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I’m someone who’s been investing for almost 8 years and am early in my life and investing journey. I have only experienced the 2020 drop, along with the April 2025 drop. Of course, both were short-lived and I continued sticking to my investment plan.
A lot of HD forum members have been through more downturn seasons. How did you deal with that? Did you “automate” your investment (a relatively new concept) and delete any phone/web apps to “trick” your emotions?
Were there any regrets that you wish you would’ve done differently in your investing journey if you could go back to your 20s and 30s?
Please share your story. Would love to learn more!
I did experience the stagflation of the 1970s, the Dot-Com bust, the 2007 banking fiasco, a couple of lost decades where the market went sideways and so on.
How did I deal with downturns? I doubt if most of us are really prepared for a 30%-50% equity downturn, and a period of years where stocks go nowhere. Recent downturns have been “head fakes” of relatively short duration and haven’t prepared us for truly difficult times. In the Dot-Com bust (2000-2002) I lost most of my investment value with a low of about $5,300. I was more fortunate in 2008 and lost “only” 15.96%.
During such periods I ignore my brokerage statements. I used Dollar Cost Averaging to fund my retirement accounts (Roth, 401(k), SEP, etc.). However, during times of market turmoil, I have altered my deposit destination. For example, 2007- I shifted my purchases away from stocks. My perspective is, I can buy on the way down or the way up. Delaying or altering my purchase as the market drops was primarily a psychological ploy. I’m aware of the arguments against this, e.g. “I may miss a peak, etc.” However, when used this was a temporary adjustment on my part. It is one of the reasons why in the period 2006-2009 my portfolio returns were 26.13% (including my 2008 loss).
On an annual basis, since 1995 I have calculated my net worth. This is helpful when markets are down and one may accumulate savings or purchase a house or other real assets (as for example a commercial property). Net Worth provides a more useful personal financial indicator IMHO. If one chooses to include items that depreciate (an automobile) that depreciation must be included in the annual calculations, ditto for any debt. My Net Worth has trended upwards each year since 2004 with several exceptions: a 7.8% decline in 2008 and 3.7% decline in 2011. It is currently 0.3% above the previous high set in 2021. I’ve been taking withdrawals of 3.5-4.0% from my retirement accounts since 2018. Any market turmoil after 2021 was barely noticed.
Consistency is important. Raising a family, running a business, a home purchase, taxes, a marital divorce, etc. all competed for my savings. Yet I was able to save on average between 10%-15% each year. Use compounding to your advantage. I actually went through two lifetimes of saving because I started over at age 51 with a net worth of $848. So yes, beginning early is nice, but beginning over at a later age was not the impediment that some say it will be.
As time goes by you may develop what is called “survivor bias”. Keep a long-term mindset, exercise discipline and avoid fads.
One thing I might add is that even if you plan to “do nothing” and “stay the course” in jittery markets, it is not always that easy. Sometimes you may face an unexpected quandary. Always a passive buy-and-hold investor, I lost my job in the spring of 2008 and had to roll my 401(k) balance into a self-directed rollover IRA. When it came time to set my asset allocation, I faced the question: “Should I hold off on stocks and stay conservative in this very jittery market?” I shrugged off that temptation and stayed heavily in stocks as I still had decades until retirement. Well, the bottom started to drop out of the market a few weeks later and continued to slide until April 2009. A total fiasco? In hindsight, absolutely not. If I had abandoned the market when I could have, my mindset likely would have prevented me from jumping back in for quite sometime. Time in the market is key. It all worked out well in the long run.
Looking back, these things worked well for me: saving early on and often, not having debt, taking advantage of full employer match and maxing out pre-tax IRA contributions, and being of a buy and hold mindset. But then I’m likely an outlier on this website in having spent my first investing decade growing my savings solely with fixed income. That was possible back in the days of higher interest rates and a gradually declining interest rate environment. Only after achieving an adequate nest egg did I venture into stocks, and mostly then in individual dividend and/or value stocks that were out of favor. On balance, that worked well too. The winners performed spectacularly over time and helped erase thoughts of the losers.
Regrets? Certainly! These I would have done: fully funded my oft-neglected Roth IRA each year; acted to minimize capital gains in my taxable account (where buy and hold doesn’t work so well!); and bought index funds instead of individual stocks. Would I have invested sooner in the market? Not likely, as I slept well at night and enjoyed the feeling of building that nest egg.
I started investing in equity funds shortly before the 1987 crash. In all the subsequent crashes or bear markets, I just kept on dollar cost averaging (DCA). In March 2009, almost at the bottom, I recall a conversation with my brother. He called and asked, “Are you selling or have you sold?” “Nope”, I said. Neither had he. We stuck it out. That said, markets can stay down for a long time. The SPY (S&P 500 Index Fund) peaked 3/1/2000 at about $154.65. I took 13 years to move higher. On 4/1/2013 it rose to $156.1 and then it was off to the races powered by near zero interest rates. If one dollar cost averaged during that period, they made a killing–in the long run.
One thing I would caution a person like yourself, with regards to college planning, is consider moving funds from equity investments to cash or short term investments maybe two years or so before needed. I didn’t do that with my second son, who graduated from high school in 2011, and his college funds were only just recovering when we needed them. Fortunately, he received so much scholarship money I had plenty for him. My younger two kids saw their portfolios recover and then some, and thus it all worked out OK. So…lesson learned the hard way for me.
We strived to maintain a well-diversified core portfolio in index ETFs, and didn’t invest in many individual stocks. (See William Housley’s article ‘When is an index fund not an index fund’.) https://humbledollar.com/forum/when-an-index-fund-is-not-an-index-fund/
Outside of a mortgage, we didn’t carry debt or overextend ourselves…and we had an emergency fund. After the 2017 Tax Cuts and Jobs Act (TCJA), we paid off our remaining mortgage for peace of mind.
I keep a top 5 investments list in case there’s a correction. I invested some of our cash during the 2020 and April 2025 market corrections. During previous market corrections, we continued to hold for the long term.
I wish I’d invested more in my Roth 401K over the years, even if only $1-2K.
The only things I wish I had done differently are: start investing earlier, and invest in low cost index funds earlier. I have lived through several downturns and did the same thing every time: nothing. Yes, I could have made more money by buying at some point during the drop, but which point? Doing nothing was much less stressful. I was also rather busy during a couple of them.
Having started investing in a tiny way around 1962 and later in a 401k in 1982 I guess I have been through lots of downs and ups, but I don’t recall specifically any of them. I never did anything to change investments along the way just kept investing mostly in the 401k until I retired in 2010. Still I keep reinvesting all dividends, etc.
I agonize over each down period, even day. I complain to my wife, I holler at my Fidelity website, but I don’t do anything.
I built our wealth by investing in our companies 401K plans only. First to at least get the maximum match otherwise you are saying no to free money and an immediate 100% return from day one. As our income rose most of the raises went to the 401K, as we were meeting our frugal living expenses.
Early in my investing life (now over 30 years) I discovered Vanguard and John Bogle. I have lived through many bad markets, but look at graph of the historical trend of US markets, they have always up and to the right, but not linear. When it came to market downturns they are an opportunity to buy stocks at a discount.
During these events I hear two of Jack Bogle’s mantras: 1) Ignore the noise, 2) Don’t just do something, stand there.
As result of following Jack’s advice this week I reached a major financial milestone that I have been waiting for. Per Vanguard I now have made as much money on my investments as I have contributed.
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While I was invested during Black Monday, I was only 21 at the time, and it really didn’t impinge on my radar; drinking beer and having fun was more important. During the dot-com bust, I was singularly focused on my fledgling business, and again, the crisis largely passed over my head.
The Great Financial Crisis was front and center of my awareness because my bankers pulled all my lines of credit. I was too embroiled in trying to save my company to take advantage, and because of the cash-flow stress, I wouldn’t have had extra money to invest anyway.
Looking back, I am just grateful that through all these periods of turmoil I was slowly and without fuss drip-feeding money into the markets month by month, building long-term wealth. I guess the only thing I wish I had done differently was invest more each month.
To begin Bogdan, based on your prior posts, I thought you were much older. You seem smart and wise beyond your years. I was in my 50s by the time I acquired the knowledge you seem to already possess. I wish more young people were tuned into HumbleDollar.
I have lived through Black Monday in 1987, and pretty much the entire decade from 2000 until 2009. I can’t explain why, but that turbulence doesn’t bother me. Those bad times were tremendous opportunities to pound more money into investments.
Will future bear markets provide similar moments? I sure hope so.