The best strategy to recover from a stock-market bottom is one you already know (via PhilipvanDoorn)
As we approach the 10-year anniversary of the post-crisis stock-market bottom on March 9, 2009, three money managers have shared the stories of how they and their clients navigated a dangerous financial environment and the lessons all investors can learn from history.
Those are total return figures, which include reinvested dividends. You can see the worst of the decline began in September 2008, which is when Lehman Brothers went bankrupt, Washington Mutual failed and Merrill Lynch was acquired by Bank of America BAC, +0.35% Then President George W. Bush signed the Troubled Asset Relief Program, or TARP , on Oct. 3, 2008.You can see that in early May 2011, the indexes were close to returning to the break-even point, before pulling back.
But the client decided not to pull the plug. “I had another meeting with that foundation probably in January 2010, and that time the equity of that foundation was up 70% for the full year in 2009,” she said. “We had bought some stuff when we were really down and out.” Taking advantage of low prices was an important part of Zerhusen’s strategy.
“It is so important to be communicating with your investors, especially during tough times,” Marcus said. “I am not calling when we have a great run to pat myself on the back, but I am calling after we’ve had a tough run so that investors understand what caused it, what we’re doing with their capital and how we’re invested going forward.”
“People got out on the way down, and many have never gotten back in,” he said. He went on to say that some investors continued to believe stock prices were too high, and remain “underinvested” in stocks to this day. “Now is as a good a time as any to buy an asset you want to own for the next five or 10 years.”
Lemonides said he sold Freddie Mac FMCC, -1.92% common shares at $1.22 on Sep. 23, 2008, after the Treasury Department took the government sponsored enterprise and its sister mortgage giant Fannie Mae FNMA, -2.20% under conservatorship. Both GSEs’ preferred-stock dividends were suspended. But on the same day he sold the common shares, Lemonides began purchasing Freddie Mac series V preferred stock FMCKM, -1.30% for 72 cents a share. Those shares have a $25 par value.
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