I am 66 years old. I dollar cost averaged my way through the crashes of 1987, 2000-2, and 2008-9. All of those crashes look like little bumps in the road when I look in the rear view mirror. After sitting on an oversized cash position for more than a year, i plan to start averaging my excess cash back into what I think will be a depressed market next year.
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I was not welcome at Saul’s board because I talked about macroeconomic risks and interest rates. Now he is getting multiple Recs for sayings nobody could have foreseen what we foresaw and he refused to hear. Which is fine by me. Some people learn best by sticking a metal fork in a light socket instead of heeding verbal warnings
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@Inspired2learn…Charlie, these are public boards. We discuss highly sensitive financial matters. I suggest that you remove your personal e-mail address from your post, especially since it appears to include your full name.
Many METARs have been board members for years so we feel like friends and sometimes address each other by our first names. But I feel it’s inadvisable to share full names.
Moving to your question…
My grandparents began investing in the 1920s. (We lived in a 2-family house together so we were all very close.) After the 1929 stock crash my grandfather swore off stock investing forever. But Grandma recognized a great opportunity after World War 2 and started putting some household money into the stock market. Grandma taught me and my older brother, Jeff (@OrmontUS) about investing in stocks and bonds. Jeff began investing in his teens.
As a naturally risk-averse personality, I absorbed these lessons from Grandma:
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When you see your investments rising and feel rich, think, “Is it all on paper?” Having witnessed investors who were completely wiped out in the 1929 crash, Grandma taught that money which was needed for anticipated expenses should never be put into the stock market because they could (and have multiple times) evaporated.
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To keep money safe from loss, put it into bonds or Certificates of Deposit and hold to maturity. I-Bonds and TIPS are inflation-adjusted. It will grow slowly. Gardening, not gambling.
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Carefully study the history of economic cycles. Read the books “Manias, Panics and Crashes,” “This Time Is Different” and “The Price of Time.” Spend several hours with the Dynamic Yield Curve, sliding the vertical red line back in time and studying the response of the yield curve. This only goes back to 2000 but you can also look at longer history charts for a more complete picture.
Dynamic Yield Curve | Free Charts | StockCharts.com
Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis (DGS10) | FRED | St. Louis Fed
S&P 500 Index - 90 Year Historical Chart | MacroTrends
Shiller PE Ratio -
Studies have shown that the S&P500 index performs better over decades than 90% of stock pickers and managed funds. There are books about this. Instead of following a guru, consider dollar-cost averaging into a low-cost, tax-efficient S&P 500 index ETF which you can Google. Avoid get-rich-quick schemes. Only put a fraction of your assets into the stock market – it’s all on paper.
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The origin of The Motley Fools was that ordinary people (“Fools”) could learn to invest without being dependent on the guidance of professionals (“The Wise”). Regrettably, that was not a profitable business model. The Gardner brothers realized that they could make more money by setting up investment services and moving into the ranks of The Wise. I don’t blame them. They were doing what was right for themselves and they kindly maintain these free boards for traditional Fools who help each other understand investing – like the METAR Board.
Charlie, you have been painfully honest with us about your unfortunate losses in the stock market. Rather than send you off on another wild goose chase with your remaining money, I would advise you to pause and think. You still have money at risk in the stock market in various investments. Which ones are likely to never recover or even decline in a recession? Sell those and cut your losses.
Then spend some time reading METAR, especially past Control Panel posts. Get familiar with the tools of Macroeconomic analysis. Don’t fight the Fed. Don’t invest in cyclical stocks just before a recession. Use the “mungofitch 99 day rule” to time your market entry and departure. Don’t try to catch a falling knife.
Like @iampops5, I am patiently waiting for the coming recession which the Fed is trying to induce. Many bear markets, including the 1970s stagflation, have zigzags up and down, with lower highs and lower lows that last a long time. I don’t intend to buy stocks until the market has made new highs – durable highs – for 99 market days. I am putting my cash into short-term TIPS and Treasuries (secondary market).
A strong bull market lasts a long time. There’s no need to get in prematurely only to have the market sink again.
Keep your money in a safe place. Study. Bide your time. Read the charts and follow METAR.
Wendy
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Thanks a lot Wendy. This is certainly helpful…thanks again.
I have also edited the post and removed the email.
Charlie
Thanks for sharing your experience Iampops5
Charlie
Thanks for sharing your thought process with us in order to learn! That’s a great first step.
I think hanging out at METAR will be helpful to you to learn all sorts of different opinions on not only investing, but also about macro economic trends which you should use when considering when and where to deploy your hard-earned savings.
I’ve been hanging out (and contributing) to TMF since 1998 and have learned so much from my colleagues here. Stick around and learn.
I think it helps to know where I am coming from in terms of me giving out current investing advice as we’re all in different places in our investing journey.
I’ve been retired for the past 5 years retiring from a nice IT career at the age of 57. I then did some part-time IT consulting gigs for 3 years before hanging it all up at 60. My wife will be retiring this year, so we will not have any wage income any longer. So my investing viewpoints will be slanted towards being more conservative than others.
You asked about folks who may have lived through the 2000 investment period. I’m one of them and I think I learned my lesson (except for one other time which I’ll get to) to always consider valuation when buying individual stocks. I invested in a number of companies back in 1998 - 2001 that were NOT the hyped “high fliers of the internet” but more picks and shovel companies that benefitted from the build out of the internet and Y2K technology modernization themes back then. Here’s a list for you - NTAP, ORCL, ATT, CSCO, GLW, EMC, F5, NOK. At one point, my brokerage account was 7 figures and I was considering retiring very early!!
I was a follower of TMF’s mantra of LTBH “Long Term Buy & Hold” philosophy and watched as these storied stocks went lower and lower and lower. Finally I gave up and started selling to cut my losses. I am still taking a $3,000 capital gains loss on my tax return after about 20 years. That’s a great reminder that bad things can happen in the stock market. I actually just pulled up an analysis that I did about 10 years ago when looking back at my Quicken stock trades and I’ll share these real number with you and my friends here at METAR.
| Portfolio Stats as of Tracking End Date - April 20, 2001 | ||
|---|---|---|
| Tracking State Date & Value | Jul 1, 1999 | 371,966.00 |
| Tracking End Date & Value | Apr 20, 2001 | 459,516.00 |
| Number of Days Tracked to Date | 456 | |
| Number of Up Days | 232 | 51% |
| Number of Down Days | 224 | 49% |
| Largest Day Gain | Dec 5, 2000 | 121,551.00 |
| Largest Day Loss | Jan 2, 2001 | (94,811.00) |
| All Time High | Sep 22, 2000 | 1,121,995.00 |
| All Time Low | Apr 3, 2001 | 303,030.00 |
| Spread from Low to High | 818,965.00 | |
I then started to invest through dollar cost averaging into SPY - a low-cost S&P 500 ETF. This had worked well for me until I started to get a feeling that “it was too good to be true” and read here and many other places that the market was getting overheated. I went to 95% cash in all of our investments right around when COVID hit and the market was tanking, and I have been out of the market since. All of this is documented at the former TMF site through my sharing of experiences there. (Sorry but they all were flushed when this new site came on-line). I of course have missed the upswing post-COVID, but I’ve also missed this most recent market downward correction as well.
Like @iampops5, I anticipate that the market will continue to drift downwards given the economic uncertainties globally and think that 2023 will give us some buying opportunities in the likes of a beautiful bloodbath - and that’s the time I will start averaging back in. Some folks think that it’ll be different this time and we will drift down with no bloodbath or no repeat of a “Black Monday”. I’m not sure - I do think there will be a huge flush on a single day or multiple days. Capitulation!!
Also like @WendyBG, I will consider waiting for the Mungofitch 99-day rule before “backing up the truck”. Backing up the truck is relative for me though. I’m planning to only put 25% of our investable assets into the market as we do not need to put all that much at risk to live comfortably for the remainder of our lives.
In the meantime, I am in cash and cash equivalents, investing the max in I-Bonds annually and short term treasury bonds and CDs as well.
During my investing career I have met with Financial advisors from Fidelity and other investment firms that were recommended to me by my peers. I have not ever gone with their “pay for services” offerings as I have always wanted to be in control of my own financial destiny. I did have an AWESOME CPA who I worked with when I had my own IT Service company who gave me great tax strategy advice as well as very conservative investment advice. I would strongly advise working with a tax accountant to make sure that you are paying the least amount of tax that you are required to! I would also recommend that LBYM is a great way to build wealth as well.
As far as other lessons learned - here’s one that I’m sure you can relate to. After reading a bunch of posts on Saul’s board while recuperating from some minor surgery in October last year, and being an IT guy who liked the notion of using AI to offer credit services to those who may be unable to get credit using the FICO credit scoring method, I invested $10K in play money in UPST at the height of their valuation - $359/share. It’s now $12. I’m letting that sit in my portfolio as a reminder that VALUATION MATTERS!!! High PE’s are not an investor’s friend.
OK - I’ve shared enough. Time for me to take a nap before heading out to our favorite Mexican restaurant for some great food and margaritas.
Cheers, and Best of Luck to you. Continue to Learn and you will achieve your investing goals.
'38Packard
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Unlike wendybg, i have consistently proven that I cannot time my reentries. That is why I plan to resume monthly stock purchases over the next few years thereby dollar cost averaging my SS checks into my etfs just like I did my paychecks the previous 40 years. This process increases my financial net worth and my dividend increase on a consistent basis.
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Sure, just buy a nice, low-cost S&P500 (or total stock market if you like) index fund and only the check the balance once a year at tax time. You will handily outperform the stock pickers and wealth managers.
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Not a single one offers a money back guarantee to make you whole should they lose your money in the market. During bull markets they are mostly good, not so in bear markets. They all include the warning, “Past performance is no guarantee of future results.” Despite this warning lots of people sign on with the latest and greatest just because they had a recent good streak. Another difficulty is that portfolio services tend to be for the average investor yet we all have specific and different circumstances. The young want to make money, the rich want to preserve money. “One fits all” doesn’t work too well.
Read books by and about great investors. My favorites include Peter Lynch, Warren Buffett, Philip Fisher, and Jesse Livermore who was not an investor but a “market operator” who will teach you a lot about markets. A great book about markets is Reinventing The Bazaar by John McMillan. Another great read is Complexity: The Emerging Science at the Edge of Order and Chaos by M. Mitchell Waldrop. Other authors worth reading, Stuart Kauffman, my favorite Complexity scientist, and Colonel John Boyd, the father of the F-15.
Get to know yourself, how risk tolerant or risk averse you are. Our fight or flight instincts learned on the African Savannah are counterproductive in the market and very difficult to keep under control.
One great piece of advice is not to buy stocks on tips, the tipster won’t be there to tell you when he changed his mind.
Maybe the best advice I ever got was to differentiate sturdy portfolios vs. efficient portfolios. The latter use leverage to boost yield while the former have enough cash reserves to weather bear markets such as this one. Buy great companies that bounce back. Much harder done than said.
Having been in the market for almost 50 years, the last 30 seriously, it has been the most difficult job I have ever attempted. I met a lot of interesting people at TMF.
The Captain
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If we bottom for much of 2023, you’d be into the end of 1Q2024 POSSIBLY.
JMO…but I like it. 
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Hi 38Packard,
Thanks for taking the time to share your experience. It gives me some confidence that this too shall pass.
I am writing down all my errors in this horrendous journey, and one of the worst mistake I did was not selling when I realized things are looking bad…And that would have come if I had a clear game plan, meaning why I want to buy something, at what price, and when to exit…I had literally nothing…
Your advice is excellent, and hopefully I will be able to emulate your success.
Thanks a lot,
Charlie
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Thank you…that is most likely what I will be doing…I was stupid for not doing it in the first place!
Sometimes, the most obvious and least expensive stuff is the most appropriate choice…learnt my lesson, for sure
Thanks a lot Captain…I have made a note of all the books you mentioned and will make sure I read them…
I only wish I had done all this before I started “investing”…But hopefully, it is not too late.
I don’t want to sulk away from investing and say that this grape is sour…I think god has probably given me a very important lesson to learn…HUMILITY…At this stage, I really know nothing…So, I think the least I should be doing is to learn and course correct…My emotions, fear of accepting loss, and some irrational hope that within a few months, or a year, this whole thing will pass away and I will come out without much loss had pinned me down. No longer will I do that.
In fact, I already moved in that direction today, by selling some of the useless stuff…It was VERY VERY PAINFUL TO SEE THE LOSS, but strangely I feel okay now and I guess I will forget it in a few months…I still have much to sell, but it is tough to make wholesale changes…but for sure, I have taken the steps to correct myself.
I am hoping I soon develop the ability to accept that cutting out from stocks at the first sign of trouble is critical in investing…
However, the real skill is knowing when a good company stock is irrationally down versus a Zombie company being down…And that is what I am trying learn…that was the reason why I wanted to see if there are any good stock picking resources or wealth management companies which not manages the money in your portfolio by telling you what and when to buy, but also the rationale for that, so we can learn…
Thanks again for taking the time to share your very helpful advice.
Charlie
Charlie,
Quality is always in style. Stocks go up and down in tandem, but “value” stocks tend to overshoot in both directions. For the long-term investor, the easiest route is to buy a slug of an S&P tracking EFT supplemented by an emerging market fund and a general foreign value fund in proportions you are comfortable with. They should be structured with a minimum of management costs (Vanguard is good for this). If you prefer individual company shares (as I do), then considering the various macroeconomic features of both domestic and foreign stacks should be considered. If you are looking for a chuckle, a few weeks ago I posted what is rattling around in my portfolio (and suspect there is nearly no overlap with those of TMF).
Jeff
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This is how people wind up poor. Successful stock investors don’t do this. You are quadrupling down on failed strategies.
Try this: Use successful strategies instead. Boring, I know. Not interesting at cocktail parities. But boring makes you really wealthy.
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Don’t buy stocks, invest in good companies with great products and services.
Peter Lynch on when to sell:
The key to knowing when to sell, he says, is knowing “why you bought it in the first place.” Lynch says investors should sell if:
- The story has played out as expected and this is reflected in the price; for instance, the price of a stalwart has gone up as much as could be expected.
- Something in the story fails to unfold as expected or the story changes, or fundamentals deteriorate; for instance, a cyclical’s inventories start to build, or a smaller firm enters a new growth stage.
https://home.csulb.edu/~pammerma/fin382/screener/lynch.htm
The Captain
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You should not invest in stocks.
Ever.
You should not use Macro Economics to buy or sell stocks.
Ever.
While I do not recommend you buy Saul stocks, or make Saul your guru. I do recommend you read his end of month write ups every month.
You will notice a few things.
One. He listens to every quarterly conference call and knows the leadership and the company.
Two. He talks about companies, not stocks.
Three. He talks about that company, not stocks, not “the market” not “the economy”
If you will take the time, even one time and review the companies you are holding stock shared in, compared to the metrics that Saul uses to evaluate the companies that he is invested in, your eyes will be wide open.
I invested by platitude for years, this is why I am still working. When I compared my holdings, mostly AT&T to the metrics that Saul thought were important, I sold every share I could. Moreover, every time I invested by platitude, I have lost money since.
When Upstart was taking over the world, I was up, a lot. When I heard then change their business model, that was a red flag and I sold. I was slow so gave back a lot of profit. On the other hand, Upstart is down almost 95 percent from its high and has no viable way to grow at all. (At least not in this environment) I really believed, and still believe that the model that Upstart is using will change the world. But that belief does not make me money.
The same goes for a whole
list of companies.
Nvidia
Cisco
Worldcom
Enron
Village Farms
and so on
What makes money is investing money in companies led by people who can grow a company profitably preferably in a growing environment.
If one of your classmates came and asked you to invest in his start up, how much work would you do before you handed over your cash? This is the bar for investing in a public company via stocks. Anything less, you might as well spend the money booze and women because you are wasting the rest.
Cheers
Qazulight
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FWIW. In the 2000 meltdown I was 34, in high tech at Motorola, and a high performer. I rode it out. (I was also entirely in funds with Morgan Stanley at the time). At that time I had no fear of losing my job. As well that crash was not market-wide anyway. 2008 was a different story for me. Newly married. Economy not doing well. Legitimate concern over my employment at AMD. Survived numerous lay-off rounds plus a 10% salary reduction. Two panicky calls with Morgan Stanley in 2 weeks telling me to stay the course. I ended up yanking my money from them and putting it all in Vanguard and stayed mostly in cash. For too long. Lost roughly half my retirement account and my taxable investing as well.
As I said, I stayed in cash for too long. Leaving MS was a wise choice. Not re-investing was stupid. I figured this:
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If Morgan Stanley was right, to stay the course, I can do that on my w/o their high commission
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If Morgan Stanley was wrong to stay the course, I’m over-paying for bad advice.
But I hung out in cash for too long waiting for the next market drop. I missed out on a lot of gains. As a result at 48 or 49 I realized I was in trouble. I joined SA, at first investing conservatively. Found Saul around 5 years ago. Got out of his system about 18-20 months ago (yay me!). But I’ve still lost 33% of my money this year, on-par with the NASDAQ.
Which brings me to questions of my own. And at 56 I’m running out of time to learn lessons.
- This is hard, this is imprecise, this is an impossible chore, but get a reasonable idea of your required retirement balance, and invest to that goal. And AS MUCH MONEY AS POSSIBLE is not a valid investment goal.
- When you hit your goal move conservative. At least with a good chunk of it. Don’t get caught up in the gains that you might miss out on. If you have met your goal then preservation is a very valid investing strategy.
- I had over-estimated how much I really needed, so when I was very close to that goal in January (10 years before retirement!) I did not know it, and did not make changes. Now I need +50% to get back to my goal (again, I have 10 years).
- No matter what Saul thinks, valuation always matters. Eventually. He still has not learned this. But we need to.
- In defense of Saul, my weekly tracking spreadsheet over the last 5 years has numerous entries where I said I was panicked, and I was always wrong. It’s the reason that, even seeing the signs all this year, I still didn’t make any large wholesale moves. It’s easy to panic. It’s hard to be right about when to panic. And that is what he means by “no one saw this coming”. More accurately “there is always a reason to panic, and no one knows when you really need to panic”. A lot of people here over the years have sounded alarms multiple times. They were only right 12 months ago.
- At the same time, that spreadsheet tells me I did much better over the last 5 years than the S&P 500 did. And I have to keep reminding me of that.
No idea if this helps any.
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Thanks so much bjurasz, Qazulight, Captain, Syke6 and Jeff. Really appreciate you taking the time to share your thoughts and experience.
This certainly helps a lot!
I don’t feel safe with many of my individual stocks, and even the ones I bought this year at reduced prices thinking those were blue chip, well, have been decimated (NVDA, TSLA, AMZN, GOOG etc.). However, before I go to those, I know I had to cut loose others which are not even profitable.
My brain says sell everything and hide till the markets recover…BUT this is extremely hard, unimaginably painful. Unfortunately, I had this exact thought last year as well, but said no to myself as I couldn’t get myself to turn the paper loss to real loss…and avoided taking that route…well, the portfolio got even more decimated…but in spite of knowing this and having personally experienced it, I still find it so hard to sell everything…and that itself tells me I have no business investing…
May be, sell a portion of everything…Very painful!
I can only admire others who are in this position and are able to take the decisions without any emotions.
I wonder if it would make the pain a bit lesser if I go through my portfolio to see which have lost by 30% or so, and sell those and immediately put in a S&P 500… (I doubt I have much in the 30% loss as most are vastly down, so I may have to sell those up to 50% loss)
- Strangely, I know I wouldn’t flinch much if the S&P 500 falls…in fact, I strongly think it is going to fall, reading everything that is out there…however, like Jeff and so many others have said, over the long period of time, I have greater confidence it will go up and to the right…The question then becomes, well, if I know the S&P 500 is gong to fall, should I not wait for that and then deploy…I guess that would be the right answer if I ask my brain…but I am not sure how my heart will cope in
the period between me selling and sitting in cash…and waiting for everything to fall …and like we have seen several times, what if the market suddenly rips (bear market rally) immediately after I sell…I don’t know how to cope with that…would make me physically sick at my ineptitude and horrible luck.
I know nobody can give me an independent advice, and I respect that…but it is very helpful to know what you would do/ would have done if you were in a similar position.
- Another question…I also see there has been talks of recession at other periods when the interest rate hikes happened ( as recent as in late 2018, when S&P 500 turned sharply negative from Sept to Dec 2018 after being up in the year till then, correlating with Fed rate hikes…and I have no idea, but assuming similar occurrences may have happened every other time correlating with rate hikes)…Is the sentiment different this time because this also happens when the inflation is still high, and the QT is also happening all at the same time…and if that is indeed the case, I guess it is possible that market can tank dramatically, and the FED U-turns… or is the expectation such that it is more likely that there may not be a black swan event, but more a steady prolonged decline in the market…I almost want to say I prefer a quick death, and hopefully a sharp up turn and sow, but prolonged move upwards…
I hate this whole mess I have gotten myself into…Totally self induced!!
Thanks everyone,
Charlie
Hi Bjurasz,
Just wanted to make sure I understood that correctly.
Did you mean to say you sold at 50% loss, and then waited out in cash…and then because you waited too long, missed the opportunity to make it up {meaning, in this scenario, it was a wrong decision to sell}
Or did you mean to say, you were late to sell…and the continued fall led your losses to increase to 50%, at which time you had to sell { meaning it was a wrong decision not to have sold it earlier}.
Thanks,
Charlie
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