A funny story I wanted to share with all of you.
I started investing in late 2012 after being disgusted with my overall returns.
From 2001 to 2012, I’d been putting enough money in my 401(k) to get the maximum from my company. I was dumb but smart enough to maximize that. So in late 2012, I began to learn about investing.
It wasn’t until today that I looked back to 2008. From October 2007 to March 2009, my portfolio lost 50.2% and I was adding money the entire time! Today, I can report that portion of my portfolio is now 10.6 times larger. My overall portfolio is not quite 20 times larger.
I have added quite a bit of money to my portfolio after I started to look toward the future beginning in 2012. The additions to the portfolio do outweigh the gains as the base was small. Nevertheless, I have been very fortunate to have been too ignorant to sell during 2008!!!
This should be a good indicator of how I should react when the next 2008 rolls around.
Hi AJ, as I wrote in the Knowledgebase:
I got killed in 2008 like everyone else. Probably worse than someone who was in defensive stocks. It was my first negative year after 19 positive years in a row. I stayed 100% in stocks, selling anything which hadn’t gone down much to buy more of the ones that were down the most.
Finally, I was down so much that even I got scared and started to think of selling out and going into cash. All the talking heads were saying, “Sell! Sell! Sell! Get out! Get 100% in cash!”
I said to my wife, “If everyone is shouting ‘Sell!’ and even I am scared enough to be thinking about selling, there’s no one else left to sell… This must be the bottom.” And it was (Nov 2008).
Not exactly the same experience as yours, but the same outcome. Remember though, that now that you are not so “ignorant”, the next 2008 will be VERY scary. The last one certainly was.
Remember though, that now that you are not so “ignorant”, the next 2008 will be VERY scary. The last one certainly was.
A general crash is not the only scary situation, so is any of your stocks crashing. To sell or not to sell? If only Shakespeare had been an investor! The advice you hear on the web is complicated by the fact that there are two kinds of investors, the long term holders and the traders. Advice and strategies that might make sense for traders do not necessarily apply to long term holders. For example, stop loss orders make sense for traders but not for investors. One broker I worked with used to say that investors should have a mental stop loss only, not place a real order.
Then there is TA, momentum dictates to sell when a stock breaks below certain support levels which might not apply to long term holders but then, you complained that TMF holds for much too long.
The most sensible advice I have seen comes from Peter Lynch, paraphrasing: “Sell when the story turns sour or when you realize you made a mistake.” No mention of “the market!”
But it’s still gut wrenching.
The best thing that happened to me in 2008 was the birth of our third child. I was taking care of a 4-year-old, a 2-year-old and a newborn.
Market? What market?
I came out of the fog around 2013, when my youngest started kindergarten.