What You Have Learned Since 2008

[MediumTex]

I don't know about the rest of you, but I am amazed at how much I have learned about investing and the markets since 2008.

Has anyone else had this experience of feeling like you have absorbed an incredible amount of investment knowledge and experience in these last few years?

I have always thought that failure and adversity were much greater teaching tools than success and easy victories.

I completely understand how people who were too young to have lived through what we have been living through will be much more apt to make dumb investing mistakes in the future than people who experienced firsthand what has happened in the last few years.  OTOH, I see lots of investors who lived through the last few years, but somehow seem not to have learned as much as you would think, especially about the prudence of stock-heavy portfolios.

[moda0306]

2008 was a blessing in disguise for me.  I grew up in the late 80's, 90's and early-2000's, went to college in the mid-2000's... You can imagine what my perspective on stocks & real estate vs gold & savings bonds was... I've learned more as a result than I ever would have had I not been face-to-face with the conversations that took place after 2008.

The statement: "The more you learn, the less you know," never rang so true, though.  Just when I feel like I'm starting to understand macro or investing, I'm exposed to something that completely confuses the heck out of me.  The thing is, I'm much more comfortable navigating the waters of the unknown with the knowledge I have than I was initially diving into this stuff.

I remember googling "How does the gov't print money" because I felt like I didn't understand the mechanics of it at all between the fed/treasury/banks.  I was relatively comfortable with the PP at this point, but wasn't confident that I actually understood the monetary system that I was assuming the PP was built around.  That was the beginning of an absolute rush of information, after I finally found the answers in one, concise place, and it's amazing the conversations being had out there about all this stuff.  These are things that never could have taken place before the internet in the way they do now.  It's one of the things that makes me very, very optimistic about the future (though other things make me very, very pessimistic... so it's a wash for me).

[melveyr]

I started investing literally at the very peak in 2007. I was picking individual stocks, even watching Jim Cramer

I am very thankful that I started when I did, with a minimal amount of money. Watching everything crumble around me was incredibly fascinating. No amount of education can simulate what it feels like to be in the midst of a financial crisis. Part of me misses the absolute craziness of it all. Watching the markets slam up and down was almost like a drug, especially because I had such a risky portfolio compared to the PP.

I feel like if I didn't go through 2008-2009, I could have never adopted the PP. The risks that the PP hedges would have seemed too remote. If I had started investing now, as opposed to five years ago, I would likely be loaded up to the gills with equities. I would likely have set myself up for a crisis when my nest egg was sizable, and possibly have done permanent damage to financial plan.

[Storm]

I discovered the PP in 2009, and I never would have been interested in such a portfolio if it hadn't been for 2008 and the previous crash in 2001.

I also learned a ton about basic things like how bond yields rise inverse to the value of the bond, and how they are calculated.  How treasuries and equities have an inverse correlation to each other.  How gold can increase in value even during deflation.  I'm still a novice, but I think I have a greater understanding of the fundamentals that should be taught in high school, honestly.

Can you imagine how much better off the average american would be if financial health were a required course in high school?

[Lone Wolf]

I know exactly what you mean.  Nothing focuses the mind like watching your precious savings endure an epic butt-shellacking in the markets.  One question dominated my thinking after that time period: "What the hell just happened to me and how do I keep it from ever happening again?"

I realized that concepts that had once seemed like part of another world (central banks, inflation, forex markets, etc.) played an important role in my financial success or failure.  Protecting my family's financial future was my responsibility.  In 2008, reality called to inform me that I was not up to the job.  The only solution?  Get ready.

It's also given me a sense of the value in studying history.  History is the opportunity to learn (at little cost) the lessons others earned through direct suffering.  When you look at it that way, taking time to consider the lessons of times like the Great Depression is a great deal compared to waiting for a negative experience to force you to learn what could have already been yours.

[craigr]

I knew this before 2008, but after 2008 it was more true than ever. It is a quote from Jack Bogle when he was a runner at a brokerage many decades ago and another runner told him about the markets:

"Nobody knows nothing."

That pretty much sums it up.

[shoestring]

I learned I was right.  I was right to diversify.  I was right to use low cost passive funds.  I was right to stick to the plan.  I was right to ignore the news.  I came out rather smug actually.  If that disaster did not swaybme from my ideas I don't know what will.

It still sucked for other reasons.

[moda0306]

I was barely invested in the market in 2008 (just started my out-of-college career), and had a rental house, but had bought it in 2002, so I had a few years of gain before it tumbled back down... I got into the job market in a high-demand industry (relatively... accounting).

I bought a house in 2010... not the bottom of housing, obviously, but I got the $8,000 credit and my neighbor just sold his house (identical to mine, though NOT the 90's cookie-cutter type... real good bones) for what we paid for ours in 2010.

I also live in a state with, relatively, a very healthy economy.

So all-in-all, I feel like I was under-exposed to the crisis anywhere close to where many others were, though it was amazing to watch unfold.

[Gumby]

I don't know about the rest of you, but I am amazed at how much I have learned about investing and the markets since 2008.

Has anyone else had this experience of feeling like you have absorbed an incredible amount of investment knowledge and experience in these last few years?

In many ways, the data from the crisis has allowed us to re-examine many aspects of economics and rhetoric from pundits and politicians that many of us used to assume was fact. If it were not for the crisis, we likely would never have had the opportunity to re-examine the world in the way we now do.

[Gosso]

I learned that junior gold mining stocks would not be "hundred baggers" once the economy collapsed.  Peter Schiff, Jim Puplava, Eric Sprott, Jim Rogers, and Marc Faber had the right prediction, yet were unable to direct their clients into the correct assets.  I also started investing in 2007, and saw my portfolio fall 75%...that was a lot of fun!  But thankfully I had only been investing for 6 months, and was dumb enough to hang on for the rebound, so I ended up averaging 10% annually.  I'd hate to see the standard deviation on that bad boy!

[Alanw]

I learned that junior gold mining stocks would not be "hundred baggers" once the economy collapsed.  Peter Schiff, Jim Puplava, Eric Sprott, Jim Rogers, and Marc Faber had the right prediction, yet were unable to direct their clients into the correct assets.  I also started investing in 2007, and saw my portfolio fall 75%...that was a lot of fun!  But thankfully I had only been investing for 6 months, and was dumb enough to hang on for the rebound, so I ended up averaging 10% annually.  I'd hate to the standard deviation on that bad boy!

Even after a number of well known prognosticators made the right call in 2008 and still couldn't put their clients in the right asset classes, the Jack Bogle quote posted by Craig rang truer than ever "Nobody knows nothing".

My investment education went into high gear after 2008 and took a rather bumpy road until a year ago when I discovered the HBPP.  The road has been much smoother since.

[AdamA]

Has anyone else had this experience of feeling like you have absorbed an incredible amount of investment knowledge and experience in these last few years?

I feel like I've internalized the lessons I've learned about investing since 2008 to the point where they are applicable to larger parts of my life.

Namely:
I've learned how much uncertainty exists in the world in the general. 

I've learned that many people are very overconfident about many things. 

I've learned that flexibility and the ability to accept reality are great qualities.

[atrchi]

I learned not to substitute assets. I had not heard of the HB PP at the time but I was familiar with the PP concept in general I and started liquidating out of equity-heavy positions in favor of a PP-like setup in 2007, believe it or not. I saw the crash coming but unfortunately in September 2008, 50% of my "cash equivalent" position was in Principal Protected Notes issued by... Lehman Brothers! I lost 80% of that position. All in all my main investment portfolio (the "money not afford to lose") was down 40% which was the same as if I had been 100% in a stock index. This was a slap in the face considering the time I had spent following the market and managing the portfolio and carefully mitigating my risks with "cash" positions (failed), put options (liquidated too soon), etc.

I also learned not to substitute gold miners for physical gold.

And not to substitute corporate bonds for treasuries.

And not to substitute ETFs & funds for actual underlying assets.

I learned the meaning and importance of "liquidity" at all levels.

[lazyboy]

In March of 2007 I retired and was "shopping" for an approach to managing my retirement assets. I remembering going to a talk held by an Investment Advisor who was recommended by my tax person. This confident fellow was bragging about how great his DFI funds were doing. Instinctively, my spidey sense was tingling, and I asked him how he projected his recommended portfolio would do over the coming year. He quickly replied that it should be up 14%. Right then I knew something was wrong. I asked that devil "What's going to happen when your small cap and emerging stock funds crash?" He paused for a spilt second, just looked right through me with his serpent eyes and kept on talking. Well, at that point, I realized, dear friends, that I did not trust him or any of his species to make my investment decisions for me, so I started educating myself. And the more I learned, the more I wanted to avoid unnecessary risk. Having already lived through the markets of the 70s, 1987 and 2001 I knew, at the very least, that the stock market could crash at any time. Still, I was caught by the 2008 crash and suffered losses even though I was starting to take money out of stock funds, thinking I could time my way out of the market. Ah yes, the sting of those losses increased my motivation to find a better way- a safer all weather portfolio and that eventually led me to find the Perm. Port. Yes, dear brothers and sisters, I have found greed and fear in my heart, after all, I'm only human. But as I progress I am learning to trust in the Great Equanimity beyond my attachments and aversions as my path continues toward the investing light. 

[jackely]

My name is Jack and I'm a stock mutual fund investor.

(Sorry, but this thread reminded me of an AA meeting).

Seriously though, 2008 was also a turning point for me. My retirement years were fast approaching and I was having to do some catch up due to some unfortunate events that depleted my savings. According to various retirement plan calculators I felt like I had a good plan in place to meet my goals but they did not anticipate a 40 percent loss in my portfolio which was much more painful to watch than it would have been 20 years ago. The portfolio eventually recovered most of the losses but the experience definitely left me thinking there has to be a safer way to invest.

[lazyboy]

addendum:

I learned from and since 2008:

PCRIX crashed and was no substitute for gold.
LTT have place an important place in the portfolio (still working on my understanding of that one)