Did you learn anything from the market correction?

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bantam222
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Did you learn anything from the market correction?

Post by bantam222 » Tue Feb 13, 2018 2:45 am

Our first market correction (10% decline from peak) after an 8 year bull run

For many recent / young investors, the first real "test" of your AA. 80/20 is a lot of fun when the market is going up every day but not as fun during the last few weeks.

What did you learn from this? Confirmed you are in the correct AA? Or a lesson you need to adjust? 10% swing is a good test for us, a nice "punch in the gut" but not large enough for anyone to really get hurt.

Are you making any adjustments after this week or staying steady?

Personally I experienced losses of 10k and 19k on back to back days and still feeling good so this helped confirm my aggressive AA (100/0) is fine for me. I read somewhere you should be able to buy a car for the amount your portfolio swings in one day... I need to go upgrade my car :D

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Re: Did you learn anything from the market correction?

Post by triceratop » Tue Feb 13, 2018 2:56 am

I learned it was not the first correction in the time period you list. In fact corrections are very common. For the asset classes I own, some were even in severe bear markets in the time periods you describe.
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Re: Did you learn anything from the market correction?

Post by mrspock » Tue Feb 13, 2018 3:19 am

I'm an 80/20 AA in the accumulation phase. I learned however that there's 80% equities and then there's an 80% I can live with. I ended up cashing out an overly concentrated investment (to avoid capital gains taxes), moving the proceeds into the S&P 500 (VOO) and handing the taxes due over the Uncle Sam.

Lessons:
1. Risk Tolerance - I'm far more comfortable taking losses on the S&P 500 index funds, as I plan to hold them till the day I die (which is hopefully a long way off). So to me the losses felt "temporary", vs the above investment which I *knew* one day I'd need to sell, with a time horizon far lower than my lifetime (i.e. less time to wait for it to recover).
2. Taxes - The fact you can effectively hold onto an index stock holding indefinitely (i.e. till you die) due to the diversity of the investment is a pretty huge advantage. Investments which (in your lifetime) will/may eventually need to be sold (due to poor returns or a irrelevance) have to do significantly better to make up for this. Now of course, when you die your heirs might have to square up the taxes (though IIRC they get a "step up" basis), but that isn't my problem anymore :).

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Re: Did you learn anything from the market correction?

Post by AlohaJoe » Tue Feb 13, 2018 3:25 am

bantam222 wrote:
Tue Feb 13, 2018 2:45 am
Our first market correction (10% decline from peak) after an 8 year bull run
There was a correction in 2010 (-16%), a correction in 2011 (-19%), another correction in 2011 (-9.8%), one in 2012 (-9.9%), one in 2015 (-12%), and another one in 2015-2016 (-13%). (All based on the S&P 500.)

So 6 correction (7, if you include the most recent one) during the "8 year bull run".

I learned as much from this correction as I did from the one that was 24 months ago.

zuma
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Re: Did you learn anything from the market correction?

Post by zuma » Tue Feb 13, 2018 3:55 am

No.

It's mostly noise.

For most buy-and-hold Bogleheads, nothing happened.

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Que1999
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Re: Did you learn anything from the market correction?

Post by Que1999 » Tue Feb 13, 2018 4:01 am

I learned that I'm somewhat amused at the hysteria that follows stock market swings. I wasn't concerned in the slightest because I know the market always recovers, and I won't be withdrawing from my portfolio for at least another 22 years.... Man, people really freak out. Stay the course and tune out all the noise!!

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Re: Did you learn anything from the market correction?

Post by minimalistmarc » Tue Feb 13, 2018 4:18 am

I learned not to give my father in law advice.

After years of sitting in 100% cash he asked me for help.

We are drip feeding aiming for around 50:50

I thought he had a calm head but at 20% equities this minor dip has him losing sleep already!

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Re: Did you learn anything from the market correction?

Post by expat » Tue Feb 13, 2018 4:31 am

was there a correction?

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Re: Did you learn anything from the market correction?

Post by TwstdSista » Tue Feb 13, 2018 4:41 am

I learned that people panic at the slightest hint of a market drop. 1% or 10% -- doesn't matter. Holy hysteria Batman! Wait until an actual crash, that'll be fun!

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Re: Did you learn anything from the market correction?

Post by AlohaJoe » Tue Feb 13, 2018 4:58 am

Here's another list of recent corrections, Far From Unprecedented: Nine Routs Like This And Nine Rebounds.

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Re: Did you learn anything from the market correction?

Post by stevekozak2 » Tue Feb 13, 2018 6:35 am

I am brand new in the market. Just got my Roth IRA going towards the end of January, fully funded 2017, DCAing 2018. Have lost money and continue to contribute my monthly amount. I learned that I am committed to my course. I learned that the silver lining to the market dropping is that my monthly contribution buys me more shares! :D

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Re: Did you learn anything from the market correction?

Post by Runner01 » Tue Feb 13, 2018 6:42 am

Every time we have a correction I have a strong desire to dump more money into the market. However, since I always invest as money becomes available, I don’t ever follow through with that desire. Oh well.

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Re: Did you learn anything from the market correction?

Post by sschullo » Tue Feb 13, 2018 6:46 am

Nothing new.
We forget that two years ago, the market had its worst start of a new year performance in stock market history! Remember the talking heads! OMG! Armageddon has finally arrived they were proclaiming. Yet, my portfolio gained 6.0% in 2016 and 2017 9.0%, only because the market increased.
Look, after every recession, crash, meltdown, correction, bear, taking a breather, pull back, decline, tumble, and whatever any other label that the financial talking heads want to call it, the market recovers!
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Re: Did you learn anything from the market correction?

Post by Agggm » Tue Feb 13, 2018 7:02 am

bantam222 wrote:
Tue Feb 13, 2018 2:45 am
Our first market correction (10% decline from peak) after an 8 year bull run

For many recent / young investors, the first real "test" of your AA. 80/20 is a lot of fun when the market is going up every day but not as fun during the last few weeks.

What did you learn from this? Confirmed you are in the correct AA? Or a lesson you need to adjust? 10% swing is a good test for us, a nice "punch in the gut" but not large enough for anyone to really get hurt.

Are you making any adjustments after this week or staying steady?

Personally I experienced losses of 10k and 19k on back to back days and still feeling good so this helped confirm my aggressive AA (100/0) is fine for me. I read somewhere you should be able to buy a car for the amount your portfolio swings in one day... I need to go upgrade my car :D
There was a correction in 2016. It's a good sign you didn't notice. Why'd you notice this one?

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Re: Did you learn anything from the market correction?

Post by indexonlyplease » Tue Feb 13, 2018 7:09 am

Nothing. My AA set with what I feel comfortable with is all I needed to not evern think about it. But it did make for some good news that the market was coming to the end.

I

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Re: Did you learn anything from the market correction?

Post by Toons » Tue Feb 13, 2018 7:10 am

Nothing but the same. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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nisiprius
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Re: Did you learn anything from the market correction?

Post by nisiprius » Tue Feb 13, 2018 7:30 am

bantam222 wrote:
Tue Feb 13, 2018 2:45 am
...Our first market correction (10% decline from peak)... Personally I experienced losses of 10k and 19k on back to back days and still feeling good so this helped confirm my aggressive AA (100/0) is fine for me...
If a 10% decline had spooked you, it would have confirmed that your asset allocation was too aggressive. If a 10% decline didn't spook you, I don't think it confirms that your asset allocation was fine for you. It's not a linear relationship; a 20% decline is much more than twice as disturbing as a 10% decline. A 30% decline is much, much, much, much more disturbing. And a 50% decline is much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much more disturbing.

Here's a little bit of statistical happenstance. The only reason why we've had "an eight year bull run" is that the decline in 2011 was 19% and therefore counts as a "correction." If it had been 1% more, it would have been "a bear market."

A recent news headline caught my eye as being either the stupidest or the wisest thing I've read about the decline so far: "Market correction: a blip, or a sign of something grim." That's exactly right, and we don't know which it is. It could very easily be either.

It is fairly widely accepted that financial markets exhibit "volatility clustering," the phenomenon that "large changes tend to be followed by large changes, of either sign, and small changes tend to be followed by small changes." Given the total collapse of the XIV ETP that was helping people make easy money by betting against volatility, I will be pleasantly surprised if this is not a volatility cluster, and if the stock market returns to the unusual state we have come to think of as "normal" (provided we forget 2011).

(If the stock market remains smooth for another year, I hope someone will remind me of what I just said so I can formally go back and edit this post to add the date and a facepalm icon).

P.S. Am I the only person who sees a phrase like "eight year bull run" and thinks "first battle of the Civil War?" (Revealing myself as a Yankee, of course...)
Last edited by nisiprius on Tue Feb 13, 2018 7:37 am, edited 2 times in total.
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Re: Did you learn anything from the market correction?

Post by bottlecap » Tue Feb 13, 2018 7:34 am

I learned that experience is gold. I lost a good bit, even with a fair amount of bonds, and merely took note.

I learned that market downturns bring out the market timers as much as sustained upswings, only faster.

I know enough to question this post's premise that the correction is over...

JT

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Re: Did you learn anything from the market correction?

Post by Cycle » Tue Feb 13, 2018 7:35 am

I learned news on the stock market from experts is really annoying and hard to mute. "Hey Google, stop streaming analysts explanations for reversion to the mean after a massive runnup" doesn't work on the Google home

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Re: Did you learn anything from the market correction?

Post by Bacchus01 » Tue Feb 13, 2018 8:05 am

Wait. Something happened?

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Re: Did you learn anything from the market correction?

Post by RRAAYY3 » Tue Feb 13, 2018 8:09 am

I learned I’ll buy more during downturns... But I already knew I would.

The markets are insane - and nothing has really changed at all. “It’s all BS” as my friend likes to say ...

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Re: Did you learn anything from the market correction?

Post by fundseeker » Tue Feb 13, 2018 8:17 am

I learned that most of my exposure to noise about market drops comes from this forum! There have been about a million posts about it recently, otherwise I would not be all that aware since I don't spend anytime on CNBC, etc. Oh well, I guess I could just glaze over all of the crash-related posts. Thanks, I feel better now :)

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mattyfu1
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Re: Did you learn anything from the market correction?

Post by mattyfu1 » Tue Feb 13, 2018 8:20 am

Stay the course

-MattFu

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Tamarind
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Re: Did you learn anything from the market correction?

Post by Tamarind » Tue Feb 13, 2018 8:27 am

80/20. It was fine, no temptation. This wasn't much of a drop, so not really much of a test.

I'm about to add 5% more bonds because my fiancee and I agreed to split the difference on our AA. May ask if she's sure she is the more cautious one, since not only did she not panic but wouldn't even have known there was a correction if I didn't mention it.

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Re: Did you learn anything from the market correction?

Post by rhornback » Tue Feb 13, 2018 8:50 am

I really only check my portfolio once a month. Though I did cheat when the market was done and I took a look. I think at that time I was done less than the market.

The reason I check once a month is the performance tool on vanguard updates once a month! So I normally check it at the beginning of the month.

It will be interesting to see come March where my portfolio is at. The market has been rebounding somewhat the last few days.

I feel really, really, comfortable with my strategy of having buckets of money. One of my buckets is having enough cash and short term securities (vanguard short term corporate bond fund) to cover 18 months of expenses.

My second bucket is to cover 3 years of downturn in bonds.

Now not everyone agrees with me. But I am comfortable with my strategy.

So the last market correct I was more entertained by watching than I was worried about the outcome. (At least so far LOL)

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Re: Did you learn anything from the market correction?

Post by Pajamas » Tue Feb 13, 2018 8:54 am

bantam222 wrote:
Tue Feb 13, 2018 2:45 am
Our first market correction (10% decline from peak) after an 8 year bull run

For many recent / young investors, the first real "test" of your AA. 80/20 is a lot of fun when the market is going up every day but not as fun during the last few weeks.

What did you learn from this?
Not a recent investor but I learned that a lot of people are eager to call a correction over even when it might not be. :beer

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Re: Did you learn anything from the market correction?

Post by livesoft » Tue Feb 13, 2018 9:09 am

I learned that the behavior of human beings has not changed. You can take that to the bank.
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Re: Did you learn anything from the market correction?

Post by deltaneutral83 » Tue Feb 13, 2018 9:12 am

livesoft wrote:
Tue Feb 13, 2018 9:09 am
I learned that the behavior of human beings has not changed. You can take that to the bank.
Yessir. Taleb's book about randomness in life (not just with the stock market) and how we humans like for things to fit into our own little box nicely and neatly in the time frame we want just doesn't work out....like ever.

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CyclingDuo
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Re: Did you learn anything from the market correction?

Post by CyclingDuo » Tue Feb 13, 2018 9:15 am

bantam222 wrote:
Tue Feb 13, 2018 2:45 am
Our first market correction (10% decline from peak) after an 8 year bull run
As another poster or two pointed out, if you have been invested the past 8 years, then you weren't paying attention over the past 8 years...

Image
https://www.yardeni.com/pub/sp500corrbear.pdf

Look at the corrections and pull backs in 2010, 2011, 2012, 2013, 2014, 2015-16. Thus far, 2018 fits within those previous moves. Where it ends up, we shall see...
bantam222 wrote:
Tue Feb 13, 2018 2:45 am
For many recent / young investors, the first real "test" of your AA. 80/20 is a lot of fun when the market is going up every day but not as fun during the last few weeks.

What did you learn from this? Confirmed you are in the correct AA? Or a lesson you need to adjust? 10% swing is a good test for us, a nice "punch in the gut" but not large enough for anyone to really get hurt.

Are you making any adjustments after this week or staying steady?

Personally I experienced losses of 10k and 19k on back to back days and still feeling good so this helped confirm my aggressive AA (100/0) is fine for me. I read somewhere you should be able to buy a car for the amount your portfolio swings in one day... I need to go upgrade my car :D
Prior examples for those of us who where invested in the 1990's...

Image

And the most gut wrenching ride for most of us was being invested during the 2000's...

Image

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Re: Did you learn anything from the market correction?

Post by The Wizard » Tue Feb 13, 2018 10:19 am

I'm just glad this correction is over.
Alrighty, onwards and upwards!
Attempted new signature...

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Re: Did you learn anything from the market correction?

Post by MotoTrojan » Tue Feb 13, 2018 10:21 am

Learned at 100% stocks it had zero impact on me, but I don’t think it was a large one.

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Re: Did you learn anything from the market correction?

Post by Call_Me_Op » Tue Feb 13, 2018 10:22 am

I learned that I have a good plan, because I had zero concern about it.
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greg24
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Re: Did you learn anything from the market correction?

Post by greg24 » Tue Feb 13, 2018 10:26 am

Here we are, just a week later, talking about the correction as if it were a thing of the past. Reflecting on AA, etc.

That was nothing. Just wait until the market goes down 30% and stays there for a couple years. Then you'll have a better feel for your AA.

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Re: Did you learn anything from the market correction?

Post by MrNewEngland » Tue Feb 13, 2018 10:28 am

If it is over then it was too small and short-lived to prove much of anything. But if we end the year down another 30% then we'll talk.

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Re: Did you learn anything from the market correction?

Post by itsgot8 » Tue Feb 13, 2018 10:29 am

I learned that it did not affect me or caused me to worry. I will say that it helped that I didn't look at my 401k balance :happy I'm quite comfortable with my 90/10 index/bond allocation. This is the benefit of auto-investment. Set it and forget it.

Also, it helps to follow the advice preached by many on this site of ignoring the noise and stay the course. I'm sure I will be bummed when I go to make my next Roth IRA contribution but will look on the bright side of buying in at a lower rate than the last time I made a purchase. :moneybag

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Re: Did you learn anything from the market correction?

Post by mx711yam » Tue Feb 13, 2018 10:38 am

I'm 31 and 100% stocks. I learned that I have even better risk tolerance than I thought. I actually bought more when the market started going down. I didn't freak out at all and it doesn't seem to phase me or hurt my sleep at night. I'm glad I'm 100% in stocks.

On a side note I do have a fully paid rental property that I view as a bond fund of sorts

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Re: Did you learn anything from the market correction?

Post by mhc » Tue Feb 13, 2018 10:44 am

It confirmed that my AA is correct and that I am not likely to make behavioral errors.

My portfolio went down the equivalent to my annual salary. I didn't even flinch. I'm still buyin through the whole thing.

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Re: Did you learn anything from the market correction?

Post by BigMoneyNoWhammies » Tue Feb 13, 2018 10:45 am

I'm 30 and 100% stock in both my IRA and TSP. I saw my porfolio take real losses for the first time and didn't flinch, and actually bought back in with my 2017 IRA contribution. Part of my not reacting is from being on this board, reading the posting of others with far more experience and time investing, and understanding that market corrections/recessions are inevitable, but there is light at the end of the tunnel. Just need to stick to my plan. Had the drop been more than just a correction and continued to go down into 2008 50% loss territory I may have reconsidered my AA, but I learned my tolerance for potential loss is (for now) high enough that I can stomach a 100% equities AA.

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Re: Did you learn anything from the market correction?

Post by stimulacra » Tue Feb 13, 2018 10:53 am

65/30/5

Felt good about my current AA and didn't even really notice the rocky ride last week or get concerned at all.

Was hoping to get an opportunity to rebalance into equities but oh well.

Was able to sleep soundly.

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Re: Did you learn anything from the market correction?

Post by Peculiar_Investor » Tue Feb 13, 2018 11:10 am

My investing career started in 1987, just in time for Black Monday. I recall thinking it would be a good time to "back up the truck" and take advantage of the big sale on securities. However as a newlywed, with a big mortgage, there were other priorities. But as least I was starting to formulate a viewpoint on my risk tolerance. Next up was the Dot-com bubble and both myself and my spouse were working in the tech field. We lived it from the inside, it wasn't pretty for many in the tech space. Fortunately we have prudently diversified our investments away from our employment and careers.

I've also experienced the 2008-09 financial crisis, and many other pullbacks, corrections, bear markets, etc that have long faded from memory of the specific events.

What I've learned through all of these is a) it is normal for markets to pullback, correct or be in a bear market and b) it is important to have an investment plan that gives consideration to the fact that all of these can occur and they are indeed normal. Your investment plan should reflect your own circumstances and risk tolerance and then should just be followed, i.e. stay the course.

Over these various market corrections, the one thing I have learned is the media and press has become more nibble in reporting a) the "bad news" and b) the explanation of the "bad news". All they really want is to attract eyeballs, so the noise level gets cranked way up during these normal course of the market events.
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams

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Re: Did you learn anything from the market correction?

Post by MJW » Tue Feb 13, 2018 11:15 am

I learned that this forum makes for some interesting reading. I'm sure we'll be back to the "how much international?" and "what do you think of 100% equities?" threads soon enough.

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Re: Did you learn anything from the market correction?

Post by runner3081 » Tue Feb 13, 2018 11:21 am

I learned that my support of the Boglehead theory is unwavering and I didn't react or even think about making changes when the correction hit (well, other than adding more money to index funds).

I have fully bought in :)

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Re: Did you learn anything from the market correction?

Post by njboater74 » Tue Feb 13, 2018 11:22 am

nisiprius wrote:
Tue Feb 13, 2018 7:30 am
P.S. Am I the only person who sees a phrase like "eight year bull run" and thinks "first battle of the Civil War?" (Revealing myself as a Yankee, of course...)
an 8 year Manassas?
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

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Re: Did you learn anything from the market correction?

Post by LiterallyIronic » Tue Feb 13, 2018 11:41 am

I learned that I'm still poor as all get-out.

$54,000 portfolio composed of 90% stock with a 10% drop in stock value? Loss of less than $5,000. It's going to be awhile before a 10% stock drop makes me see "serious losses."

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Re: Did you learn anything from the market correction?

Post by R-Man » Tue Feb 13, 2018 12:43 pm

For anyone who has been through this before I am surprised you learned anything. After all, you learn nothing from the second kick from a mule.
Wag More, Bark Less.

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Re: Did you learn anything from the market correction?

Post by Pajamas » Tue Feb 13, 2018 12:49 pm

R-Man wrote:
Tue Feb 13, 2018 12:43 pm
For anyone who has been through this before I am surprised you learned anything. After all, you learn nothing from the second kick from a mule.
You do learn something it kicks harder the second time. You might learn something after it keeps kicking you again and again, too.

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Re: Did you learn anything from the market correction?

Post by Sandtrap » Tue Feb 13, 2018 12:51 pm

I learned the value of mutual support, education, and mentoring, on the forum.
Walk the talk.

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Re: Did you learn anything from the market correction?

Post by Sbashore » Tue Feb 13, 2018 12:58 pm

No I didn't learn anything. The market corrected my portfolio did not.
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Re: Did you learn anything from the market correction?

Post by TG2 » Tue Feb 13, 2018 12:58 pm

Everything I needed to know I learned in October, 1987.

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Re: Did you learn anything from the market correction?

Post by nisiprius » Tue Feb 13, 2018 1:08 pm

I learned from a financial columnist that You can no longer trust the 200-day moving average as a stock-market indicator. Just as I learned that I could no longer trust my lucky rabbit's foot when I slipped on the banana peel and fell down the manhole and had the anvil land on me. I learned that the advice from the market timers is to never trust your instincts, you should always follow your system, until your instincts tell you to quit following the system.

I learned that everybody is arguing about "Was this a largely 'technical' pullback that was merely overdue in the wake of a historic rally and an unprecedented stretch of low volatility or does it signal something deeper?" and that nobody knows.

I learned that Nassim Nicholas Taleb's Thanksgiving turkey chart wasn't just a parable.
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Last edited by nisiprius on Tue Feb 13, 2018 1:10 pm, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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