October 2008 Market Destruction

The title of this post demonstrates the emotion that can be generated by market moves. I am 56 years old and the recent market moves and current financial fragility is the scariest I've faced in my life time. Having said that, I've made the following adjustments to my portfolio during the October devastation:

• Beginning in July, I've steadily moved from bonds to stocks and continued doing so throughout the October down turn. By the end of October my portfolio was fully 75% invested in stocks, still below my 80% target, but well above the ~60% at the end of 2007.
• I have eliminated Large Cap Value and Small Cap styles, replacing them instead with Small Cap Value to represent both groups. I have also increased REIT's theoretical share to 16%.

While satisfied with the theory behind the above moves, from a percentage standpoint they are unlikely to have much impact upon overall portfolio performance. The moves during October represented less than 2.5% of the portfolio. The other thing that stands out is how scared I was - and continue to be - by the devastation suffered by my overall retirement portfolio. It is difficult to believe that this can be a "good thing" and that the portfolio can recover from a decline in value in excess of 30% in overall value. I suppose I've become resigned to the fact that there is no alternative and thus nothing that could have been done differently, then or now.

Current allocation:

Stocks: 74%
Total Stock Index (includes WF S&P500): 37%
Small Cap Value: 9%
REIT: 10%
International: 14% (Emerging: 5%)

Note: I sold Mutual Shares and Vanguard Index Extended, both held in my taxable account and use those funds to purchase:

Vanguard Tax Managed Capital Appreciation; and
Vanguard Tax Managed International