Your experience?

tonyfromlondon

Has anyone here had first hand experience of how a globally diversfied equities heavy portfolio fared during the last financial crisis (2008). What was the lowest point in the peak to trough % fall, and how long did your portfolio take to recover back to its pre-crisis value?

My portfolio is 70% equities, 20% bonds, 10% cash. The 70% equities is 30% global large cap, 25% global small cap, 15% emerging markets. All Vanguard index trackers.

The past is no indicator of the future and no two situations are the same etc., etc,. But if you had one I would be interested to know how your own portfolio fared during the 2008 downturn in terms of lowest point % drop and how long it took to recover?

Malthusian

Around 30% was fairly typical for an equity portfolio from 2007 to 2009. With dividends reinvested, an investment at the peak of the market in 2007 should have stuck its head above water in 2011, although depending on the exact mix you might need to wait until 2013 to be clearly in profit.

tonyfromlondon

Thanks. That 30% fall - was that 100% equities or with an allocation of bonds and cash?

I can see historical data for FTSE, S&P and major indexes so I'm interested in how a diversified portfolio with an allocation to bonds and cash stood up in real life.

Malthusian

I was looking at a set of model portfolios ranging from about 60% equities to 85% equities, the rest to a mix of bonds and commercial property (no cash). Their peak-to-trough falls 2007-2009 ranged from roughly 25% to 35%.

One of the lessons learned by many in 2008 was that in a proper full-on crash, all assets become correlated, downwards. So having an allocation to bonds may have reduced your losses, but not enough to stop nervous "low risk" investors from getting sleepless nights. And the banks who'd been flogging them funds with words like "cautious" in the name got in some trouble.

I suspect that your portfolio would have fallen by more than this because 25% in global small cap is quite a lot and small caps are typically more vulnerable in a downturn. You might want to use a free service like Trustnet where you can enter the funds in your portfolio and model how it would have performed over time - if your existing platform doesn't offer this.

Linton

My high risk 100% equity growth portfolio dropped around 40% in the 16 months from the October 2007 FTSE100 high to the March 2009 low. 2 or so years later it had completely recovered.

tonyfromlondon

Thanks for the replies. Historical index data only tells you so much so it is really helpful to have some figures based on real portfolio performances. Thanks!

darkidoe

Oh can't wait for the next great stocks sale!! ;D