2008 winners

[stephen902]

Does anyone think there is value in holding a 10-20% of large cap stocks that did well in the 2008 recession as a way of protecting yourself for future recessions? Specifically, walmart - mcdonalds - dollar tree - Ross. Obviously the drops come from whatever causes the recession, but those stocks seem reasonable to me anyways. Is this mere gambling?

[Apocalyptica602]

Is this mere gambling?

Yep.

[TomTX]

Does anyone think there is value in holding a 10-20% of large cap stocks that did well in the 2008 recession as a way of protecting yourself for future recessions? Specifically, walmart - mcdonalds - dollar tree - Ross. Obviously the drops come from whatever causes the recession, but those stocks seem reasonable to me anyways. Is this mere gambling?

If you have VTI, you are diversified across the market and already have a large share of large cap stocks.

[alanB]

Interesting strategy that could easily be back-tested.  How did the top performing stocks from previous recessions/depressions fare in the following years?  How long is your investing horizon?  If your conclusion is that you can't compare because other unexpected events happened following those previous events, well I think you have your answer ;)

[Scandium]

Does anyone think there is value in holding a 10-20% of large cap stocks that did well in the 2008 recession as a way of protecting yourself for future recessions? Specifically, walmart - mcdonalds - dollar tree - Ross. Obviously the drops come from whatever causes the recession, but those stocks seem reasonable to me anyways. Is this mere gambling?

I think "holding a 10-20% of large cap stocks that did well in the 2008 recession" is a good way to protect yourself in the 2008 recession. But what does that have to do with a future recession?

No offense, but this is one of the sillier things I've read here

[daverobev]

I disagree that it is gambling. You could certainly put together a portfolio of 'defensive' stocks that will not drop *as much*, are unlikely to cut dividends, and so on. Blue chips with a long increasing dividend history. If it'll make you sleep better at night.

They'll likely underperform the market over time, but that's not why you're buying them.

[Proud Foot]

If you wanted to do this I would add the Vanguard Consumer Staples ETF (VDC) rather than trying to purchase individual companies. Just be aware that you will underperform the total marked over the long term.

[Radagast]

I predict that in 2008 a 5% allocation to EDV (extended duration treasury bonds) will outperform 20% in any of the stocks mentioned so far.

[neil]

I wouldn't call it gambling, but an attempt to focus your portfolio in this way makes several assumptions.  The ones that bother me:
- A recession is definitely coming
- The recession will be exactly like the last recession

I'm not claiming those companies would be bad purchases individually, but retail is already pressured even in this "strong" market, people's tastes change, the company is being led by idiots, who knows.  Stuff changes in 10 years.

And then a big reason why I've stopped fiddling so much with my portfolio:
- I don't know the SWR of my portfolio after personal investing decisions

[Heckler]

Those three stocks all rose through 2017, peaked in January, plunged in February and are bouncing in March.

A lot like VTI.

Im curious - does the index follow the stocks, or do the stocks follow the index?

[marty998]

Those three stocks all rose through 2017, peaked in January, plunged in February and are bouncing in March.

A lot like VTI.

Im curious - does the index follow the stocks, or do the stocks follow the index?

The index is a measure of the stocks! One does not follow the other - One comprises the other.

[alanB]

Those three stocks all rose through 2017, peaked in January, plunged in February and are bouncing in March.

A lot like VTI.

Im curious - does the index follow the stocks, or do the stocks follow the index?

The index is a measure of the stocks! One does not follow the other - One comprises the other.

Stocks follow the index like cows follow a herd.  Sometimes one will wander off or get trampled, and they are easily spooked.  Most of the time they go in the same direction for no discernible reason.

[ChpBstrd]

You're wanting a less volatile portfolio. There are several easier ways to do that than stock picking based on history:

1) Diversify into less-correlated assets, such as bonds, REITs, commodities, preferreds, etc. Rebalance if a big drop occurs.

2) Seek lower-leverage companies. Debt multiplies both gains and losses. I'm sure there are funds that do this but I'm not aware of any off the top of my head.

3) Use a protected put options strategy to cap your downside. OR hold long-term call options with a fraction of your portfolio and put the rest to work in lower-volatility investments.