The Worst is Over (Right?)

In 2008 the major indices fell at least 20%.

Although 08/08/08 was purportedly one of the most auspicious dates in the new century, 2008 proved to be a most unlucky year for market participants. Whether the preferred vehicle was real estate, common stocks, bonds, or commodities, for many investors their decline in net worth was likely to exceed their annual income. Yes, we’re fortunate to be in the majority who have jobs, a health plan, and houses not in foreclosure, but it’s tough not to be distracted when our assets are eroding faster than we can add to them.

If you’re over fifty and living in the Bay Area, it’s not unusual to have a net worth that summed to a million dollars at the beginning of 2008, say, $400,000 in a house, $300,000 from a 401(k) [$10,000 per year, including the company matching contribution, over 19 years at a 5% earning rate gets you there] $200,000 in savings, stock options, and company profit-sharing, and $100,000 in cars, furnishings, and other assets. When the values drop by more than 20%, one needed a healthy six-figure income just to stay even. And no, the math didn’t work for me either. I worked pretty hard, yet lost ground. Plans to retire have been pushed back.

I really have no one but myself to blame for my financial situation. [Blaming others leads to anger and diverting myself from working my way through problems.] I could easily have switched out of stocks and mutual funds into cash-equivalent investments, but I kept believing (hoping) that a bottom had been reached.

At the beginning of 2009 I’m not discouraged. I’m investing more heavily into equities. The worst is over (right?).

[Addendum: The final report on my 401(k) showed that it recovered some of its losses at the end.]
© 2009 Stephen Yuen