The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: ForeverLearning on March 09, 2017, 09:21:36 PM
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It's 2008 again, what advice would you have given yourself?
I am still very new to the whole investment world and I am trying to understand as much as I can. However, I often read to stay the course but how does one really know how one would react until you are are actually going through the ups & the downs.
I know it's been a few years but do you recall what help you personally to stay the course or what would have helped YOU stay the course?
Thank you for sharing! I'm not one to live in the past, but it can be very instrumental to learn from the past. For new ones like myself, we can sometimes think 'We Got This' but then we realize we were not fully prepared for what lies ahead.
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If you're gonna do the investing thing and take any risk at all that will return rates above inflation, i think you have no choice but to 'stay the course' or you'll end up selling low. Even seemingly good innocuous advice like "buy the dips" is tough in practice. When the market fell 20% in 2007/8 i thought that was the greatest buying opportunity (I thought that was "the dip", but it then fell a ton more.
To stay course you have to know your risk tolerance. I think thats where thinking about what you;d do in differing market times is when to think about that. A lot of people made their portfolios much more conservative in 2008 or so thinking they were just following the advice of selecting their risk tolerance, but that risk tolerance seems to really be colored by the market at the time. So when markets are at highs I like to ask myself am I too risky, and when they are at lows am I not risky enough, as the natural tendency is to ask yourself the opposite question at those times and act upon your answer.
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Dollar-cost average. Invest some money from every paycheck and ensure the deductions are automatic (ira,m 401k, 457 etc).
Like the post above reads, do not read financial "news". They stories always revolve around: "Why the market crash may be just around the corner" or some such variation. Click bait only.
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I forgot, if the market "crashes" don't sell! Put more more money in if you have it. Don't sell, you will just lock in losses!
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I have been through two crashes in my working life. 2000 and 2008. I profited from both by accident. The first I had worked for a tech company before things burst and after the crash I felt like I knew from friends that the company was still good even though their stock had cratered. I had no money at the time but was in grad school and so took out a student loan for $3k and bought that company's stock. In a couple of years I had $30k which I used for a house down payment. It was luck really. I didn't do any fundamental analysis or anything on the company and my friends weren't in a position to really know how well the company was or was not doing, I could have lost all my money and been in debt as easily as gained.
2008 I accidentally profited by happening to have a full time decent paying government job and putting 15% into my retirement account during my time there. I didn't really think about it other than "I should start saving for retirement" but it was amazing to see my net worth grow as the recovery happened. A little less accidentally, in 2012 I decided to start investing in real estate that was still cheap in my area and that has done well too.
So my advice if we were just tipping off into another crash. 1) Dont touch the money you have invested. 2) Dial your expenses down as far as you can 3) get as high of a salary as you can 4) Invest the entire difference between 2 and 3. If its totally obvious what kind of crash it is (tech, real estate, etc) start learning as much as you can about that sector and when you feel confident put extra money into that.
If I had done those things during the last two crashes I would definitely be rich now even if I didn't work in between the times. The down times are the opportunities and if you really throw your money at them you can make big gains. So don't worry about how you keep from taking your money out, worry about how you can maximize the amount you can pour in there.
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I would start by telling myself:
Giants
Steelers
Saints
Packers
Giants
Ravens
Seahawks
Patriots
Broncos
Patriots
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I would tell myself "Don't worry. You may be in a new place far from home, but your life is going to change in amazing, wondrous ways. You won't believe the doors that are going to open for you. Don't be afraid. Your life truly begins now."
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It's 2008 again, what advice would you have given yourself?
Forgetting the obvious time traveller advice of convert every dollar to cash and buy at the exact bottom of the market my advice would be: save like a mother fucker and invest evert damn penny!
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Ben Bernanke will be vindicated, and you should already know that because you're studying graduate-level macroeconomics.
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Don't dismiss this outright as the work of some raving lunatic. There's some sense to this story, if you'll just hear me out...
Look, we all wonder if time travel is possible, right? Well let me tell you something... it is. I'm from the future, actually. I know you probably don't believe that, but seriously, I'm from the future. It's a really great thing; getting to see the past, watching events unfold... stuff like that. We know more now than we ever would.
Behind all the fun, though, there is a more serious aspect. We aren't supposed to go into our own lifetime, and we are never allowed to contact our past selves. Let me tell you, I'm breaking that rule right now. Yes, you're talking to yourself. Your future self. I'm going to be executed for this, but you know what? I accept that. I'm preventing something by talking to you that is worse than death. I can't tell you outright what to do, because the filters would catch it. This is the closest I can get, trust me. I can, however, send a little message.
You should probably read the first word of every paragraph, now.
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Don't sell investments.
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If you're gonna do the investing thing and take any risk at all that will return rates above inflation, i think you have no choice but to 'stay the course' or you'll end up selling low. Even seemingly good innocuous advice like "buy the dips" is tough in practice. When the market fell 20% in 2007/8 i thought that was the greatest buying opportunity (I thought that was "the dip", but it then fell a ton more.
To be fair, it was a pretty good price. Looking back, I would kill to be able to buy right before the 2008 crash.
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I would start by telling myself:
Giants
Steelers
Saints
Packers
Giants
Ravens
Seahawks
Patriots
Broncos
Patriots
Very clever! Took me a while to figure out the relevance of this particular ordering of team names - I don't watch football but I am familiar with the names due to a foray I once had into the world of football pools.
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If you're gonna do the investing thing and take any risk at all that will return rates above inflation, i think you have no choice but to 'stay the course' or you'll end up selling low. Even seemingly good innocuous advice like "buy the dips" is tough in practice. When the market fell 20% in 2007/8 i thought that was the greatest buying opportunity (I thought that was "the dip", but it then fell a ton more.
To be fair, it was a pretty good price. Looking back, I would kill to be able to buy right before the 2008 crash.
My Plan was to buy VTSMX @20% down just as Strick did, so I did. Worked out well anyhow, but if Ihad procrastinated 5 weeks, I would have been near the bottom. The good news is that there is less future cap gains tax.
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I would tell myself the following:
Propose to your girlfriend
Don't buy that house
Put more $$ into your 401k
Keep running
Transfer Roth from EJ to Vanguard
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i like the football post, but I would have accumulated even more $$$ with the annual winners of the Men's NCAA basketball tournament.
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Didn't Warren Buffet have a $1 Billion bet around NCAA basketball? You just need to tell yourself who the winners were, enter contest and then retire like a king. ;)
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Don't go to law school.
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It's 2008 again, what advice would you have given yourself?
Max your 401k in VFIAX. Incidentally that's what I'm doing now, just wish I had started sooner.
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My advice to myself would have been to cut costs more, eat out less, and invest more. I would have advised myself to better research Roth 401k's and spousal IRA's, because that was about when I started putting a portion of my 401k money into the Roth 401k option without understanding that I would be losing out overall. Thankfully it was only a few thousand a year, and set me back only about a percent of my current total stache.
In 2008 I was already married for a year, already bought my house at the absolute peak, and already knew I wanted out of my current employer, and the local job market already sucked. My main beef with myself was that I was going a little light on the savings, and was not backing off on spending enough for my newly house poor situation, and was throttling back 401k contributions to compensate.
I should have bought more through the trough, but at least I did not panic as things cratered.
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My advice to myself would have been different depending on if I was in the market or not. If I was in the market, I would tell myself to hold on and buy more if I can afford it. If I was not in the market then I would tell myself to buy as much as I can.