How long until a $10,000 loss matters?

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TheTimeLord
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How long until a $10,000 loss matters?

Post by TheTimeLord »

My portfolio is down well over $10,000 over the past week. No big deal the market ebbs and flows and I am still drawing a steady check. I was wondering when you are retired how long does it take and how large a loss before you think this might have a material effect on my retirement?
Last edited by TheTimeLord on Mon Jul 27, 2015 3:37 pm, edited 1 time in total.
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Re: How long until a $10,000 loss matters?

Post by RadAudit »

I'd guess a loss would begin to matter when it was substantial enough to where the advisability of taking the SWR for that year would be called into question.
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Re: How long until a $10,000 loss matters?

Post by livesoft »

Since you have a $13 million portfolio, I don't think a $10,000 loss matters one iota.

FWIW, I think my portfolio at the end of today will probably be down 3% from mid-May. It won't be material to me until I am down about 30%.
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Re: How long until a $10,000 loss matters?

Post by Sheepdog »

A $10,000 loss would start bothering me if I had only $100,000.
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TheTimeLord
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Re: How long until a $10,000 loss matters?

Post by TheTimeLord »

livesoft wrote:Since you have a $13 million portfolio, I don't think a $10,000 loss matters one iota.
Since July 20th
VTI has moved from 109.94 to 106.88 or down 2.78%
VEU has moved from 49.11 to 47.47 or down 3.34%
So a portfolio made up equally of these 2 would be down 3.06%
100/3.06 = 32.67.
$10,000 * 32.67 = $326,700
$326,700 * 3.06% = $9,997

I am confused where the $13 million dollar portfolio estimate comes from. Perhaps my math is in error. And yes my loss so far is north of $10,000.
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Taylor Larimore
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Re: How long until a $10,000 loss matters?

Post by Taylor Larimore »

How large a loss before you think this might have a material effect on my retirement?
TimeLord:

The money I cannot afford to lose is in cash and bond funds. I could have a 100% loss in stocks and it would have little material effect on my retirement.

Best wishes.
Taylor
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Re: How long until a $10,000 loss matters?

Post by HomerJ »

VTSAX (Vanguard Total Stock Market) is up 2.3% for the year...

VBTLX (Vanguard Total Bond Market) is up (barely) 0.28% for the year...

I haven't lost any money yet this year.

If you gain $12,000 first, I don't think losing $10,000 should be a scary event.
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Re: How long until a $10,000 loss matters?

Post by jhfenton »

I'm well north of $20,000 down, but I haven't done the exact math. I don't consider market fluctuations to be losses. I still have the same number of shares (or more) of all my funds as I did a month ago.

Now if I owned individual stocks, with the idiosyncratic risks inherent in individual stocks, I might be bothered by an idiosyncratic $10K loss in a security moving down independently of general market trends. I would feel like that represented more of a genuine impairment in the value of my long-term portfolio. (That's one reason I don't own individual stocks.)
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Re: How long until a $10,000 loss matters?

Post by HomerJ »

Besides, you gain and lose $10,000 all the time... That's 1% of a million dollars... 2% of $500,000...

If you retire with $500,000 in stocks, you're going to see 2% changes up and down all the time... Losing or gaining $10,000 from your portfolio better not materially affect your retirement, or you have too much in stocks and/or you better keep working.
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Re: How long until a $10,000 loss matters?

Post by Twins Fan »

How long....
TheTimeLord wrote:Since July 20th
Probably a little longer than 7 days! Come on now. Were you bored and just felt like posting? :wink:

I think livesoft overshot a little there, but you have talked about a $1 million portfolio. Ten thousand really concerns you??? Maybe stop watching the portfolio on a daily basis...
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Re: How long until a $10,000 loss matters?

Post by earlyout »

Our retirement portfolio is designed to provide the money we need even if the equity portion of the portfolio declines by 50%. This means that a $10,000 decrease in the value of our retirements funds would bother me when it represented 50% of our equity holdings. Doing the math, I would have had only $20,000 in equities when the decline started.
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Re: How long until a $10,000 loss matters?

Post by grayfox »

TheTimeLord wrote:My portfolio is down well over $10,000 over the past week. No big deal the market ebbs and flows and I am still drawing a steady check. I was wondering when you are retired how long does it take and how large a loss before you think this might have a material effect on my retirement?
If you follow the prescription of financial economists, it should have little or no effect on your retirement. Financial economists recommend funding your retirement with guaranteed income sources like social security, DB pensions, SPIA's, Treasuries, TIPS, CDs.
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Re: How long until a $10,000 loss matters?

Post by TheTimeLord »

Twins Fan wrote:How long....
TheTimeLord wrote:Since July 20th
Probably a little longer than 7 days! Come on now. Were you bored and just felt like posting? :wink:

I think livesoft overshot a little there, but you have talked about a $1 million portfolio. Ten thousand really concerns you??? Maybe stop watching the portfolio on a daily basis...
The question was about directed to those who are retired. Trying to understand the psychological differences between working with a steady paycheck and building your portfolio and once one is retired and somewhat dependent on income from their portfolio. In my current situation a $10,000+ loss is basically like a scrape, it hurts but it should heal soon enough. But I would like insight into how my mindset might change once I am dependent on my portfolio to help take care of me.
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Re: How long until a $10,000 loss matters?

Post by MrNewEngland »

I've already lost $10,000 this year. If you don't sell you haven't lost it though.
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Re: How long until a $10,000 loss matters?

Post by HomerJ »

TheTimeLord wrote:But I would like insight into how my mindset might change once I am dependent on my portfolio to help take care of me.
Again, I would suggest looking at the big picture...

If your portfolio is up $400,000 over the last 3 years, then maybe you can change your mindset to see it reduced to a $390,000 gain instead of a $10,000 loss?
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TheTimeLord
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Re: How long until a $10,000 loss matters?

Post by TheTimeLord »

MrNewEngland wrote:I've already lost $10,000 this year. If you don't sell you haven't lost it though.
Okay, rephrase your net worth is $10,000 less than it was a week ago.
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Re: How long until a $10,000 loss matters?

Post by Grt2bOutdoors »

TheTimeLord wrote:
MrNewEngland wrote:I've already lost $10,000 this year. If you don't sell you haven't lost it though.
Okay, rephrase your net worth is $10,000 less than it was a week ago.
If retired, or close to retiring (within a 5 to 7 year window), at that point you should be positioning your portfolio to be more conservative.
What level of conservatism is necessary? That is up to the individual/couple. Personally, I'd like to have a 50/50 or 40/60 portfolio that coupled with Social Security and laddered fixed income would let me enjoy my latter years with little worry. Another poster on the forum advocates the use of a 15 year IRA CD ladder that provides you with an income floor. BTW, if your account took a whole week to drop $10K then you are indeed fortunate, think of the folks who've seen their accounts drop that in a day or less (hours!).
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Re: How long until a $10,000 loss matters?

Post by Grt2bOutdoors »

grayfox wrote:
TheTimeLord wrote:My portfolio is down well over $10,000 over the past week. No big deal the market ebbs and flows and I am still drawing a steady check. I was wondering when you are retired how long does it take and how large a loss before you think this might have a material effect on my retirement?
If you follow the prescription of financial economists, it should have little or no effect on your retirement. Financial economists recommend funding your retirement with guaranteed income sources like social security, DB pensions, SPIA's, Treasuries, TIPS, CDs.
+1
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Re: How long until a $10,000 loss matters?

Post by steadyeddy »

It matters when you need it. If you don't actually need to withdraw the $10,000 immediately, then I don't think it should matter to you.

I think a more difficult question is whether a 50% portfolio drop in year 1 of retirement should impact your planned income.
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Re: How long until a $10,000 loss matters?

Post by an_asker »

TheTimeLord wrote:
Twins Fan wrote:How long....
TheTimeLord wrote:Since July 20th
Probably a little longer than 7 days! Come on now. Were you bored and just felt like posting? :wink:

I think livesoft overshot a little there, but you have talked about a $1 million portfolio. Ten thousand really concerns you??? Maybe stop watching the portfolio on a daily basis...
The question was about directed to those who are retired. Trying to understand the psychological differences between working with a steady paycheck and building your portfolio and once one is retired and somewhat dependent on income from their portfolio. In my current situation a $10,000+ loss is basically like a scrape, it hurts but it should heal soon enough. But I would like insight into how my mindset might change once I am dependent on my portfolio to help take care of me.
I think livesoft estimates that he/she will have a portfolio of $13 million when retired. Now, does his/her answer make sense? ;-)
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Re: How long until a $10,000 loss matters?

Post by abuss368 »

TheTimeLord wrote:My portfolio is down well over $10,000 over the past week. No big deal the market ebbs and flows and I am still drawing a steady check. I was wondering when you are retired how long does it take and how large a loss before you think this might have a material effect on my retirement?
Hi TheTimeLord,

Your safe allocation in your investment portfolio should be to bonds and cash. The equity allocation should make little difference.

It is more important to protect what we have accumulated sometimes than to take unnecessary risks to get more.

Best.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: How long until a $10,000 loss matters?

Post by TheTimeLord »

an_asker wrote:
TheTimeLord wrote:
Twins Fan wrote:How long....
TheTimeLord wrote:Since July 20th
Probably a little longer than 7 days! Come on now. Were you bored and just felt like posting? :wink:

I think livesoft overshot a little there, but you have talked about a $1 million portfolio. Ten thousand really concerns you??? Maybe stop watching the portfolio on a daily basis...
The question was about directed to those who are retired. Trying to understand the psychological differences between working with a steady paycheck and building your portfolio and once one is retired and somewhat dependent on income from their portfolio. In my current situation a $10,000+ loss is basically like a scrape, it hurts but it should heal soon enough. But I would like insight into how my mindset might change once I am dependent on my portfolio to help take care of me.
I think livesoft estimates that he/she will have a portfolio of $13 million when retired. Now, does his/her answer make sense? ;-)
Not really.
livesoft wrote:Since you have a $13 million portfolio, I don't think a $10,000 loss matters one iota.
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Re: How long until a $10,000 loss matters?

Post by Twins Fan »

TheTimeLord wrote:
Twins Fan wrote:How long....
TheTimeLord wrote:Since July 20th
Probably a little longer than 7 days! Come on now. Were you bored and just felt like posting? :wink:

I think livesoft overshot a little there, but you have talked about a $1 million portfolio. Ten thousand really concerns you??? Maybe stop watching the portfolio on a daily basis...
The question was about directed to those who are retired. Trying to understand the psychological differences between working with a steady paycheck and building your portfolio and once one is retired and somewhat dependent on income from their portfolio. In my current situation a $10,000+ loss is basically like a scrape, it hurts but it should heal soon enough. But I would like insight into how my mindset might change once I am dependent on my portfolio to help take care of me.
Well, I am not retired either... so, I can't answer as one there.

But, I don't think the answer would change either way. If you're worried about 7 day movements and watching the market daily in retirement, your AA is probably very incorrect. JMO Would you go out and celebrate each time you gain $10k? Then why fret over losing $10k?

Also, you should probably put this in percentages. Ten thousand may be 1% of the portfolio to someone and it could be 50% of the portfolio to another.

What's the saying about investing in the stock market, you're going to lose money from time to time? That will still be true in retirement. The market doesn't care that you're retired. :happy
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Re: How long until a $10,000 loss matters?

Post by TheTimeLord »

TheTimeLord wrote:I was wondering when you are retired how long does it take and how large a loss before you think this might have a material effect on my retirement?
Question is not about $10,000 per se, just seeing a 5 figure loss brought the question to mind.
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Re: How long until a $10,000 loss matters?

Post by Twins Fan »

Oh, my bad.... the question in the title of the thread threw me off. :twisted:
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Re: How long until a $10,000 loss matters?

Post by GerryL »

Recent retiree here. I have 3-4 years worth of living expenses in money markets and CDs. I generally check my portfolio every (or every other) Friday. Last week I noticed that I was down in two weeks more than I used to make in two years about 25 years ago. Some weeks I see that I'm up almost as much. So what? That is long-term investing. I look out of curiosity -- and because I know that what I see is not going to compel me to start tweaking.

If you have the money you need for a couple of years of living expenses in appropriate savings/investment vehicles, you have plenty of time to adjust your spending to the longer outlooks of the market -- and to decide if maybe your AA needs to be adjusted to something more conservative. In other words: Don't react, respond.
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Re: How long until a $10,000 loss matters?

Post by cfs »

Time for a review

Here is the article from Larry again. It is time for a quick review (hint, this could be on the final).

http://www.etf.com/sections/index-inves ... -look-away
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Re: How long until a $10,000 loss matters?

Post by nirm »

If I was close to retiring or retired, I think seeing a paperloss of more than one year's worth of expenses would start to get concerning.
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Re: How long until a $10,000 loss matters?

Post by abuss368 »

It is not a loss until you sell.

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Re: How long until a $10,000 loss matters?

Post by TomatoTomahto »

I'm "retired" but my wife still works. A topic for another day might be whether it's really possible for one in a couple to retire; I think a case could be made that a retirement means no additional earned income for the family unit.

We still save. Every year we put $x into accounts that are intended to grow. If, in the space of a year, our net worth was less than it was a year prior, it would "matter." I'd be a bit bummed. I would probably wish that I had spent the money rather than put it aside for the future, but I guess then I'd be even more in the hole.
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Re: How long until a $10,000 loss matters?

Post by goingup »

I'd guess many Bogleheads aspire to retire with a portfolio somewhere between $1-5mill. Fluctuation of $10,000 is just an everyday blip. A 10% downturn may get one's attention. A 20% downturn will definitely focus the mind. :shock:
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Re: How long until a $10,000 loss matters?

Post by Kevin M »

Yeah, +/-$10K is a typical, daily non-event for me. I remember being pretty freaked out in 2008/2009 when my portfolio was down by more than $1M, and that's with a very conservative AA. No down moves since then have bothered me, but we haven't really seen anything very significant. I retired in 2007.

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Re: How long until a $10,000 loss matters?

Post by Toons »

Retired.
That happens all the time for me 10k and a lot more in a day,
I don't give it a second thought.
Volatility is an inherent part of investing.
One needs to learn to accept it.
Find another hobby other than market watching ,,,,,,
And keep investing,,the further it drops. :happy
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Re: How long until a $10,000 loss matters?

Post by John3754 »

Absolute amounts aside as they will obviously vary based on the size of your portfolio, if you're not financially and mentally prepared for a 30+% "loss" on the equity side of your portfolio then you may be overestimating your risk tolerance. For example, if you have a $1M portfolio that's 60/40 and a paper loss of $180k would put you in serious jeopardy then you need to reevaluate your plan.

$10k/1%...that's noise.
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Re: How long until a $10,000 loss matters?

Post by staythecourse »

Taylor Larimore wrote:The money I cannot afford to lose is in cash and bond funds. I could have a 100% loss in stocks and it would have little material effect on my retirement.
Spot on comment from Taylor.

Personally, the whole view on "how much to allocate to stocks/ bonds/ cash/ alternative investments" needs to be turned on its head. Folks need to consider, "How much money do I NEED to live on for x years" That Y number needs to placed in bonds and cash. The remainder in stocks and alternative investments (if they even have a role). The end result is how folks should be deciding on their asset allocation and not by, "I can tolerate x drop in the market so I will have y amount in stocks and the rest in bonds".

In essence asset allocation should be the END result of one's situation and not the starting point.

Good luck.
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Re: How long until a $10,000 loss matters?

Post by joe8d »

Toons wrote:Retired.
That happens all the time for me 10k and a lot more in a day,
I don't give it a second thought.
Volatility is an inherent part of investing.
One needs to learn to accept it.
Find another hobby other than market watching ,,,,,,
And keep investing,,the further it drops. :happy
:thumbsup Same here.
All the Best, | Joe
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Re: How long until a $10,000 loss matters?

Post by JoMoney »

Hopefully I'm a long way away from being retired, but I can say I don't plan on taking any fixed dollar amount from the stock portfolio.
Ideally I would have a great deal of my essential liabilities matched to sources of fixed income.
Withdrawals from equities would probably be on some proportional/variable basis relative to the balance. To the extent that it 'matters' would depend on how much I had to rely on that to meet my needs, how much that $10,000 loss is offset by $10,000+ gains, and to some extent how large a percentage $10,000 is to my overall portfolio/withdrawals.
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Re: How long until a $10,000 loss matters?

Post by letsgobobby »

TheTimeLord wrote:
Twins Fan wrote:How long....
TheTimeLord wrote:Since July 20th
Probably a little longer than 7 days! Come on now. Were you bored and just felt like posting? :wink:

I think livesoft overshot a little there, but you have talked about a $1 million portfolio. Ten thousand really concerns you??? Maybe stop watching the portfolio on a daily basis...
The question was about directed to those who are retired. Trying to understand the psychological differences between working with a steady paycheck and building your portfolio and once one is retired and somewhat dependent on income from their portfolio. In my current situation a $10,000+ loss is basically like a scrape, it hurts but it should heal soon enough. But I would like insight into how my mindset might change once I am dependent on my portfolio to help take care of me.
If $10,000 hurts like a scrape and you are retired, and this has occurred with a 3% loss, then you have far too aggressive a portfolio for your risk tolerance. I beg you to severely limit your risk exposure before the next bear market.

One hint is to stop checking your portfolio. Why bother calculating a loss? It's like taking an alcoholic into a bar.
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Re: How long until a $10,000 loss matters?

Post by TradingPlaces »

I vote for this thread to be locked.

There is nothing actionable prescribed in this thread, and there are a bunch of assumptions made.
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Re: How long until a $10,000 loss matters?

Post by LadyGeek »

Good timing. This thread has run its course and is locked (topic exhausted, no added value to continue). See: Board rules
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