Agreed, I would have like to be down 17.6% this year instead of whatever I am actually down. Luckily, I pulled most money out last spring to travel and start a company - best investment I have ever made!
When I was first starting my startup, I figured I ought to rebalance my portfolio just so I could forget about it while I worked. Tallied everything up, divided them up by asset classes, and figured out what dollar value I wanted in each fund. And I moved some of it around, into bonds and out of individual stocks and such.
But when it came to putting money into an S&P 500 index fund, I just couldn't do it. I had the Vanguard website open, everything ready to invest, form filled out, but my gut told me that there was no possible way that the stock market was worth what the ticker said it was worth. I'd previously worked at a financial software startup, so I had all the stats on market P/E, record earnings, leverage levels, etc. So I closed the window and forgot about it.
This was on Oct 5. The S&P 500 peaked on Oct 11.
So yeah, a whole lot of luck, and maybe a little knowledge thrown in. I tell this story because everyone here's coming up with excuses for hedge funds: they're "only" down 17.6% when the market is down 40%, or they got those outlandish returns with less risk, or they're really really smart and so should be compensated for those sophisticated quant models. But excuses don't matter in finance - only your return. Ultimately, it's a whole lot of luck and a little knowledge - for everybody. I predict we'll see many, many more hedge funds do a lot worse in the coming year.
So, at what point are you going to reverse that decision, or what do you think are currently good investments for a retirement beyond 20 years from now?
I think the market is pretty close to fairly-valued now, by conventional valuation measures. Maybe still a little overpriced, but you can't call the exact bottom.
I'm waiting to put money in because I don't yet have a job, and so may need that cash to fund another startup (there's that luck aspect again; had I not been starting a startup last year, I likely would've had way more in the market). But if I had a normal employment situation, I'd be gradually money into stocks, towards a more normal asset allocation.
As for a retirement 20 years out - I wouldn't even try to predict that. I haven't touched my Roth IRA this crisis, nor do I count it in overall returns (haven't even looked, really). The one thing I would say is to have some international exposure. Prices rise or fall based on how reality compares to the market's expectations, and I think it's unlikely that America in 20+ years will have the hegemonic position it does now.
Yes and no. If I am not allowed to short IBM, I can get around it. I simply short the Dow and go long the other Dow components (that is, excluding IBM). The transaction costs are not that large. Mostly, it's just a stupid rule that can be easily traded around.
I don't think that that's correct. I think that the 'short selling ban' banned actual short selling, and actions which had an equivalent effect. So your example of shorting the index and buying all the stocks except one would have fallen foul of the ban.
