I Held 90% Stocks Through the 2008 Crash. Here's What I Learned.

Summary

Rob Berger recounts how his investing approach evolved from choosing 401(k) funds based on past returns to using a diversified, low-cost portfolio. He says the central lesson was not to find a perfect allocation, but to make a sensible plan and stick with it—even through the 2007–09 financial crisis, when he describes the broad market as falling about 50%.

Investing History and Key Lessons

• 1993: Berger began contributing to a 401(k) after law school. With little investing knowledge or access to online research, he chose two or three funds largely by comparing their 1-, 3-, 5-, and 10-year returns. He contributed what he could, though he and his wife did not fully fund the account.
• Mid-to-late 1990s: After a colleague introduced him to Legg Mason Value Trust, managed by Bill Miller, Berger began investing $100 per month in it through a taxable account. Miller’s fund had beaten the S&P 500 for 15 consecutive years; the streak ended in 2005. Berger later concluded that consistently finding active managers who beat benchmarks was unlikely and moved his investments to index funds before the fund closed.
• After reading Rick Ferri’s book on asset allocation and researching index investing, Berger adopted a portfolio that was approximately 90% stocks and 10% bonds. It included U.S. and international stocks, emerging markets, REITs, and small-cap value stocks. He began following this approach around 2003 and kept it through the financial crisis.
• Berger once strongly expected small-cap and value stocks to outperform large-cap and growth stocks over the long term. He no longer views those outcomes as inevitable; he says small caps, value, and growth can each lead at different times.
• His stated priorities are low costs, broad diversification, simplicity, and staying invested. He considers these more important than fine-tuning small allocation differences, which cannot reliably be known in advance to produce better results.

Portfolio Today

Overall Allocation

Berger’s overall allocation is approximately 75% stocks and 25% bonds. He tolerates allocation drift of roughly 2–4 percentage points and avoids triggering taxes just to rebalance taxable holdings.

Taxable Brokerage Account

The account includes VTSAX (Vanguard Total Stock Market), VFWAX (Vanguard FTSE All-World ex-US), VSMAX (Vanguard Small-Cap Index), and shares of Apple and Berkshire Hathaway.

• He bought Apple in 2013 and added shares in late 2018 and early 2019.
• He says VFWAX has no small-cap holdings. He originally switched to it after tax-loss harvesting in 2018 to avoid a wash sale, but says that if starting over, he would choose VXUS or a comparable international fund instead.
• If he could change the taxable portfolio without tax consequences, he would consolidate the three Vanguard funds into VT (Vanguard Total World Stock ETF). He plans to keep the existing holdings because selling could create taxable gains, and says he will likely continue adding to VFWAX and VSMAX.

Retirement and Health Accounts

• Traditional 401(k): Almost entirely VTINX, Vanguard Target Retirement Income Fund. Berger values its automatic rebalancing and the simplicity of a single fund for contributions and withdrawals. Its holdings provide exposure to international small caps, international bonds, and short-term TIPS.
• Inherited IRA: FIPDX, a Fidelity inflation-protected bond fund, added to increase TIPS exposure.
• Roth accounts: He plans to consolidate into VT, favoring stock growth in the tax-free account, subject to applicable rules.
• HSA: Holds SCHD, which he says he plans to transition to VT.

Berger assesses his Apple and Berkshire positions by asking whether a 50% decline would cause him to panic or interfere with paying bills. He says the answer is no. He considers Apple expensive, while saying he sees no fundamental flaw in Berkshire at the time of recording; these are his personal judgments.

Methodology and Considerations

• Set an allocation across stocks and bonds, with domestic and international diversification.
• Favor broadly diversified, low-cost funds rather than relying on the ability to pick active managers who will beat benchmarks.
• Keep the portfolio simple enough to maintain, rebalance, and draw from consistently.
• In taxable accounts, weigh the benefits of simplifying or rebalancing against the taxes that selling may trigger.
• For individual-stock exposure, consider whether a large decline would cause financial hardship or prompt panic selling.

Tickers, Assets, and Instruments Mentioned

• Equities and indexes: S&P 500; U.S. total stock market; international stocks; emerging markets; small-cap and small-cap value stocks; growth and value stocks.
• Funds and tickers: VTSAX, VXUS, VFWAX, VSMAX, VT, VTINX, BND, FIPDX, SCHD. VFWAX is rendered once as “VFWEX” in the subtitles.
• Other holdings and instruments: Apple (AAPL, ticker not spoken); Berkshire Hathaway (ticker not specified); Legg Mason Value Trust; REITs; bonds; TIPS; international bonds; 401(k), Roth IRA, inherited IRA, and HSA.
• Factors discussed: Company size and value versus growth, with momentum and company quality also mentioned.

Disclosures and Cautions

Berger presents the portfolio as his personal experience. He says it may not be the best approach or suitable for others, though it works for him. His comments about Apple, Berkshire, and portfolio choices are personal opinions, not universal recommendations.

Presenter and sources mentioned: Rob Berger; Rick Ferri (author of the asset-allocation book); Bill Miller (Legg Mason Value Trust manager); Fidelity (401(k) investment-options statement); Morningstar (fund information); and the Wayback Machine (archived Legg Mason Value Trust page).