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fence sitter here. I got out of the stock market in 2007. Invested very conservatively and made 5% in 2008; no loss for me.
Did you invest conservatively from 2002-2007?
I find it hard to believe you can go from aggressive investing (international, emerging markets markets, small caps) those years and just switch gears to bonds and money market all of the sudden.
I find it hard to believe you can go from aggressive investing (international, emerging markets markets, small caps) those years and just switch gears to bonds and money market all of the sudden.
There were already plenty of signs that trouble was coming in 2007. The smart people got out. I should have been smarter.
For those of you who pulled out of the stock market in 2007, put everything in cash and CDs, you are either just plain lucky or had insider knowledge the rest of us didn't have.
There were plenty of signs. We've been 90% cash (other than IRAs, we're both 31) since 2006. Now we're 100%. Yeah, we missed some of the upswing, but we more than made up for it in losses not taken in the last year. We tentatively began looking for our first home over two years ago and were aghast at the lending practices, home "values" and herd mentality of all involved. If we were smarter, we would have locked in 4-5% CD rates back in the day and have 85% of our living expenses paid for as well. But we didn't want to tie up down-payment cash (which is now turning into buy-the-house-outright cash), so it largely sits in a few ING accounts. Every month home values decline is money in the bank for us.
I'm a fence sitter. I didn't know much about investing. I was always one of those passive people who said to myself, I gotta learn about investing one of these days. Well when Bear Stearns collapsed, I was like omg, time to learn. I did a lot of reading in a short span of time. The first thing I figured out was try to figure out what to do w/ my stocks. Luckily I came across Martin Weiss from Moneyandmarkets.com, he had very specific instructions which was to sell all stocks on a rally. I did exactly that, and ended up losing very little.
People listened too much of what they were 'trained' by the MSM which was stay the course. Stay the course is a bunch of nonsense IMO. Even if someone pulled out a little late, better to lose 10 or 20% rather than 50%. And if you are still in the game, my personal opinion this is a suckers rally now. (But a great time to still sell).
As for real estate and not being in it, we just lucked out. We just were working contract jobs during the bubble and not looking to settle down. I'm not sure what we would have done or gotten ourselves into had we been looking during then. I would like to say oh we would have been smarter and not gotten an ARM or bought on one income, but I don't know. The herd mentality is powerful and it's easy to get sucked into it.
There were already plenty of signs that trouble was coming in 2007. The smart people got out. I should have been smarter.
You just can't predict things. Everyone was talking about the "housing bubble" as soon as early 2003. I had another friend sell his condo in late 2003 thinking he got out of the housing bubble. He purchased in 1999 in a very good part of DC (Cathedral area) for 100K, sold it for 200K. Only to see his Washington DC condo get flipped twiced (2004 and 2005). The last time it sold was for 320K. So he was kicking himself for that "lost 120K" in gain because he could have gotten more.
So he stood on the sidelines for almost 4 years. Renting. Moved to San Francisco. Purchased a row/townhouse in the city (near or in the Financial district) for 1 million (yeah that's how much 1 million will buy you in the city of SF). So he thought he was buying in a down market (as real estate values were already declining in late 2007). Now his townhouse value has probably declined 100-150K from the 16 months he's lived in it.
I re-diversified my stock allocation almost every year. I was upwards to 40% invested in emerging markets by late 2006. I rode that gravy train for at least 3 years. By early 2007 I had switched to only 15% international/emerging and put at least 50% towards investing in "value" stocks (those with low P/E ratios with high paying dividends). I thought I was playing it safe. Guess which are considered "value" stocks...financials stocks. So I ended up getting killed last year.
What would you have done if you already had 250K cash in bank accounts? You had another 200K in emergency money. You have all that remaining money (at least 400-500K left over). Most of us would invest that money.
Yeah you can keep all that remaining money in cash. Look at all the money on the sidelines that past 5 weeks. You could have made a killing in the stock market rally (maybe its a suckers rally?) if you would have bought BAC at $3, you could have tripled your money in 5 weeks.
What would you have done if you already had 250K cash in bank accounts? You had another 200K in emergency money. You have all that remaining money (at least 400-500K left over). Most of us would invest that money.
Yeah you can keep all that remaining money in cash. Look at all the money on the sidelines that past 5 weeks. You could have made a killing in the stock market rally (maybe its a suckers rally?) if you would have bought BAC at $3, you could have tripled your money in 5 weeks.
If I knew I'd want to spend the money on date X, I would not go 100% equities. Problem is, I bought into those stock positions when I was still on the dating scene. I figured my time horizon was several years. But a year later, I'm married, then a year later, I have a kid on the way.
My cost basis is almost enough for a solid down payment, but now I need to rebuild some savings. That's the price you pay for getting into equity investments -- you need to be prepared to sell at a loss, or wait a while to see returns.
We are fence sitters too. Sold in 2007 and have been renting since.
We put all of our house money into easy access, high interest accounts with HSBC, ING and BofA.
It was a mixture of gut feeling and luck.
We also kept our cash handy so we could jump on a house when the time was right. That means we are now getting a low interest rate which sucks, but we haven't lost money, which doesn't suck.
We are about 90% cash. We have a SEP and 401k, but that's it. I'm 31 and my husband is 37. No insider knowledge. Just luck and that gut feeling that said it was time to go.
For those of you who pulled out of the stock market in 2007, put everything in cash and CDs, you are either just plain lucky or had insider knowledge the rest of us didn't have. Especially those younger than 35 years old. We were all trained to have that 2 year emergency savings, have that big downpayment set aside already. The rest of the money goes to investing.
Seriously, if you already had 150-200k cash saved up (for the downpayment) plus another 200K in emergency savings. What do you do with the other 400K-500K you have remaining? You already put aside over 45K a year into your SEP. You would probably have invested it in the stock market. Don't kid yourself. Most (I'm saying at least 80 percent especially the younger crowd in their earlier 30s) would have invested that money while waiting out the real estate bubble. So those who waited out the bubble saved themselves in real estate values declining, lost money in the stock market crash.
No luck, no insider information. I follow Roubini and Schiff and they started giving the warning signals in 2006. I also follow the market and the financial sites also started giving warning signals. I don't follow the MSM.
The OP in this thread makes no sense. I don't know if it's bitterness or jealousy, but just because the stock market went down doesn't mean everyone automatically lost money. Like the bursting of the housing bubble, there were plenty of signs that the stock market was going to crash months before it actually happened.
Did people who didn't buy a house lose money in the stock market? Sure. But I'm willing to bet that people who were smart enough to sit out the housing bubble also transferred their money from volatile stocks to safer investments.
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