everytime someone says that, I always think of a great quote by Nouriel Roubini:
"asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%."
Since June 2009, when that interview was conducted, the S&P500 has more than doubled, not including dividends, so I hope he switched back or he did, in a sense, "lose" 50%.
Numerous financial experts assert the current valuations within the stock market do not reflect the underlying fundamentals; or, in other words, ZIRP allows for cheap debt in the bond markets which many firms are using to aggressively buy back stock, thereby artificially inflating the market value. Thus, "a correction" is due and his statement is still valid from a conservative investing standpoint.
This is hindsight bias. The markets could have easily went the other way. Market timing is notoriously futile. If you want to play "what if?" and pick arbitrary dates then he could have as easily put his cash position into equities lets say beginning of October 2008? Then his advice would seem very wise indeed.
I agree, market timing is futile. Roubini is unwise not because he lost money, but because he believed he could time the market. Mountains of evidence suggest that the RoR on stocks is positive and higher than that of lower-risk assets, Roubini claimed that the opposite was temporarily true. This is a good example of an attempt at market timing that failed.
Picking arbitrary dates to buy a lot of equities and then not selling them isn't market timing; trying to trade repeatedly on the right dates is. That's how you lose all your money.
Other commenters weigh in with excellent counters. However, the OP (and I) didn't split between equities and cash.
It would have been very rare for one to have -- while trying to be prudent -- constructed a portfolio of assets across checking accounts, equities, bonds, and primary residence that saw anything like a 50% loss from peak to 2008-crisis trough.
Note that the checking account loss was 0%; bonds did not perform as badly as equities; and in the vast majority of the US, residential RE did not fall 50%. Also note that if one did not choose the absolute generational bottom to liquidate the entire portfolio, the actual losses would have been lesser still. In other words, allocating across a diverse set of assets would have protected from the worst of the downside (while letting you participate in the historic run in equities since).
Irrational fear of volatility is going to have a lot of people retiring much later than they would like, with less money than they would like.
When the market goes down, you can still hold.
Or you can sell before the bottom. I was playing in the market in 2008, I got out after the down lost about 2000. Paid off all my debt, got back in at lower prices! Worked great.
that is very true, but a lot of people that couldnt afford to lose money lost that and more (percentage wise) in between march - sept. 2008. Your best bet is to put money in vanguard index funds targeted for your ideal retirement year and check it once a year - but for people that are trading single stocks/options/.etc, i think Roubini is right - he is also 55 so he is and should be a lot more conservative than someone that is in their early 20s/30s
"asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%."
[1] https://en.wikipedia.org/wiki/Nouriel_Roubini