<p>We are very risk adverse too. When the kids were young, we bought zero coupon bonds for them and each matured corresponding to the 4 years they were in college. We knew exactly how much we had. Fortunately no one took more than 4 years to graduate.</p>
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We are about as risk adverse as one can be. We saved for our kids' colleges...in a savings account. In a bank.
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<p>I wouldn't really recommend people follow this route (unless you're saving for expenses that are just a few years out). In fact, if you're saving for something 10+ years down the line now would be an excellent time to make some investments into the market... everything is one sale. </p>
<p>Yes it might go down a bit in the short term but investing is a long term game. The only number that really matters is what you sell the investments for down the line... the paper value in the meantime is quite meaningless (even if it's frustrating to look at).</p>
<p>The current situation is an excellent example of why you need to have a proper strategy for investing (eg transitioning to safer investments as your intended withdrawal date nears)... however, getting scared to the point that you stop making regular investments into the market for long term things down the line would be a HUGE mistake.</p>
<p>I hear what you're saying, but, when we needed the money, it was there. If inflation went up, so did our saving. Was much easier to sleep at night.</p>
<p>It depends on what you call long term. The s&p is where it was 10 years ago. There have been times when the market has taken more than 20 years to recover. Some of those who invested years ago may be dead before they see a full recovery in the market.</p>
<p>I'd suggest reading up on secular markets. We had a secular bull market from 1982 to 2000. Secular bear markets usually follow with similar time frames with cyclical markets in-between. We had outsized returns in many of the years of the 1990s. I think that the long-term rate is supposed to be around 8% so one would expect a reversion to the mean after the great growth of the 1990s. A friend of mine posts long-term charts from time to time and I find them useful in seeing the big picture.</p>
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If inflation went up, so did our saving.
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<p>And so did the amount that you were losing each year.</p>
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The s&p is where it was 10 years ago. There have been times when the market has taken more than 20 years to recover.
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<p>If someone just invested one chunk of money and then never invested anything else, what your saying might make sense... but of course that's not how it works. It's all about dollar cost averaging. If that person stayed the course with a strategic plan for investing modest amounts every month they'd almost certainly be far better off than someone that got scared and stuck to cash-only investments. </p>
<p>Yes the money they invested right before the crash will take some time to recover... but don't forget about all the gains they'll be making on the money invested after the crash during the 'recovery' period. In fact, it's the gains made during these periods that really make dollar cost averaging such a powerful tool of long term investing.</p>
<p>In times like these it's easy to get scared and run for the hills... but in the end these are usually the ones that end up losing out in the long term.</p>
<p>And for the record, I'm investing the same every month into my accounts now as I was before... I've not changed anything in light of this crisis. My accounts are all programmed to adjust their investment profile as time passes (and I check to make sure that happens). Have these accounts lost value in the last few months? Absolutely. However, would I have better off investing in cash only? Absolutely not. Even with the recent mess these accounts still have far more in them than they would have if I just invested in cash-only investments over the same period.</p>
<p>"Yes the money they invested right before the crash will take some time to recover... but don't forget about all the gains they'll be making on the money invested after the crash during the 'recovery' period. In fact, it's the gains that made during these periods that really make dollar cost averaging such a powerful tool of long term investing."</p>
<p>And you've backtested this theory, right? The $INDU went from 1000 to 9000 in the secular bull from 82 to 2000. How has it done since then? Factoring in a secular bear with gains during a secular bull market violates the past returns do not imply future performance. Do you think that an 800% gain in 18 years is normal? Do you believe in reversion to the mean?</p>
<p>I think it is in very poor taste for people to come on these boards and gloat about the fact that they had been prudent about their own finances and that the folks who are in trouble today should have known better. It is like going on a "chances" thread and writing something like "You should have worked harder in sophomore year, your grades were terrible, now you are never going to get into your dream school".</p>
<p>I don't think anyone is 'gloating.' It's times like these when people take notice of the problems that other have and think "hey, maybe I should plan for the future to make sure I don't make the same mistakes."</p>
<p>When the market is booming, nobody sits down and thinks "Is our 5 year old child's college fund investment plan setup to move into safer investments as she nears 18?" Now... it's too late for many, but if the problems of some make others take notice and properly plan for the future then at least some good comes out of it.</p>
<p>Vicariousparent--I am sorry if you see gloating in someone describing another approach (one that most folks would call foolish, by the way, since I didn't make any of those gains that most other people did when they were to be had.)</p>
<p>CC is about offering viewpoints and disparate experiences. We all are trying our best to get by, get ahead, get somewhere. </p>
<p>If anything, my approach to college, savings, and life in general, is to not do what you're supposed to do, but do what feels right to you, and let the chips fall as they may. That was probably most apparent in our kid's approach to preparing for college and college apps (and boy, did the chips fall....but that's another story).</p>
<p>I'm always interested in what other folks do; I don't look at their stories as gloating just because they're different from mine. Some I learn from, some I don't--most get an "ahh--that's interesting!" from me.</p>
<p>If it is gloating to suggest that folks pay more attention to what financial theorists (who don't have as much of an angle or financial interest in individual activities) recommend, instead of what your broker or other parties who make money off of transactions, then, yes, I am gloating.</p>
<p>If, on the other hand, you believe that there is value in sharing in rational information, especially information that may not be intuitive, to help people understand where they are now and avoid mistakes in the future, then I am not gloating. </p>
<p>Investing is a tough area, and one where the amount of misleading information so vastly outweighs rational information, that things can indeed be very tough for the individual inventor who is not professionally trained. Way too much of what you read in the popular press is written by, or with input from, people who have an angle to push, most often an angle in which they gain personally. </p>
<p>Reader beware.</p>
<p>Seems like gloating to me. Of course it is hard to get "tone" from a message board.</p>
<p>The garbage one hears from financial planners is just that garbage. If there is anything that one should have learned from the debacle in 2000 - 2002, is buy and hold investing is a mistake. Put up any chart s&p, msci world index, the dow etc over the last 100 years (for those charts that exist), you would see that long term trends persist and getting in and out of the market following those trends would have reduced your losses a lot.</p>
<p>Long term charts are available at Historical</a> Chart Gallery - StockCharts.com</p>
<p>A lot of the financial advise given these days is based on data from roughly 1980 forward where the markets have trended upwards and we as a country splurged on spending. Unfortunately the data from before this period has relevance for today. By the way, the dow is significantly below its 10 year mvg avg.</p>
<p>A clarification- my family is personally blessed with relative financial security, so I didn't feel personally hurt by the 'gloating'. But I think we should all be sensitive to the fact that many people have made financial mistakes or have just been unfortunate, and at this moment of financial pain it would be a good idea to go easy on the lecturing.</p>
<p>Edit: The other thread on this topic has a lot of lecturing too. I guess some people love to rub it in.</p>
<p>I'm not certain who is gloating. I can tell you that from 2000-2002, I was crushed in the market - losing close to 7 figures. I'm warning people to not listen to others and do their own research - nobody can be trusted.</p>
<p>I have learned a lot here, so I appreciate all the input, but I can see why comments about who should and should not get "sympathy" can be seen as emotional, rather than informative..</p>
<p>Some people are still not certain whether we are mirroring 1987 or 1966/1973 scenario. The later is a lot worse.</p>
<p>Cash helps you sleep well at night.
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I thought I should try to maintain my health so I could keep working and speaking longer and keep supporting my family longer, not to mention the many other people and lenders I help support. I also thought that I would like to keep as liquid as I prudently can, even if it often means selling stock at a loss. Cash is balm in this situation: it lets you sleep. I also thought that I wouldn’t be buying a ranch in Idaho, as my wife has wanted me to do — not for some time, if ever.
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<p>"In fact, they are among the angriest upper- and middle-class people I have ever seen. And the most frightened and worried. (In a way, they are now feeling the way ordinary workers have been feeling for years.)"</p>
<p>That article provides a bit of an idea about the level of anxiety. There was a paragraph about how angry these folks are too. The frustration of everyday life boils over. I got a state tax audit. As near as I can figure, I owe the state at most $7.50. I just need to find a piece of paper to get that amount, hopefully, down to $0. But it's going to take a day or two to straighten out my paper system (two file cabinets and three hanging folder systems and who knows how many boxes of paper) to prove that. Or maybe a call to the mutual fund company for information from four years ago. The thing that I really, really hate about taxes is the paperwork involved.</p>