My portfolio finally recovered. How about you? What lessons did we learn?

[xbdb]

My portfolio is now slightly above what it was before the drop in February.

Lessons learned (even though we are not out of the woods just yet):

1. Didn't panic. Watching the market drop was terrifying. I was spared in 2008 because I didn't really pay attention to my 401K (other than maxing it out). Ignorance is bliss I guess. LOL. This time though... Not even a year after FIRING. It was hard not to panic because it was down 33% at the bottom, but I managed to stay frosty and not do anything I'd regret. SUPER HARD. One thing that helped was...
2. Have a cash cushion. I have 2-3 years of cash on hand and that allowed me to sleep at night. The conventional wisdom says you should put that money to work, and that's probably true. But, peace of mind is worth a lot.
3. Black swan events do happen.

[HPstache]

It might be a little too soon to pop the champagne corks, but I will say that it was a great experience to finally get tested with a real drop.  I think I watched a little too closely and was super tempted to sell out a few times.  Those times would have been the correct calls had I executed them... but I think I'm more proud of sticking to my plan than I would have been successfully timing the market.  A 1yr+ recession would be absolutely brutal though... I was too early in my investing to really feel 2008.  There still could be a lot of rough roads ahead, I don't know if we are in the clear or some sort of super dead cat bounce.

[Laserjet3051]

I didn't really learn any lessons. But the experience tested my risk tolerance and reaffirmed that nobody knows nothing and that staying the course is the right thing to do.

[maizefolk]

Like a lot of the folks posting, I went through the 2008 crash not really paying much attention or having a lot of money at play. It's been useful to have the 2018 slump (20%) and this crash (30 odd percent?) to get a sense of my emotional reactions to having a bunch of money disappear. It's not fun, and this time I stopped opening my accounts for a few months because that felt better than updating them. But I didn't observe any detectable urge in myself to sell, which I think was a very good thing. (May it would kick in at 50 or 60% down?).

From the recovery, I learned that the main street/wall street connection that politicians are always talking about is even more broken that I had realized. That makes me more optimistic about my ability to successfully pull off a long term retirement funding by investments, and more pessimistic about the future of the country.

[rmorris50]

I came to appreciate the comfort of having 2-3 years of living expenses in cash. I'm not FIRE'd yet (close though) but have the cash due to the sale of my house right before COVID and have been renting for now. Given I liked that security, I think my retirement strategy will be to maintain 2-3 years in cash and the rest invested in the stock market. Bonds seem to risky too bother with (interest too low, and if rates go up MV goes down). And I'll keep the cash replenished with fixed income streams and strategically taking money out of the markets over time.

[Blissful Biker]

In the depths of the market drop I worked up my courage, took a deep breath and rebalanced.  I sold safe cozy bonds and bought scary stocks.  It's paid off and I feel good about my ability to stay the course and stick to the plan.

On a personal note, I learned keep the financial discussions with DH simple, calm and as positive as truthfully feasible.  He trusts me but encouraged me to sell it all and buy gold.  Distracted him with kisses and pie.  :)

[Much Fishing to Do]

Like a lot of the folks posting, I went through the 2008 crash not really paying much attention or having a lot of money at play. It's been useful to have the 2018 slump (20%) and this crash (30 odd percent?) to get a sense of my emotional reactions to having a bunch of money disappear. It's not fun, and this time I stopped opening my accounts for a few months because that felt better than updating them. But I didn't observe any detectable urge in myself to sell, which I think was a very good thing. (May it would kick in at 50 or 60% down?).

Yep, in 2009 there seemed to be a lot of "reasoned" selling low due to people discovery what their real risk tolerance was.  While still saying things like don't give up and dump it all and sell low, I think a lot of investment advisors suggested revisiting risk tolerance and allocation, which at that time of course led to a lot of people shirfting toward a less risky allocation, which of course meant selling some low.  This probably hit folks years from retirement twice, as by 2016 everyone was so confident they again 'reevaluated' their risk tolerance and decided to buy more equities again.

I'm also totally of the type to not watch when its bad...during the bulls I have CNBC on every day and during the bears its ESPN ;-)

[ATS]

I FIREd on January 31st of this year

What I learned - cash reserves help you sleep better at night

1. I keep a stronger position in my portfolio than usually recommended around here in cash because I felt like there was some kind of a correction coming.  On top of that I had an even bigger position in cash than usual because I had a couple of bonuses hit when I left and they were still sitting in my checking account.  I'm not confident we've seen the end of the volatility, I'm not investing those bonuses yet but I did move it from my checking account to something paying a bit of interest.

2. Having ways to generate cash is helpful - I have had a side hustle for years that i enjoy that brings in some cash but can be ramped up if necessary.  I've been playing around with some expansion ideas, the research and implementation of ideas is fun for me (I'm strange that way).

3. I caved and went back to work for a couple of months - I was offered a short term contract position at my former company and since I'm pretty much stuck at home with shelter in place and the job was something I knew I could handle I negotiated a deal I could live with and the earnings from the couple of months of work will get me through the end of the year.

4. I'm not competent enough to time the market - a few times I was ready to sell or buy but I'm glad I stayed my course.

[Mr. Green]

I learned that if you are considering making a big purchase in the near future you may want to have some of your after-tax money in bonds or cash.

Prior to the drop, our after tax money was all in stocks because it is most tax efficient to have bonds in tax-deferred accounts. When the market dropped, our 500k+ in after-tax money turned into 325-350k. If we were just drawing normal annual expenses I wouldn't be bothered by this. However we were thinking about buying some land, meaning a 120-150k cash expense. We're still early in the Roth IRA rollover pipeline process and need a certain amount of after-tax money for the next few years' expenses so that suddenly got more uncomfortable than I wanted it to be. We inevitably bailed on the purchase.

When the market recovered, we sold some stocks into cash and then moved bonds into stocks in our tax-deferred accounts to keep our AA the same. Now our after tax accounts were more like 75/25 as opposed to 100/0. We're still thinking we may buy land or a house in the next year or two so we should keep our after-tax allocation this way in case there is another drop. If we find a deal on something we want, the smaller drop in after-tax funds may leave us feeling comfortable enough to make a purchase even in a down market. That's worth a tiny amount of tax inefficiency.

If at any point buying property is no longer a consideration for us we'll move all our bond holdings back to tax-deferred accounts.

[iris lily]

I FIREd on January 31st of this year

...I'm not competent enough to time the market...

Which means you are a savvy investor. Good for you!

[PaulMaxime]

I'm concerned about the word "Finally" in the title of the original post.

We've had an amazing recovery at this point. Generally things like this take multiple years to get back to where you started.

This was not normal.

From the peak in Sept 2007 to the recovery in the S&P 500 total return index (includes dividends) was just under 5 years.

From the Dot Com crash the recovery time was around 6 years.

I wouldn't be throwing around "Finally" like this was a long downturn.

[HenryDavid]

Strongly agree that this is no time to use words like “finally.”
So much shit, so many fans ... still waiting in the wings.

I’m always re-learning how good it is to have cash for a few years of living costs. Phew.
But struggling with the idea that stock markets make sense any longer. So many historic interventions have kept things afloat in 2020. How long can that go on? In the medium term, which matters to me, it’s hard to see how a long slow grind at low return can be avoided. Japanification, good for steady state economic life, not great for investors. For how long? Ten years, longer? Why should I take any risk, when the premium may be so low? 1.5% interest is looking more and more ok. Just preserving savings, roughly. But I recognize these times are well beyond my own understanding. I don’t have blind faith in “the market” either though. Especially since it’s now so artificially held up.

As for “black swans” this ain’t one. A new pandemic was the most foreseen and predicted and planned-for disaster in recent decades. Since SARS at least. But the plans weren’t acted on.

[bmjohnson35]

The one thing I did learn, is the danger of becoming enamored with stocks.  I have always invested with the hope to get an 8-12% average annual return over the long haul.  I have never bought individual stocks before, but the drop in Feb/Mar was simply too tempting to pass up.  We bought Boeing and Carnival stock.  I checked them a few weeks ago and both had gained over 90%. I suggested to my spouse to sell the Carnival stock, since I viewed it as higher risk.  We didn't and it dropped down to a "lousy" 60% return less than a week later.  I have since placed a sell order at the 90% mark for Carnival, if and when it gets back to it.  I intend to keep Boeing, because I do believe that it will provide a 400% return within the next 3-4 yrs.  When you invest in mutual funds, you don't watch the daily rollercoaster ride that individual stocks go through.  I see how you can make a lot of money if you seize opportunities as they arise, but I also see how you can easily get burned.  I only took $10k out of our cash funds to play with, so it's relatively insignificant portion of our portfolio and I consider gambling more than investing.

Like others have said, I don't think the ride is over yet.  The market has been "manipulated" and/or "managed" a lot more over the past 20 yrs, so I think that historical performance is not very reliable.  I get emails daily from investment advisors about the impending doom of the US Dollar, the coming crash or some other "insight."  Everyone of them can provide multiple examples of how they predicted past economic events.  Of course, when you are spewing predictions daily, it's easy to get it right a few times over the long haul.

Aside from some minor rebalancing to get back to our 20/80 mix, I didn't really react to the drop in the market.  We keep around 3 yrs in cash and maintain a 20/80 mix in our investments.  I invest in index funds to keep things simple.  Next year, we will be living entirely off our investments.  Our first retirement income stream will start in 2022, the next one in 2025 and our last one will commence in 2032. This financial blip in our first year of FIRE has me appreciating the importance of these future income streams.

[zinnie]

My lessons so far:

hold more cash

hold less individual stocks

try not to look

[Michael in ABQ]

No change. Kept pumping money in every two weeks watching it buy more and more shares as the market dropped. Being down 20-25% wasn't a pleasant feeling but I never had any thoughts of selling. I'm not touching this money for 20+ years so I'm pretty certain the market will go up during that timeframe. My net worth now is higher than it was just from continued investing and a substantial recovery.

[matchewed]

I'm concerned about the word "Finally" in the title of the original post.

We've had an amazing recovery at this point. Generally things like this take multiple years to get back to where you started.

This was not normal.

From the peak in Sept 2007 to the recovery in the S&P 500 total return index (includes dividends) was just under 5 years.

From the Dot Com crash the recovery time was around 6 years.

I wouldn't be throwing around "Finally" like this was a long downturn.

There is a difference between the S&P 500 recovering and your portfolio recovering. Your portfolio will reach the it's previous value due to DCA well before the S&P 500 reaches it's previous high.

https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends/

[Missy B]

I'm concerned about the word "Finally" in the title of the original post.

We've had an amazing recovery at this point. Generally things like this take multiple years to get back to where you started.

This was not normal.

From the peak in Sept 2007 to the recovery in the S&P 500 total return index (includes dividends) was just under 5 years.

From the Dot Com crash the recovery time was around 6 years.

I wouldn't be throwing around "Finally" like this was a long downturn.

Yup. The whole tone of the title implies that this correction is done and dusted. Time for the post-mortem!
There seems to be no memory of previous lengthy recessions.

[xbdb]

I'm concerned about the word "Finally" in the title of the original post.

We've had an amazing recovery at this point. Generally things like this take multiple years to get back to where you started.

This was not normal.

From the peak in Sept 2007 to the recovery in the S&P 500 total return index (includes dividends) was just under 5 years.

From the Dot Com crash the recovery time was around 6 years.

I wouldn't be throwing around "Finally" like this was a long downturn.

Yup. The whole tone of the title implies that this correction is done and dusted. Time for the post-mortem!
There seems to be no memory of previous lengthy recessions.

See where I wrote:


Lessons learned (even though we are not out of the woods just yet):


I never claimed it was "done and dusted." We can learn lessons while STILL going through an experience.

[HPstache]

I'm concerned about the word "Finally" in the title of the original post.

We've had an amazing recovery at this point. Generally things like this take multiple years to get back to where you started.

This was not normal.

From the peak in Sept 2007 to the recovery in the S&P 500 total return index (includes dividends) was just under 5 years.

From the Dot Com crash the recovery time was around 6 years.

I wouldn't be throwing around "Finally" like this was a long downturn.

Yup. The whole tone of the title implies that this correction is done and dusted. Time for the post-mortem!
There seems to be no memory of previous lengthy recessions.

See where I wrote:


Lessons learned (even though we are not out of the woods just yet):


I never claimed it was "done and dusted." We can learn lessons while STILL going through an experience.

You must be new... people love to correct things you haven't said around here!

[xbdb]

I'm concerned about the word "Finally" in the title of the original post.

We've had an amazing recovery at this point. Generally things like this take multiple years to get back to where you started.

This was not normal.

From the peak in Sept 2007 to the recovery in the S&P 500 total return index (includes dividends) was just under 5 years.

From the Dot Com crash the recovery time was around 6 years.

I wouldn't be throwing around "Finally" like this was a long downturn.

Yup. The whole tone of the title implies that this correction is done and dusted. Time for the post-mortem!
There seems to be no memory of previous lengthy recessions.

See where I wrote:


Lessons learned (even though we are not out of the woods just yet):


I never claimed it was "done and dusted." We can learn lessons while STILL going through an experience.

You must be new... people love to correct things you haven't said around here!

LOL, apparently so.

[Steeze]

Lesson Learned- BUY THE DIP

[brooklynmoney]

It made me so happy I still had my job and that big fat infusion of cold hard cash every 2 weeks.

[Much Fishing to Do]

I'm a little below the S&P recovery b/c I have a bit in international and my Roths are fairly small cap over-weighted. 

Well, my plan from 2008 didn't work where on good days I would have CNBC on in the background and on bad days ESPN, because there was no sports to follow.  So I tried the regular news but that was even more scary, so it was a lot more music, which worked just fine.

[duyen]

I didn't panic when it went down. I bought more on the way down. But when it started coming back up, I sold some on the way back up thinking it reached peak and doesn't reflect economy. I converted those into bonds.

As of now I am slightly past the Feb 19th max. But my AA changed from 100% stocks to 60% stocks and 40% bonds due to all the selling. I plan to hold this way hoping to move the bonds to stocks if a crash happens.

[matchewed]

I didn't panic when it went down. I bought more on the way down. But when it started coming back up, I sold some on the way back up thinking it reached peak and doesn't reflect economy. I converted those into bonds.

As of now I am slightly past the Feb 19th max. But my AA changed from 100% stocks to 60% stocks and 40% bonds due to all the selling. I plan to hold this way hoping to move the bonds to stocks if a crash happens.

You could use an IPS to help you stop the market timing crap.

[Roland of Gilead]

1) Never sell your puts too early, but do sell them before the market recovers

[woopwoop]

I learned my true risk tolerance is a lot higher than I thought. I was at 20% bonds and ended up shifting about half of that over to stocks during the dip. It was a huge drop and I didn't even bat an eye. If it happens again and I still don't care, maybe I'll go to 100% stocks :)

[Michael in ABQ]

It made me so happy I still had my job and that big fat infusion of cold hard cash every 2 weeks.

Same. I increased my retirement contributions substantially for 2020 from about 10% to 25% of my income. That's worked out very well over the last few months - even if the shares I bought in January are not quite recovered, the ones in March and April have more than made up for that.

[RainyDay]

I learned my true risk tolerance is a lot higher than I thought. I was at 20% bonds and ended up shifting about half of that over to stocks during the dip.

Same here.

Also learned, via watching what friends/family were doing, that market timing really, really doesn't work.       

[mstr d]

Have we really recoverd? I keep asking me that. If the fed and the european centrale bank create money out of nothing to inject in the stock market. And create inflation. Is my recoverd stock now at the same price a share still worth the same amount?

Prices in supermarkets have risen. House price in the netherlands  have rizen 11%. Bud my salary has been frozen for a year agreed trade unions in the transport industry.

[Valley of Plenty]

I didn't really learn anything new from the experience, but I did find myself desperately wishing I had more money to throw into the market during the fall. I only just yesterday paid off the last of my consumer debt, so I hadn't been maxing out my retirement accounts but instead paying down high interest debt.

Now that the debt is gone, I have twice as much money going into my investments. If this does end up just being a bounce and another crash is coming, I'll be better prepared to capitalize on it.

I am once again reminded of that brilliant quote from Warren Buffet, that "every decade or so, dark clouds will fill the economic skies and briefly rain gold. When downpours of this sort occur it is imperative that we rush outside carrying washtubs, not teaspoons."

And that we will do.

[Dicey]

Congratulations on the debt payoff Valley of Plenty!


DH and I didn't do anything different. We did dump In enough to fill our 2019 Roth buckets, which were then disallowed because our net income was too high. We had to recharachterize it as our 2020 contribution. Definitely an MPP.

[ol1970]

Well I was down over 7 figures on paper with an extremely conservative portfolio and it never really affected me.  If anything it made me realize how more money I have than what is needed to live a good life.  I’m still down on paper in my investment accounts from their peak, but the surprising thing to me is how all my other assets have risen in value because of the pandemic.  I own a very nice lake home and thought I sort of knew about what it was worth, but I was way off...like nearly $1M off.  Stuff is selling for crazy amounts because people are rethinking their priorities.  My boat that I’d estimated was with $80k got a call from the dealership with them asking to buy it back for $95k because they have a shortage and buyers lined up waiting, I was shocked. 

I’m thinking this is a little bit euphoric and unsustainable, I mean when boats are going up in value you know things are crazy!  Even if not, it’s fine too.  It’s been kind of nice being locked down with the family

[BTDretire]

I'm up $15k as of yesterday, but that is after withdrawing $30k for kids tuition. I did sell some on the way down and got scared back in just a couple days after the bottom.
  I'm not sure I learned anything, I'm still very concerned that Covid19 may cause a long term economic downturn and I contemplate selling all my stocks daily. Just can't pull that trigger. Been buy and hold since the late 80s.

[Metalcat]

I just haven't checked my investments since before COVID.
Easy.

[Rdy2Fire]

Well I'd say this market fluctuation is far from over, just look at today..

We haven't had multiple quarters of earnings, unemployment is still soaring and although the markets look good the economy, not so much.

I think the market will remain highly volatile til after the election and probably won't really level off for good til Q1 of 2021 maybe longer depending on COVID spread/vaccinations, who wins and if one party has control of Congress and the White House

[soccerluvof4]

Been through several downturns but not being fire'd and with this much invested.

Bottom line I didnt learn anything new BUT alot of what you learn around places like MMM were proven correct.

Depending on what helps you sleep at night for me it was-

I'll be fine I have 4-5 years cash or cash like investments to live on

Buy the dip

Re-balance when the time is right

Take a deep breath and ride it out

Dont panic sell!

[Simpli-Fi]

some luck and some bad luck. 
-I was beginning to downshift my career in Jan. 
-Pulled large sum of money out of market on Feb 14th for new home purchase...meaning I couldn't buy into the same funds again until March 14th (scheduled 18th).  With the downshift my weekly purchase was reduced by 80% the entire way back up the other side of the V; bottom of V is March 23rd
-Rebalanced April 14th

I didn't panic (watching half a million in value evaporate, in short term, was terrifying...with the thought of losing a job and needing nCoV treatment for any or everyone in the family; BTW all still healthy knock on wood)...stayed the course and I'm positive for the year but if I'd waited 1 more year to downshift, I'd be WAY ahead right now, but still not knowing what 2021 would bring.

[Scio5]

I'm only a few years into investing, so it was an eye-opener for sure. I ended up putting roughly $98k into the market this year - I had a $70ish deposit from a 401k rollover that I couldn't do anything about the timing of, had a small windfall from a house sale, and a nice check from a side gig that paid out. I grit my teeth and put all this "extra" money into the market in April/May as I got it.

I did realize that 100% VTSAX was a little much for my peace of mind, so I paused my regular investments to build up a $20k cushion in high-interest bank accounts and then rebalanced 10% of investments into bonds. I'm still checking my balances way too much, though.

[honeyfill]

I am still down a few percent from the Feb high but up for the year.  I was all set to retire in Feb near the top but decided to wait until the annual bonus in March.  I didn't sell any stocks , and continued to invest  normally each month. I was 95% stocks in Feb and I am still 95% today.  I am one of those strange people who fear missing out on market returns more than losing a few dollars in a downturn.  Bottom line is that I am still working.  My new date is somewhere between Sept 8 and June 1. 
My retirement plans include a lot of international travel, so I might as well keep working as long as the Virus is still rampaging.  Hopefully it will be  lots better by June. (Sept is looking pretty iffy)  I've already scheduled a few weeks in Greece in May. 

[flyingaway]

I am still down a few percent from the Feb high but up for the year.  I was all set to retire in Feb near the top but decided to wait until the annual bonus in March.  I didn't sell any stocks , and continued to invest  normally each month. I was 95% stocks in Feb and I am still 95% today.  I am one of those strange people who fear missing out on market returns more than losing a few dollars in a downturn.  Bottom line is that I am still working.  My new date is somewhere between Sept 8 and June 1. 
My retirement plans include a lot of international travel, so I might as well keep working as long as the Virus is still rampaging.  Hopefully it will be  lots better by June. (Sept is looking pretty iffy)  I've already scheduled a few weeks in Greece in May.

Yes. Keep working for a few more dollars. I think travels will get more expensive when the virus is gone.

[Valley of Plenty]

Yes. Keep working for a few more dollars. I think travels will get more expensive when the virus is gone.

I flew out to Colorado earlier this month and decided not to use any of my reward points for free travel because tickets are so cheap right now, it just wouldn't have been a good value to use points.

But yes, I suspect that once this is over prices will climb and it will be very worth using reward points. I just hope ticket availability isn't too dreadful.

[Simpli-Fi]

Fire the whole family across the country first class with miles, Tickets purchased using miles are also cheaper now too

[Pigeon]

I'm older than most here, not far from traditional retirement age.  This isn't my first rodeo, so I can't say as I've learned lessons from the last several months.  I've always saved via payroll deduction, and during the past recessions, I've just ignored the market and continued on.  Same thing this time. 

I do think the worst is yet to come this time around.  It boggles my mind that the market has done as well as it has and that the dip wasn't lower.  I think we'll have a second shut down in a few months and the market will go lower.  I will continue to ignore it.

I'm FI and am giving serious consideration to retiring before the end of the year, and I do worry about the bad sequence of events.  We've got several years' worth of expenses in cash, and that helps me a lot. 

[Car Jack]

Waves to Pigeon........so you remember what the teachers' reactions were when President Kennedy was shot too?

Anyways, I learned that I need to stick with my set rules.  My rule is when I get 5% out of whack in my AA, to rebalance to target.  Well, it's so much money at 5% ($140k) that I got scared and just did half ($70k).  I should have done the whole thing.  Of course, equities all came back up and I could have had double that added to capture the gain from near the bottom.

Also learned how much of a pain in the ass tax loss harvesting is.  I'm not planning on doing it anymore as the benefit isn't worth the effort to me.

[Pigeon]

Waves to Pigeon........so you remember what the teachers' reactions were when President Kennedy was shot too?

More my family than my teachers. They were nuns and never broke from the script. I do vividly recall my older sister sobbing and her mascara running down her cheeks. The funeral was heartbreaking.

[CCCA]

watching a drop of >$500k dollars from pre-Covid 2020 to March/April 2020 and back up again was . . . interesting.  I was expecting things to drop more and made some small adjustments in anticipation of that, which never materialized.


One could call it "market timing" or "risk reassessment".  :) 


Once it became clear to me the market was on it's way back up, reversed those adjustments and we are past our pre-Covid highs.