Remember back in the year 2000 and what good times those were? Dot.com stocks were flying high. Equities were breaking all-time records every day. It seemed like there was nothing but blue skies and prosperity ahead for all of us. Then the unexpected happened.
BAM… Many of us lost 50% or more of our retirement savings in the dot.com bust. The NASDAQ technology stocks plunged 78% from March 10, 2000 to October 9th, 2002. It was ugly! It’s interesting to note that even more than a decade later, the NASDAQ is STILL below its highpoint in 2000.
For the smarter people who did not get so caught up in the Dot.com stocks, the S&P 500 got caught in the market downdraft and lost 49% during that same 2½ year time period. When all of the dust settled from the Dot.com crash, over 9.5 Trillion of American’s wealth had disappeared! Along with the wealth that disappeared, many people’s retirement dreams also disappeared with the crash.
Then, just as we were beginning to recover from the Dot.com carnage and finally start gaining some positive ground with our retirement accounts, BAM… We got hit with the 2008/2009 stock market crash and many lost another 40% or 50% of their retirement account values. The S&P 500 lost 57% from its high point in October of 2007 through March of 2009. It was not a happy time at all.
It used to be that we always knew we had our home-equity value to fall back on. After all, many of us had been faithfully paying our home mortgages for decades because we knew that our home would always grow in value and our home would eventually be an important part of our retirement program.
Everything was going great, right up until the 2007 housing crisis hit and then BAM… Many of our home values dropped like a rock. I knew some people whose home values dropped by more than 50%. I think all of us have friends and loved ones, (and possibly even ourselves), who ended up losing their homes, short selling them or having them foreclosed. Talk about adding insult to injury, this was a hard blow to stomach for all of us.
The 2008/2009 market crash and the housing bust caused another 14.8 Trillion of American wealth to disappear!
Remember the old Whack-A-Mole arcade game? It’s the one where you hold a mallet and every time a mole pops his head up, BAM… you whack it back down. And you keep whacking them and whacking them, every time they poke their little heads up.
Are you feeling like that Whack-A-Mole? Every time you finally start to get ahead… and just when you begin to start looking forward to opening your investment account statements again…BAM, it seems like something else always comes along and whacks us down again.
I vividly remember the 2008/2009 stock market crash. A close friend of mine at that time was a senior-level investment manager at one of the largest and commonly known investment firms in American. He had been with that company for over 35 years. This guy was “in the know.” He had all of the real-time and cutting-edge market information anyone could ever hope to get. We would often go to dinner and play golf together. He constantly told me how strong the market was and how promising our investment future was. Things were just going up and up, and the future was brighter than ever!
Sadly, his health started to decline, but he only had less than two years before he planned to retire. He decided to hang in there, stick it out and retire in a year and a half. I remember him telling me this like it was yesterday. I called him shortly after the stock market crashed. When most of the dust had settled, he had lost about 65% of everything he had worked his entire life to acquire.
Here’s the lesson from this that hit me like a ton of bricks.
This guy did investing for a living. He was an experienced 35 year industry veteran. While I was busy traveling and working in my business, I had always envied that he had the luxury of time to watch the markets 24/7. He had the finest corporate market data at his fingertips, from one of the largest financial institutions in the world. If anybody should have seen the crash coming and prepared for it, he should have. He didn’t. He did not have one clue about it, right up until the end. It caught him and countless others completely by surprise.
I only lost somewhere in the high 40% range of my investment portfolio in that crash. The expert with all the best information in the world, and doing this professionally, (not an amateur like me), lost 65%. I spent many sleepless nights thinking about this. It was a hopeless feeling. I kept saying to myself “How do I, as an amateur investor, stand a chance if an expert like this, got creamed?” It’s like a rigged game, and we’re the pawns in the game, that get sacrificed.
My friend was 1½ years away from retirement, and he lost 65% of everything he had! Plus, he was in poor health. He was devastated. I remember saying to myself that I wanted to do everything I could to avoid being in a situation like that and particularly when I was so close to retirement.
