How would you prepare the next '08 crash?

[Lowexpectations]

Originally Posted by ThisDamnLife

I disagree with your assesment here as it seems to suggest that you stick to you ought to stick to your plan even when you see the approaching iceberg.

As I begin to understand the markets more, I believe having a game plan preparing for a crash/correction should be inherent part of one's investment plan. Having said that I do also strongly believe in staying the course with your core investments while rebalancing the rest of your portfolio. Like for instance, this year I've almost stopped investing in US equities - just letting them grow - while I grow my international/emerging/gold/reit investments. I somehow can't get over my aversion for bonds but about ~6% of my portfolio is in bonds (primarily through my 401k). I'm a vanguard-devotee and so might open up my portfolio in the near future to BND/BNDX/VTIP.

You see it as an iceberg and that shows more about your risk tolerance than anything else. It's a roller coaster that goes up higher overtime

[mathjak107]

Originally Posted by ThisDamnLife

I disagree with your assesment here as it seems to suggest that you stick to you ought to stick to your plan even when you see the approaching iceberg.

As I begin to understand the markets more, I believe having a game plan preparing for a crash/correction should be inherent part of one's investment plan. Having said that I do also strongly believe in staying the course with your core investments while rebalancing the rest of your portfolio. Like for instance, this year I've almost stopped investing in US equities - just letting them grow - while I grow my international/emerging/gold/reit investments. I somehow can't get over my aversion for bonds but about ~6% of my portfolio is in bonds (primarily through my 401k). I'm a vanguard-devotee and so might open up my portfolio in the near future to BND/BNDX/VTIP.

the problem is you do not know where the icebergs are . you think you do but in reality no one does.

the good news is it is if you ever saw the myth busters episode where they were trying to see if dodging traffic and weaving in and out really pays off, the answer is nooooooooooooo.

want proof? ibbotson and morningstar track small investor money as it moves in and out of funds. they give two fund ratings on every fund.

the bobbers and weavers for the most part average about 1/3 of the return the fund actually gets as they attept to move to what they think is safe or hot next.

the real winners are those with discipline who stick to the plan they have.

in fact take a simple mix of 25% gold-equities-cash -long term treasuries.

lets buy everything back in the 1980's at the moment gold peaked at i think 800 bucks or so.

just by rebalancing each year and sticking to the plan the gold portion up until it just slid back actually beat a 100% investment in the s&p 500 after all those decades despite buying it at the worst possible time. .

[jrkliny]

First the iceberg analogy is really pretty bad. Icebergs were never a problem when visibility was good. For decades we have had radar and the iceberg issue went away.

The idea that we can never learn or do something is a guarantee of failure and not at all necessary. History does show that big unexpected crashes can occur. We need to be prepared for those possibilities, even if remote, but that does not mean we cannot see the major trends most of the time.

There are a few day traders who are successful. I have an in law who does fairly well. He spends hours a day watching the market and a few stocks of interest. He definitely comes out ahead but he is also definitely an exception. Most of the small investors who jump in and out of the market are likely to be wrong. It takes one party to sell and one to buy so 50% of the time one investor is making the wrong move. There are also lots of small investors who panic during corrections and sell at the bottom of the market. These observations have nothing to do with trying to understand the market and making longer term adjustments in allocations and portfolio assets. The average person is none too bright, but that does not mean that no one should become a scientist or physician or architect.

[ThisDamnLife]

Originally Posted by Lowexpectations

You see it as an iceberg and that shows more about your risk tolerance than anything else. It's a roller coaster that goes up higher overtime

So, you know my investment profile just based on one analogy .

[ThisDamnLife]

Originally Posted by mathjak107

the problem is you do not know where the icebergs are . you think you do but in reality no one does.

I agree with you. I didn't say I'm going to exit the market on seeing one (because I keep reminding myself in moments of weakness that these are still early days in my investing life and I've decades to go before I truly 've use for this money) but my intention behind using this analogy is to learn the ability to increase my probability of spotting iceberg's so that I can just do those little course corrections that will still put me on course.

Originally Posted by mathjak107

want proof? ibbotson and morningstar track small investor money as it moves in and out of funds. they give two fund ratings on every fund.

the bobbers and weavers for the most part average about 1/3 of the return the fund actually gets as they attept to move to what they think is safe or hot next.

I think you see me as a nervous investor who can't wait to exit @ the first sign of trouble. I'm not that one. What I want is to hear perspectives/experiences from other on this forum on what they did to stay the course when they had a significant portfolio to protect during crashes like '08.

Originally Posted by mathjak107

in fact take a simple mix of 25% gold-equities-cash -long term treasuries.

lets buy everything back in the 1980's at the moment gold peaked at i think 800 bucks or so.

just by rebalancing each year and sticking to the plan the gold portion up until it just slid back actually beat a 100% investment in the s&p 500 after all those decades despite buying it at the worst possible time. .

Just goes to show that there's more than one way to skin a cat.

[mathjak107]

me a nervous investor? i have never cut and run in my 26 years as an investor and had 7 figures invested in the 2008 downturn.

what i am is goal driven and retiring within 9 months.

i do not need nor want more volatility in retirement than i need to meet my income goals.


do not confuse nervousness with a a plan that gets carried out regardless of where markets are or what i think is next.

[ThisDamnLife]

Originally Posted by mathjak107

me a nervous investor? i have never cut and run in my 26 years as an investor and had 7 figures invested in the 2008 downturn.

Was the 7 figure portfolio your nest egg or did you 've a core protected portfolio and the 7 figure portfolio is a secondary portfolio that you would like to grow by staying the course.

Originally Posted by mathjak107

what i am is goal driven and retiring within 9 months.

So, by doing what you've done (which I understand is staying the course) are you retiring ahead of when you wanted to retire or are you 9mos away from turning 65.

Originally Posted by mathjak107

do not confuse nervousness with a a plan that gets carried out regardless of where markets are or what i think is next.

Yes, the more I talk & listen to conversations around me about the market I believe I'm developing the ability to spot the 'nervous' investor hoping to make a buck before the heavens come crashing down to the 'be greedy when others are fearful' kinda investor.

[Lowexpectations]

Originally Posted by ThisDamnLife

So, you know my investment profile just based on one analogy .

No where did I indicate such a thing. I said the analogy shows more about your risk tolerance than anything else if that's really how you feel

[mathjak107]

Originally Posted by ThisDamnLife

Was the 7 figure portfolio your nest egg or did you 've a core protected portfolio and the 7 figure portfolio is a secondary portfolio that you would like to grow by staying the course.



So, by doing what you've done (which I understand is staying the course) are you retiring ahead of when you wanted to retire or are you 9mos away from turning 65.



Yes, the more I talk & listen to conversations around me about the market I believe I'm developing the ability to spot the 'nervous' investor hoping to make a buck before the heavens come crashing down to the 'be greedy when others are fearful' kinda investor.

the retirement grave yard has been filled with failed attempts at retirement by folks waiting until the last minute to structure for their retirement.

selling equities at a loss to gather up a few years of living expenses at the last minute would be no different than a trader having a string of losses and losing the goose laying those golden eggs.

with no idea if you will be the lucky retiree who pulls the plug right before an extended down turn like those in the year 2000 good planning says get that structure you want in place when things are up .

as far as me, i am retiring just shy of 63 in july.

in 2008 i was about 60/40 down from 80-100% equities where i spent my entire investing life . but that reduction was part of a plan that had me retiring to another state at age 60 which was later changed.. but the structure remained and in retrospect was good timing with what was to follow and not on the radar yet...

i also held substantial amounts of commercial real estate here in nyc which was fairly ill-liquid for many reasons at the time. the portfolio would be my main means of support.

as human capital has less and less years to produce more and make up for the awe craps , what you accumulate over almost a lifetime should be protected more and more in my own opinion unless you are not really dependent on that money to support you like those with decent pensions.


losing some money while accumulating money is not so bad, but losing the same percentage when you are at a life time apex can be years of expense paying dough evaporated.

yes , spending down early on at a loss over the first 5 years of a retirement will be just like that trader with those losses if forced to sell in to an extended down market spanning a few years..


my goal is to preserve and protect my capital as best as i can taking only the risks i need to take to make the numbers work.

that does not mean others see it that way but that is me agreeing with bernstein.

my eventual retirement level will be 45-50% equities but 35% or so heading in to retirement.

but putting retirement aside if anyone feels they need to prepare for a crash than they are to aggressively invested or their time frames matching long term money to short term needs are screwed up. you should be able to turn off the noise and ride things out regardless.

the only decisions should be when to rebalance or when and what to add to the portfolio.