On NPR radio (I don't recall the exact source) and this CNBC article on How the Financial Crisis Impacts Your Retirement estimated investment losses between $6.5 to $8 trillion for 2008.
Wow! That's a lot of financial value that just went poof. And it doesn't even include the loss in housing values. Tomorrow, I will write about where did all the losses go.
Looking back, here's what worked in 2008: Investing in CDs, bonds, and shorting stocks. Cash was also a good place to have money. And there were probably some individual stocks like Wal-mart (WMT) and McDonald's (MCD) that had a gain for 2008. These investments made money in 2008.
Just about everything else didn't work in 2008: A diversified stock portfolio, international stocks, commodities, hedge funds, value investing, mutual funds, sector funds, real estate, etc. These investment probably lost around 30 to 40%, as did the market indices. Even university endowment funds weren't protected from the decline. According to The Wall Street Journal, even Harvard's endowment fund lost 22%, or $8 billion, in the second half of 2008.
There is a market expression that says, "Don't confuse a bear market with stupidity." For now, while my wealth has declined significantly, I don't attribute it to stupidity. I do expect the market to rebound and a diversified portfolio will benefit.
However, in the future, I'll remember another market expression that says, "Don't confuse brains with a bull market." When the market rebounds, I plan to take profits on some of the gains and reallocate the funds to CDs, bonds, and cash.
Disclosure: At time of publication, I don't own either stock in our trading account. Our managed accounts own Wal-mart and McDonald's.
For more on Reaping the Rewards, check back every Friday for a new segment.
This is not financial advice. Please consult a professional advisor.
Copyright © 2009 Achievement Catalyst, LLC
September Income – $4560.09
2 days ago
No comments:
Post a Comment