that it was a 100-year flood scenario and we survived it. I personally don't think we'll see anything like the shocks that hit our financial system in 2008 again in my lifetime...but I'm an optimist and I've been wrong before. And if I am, then cutting your losses and moving into cash probably won't help anyway.

clifp

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There is no immutable law of physics that US equities must increase in value over time. That's just what we've seen for as long as anyone here cares to consider. I think 2008 was a 100-year flood scenario. The very good news is that we had the political will and technocratic ability in the US to fight it (Europe was maybe not so fortunate, except to benefit from a surprisingly quick US rebound). The bad news is that I'm not so sure we could muster it all again if it struck in the near future, which brings me back to the extremely good news that it was a 100-year flood scenario and we survived it. I personally don't think we'll see anything like the shocks that hit our financial system in 2008 again in my lifetime...but I'm an optimist and I've been wrong before. And if I am, then cutting your losses and moving into cash probably won't help anyway.

I agree I don't expect to see that bad event in my lifetime, but then I'm over 50 and not counting on living to 100. Although the stock market crash was not nearly as bad as the Great Depression or even the panic of 1871.  The dividend cuts in the S&P were actually greater in 2009 than during the Great Depression.   The housing prices were actually much worse than the Great Depression in both the breadth basically the whole country and the severity in places like Florida, part of California, Nevada, and Arizona

chasesfish

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It hurt!  I started chunking money into my accounts in 2003 and at one point in 2009 I still had less money in the accounts than I had contributed.

I stayed the course and I started making "real" money in 2009, together with my wife getting a raise and we got up to a 50% savings rate.  The market has been very good to us since.

My only regret was I bought some conservative investments and was aggressively prepaying a mortgage when I should have just bought the S&P 500 fund and gone all in.


johnny847

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There is no immutable law of physics that US equities must increase in value over time. ..... And if I am, then cutting your losses and moving into cash probably won't help anyway.
The last part of your statement is part of the reason why people still invest. If the US stock market does crash hard, and never recover...we've all got worse problems to worry about than the fact that we just lost a significant portion of our net worth.

So I plan to keep investing in a crash. Of course, I say this without ever having money in the market before a crash, so you know, take it with a grain of salt (or maybe a bag of salt)

Daisy

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There is no immutable law of physics that US equities must increase in value over time. ..... And if I am, then cutting your losses and moving into cash probably won't help anyway.
The last part of your statement is part of the reason why people still invest. If the US stock market does crash hard, and never recover...we've all got worse problems to worry about than the fact that we just lost a significant portion of our net worth.

So I plan to keep investing in a crash. Of course, I say this without ever having money in the market before a crash, so you know, take it with a grain of salt (or maybe a bag of salt)

I agree. I used to think I needed to be prepared if TSRHTF (R is for really), but I've come to realize that if it's that bad it then won't be too bad because everyone else around me will be in the same (or worse) situation. The 2008 situation is the one that got me to be scared of the future, with all of the talk of systemic failure and all of that. But then I came to my senses.

Kind of like when I saw a documentary on people preparing for the apocalypse and I realized they were so weird that, if it ever came to that, I'd rather die in the apocalypse than survive with those people around.

frugalnacho

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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!).

They came to the conclusion that wall street is a giant casino and FIRE is just a pipe dream, so they are off enjoying 100% of their income rather than losing it all (when they panic and sell at a loss) in the next recession.  Maybe 120% of it if they are like most consumers.

iris lily

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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!).
I love that word "daft!"

In the 2008 meltdown we lost around 10 percent of our net worth. I was 54 years old and 55 had always been my number for FIRE. But that,s ok because we actually we're not nearly ready to retire.
I just kept Throwing money into investment accounts and didn't look at the value. DH and I occasionally, ruefully, moaned about the market, but we didn't,t change our behavior.

In the tech drop of 2000 we didn't have much in tech stocks because there wasn't much drop in our net worth..

In '87 I had no money in the market, but I remember that a boyfriend who was pretty sharp dude had pulled his out before the oct crash.
« Last Edit: January 27, 2015, 09:03:04 AM by iris lily »

Franklin

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In 2000 I had $500K in restricted stock.  After the lockup period ended it was worth $2k.  So a 99.6% loss of paper money.
In 2008 I lost 24% of my portfolio on paper. In 2009 I gained 85%.  So an average of +41% per year.

That's life on the street:)

catccc

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I started investing in 2003, and 2008 was like "meh."  It didn't faze me, really.  We had our first baby that year so maybe had other things to be thinking about.

slugline

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I managed to not panic and held through both 2001 and 2009. I suppose it was a good thing that most of my investable assets were tucked away in tax-deferred retirement accounts as that greatly reduced any temptation to tinker with them.

I have a couple of "rules" for these situations --
(1) If it's money I think I'll be tapping to spend in five years or less, it probably doesn't need to be exposed to the volatility of the stock market in the first place.
(2) Losses in down markets only become real if I panic and sell. Buy low, sell high.

Mr. Green

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My wife and I were only into our third year of investing (early 20's) when the crash of '08 happened. It seemed fairly obvious to me that it was coming so I had moved all my money to cash but I left my wife's account alone in case I was wrong. I experienced a 4% loss that year compared to her 26% loss.

Interestingly enough, we had so little funds invested at that point ($25,000 for me and $15,000 for her) that there is no difference in the current balance of our holdings as a percentage of what we have contributed over the years. For both of us, the value of our investments are worth ~50% more than the total amount we have invested.

johnny847

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My wife and I were only into our third year of investing (early 20's) when the crash of '08 happened. It seemed fairly obvious to me that it was coming so I had moved all my money to cash but I left my wife's account alone in case I was wrong. I experienced a 4% loss that year compared to her 26% loss.

Interestingly enough, we had so little funds invested at that point ($25,000 for me and $15,000 for her) that there is no difference in the current balance of our holdings as a percentage of what we have contributed over the years. For both of us, the value of our investments are worth ~50% more than the total amount we have invested.
When did you get back in the market?

shanghaiMMM

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In 2000 I had $500K in restricted stock.  After the lockup period ended it was worth $2k.  So a 99.6% loss of paper money.
In 2008 I lost 24% of my portfolio on paper. In 2009 I gained 85%.  So an average of +41% per year.

That's life on the street:)

Wow, what! 99.6% loss... I'm not really familiar with restricted stock... Did this loss not devastate your FIRE plans?

Allie

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We started really investing, not just saving to buy stuff, in 2005.  By 2007, we had a whole 30k in investments.  It felt like a whole lot of money.  But we had lots of debt from school.  Lots of money came in and lots of money went out.  It felt wrong. 

We decided to sell our house, downsize, and focus on paying off our debt.  We missed the last hurrah of the mid 2000s bull market and the big dip/housing crisis by shear luck. 

In 2009, we put the last high rate debt to bed and started piling our money into the market.  Our net worth has multipled over and over.  It feels so good...

We know a dip will come.  It is highly unlikely we will be lucky enough to sell off the assets that are going to tank right before it happens again.  I hope we will have the fortitude to stay the course and find the discounted investments and programs. 

Anyone else buy a fixer as the housing market crashed and then dance a jig of glee as program after program was announced to provide free home improvement money!?! 

MsRichLife

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It's rather a long story, and probably a cautionary tale. In the end, I learned some very expensive lessons. Here are some of my blog posts from late 2008.

https://livingmyrichlife.wordpress.com/2008/11/12/so-my-financial-advisor-called/

https://livingmyrichlife.wordpress.com/2008/11/16/my-stockholdings-look-sick/

I don't have the time right now, but if you are interested in more details I'm happy to share.

Miss Prim

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I had rebalanced my portfolio to add more bonds about a year before the crash of 2008.  I watched my holdings go down about 25%.  I read that stock funds dipped about 30-40%, so I came out a little bit ahead.  I remember a coworker panicking and he told me he was going to move everything over to some fixed account before he lost any more money.  I told him, please, please don't do that for your sake.  The stock market is not going to go to zero and you will recoup your losses if you hold on.  Right now they are just paper losses, but if you cash out they are real losses.  But he did it anyway.

Needless to say, I just kept investing at my usual 20% (Was not really planning for very early retirement, and didn't make enough to anyway), and my portfolio has more than doubled from what it was in 2007. 

I learned a lot over the years having just started putting money in a 403B in September of 1987, just to watch it drop in October!

You have to be in it for the long haul.                                                Miss Prim

Mr. Green

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My wife and I were only into our third year of investing (early 20's) when the crash of '08 happened. It seemed fairly obvious to me that it was coming so I had moved all my money to cash but I left my wife's account alone in case I was wrong. I experienced a 4% loss that year compared to her 26% loss.

Interestingly enough, we had so little funds invested at that point ($25,000 for me and $15,000 for her) that there is no difference in the current balance of our holdings as a percentage of what we have contributed over the years. For both of us, the value of our investments are worth ~50% more than the total amount we have invested.
When did you get back in the market?
I got back in in '09. Not right at the bottom but I caught it fairly early. Saw 15-20% gains in '09 and '10.

Franklin

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In 2000 I had $500K in restricted stock.  After the lockup period ended it was worth $2k.  So a 99.6% loss of paper money.
In 2008 I lost 24% of my portfolio on paper. In 2009 I gained 85%.  So an average of +41% per year.

That's life on the street:)

Wow, what! 99.6% loss... I'm not really familiar with restricted stock... Did this loss not devastate your FIRE plans?

No, I was clueless about FIRE in 2000. 

Restricted stock is similar to stock options but with certain restrictions.  It's sometimes given to insiders or officers as a form of compensation.  I received mine right before our IPO.  The restriction was that we had to hold the shares for a year after the IPO so that we don't try to flip our shares in the middle of our run-up.

luigi49

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I took my money out before the crash and put it back in when the market started going up.  My gain is 180%.  The buy and hold sometimes is dangerous.  This time it work but this is after the fed pump so much QE into the market.  4 QE plus 0 interest rate, TARP and the vehicle program.  2008 was a global recession.  Even warren buffet went on TV to appeal to the public (PSA)not to bet against america. 

eccdogg

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I honestly hardly noticed it.  I started investing in 2000 when I got my first job maxing out 401k, for a long time I could not even tell you how much was in there just that I knew it was accumulating on autopilot.  It probably helped that due to some chance that time period ended up being very good for me salary wise and I was a new father, so it was easier to shrug off.

hodedofome

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Charlie Munger has said if you can't handle losing 50% of your money twice in your lifetime, then you shouldn't be invested in stocks.

I learned so much in 2008, I'm glad I didn't have too much money at the time, but I still remember what losing half of it feels like. I decided I would learn how to invest in such a way that I would lessen the drawdown to something more emotionally manageable to me. I can't control my returns, but I can control my risk.

MsRichLife

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Yep...losing 50% of a large portfolio is extremely painful. I know know what it feels like and I know I won't do it again. I set stop losses of 25% on my 'growth' holdings now.

The Guru

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My story's a little different, but hopefully instructive nonetheless:

After years of investing in safer investments like CDs and bond funds I decided to take the plunge into stock mutual funds. At the end of the first month I was up 10%. Cool, thought I.

At the end of the second month I was up another 10% and thinking, shoot- this is EASY!

At the end of month 3 I'm up another 5%- 25% total in 3 months- and thinking, I should have done this years ago!

That was in October 1987. One bad day later, I'd give up all my gains. Fortunately I was mentally prepared for the possibility, and maybe it was good to get that lesson out of the way early on in my investing career, so as not to throw in the towel in '00 (which I barely remember) or '08 (lost 29%- regained within 3 years).

CU Tiger

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I started investing in about 1993 or 1994. After the Hubs and I got married, we continued investing a fixed amount each month. We have ridden out both of the down markets you mentioned without changing our strategy.

During 2007-2008 I issued to joke that our 401(k)s were more like 201(k)s.

The thing that has helped us stay the course is that we have a large Emergency Fund. It would give us a year or more of bare bones expenses, so I have never felt panicky when things go down.

Our EF is probably larger than some think is smart or necessary, but it works for us. I feel sorry for people who sell at the bottom...if they are that loss averse, the equities markets may not be right for them. Considering that I am somewhat impulsive and emotional about many things in my life, I am fairly hardheaded and analytical about investing.