How are you preparing for the coming bear market

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TheTimeLord
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How are you preparing for the coming bear market

Post by TheTimeLord »

Since Bear markets happen on a regular basis there is one coming, not that anyone knows when. Is there anything you do to prepare for the coming bear market beyond "stay the course"?
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Re: How are you preparing for the coming bear market

Post by steve_14 »

I expect bear markets, but I also expect the bulls to win in the end, with "the end" being my remaining lifespan. So I simply stick to my plan, which adds bonds as my time horizon shortens anyway.
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Re: How are you preparing for the coming bear market

Post by John3754 »

This is a thinly veiled question about what people do to try and time the market...

What can one do to prepare for the inevitable bear market other than have the appropriate amount of non-equity assets for their personal risk tolerance?

Anything that you could possibly do, like stock piling cash, has been shown to be a drag on long term returns.
Last edited by John3754 on Sat Apr 05, 2014 11:18 am, edited 1 time in total.
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Re: How are you preparing for the coming bear market

Post by livesoft »

I am a very successful market timer, so I'm all set for the coming bear market. I will lose money like everybody else, but perhaps not as much. :)
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Re: How are you preparing for the coming bear market

Post by Geologist »

I have an asset allocation that takes into account how much I would be comfortable losing in a bear market. Then I go on with the rest of my life.
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Re: How are you preparing for the coming bear market

Post by Geronimobro »

I'm ensuring that I remain gainfully employed so that I may continue to invest regularly based on my IPS.
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Re: How are you preparing for the coming bear market

Post by gkaplan »

StarbuxInvestor wrote:Since Bear markets happen on a regular basis there is one coming, not that anyone knows when. Is there anything you do to prepare for the coming bear market beyond "stay the course"?
Is there anything you will do to prepare for the coming bull market after the coming bear market?
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Re: How are you preparing for the coming bear market

Post by sscritic »

I have already sold all my bonds and bought stocks in preparation for the bear market. I think there are lots of threads on the topic of preparing for rising interest rates and the bear market in bonds.
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Re: How are you preparing for the coming bear market

Post by TheTimeLord »

John3754 wrote:This is a thinly veiled question about what people do to try and time the market...

What can one do to prepare for the inevitable bear market other than have the appropriate amount of non-equity assets for their personal risk tolerance?

Anything that you could possibly do, like stock piling cash, has been shown to be a drag on long term returns.
That would be interesting to read. I haven't seen anything related to specifically using bear market as investment trigger. In doing some research I was surprised by there frequency. On the other hand there was a bull market that last from 1987-2000 so no bear markets there. I also realize maintaining a consistent asset allocation does help position one for a bear market.
Last edited by TheTimeLord on Sat Apr 05, 2014 11:33 am, edited 1 time in total.
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Re: How are you preparing for the coming bear market

Post by scone »

StarbuxInvestor wrote:Since Bear markets happen on a regular basis there is one coming, not that anyone knows when. Is there anything you do to prepare for the coming bear market beyond "stay the course"?
Cash in the bank. That FDIC guarantee may not be perfect, but it's rather calming. And I bought some real estate. It's kind of primitive and atavistic, but the physicality of land gives me a kind of psychological comfort that nothing else does.
Last edited by scone on Sat Apr 05, 2014 11:35 am, edited 1 time in total.
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Re: How are you preparing for the coming bear market

Post by MN Finance »

The implication of your "stay the course" line is that someone doing nothing is a lemming plummeting to their death. I'm preparing the same way I'm preparing my home for the coming blizzard, which if you can't compete the analogy on your own, means I'm not living in a house capable of weathering a single season.
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Re: How are you preparing for the coming bear market

Post by manwithnoname »

StarbuxInvestor wrote:Since Bear markets happen on a regular basis there is one coming, not that anyone knows when. Is there anything you do to prepare for the coming bear market beyond "stay the course"?
If you give me a date I can tell you what I will do at that time.
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Re: How are you preparing for the coming bear market

Post by chaz »

I buy and hold. Works for me.
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Re: How are you preparing for the coming bear market

Post by dbr »

For retirees having more of one's income than not from sources other than portfolio withdrawals can be a big help.
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Re: How are you preparing for the coming bear market

Post by TheTimeLord »

MN Finance wrote:The implication of your "stay the course" line is that someone doing nothing is a lemming plummeting to their death. I'm preparing the same way I'm preparing my home for the coming blizzard, which if you can't compete the analogy on your own, means I'm not living in a house capable of weathering a single season.
No, I assume the standard answer would be stay the course and it would be pretty boring to read 20 posts 18 of which said stay the course. I am willing to stipulate this would be the standard plan/advice. I mean doesn't having a consistent asset allocation always passively prepare you for a bear market?
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Re: How are you preparing for the coming bear market

Post by GiJoeMonterey »

I've tried to time the market in the past, and even though I'm able to buy when the market drops 5%, I many times miss out on the 8% jump that occurs before the drop because I was sitting on the sidelines. They've been talking about the "correction" for a couple years now, and if I'd sat out the entire time I would've missed out on incredible gains.

It's important to create a plan on day one and stick to it. I'm only 32 and my wife is 27, so we invest 100% into stocks. I'm a huge Buffett follower, so I purchase those stocks that I feel are great value buys. If I can't find one that is blowing me away with its impressive value, then I invest in an index fund. I do ALL OF THIS regardless of the market timing. I'm smart enough to know that I'll never know when the market is going to go up and down short-term, but I'm extremely confident that it'll go up over the next 25-30 years.

Stick to your plan, and if you don't have one, make one. Make one that applies to all markets, not just today's market.

Good luck my friend!
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Re: How are you preparing for the coming bear market

Post by peppers »

The Tetrad Red Blood Moon starts on April 15th. (Irony)

We will carry on according to plan. Or more likely muddle through.
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Re: How are you preparing for the coming bear market

Post by Doc »

John3754 wrote:This is a thinly veiled question about what people do to try and time the market...

What can one do to prepare for the inevitable bear market other than have the appropriate amount of non-equity assets for their personal risk tolerance?

Anything that you could possibly do, like stock piling cash, has been shown to be a drag on long term returns.
Very short sighted remarks. Just breaking up a Total Bond Market type FI portfolio into its several components so as to have a better chance that one of them will behave well in an equity bear market is preparation without any hint of market timing at all. It's just a prudent safeguard without any change in risk/return at the cost of only a little more complexity in your portfolio.
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Re: How are you preparing for the coming bear market

Post by John3754 »

StarbuxInvestor wrote:
John3754 wrote:This is a thinly veiled question about what people do to try and time the market...

What can one do to prepare for the inevitable bear market other than have the appropriate amount of non-equity assets for their personal risk tolerance?

Anything that you could possibly do, like stock piling cash, has been shown to be a drag on long term returns.
That would be interesting to read. I haven't seen anything related to specifically using bear market as investment trigger. In doing some research I was surprised by there frequency. On the other hand there was a bull market that last from 1987-2000 so no bear markets there. I also realize maintaining a consistent asset allocation does help position one for a bear market.
The term is "cash drag" and its effect has been researched. Cash reserve or "dry powder" strategies are very powerful psychologically, you KNOW that the bear market is coming so you're going to be ready to SWOOP in at just the right moment and take advantage of it. More often than not though, it doesn't play out that way, and the numbers show that intentionally keeping cash out of the market is a drag on returns. Its not about timing the market, its about time in the market, and all that jazz.
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Re: How are you preparing for the coming bear market

Post by pennstater2005 »

Wait, so we're in a bull market? Why didn't someone tell me :(
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Re: How are you preparing for the coming bear market

Post by moshe »

Personally, I would not change my allocation of equities to bonds, although as a matter of prudence i would suggest examining your AA for international exposure regardless of the near term anticipated stock market returns.

The key is understanding that the co-relationship between different US and international stock markets returns are not 1. Also, many small-cap international firms do not have the same exposure to international conditions so the co-relationship ratio would be lower than with an internationally based MNC. Small cap companies by their nature are much more focused on their local markets whereas large cap MNCs, Royal Dutch Shell, BP, Nestle, etc. would share much more of the co-relation to the performance of the attributes of US stock market.

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Re: How are you preparing for the coming bear market

Post by dbr »

pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
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Re: How are you preparing for the coming bear market

Post by nisiprius »

I think I could say that I completed my preparations, past tense, in 2007, which was the time I kind of finalized my retirement plans--consolidated accounts for simplicity, moved everything movable from TIAA-CREF to Vanguard and annuitized everything not movable, fiddled around my Fidelity and Vanguard account until I had nothing but index (or index-y) Vanguard funds at Vanguard, and nothing but individual TIPS at Fidelity, and mused about asset allocation. My stock allocation had been pretty low and I kept it low. In fact I was becoming convinced I had set it too low, until 2008-2009 hit, at which point my wife and I discovered that we actually were at the extreme outer limit of our risk tolerance.

So, while I hadn't consciously prepared for the "coming bear market" to happen in 2008-2009, I nevertheless had prepared for it. My preparations for the "coming bear market" are to stick to the plan that served us sorta-OK in 2008-2009.

Doc probably is doing better than I am, but just blindly sticking to the same bond allocation did OK in 2008-2009 (missed out on the hit to corporates, experienced the hit on TIPS) has served well. People who shifted from bond funds to CDs around the time Kevin M. and tfb were advocating it will probably do better than me, but so far blindly sticking to high-grade intermediate-term bonds hasn't done badly.

In short, my preparations for the coming bear market were made in 2007 and nothing that's happened since then has convinced me to change.

As a result of this thread I suppose I'll see whether my stock allocation is above target. I don't use formal rebalancing bands and if I did I'm certain I wouldn't be anywhere near hitting them, but if I feel an itch to tinker I might scratch it by shaving it down to the exact number. If it is in fact above target. Which I'm not sure of.

Oh, yeah. We do have some "cash drag," probably more than an advisor would like to see. I don't lose any sleep about that at all. It's not enough to ride through a bear market, it's not dry powder, it's just cash. In the bank, where it is plainly visible to my wife and to me.
Last edited by nisiprius on Sat Apr 05, 2014 12:41 pm, edited 1 time in total.
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Re: How are you preparing for the coming bear market

Post by leonard »

StarbuxInvestor wrote:Since Bear markets happen on a regular basis there is one coming, not that anyone knows when. Is there anything you do to prepare for the coming bear market beyond "stay the course"?
Like what, for example.
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Re: How are you preparing for the coming bear market

Post by nisiprius »

dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
All that stuff about "average length of a bull market" and "average length of a bear market" is, in my arrogant opinion, some of the most bogus stuff in existence. You might as well talk about the "average duration of a love affair" or the "average length of a piece of string" or the "average height of up."
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Re: How are you preparing for the coming bear market

Post by dbr »

nisiprius wrote:
dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
All that stuff about "average length of a bull market" and "average length of a bear market" is, in my arrogant opinion, some of the most bogus stuff in existence. You might as well talk about the "average duration of a love affair" or the "average length of a piece of string" or the "average height of up."
Geez, sorry you are offended.
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Re: How are you preparing for the coming bear market

Post by pennstater2005 »

dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
I was being sarcastic :happy
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Re: How are you preparing for the coming bear market

Post by am »

Who says we can not have a massive and lengthy bull run without bears? There is no bad news on the horizon :D . There were reasons for the last few bears. Valuations? Yes they are high. But not sure there is some fundamental force that says future returns have to be modest. Perhaps Bangladeshi butter production will go up :)
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Re: How are you preparing for the coming bear market

Post by moshe »

nisiprius wrote:
dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
All that stuff about "average length of a bull market" and "average length of a bear market" is, in my arrogant opinion, some of the most bogus stuff in existence. You might as well talk about the "average duration of a love affair" or the "average length of a piece of string" or the "average height of up."
Isn't there some validity to the idea that markets only go up as long as new money comes in? Can't that mean time period be relied upon for some ideas of expected time frames?

Not trying to be argumentative just was wondering about this.

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Re: How are you preparing for the coming bear market

Post by John3754 »

moshe wrote:
nisiprius wrote:
dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
All that stuff about "average length of a bull market" and "average length of a bear market" is, in my arrogant opinion, some of the most bogus stuff in existence. You might as well talk about the "average duration of a love affair" or the "average length of a piece of string" or the "average height of up."
Isn't there some validity to the idea that markets only go up as long as new money comes in? Can't that mean time period be relied upon for some ideas of expected time frames?

Not trying to be argumentative just was wondering about this.

~Moshe
Those mean time periods were generated by events that happened in the past, and theres no guarantee that those same events will occur in the future.
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Re: How are you preparing for the coming bear market

Post by ogd »

I stay prepared by holding a comfortable cushion of bonds and cash and resisting the allure of the bull market. Is there any other way that works?
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Re: How are you preparing for the coming bear market

Post by moshe »

John3754 wrote:
moshe wrote:
nisiprius wrote:
dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
All that stuff about "average length of a bull market" and "average length of a bear market" is, in my arrogant opinion, some of the most bogus stuff in existence. You might as well talk about the "average duration of a love affair" or the "average length of a piece of string" or the "average height of up."
Isn't there some validity to the idea that markets only go up as long as new money comes in? Can't that mean time period be relied upon for some ideas of expected time frames?

Not trying to be argumentative just was wondering about this.

~Moshe
Those mean time periods were generated by events that happened in the past, and theres no guarantee that those same events will occur in the future.
Even if we do not know when specific events will occur we certainly know that some events will occur. No business cycle is always boom. Regression to the mean is a law of nature. I am not saying these cycles are absolutely predictable but I wonder if it is possible to guess with more precision.

I guess i have been reading too much Asimov lately :-)

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Re: How are you preparing for the coming bear market

Post by FinancialDave »

ogd wrote:I stay prepared by holding a comfortable cushion of bonds and cash and resisting the allure of the bull market. Is there any other way that works?
Bear markets should be a welcome event for "accumulators" - though I realize some do not see it as so and derail their future, when they should be buying "on sale."

In retirement it is a completely different story, so I try to focus on income streams that are not upset by changes in market trends, either equity or interest rates.

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Re: How are you preparing for the coming bear market

Post by ogd »

FinancialDave wrote:
ogd wrote:I stay prepared by holding a comfortable cushion of bonds and cash and resisting the allure of the bull market. Is there any other way that works?
Bear markets should be a welcome event for "accumulators" - though I realize some do not see it as so and derail their future, when they should be buying "on sale."
The good ones are. The bad ones that take a long time and cost you your job might not be so welcome. In general, I don't consider an event that slashes the productivity of my best assets as "welcome". As I said in a few other threads, the assets that are "on sale" are quite a bit worse quality than the booming assets of a few years before, some of them inches from bankruptcy, so in a sense you get what you pay for. You might get lucky and keep a steady income stream that buys equities only temporarily depressed, but luck is not a strategy.
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Re: How are you preparing for the coming bear market

Post by FinancialDave »

ogd wrote:
FinancialDave wrote:
ogd wrote:I stay prepared by holding a comfortable cushion of bonds and cash and resisting the allure of the bull market. Is there any other way that works?
Bear markets should be a welcome event for "accumulators" - though I realize some do not see it as so and derail their future, when they should be buying "on sale."
The good ones are. The bad ones that take a long time and cost you your job might not be so welcome. In general, I don't consider an event that slashes the productivity of my best assets as "welcome". As I said in a few other threads, the assets that are "on sale" are quite a bit worse quality than the booming assets of a few years before, some of them inches from bankruptcy, so in a sense you get what you pay for. You might get lucky and keep a steady income stream that buys equities only temporarily depressed, but luck is not a strategy.
Sorry,
Buying on sale should be index funds.

fd
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Re: How are you preparing for the coming bear market

Post by TheTimeLord »

am wrote:Who says we can not have a massive and lengthy bull run without bears? There is no bad news on the horizon :D . There were reasons for the last few bears. Valuations? Yes they are high. But not sure there is some fundamental force that says future returns have to be modest. Perhaps Bangladeshi butter production will go up :)
There is no reason I know of. But I would prefer to have some bad news around. I am a climb the wall of worried type of guy. With no bad news thing get priced to perfection and then random events can be killers.
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Re: How are you preparing for the coming bear market

Post by TheTimeLord »

John3754 wrote:
StarbuxInvestor wrote:
John3754 wrote:This is a thinly veiled question about what people do to try and time the market...

What can one do to prepare for the inevitable bear market other than have the appropriate amount of non-equity assets for their personal risk tolerance?

Anything that you could possibly do, like stock piling cash, has been shown to be a drag on long term returns.
That would be interesting to read. I haven't seen anything related to specifically using bear market as investment trigger. In doing some research I was surprised by there frequency. On the other hand there was a bull market that last from 1987-2000 so no bear markets there. I also realize maintaining a consistent asset allocation does help position one for a bear market.
The term is "cash drag" and its effect has been researched. Cash reserve or "dry powder" strategies are very powerful psychologically, you KNOW that the bear market is coming so you're going to be ready to SWOOP in at just the right moment and take advantage of it. More often than not though, it doesn't play out that way, and the numbers show that intentionally keeping cash out of the market is a drag on returns. Its not about timing the market, its about time in the market, and all that jazz.
All the info on things like this and lump sum deal with much shorter time frames than I am referring to with bear market frequency.
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Re: How are you preparing for the coming bear market

Post by MnD »

Practicing my "tsk tsk" and haughty belly laugh for the time when friends and associates tell me they "finally got out of this terrible market". 8-)
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Re: How are you preparing for the coming bear market

Post by nisiprius »

dbr wrote:
nisiprius wrote:
dbr wrote:
pennstater2005 wrote:Wait, so we're in a bull market? Why didn't someone tell me :(
http://money.cnn.com/2014/03/06/investi ... ive-years/
All that stuff about "average length of a bull market" and "average length of a bear market" is, in my arrogant opinion, some of the most bogus stuff in existence. You might as well talk about the "average duration of a love affair" or the "average length of a piece of string" or the "average height of up."
Geez, sorry you are offended.
Not offended, sorry to have been overly snarky. The point is that any definition of "bull market" and "bear market" is almost totally arbitrary--and the statistics will change wildly depending on what definition you pick.
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Re: How are you preparing for the coming bear market

Post by ogd »

FinancialDave wrote:
ogd wrote:The good ones are. The bad ones that take a long time and cost you your job might not be so welcome. In general, I don't consider an event that slashes the productivity of my best assets as "welcome". As I said in a few other threads, the assets that are "on sale" are quite a bit worse quality than the booming assets of a few years before, some of them inches from bankruptcy, so in a sense you get what you pay for. You might get lucky and keep a steady income stream that buys equities only temporarily depressed, but luck is not a strategy.
Sorry,
Buying on sale should be index funds.

fd
I too meant the entire market. During crashes it's composed of companies whose customers aren't buying, who can't get credit, and other nice things like that. So that's what you're buying for that low, low, price. Meanwhile, your existing assets have also been vandalized. The hope is that everything will recover to make it worth it, but there are no guarantees to that effect. That's why I'm not looking forward to crashes despite being an accumulator. I plan for, but I don't welcome.
Last edited by ogd on Sat Apr 05, 2014 1:59 pm, edited 1 time in total.
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Re: How are you preparing for the coming bear market

Post by nisiprius »

I understand starbux isn't predicting a time frame. Just, to quote Roger Babson, "sooner or later a crash is coming and it may be terrific." But another point I think is worth making is that even if you believe that there are times when the market is at such an extreme that action might be warranted, there is a fat "zone of argument" in between and I think we are still in it. I honestly do remember a real "WTF?" sense about 1995-2000. I kept asking friends, sure GE is a great company and all but what on earth has GE done that is all that great that could explain 20-25% annual increases? There was never any good answer anchored in any real-world accomplishments. I am not ready to say that it is 1929 or 2000 all over again. CAPE/PE10 chart:

Image
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Sheepdog
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Re: How are you preparing for the coming bear market

Post by Sheepdog »

I am prepared, mentally and fiscally, so that I don't have to do anything, even when the stock market drops 50%.
I have a proper In-retirement lower stock allocation.
I have at least 3 years of in-retirement distributions safely tucked away so that I don't have to sell stock containing funds in over 3 years.. That includes allocation for the RMDs.
I have my computer turned on and this channel and others book marked so that I can catchup on all of the panic out there again. Some of the panic will be from the same group, I bet. They seem to never learn from their own experiences or from the history of the rest of us. How many times in the last 50 years anyway?
Stay the course? You betcha.
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Re: How are you preparing for the coming bear market

Post by Grt2bOutdoors »

I'm itching to pick up some more international equities on sale, but for that I need a RBD as defined by Livesoft, we haven't seen that in quite some time, but stay tuned. :D
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staythecourse
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Re: How are you preparing for the coming bear market

Post by staythecourse »

The easy answer is to always have some money liquid as I do not want to sell in a bear market if emergencies happen (which with Murphys law dictates seems to happen at the worst possible time).

The only thing is not so much preparation, but hoping I'm in a recession proof job so I can take advantage when stocks go down hill so I can just keep plowing money in.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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Re: How are you preparing for the coming bear market

Post by am »

nisiprius wrote:I understand starbux isn't predicting a time frame. Just, to quote Roger Babson, "sooner or later a crash is coming and it may be terrific." But another point I think is worth making is that even if you believe that there are times when the market is at such an extreme that action might be warranted, there is a fat "zone of argument" in between and I think we are still in it. I honestly do remember a real "WTF?" sense about 1995-2000. I kept asking friends, sure GE is a great company and all but what on earth has GE done that is all that great that could explain 20-25% annual increases? There was never any good answer anchored in any real-world accomplishments. I am not ready to say that it is 1929 or 2000 all over again. CAPE/PE10 chart:

Image

That chart is not looking good for us. Is there anything about this time that is different?
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Re: How are you preparing for the coming bear market

Post by beammeupscotty »

am wrote:That chart is not looking good for us. Is there anything about this time that is different?
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Re: How are you preparing for the coming bear market

Post by Wildebeest »

sscritic wrote:I have already sold all my bonds and bought stocks in preparation for the bear market. I think there are lots of threads on the topic of preparing for rising interest rates and the bear market in bonds.

by Geronimobro » Sat Apr 05, 2014 12:22 pm: " I'm ensuring that I remain gainfully employed so that I may continue to invest regularly based on my IPS."


Above the two quotes I identify with.

Of course there will be bear market and it is silliness to try and time it and that is why I have my IPS and will stick to it.

When the market will drop 30 or more percent, I will check once my index funds once a year to rebalance. I did not start looking at my accounts again on a regular basis till 2010.
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Re: How are you preparing for the coming bear market

Post by BigFoot48 »

nisiprius wrote:In short, my preparations for the coming bear market were made in 2007 and nothing that's happened since then has convinced me to change.
Mine too. That slide dropped me down to 42% stock allocation from 57% a year earlier and I decided to set it at 45%. The recent bull pushed it back up to 50% so on my re-balance last year I dropped it down to 42%, which fits nicely with my six Coffeehouse stock funds.

So I'm ready for a 50% stock drop. Won't lose a minute of sleep if it happens (unlike 2008!), and unlike some, I also welcome higher interest rates for my bond fund holdings and I don't really care if they drop 5-10% for a few years as I don't see a need to be selling them anyway.

I was watching Bill O'Reilly the other day and he was discussing the "Flash Boys' book and remarked how he thinks the market is rigged and he doesn't understand it, and as a result he only has a 30% stock allocation, but then he said something that surprised me. He said he has stop-loss sell orders on all of his stock fund holdings. I guess he thinks selling low is a good strategy. I think I will send him an email directing him to the Bogleheads where he can get an education and lessen, if not end, his fear of the market.
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Re: How are you preparing for the coming bear market

Post by HardKnocker »

How do we prepare for the bull market that comes after the coming bear market?
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Re: How are you preparing for the coming bear market

Post by zaboomafoozarg »

Bear spray, don't leave home without it.
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