What was it like going through a stock market crash?

[Hugo Drax]

I started investing in the stock market in 2010 after the crash of the previous year, so I've never been through a crash. I've got most of my money in mutual funds. No individual stocks. If the stock market crashes, I'm pretty sure I'll just ride the whole thing through without selling. In fact, I might buy more shares for cheap.

Of course, I'm saying this now, but I don't know what my mind will go through when a crash occurs. Is it easy to ignore a stock market crash? or do people's emotions get in the way of doing the right thing?

What was your experience like in the previous decade?

I have been through a few of them. Always been the same thing, everyone panics and sells everything but the kitchen sink (retail). The smart folks (non retail, a few sharp retail) come and scoop up the free money (stock sold way below market value).

Profit.

Then the next bubble, thats where (retail) come and buy at the top and repeat the cycle of selling at the bottoms.

 

[Yossarian]

Was looking to retire at 58-59. Now looking at 62-63. Lost almost half the value of my 401k in 2008. Not the end of the world, but it did change my plans.

How did your 401k not rebound spectacularly, along with the rest of the market?

 

[nickbits]

Wait for the bottom and buy.

 

[MongGrel]

As an investor with a long term view I salivated at the opportunity to buy good companies at a low. To me it was like a memorial day sale, where the products on sale were solid companies.

I do realize this ignores the damage the crash did to lots of people. But you asked what my personal experience was with the crash, and so I gave you my honest answer.

Investments made in 2008-10 are now up . . . a LOT.

Fortunately I had a couple are doing well after it, had a few that pretty much got hit hard and I just let rebound.

 

[MongGrel]

How did your 401k not rebound spectacularly, along with the rest of the market?

Not all 401K's are the same of course depending on where you put the money of course.

I had some twit advise me to take my money out of Asian market investments just prior to the Y2K joke, was the worst advice I every received as it was doing well.

Took quite awhile for that one to recover, if I hadn't listened to him at the time it would have been much better off.

 

[overst33r]

Wait for the bottom and buy.

Buy low, sell high. It's so easy, why doesn't everyone do it?

 

[Exterous]

I didn't have much money so I didn't pay that much attention. I also didn't know much about saving for retirement other than I should and that it was a long term game. So I increased my contributions twice in 2008. Company went bankrupt in March of 09 (same month the low hit) so I moved account to a separate IRA. Today its worth $25k. Not bad for someone earning $8-12 an hour at the time of contribution

I am sure the next one will be much more nerve racking

 

[KeithTalent]

Lot's of layoffs and salary reductions for those of left after the tech crash. This last one was not as bad, so while we did let some people go, it was a far lower number, plus salaries were not reduced, just frozen.

Could have been worse. Things are going pretty well now.

KT

 

[Newell Steamer]

401k and Roth took a beating. But, I have more "buying power", since I kept investing during that crash (2008).

 

[Michael]

My first "crash" was 1987 followed by a recession in 2001. Been around for every one since then. The $ amount that I "lose" each time gets bigger and bigger. I think it was just into 7 figures in 2008/2009. So far the market has recovered and come back each time.

I think it is naive to think that you just buy right after. Firstly, you need cash to buy and that means that you were not fully invested before the crash and missed some of the run-up. Secondly, there is no guarantee that the market will rebound. If you look at the charts in this thread, you will see long periods of stagnation and slow declines do happen. We are going through the switch over of a population boom that has been saving for years and now will be retiring in droves. Interest rates are tiny and asset inflation is the policy of the Fed. Even optimistically, as the protection is removed it is hard to see much of a case for continued large gains.

Coupled that with the multiplied effect on emerging and overseas markets and just buying after a crash may not be slouch a great move.

As for being there during a crash, it is very hard not to be emotional. Even more so today with the access to news and real time quotes. Watching hundreds of thousan of net worth go up in smoke in minutes is not fun.

Michael