When the market crashes ...

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When the market crashes ...

Postby umfundi » Wed Feb 13, 2013 8:27 pm

Once again, Mike Piper provides blinding insights in a few hundred words.

http://www.obliviousinvestor.com/what-t ... t-crashes/

In particular, if you need to sell in the face of a crash, should you have been there in the first place?

He says,
(Of course, one could make the case that this investor shouldn’t have had so much in stocks to begin with. But that’s a separate discussion.)


I look forward to that separate discussion.

Keith
Déjà Vu is not a prediction
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Re: When the market crashes ...

Postby ObliviousInvestor » Wed Feb 13, 2013 11:41 pm

Thank you for linking to the article, Keith. And thank you for the article suggestion as well. :)
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Re: When the market crashes ...

Postby RadAudit » Thu Feb 14, 2013 10:04 am

umfundi wrote:Once again, Mike Piper provides blinding insights in a few hundred words.

http://www.obliviousinvestor.com/what-t ... t-crashes/

In particular, if you need to sell in the face of a crash, should you have been there in the first place?


That's a heck of a way to figure out your risk tolerance was lower than you thought it was. Hopefully there are other criteria that you might want to consider concerning what your risk tolerance ought to be before the horse leaves the barn.

I would guess that can you pay your bills no matter what the stock does is a good place to start. Betting that your asset allocation has inversely correlated segments and one area will be up while the other is down and we'll muddle through some how may not work in a crash where all correlations go to one.
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Re: When the market crashes ...

Postby Call_Me_Op » Thu Feb 14, 2013 10:48 am

RadAudit wrote:I would guess that can you pay your bills no matter what the stock does is a good place to start. Betting that your asset allocation has inversely correlated segments and one area will be up while the other is down and we'll muddle through some how may not work in a crash where all correlations go to one.


Very unlikely that all correlations go to one - unless you are referring to correlations of risk assets.
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