The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: retireatbirth on February 20, 2015, 04:56:18 PM
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Hey guys,
I was looking at my old statements to see how I did in 2008 and it turns out I sold Sept. 22, 2008 and bought back in Jan 6, 2009. Is this particularly good? It appears I avoided a significant portion of the crash, but I'm trying to get a sense if many other individual investors also saw some signs around Sept. 22 and sold before the big crash.
I was only trading a mutual fund that closely follows the S&P 500.
Reason I'm asking is because I had a small amount invested back then and was exceptionally passive really not caring what happened, but my brother was really into the markets and he called me and urgently told me to sell so I said "ok" and sold without giving it a second thought. If this was really good timing, I'm going to ask him what signs he saw to sell on that day. I looked at the VIX, thinking that was it, but it wasn't completely out of control at that point.
I decided to buy back in on Jan 6, 2009 on my own just because everything was so damn cheap.
Thanks
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September 22, 2008 was exactly one week after Lehman Bros. filed for bankruptcy and most of the population (apparently including your brother) thought the world was on the brink of financial apocalypse. Just be glad he panicked and told you to sell when he did rather than six months later, and don't try to press your luck timing the market again.
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heh, sure, I'd say that in the whole scheme of things, that looked like pretty good market timing.
It looks like the Friday before your Monday sale was when TARP was announced (http://en.wikipedia.org/wiki/Global_financial_crisis_in_September_2008). That led to a 2-day bump in the S&P500 of nearly 9%. I'd guess your brother saw that as a high point amidst chaos, and correctly guessed that the chaos was not yet at an end.
Your buy-in in January was less perfect, since you also managed to find a high point (which is the opposite of what you want!) Literally any other day in the two months previous or the six months after, you would have bought back in at a lower price than you did. In other words, you had a 1-in-240 chance of hitting that crap-jackpot, and you did!
Getting lucky like your brother did, particularly early in an investing career, is actually horribly unlucky in my opinion. Because that experience is then often assumed to be the result of skill, and it can take decades of getting beaten up for that person to be convinced that the market is a nasty bitch, while the person who was on the other side of that trade learned it much more quickly.
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I had an acquaintance who did get out of the stock market around when you did, but then he could never bring himself to get back in. So while I rode the stock market down, which was anxiety provoking, it proved to be a good buying time, and an asset allocation model (which takes emotion out of it) requires it. This acquaintance lost a lot by not buying back, and he slowly over time increased his asset allocation to 25% stocks, but that still was too low, and he lost most of the upside.
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Kudos to your brother. He and I would get along well if we knew each other in person.
He saved you a lot of pain.
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SO the questions is... are any signs showing now?
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SO the questions is... are any signs showing now?
No