Why did you get out so fast? The market has recently gone upwards with low volatility so you must be patient!
I would be real interested to know some of the specifics on how you handled the huge drop at the end of 2008. Using the average down strategy, which I like, you would have had to planned for more than a 55% drop, peak to trough, or waited a long while for the indexes to recover. Months is one thing but if say you planned for worst case scenario of a 30% drop, you would have had to wait until approximately May of 2010 to break even, unless the hedges and dividends made a large difference. Or did you just get lucky, (nothing wrong with getting lucky) and happen to start averaging in after the indexes had dropped 30% or more. Long time lurker
I got PMed this same question from a different account so I assume it was the same person. Back in 2008 I was using a slightly different strategy but it was still an average down strategy. I was buying the weighted ETFs, specifically SSO and QLD, rather than SPY itself. I also happened to get lucky and my last buy was right around when SPY was $73 or so, so it was pretty close to the "bottom," although I didn't know how low it was going to go so I had more lined up. I'll have to check my account to see what the exact price I bought at was. I wasn't really a big trader at this point. Most of my money was sitting in a bank account although I had a little bit invested in SPY at the time. As price started getting lower, I transfered most of my liquid assets into my Scottrade account so I would have money to buy more if price kept going lower. So it's not like I rode a big position down from when SPY was at $150. I was basically starting mid way through the drop, so it was kind of lucky timing thing in that regard. When looking at historical charts, look at SSO. It went from under $20 to over $40 in under a year. QLD went from around a low of $20 to over $60 in that same time period (too bad I'm not still holding it, it's over $100 now). At the time though I didn't really have an exit strategy, it was more just like "buy as price keeps dropping and I'll worry about selling later." I know people get freaked out when you mention holding weighted ETFs for long periods of time (they're designed to be used intraday, as they match daily returns but not necessarily long term returns). If you look at a chart, SPY is much closer now to where it was during 2007 highs than SSO is. In July of 2007, SSO was around $100. Today it's $58. In July of 2007, SPY was around $154. Today it's $140. So obviously SSO isn't double weighted over long periods of time, and I wouldn't necessarily recommend it as a long term investment vehicle. In other words, people holding SPY since July of 2007 are pretty close to having made their money back. People holding SSO since July of 2007 are not.