Young Investor: Investing In A Bear Market

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harri192
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Young Investor: Investing In A Bear Market

Post by harri192 »

I'm a relatively young investor. I'm about to turn 30 and I've only been investing since 2010 so I still consider myself relatively new to the "game". Historically I've just invested in low expense ratio index funds that stratagize to match the market. I'm talking about assets like DIA, QQQ, VOO, etc.

I however am getting fairly nervous about the way the market is looking and get the feeling that the recent correction is only the start of the troubles for the rest of this year. So my question is, what are some reasonable investment options if we assume a rough year ahead? In general I'm concerned that stocks are currently still overvalued, inflation is going to be picking up, and stocks are going to be looking less attractive as compared to bonds.
software
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Re: Young Investor: Investing In A Bear Market

Post by software »

Invest exactly as you are today, I.e. whatever allocations you have deemed comfortable. Invest as much as you can as early and often as you can.

Ignore the noise and DO NOT SELL. If it looks like the market will collapse, go down with the ship and still do not sell, trust me at that point we have bigger problems.

Don’t ever use market conditions as a reason to change your allocations. If you want to change your allocation as you get closer to retirement, then define this glide path ahead of time so it is emotionless.

These are the secrets to financial freedom.
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dogagility
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Re: Young Investor: Investing In A Bear Market

Post by dogagility »

harri192 wrote: Wed Feb 21, 2018 9:58 pm I however am getting fairly nervous about the way the market is looking and get the feeling that the recent correction is only the start of the troubles for the rest of this year. So my question is, what are some reasonable investment options if we assume a rough year ahead? In general I'm concerned that stocks are currently still overvalued, inflation is going to be picking up, and stocks are going to be looking less attractive as compared to bonds.
Don't worry about a "rough year"... you're investing with a 30+ year time horizon.

What happens this year in the market should be of little (to no) concern of yours.

Set this graph (http://quotes.morningstar.com/chart/fun ... ture=en-US) of the S&P 500 to "maximum" and you will see the "the way the market is looking" now is typical.

Ignore the chatter by the likes of Cramer, et al.

:sharebeer
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Toons
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Re: Young Investor: Investing In A Bear Market

Post by Toons »

30?
25 years or more of investing ahead of you.
Should shold look forward to an extended bear market.
Your dollars will purchase more shares at depressed prices.
Once the market heads North again,your portfolio will "Propel" Higher.
Stay Invested,Keep Investing.



:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
B. Wellington
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Re: Young Investor: Investing In A Bear Market

Post by B. Wellington »

software wrote: Wed Feb 21, 2018 11:01 pm Invest exactly as you are today, I.e. whatever allocations you have deemed comfortable. Invest as much as you can as early and often as you can.

Ignore the noise and DO NOT SELL. If it looks like the market will collapse, go down with the ship and still do not sell, trust me at that point we have bigger problems.

Don’t ever use market conditions as a reason to change your allocations. If you want to change your allocation as you get closer to retirement, then define this glide path ahead of time so it is emotionless.

These are the secrets to financial freedom.
+1 With 25 or 35 years ahead of you a down market is the best time to invest! Keep it simple! Compounding is key. You will look back 25 years from now and be glad you invested. (As you're traveling the world.) :wink:
Grt2bOutdoors
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Re: Young Investor: Investing In A Bear Market

Post by Grt2bOutdoors »

Your investment horizon is not 25 or 30 years, it’s 55-60 years! Why? Because you are not going to withdraw all of your assets on Day 1 of retirement to plunk it into inflation ravaged cash. Some portion of your assets need to be continually invested to stay ahead of inflation - equities are your best shot at doing so.

The market looks worrisome? Jump up, clap, hoot, holler, celebrate - stocks are going on sale! Who doesn’t like buying things for cheap when they have a long time horizon? Never met a person who wanted to pay full price. Why should you be any different? And even if prices remain the same for ten years, be happy because one day prices will eventually catch up with greater economic growth meaning those who stuck with it will reap greater profits. If you bail now, when will you get back in and what happens next time you feel worrisome?

You need to separate your emotions from investing. Stay the course.
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Bwlonge
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Re: Young Investor: Investing In A Bear Market

Post by Bwlonge »

Look, I know the "early and often" advice is the thing to do, but I have to believe its the mainstream advice that makes assumptions about which funds you're buying. It makes sense to just dump money into a total market fund because its a slow moving boat.

But look at an emerging market fund like FSEAX. You have the steep peak leading up to 2008, then it lost 4 years of progress in a year. If you put money into it before it crashed, you would have just broke even last month, 10 years later. That's 10 years of wasted time.

Sure, save as much as possible. But don't think you can buy any product at any time and come out ahead. Full disclosure, I just bought into FSEAX, 5% AA, yesterday and I'm a little worried I'm going to get whacked but what I expect to be a rough year as US rates ramp up, but hoping that doesn't happen. Maybe its more of a lesson to stick to the mainstream advice if you're going to worry about this stuff...
indexonlyplease
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Re: Young Investor: Investing In A Bear Market

Post by indexonlyplease »

This is why I am more and more convinced that young investere shoul be in one fund like the Target Dated Fund. Then you just max it out and forget about trying to figure out the market. I believe many of us would of done far better if we had this choice many years ago.

Then the young investor can focuses on making more money in their career. And making sure they live debt free for life.
B. Wellington
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Re: Young Investor: Investing In A Bear Market

Post by B. Wellington »

Grt2bOutdoors wrote: Thu Feb 22, 2018 6:15 am Your investment horizon is not 25 or 30 years, it’s 55-60 years! Why? Because you are not going to withdraw all of your assets on Day 1 of retirement to plunk it into inflation ravaged cash. Some portion of your assets need to be continually invested to stay ahead of inflation - equities are your best shot at doing so.

The market looks worrisome? Jump up, clap, hoot, holler, celebrate - stocks are going on sale! Who doesn’t like buying things for cheap when they have a long time horizon? Never met a person who wanted to pay full price. Why should you be any different? And even if prices remain the same for ten years, be happy because one day prices will eventually catch up with greater economic growth meaning those who stuck with it will reap greater profits. If you bail now, when will you get back in and what happens next time you feel worrisome?

You need to separate your emotions from investing. Stay the course.
This is an excellent point! Thanks Grt2bOutdoors for reminding us, (me) that our investing career does not end on the first day of "retirement."

The investment horizon could continue on for decades when the funds are passed onto heirs. :beer
Crisium
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Re: Young Investor: Investing In A Bear Market

Post by Crisium »

Bwlonge wrote: Thu Feb 22, 2018 6:39 am Look, I know the "early and often" advice is the thing to do, but I have to believe its the mainstream advice that makes assumptions about which funds you're buying. It makes sense to just dump money into a total market fund because its a slow moving boat.

But look at an emerging market fund like FSEAX. You have the steep peak leading up to 2008, then it lost 4 years of progress in a year. If you put money into it before it crashed, you would have just broke even last month, 10 years later. That's 10 years of wasted time.

Sure, save as much as possible. But don't think you can buy any product at any time and come out ahead. Full disclosure, I just bought into FSEAX, 5% AA, yesterday and I'm a little worried I'm going to get whacked but what I expect to be a rough year as US rates ramp up, but hoping that doesn't happen. Maybe its more of a lesson to stick to the mainstream advice if you're going to worry about this stuff...
If you lump summed on the worst day possible, and never made new contributions ever, then sure, wasted 10 years. Most of the time you should be regularly contributing with 401k, IRA, etc.

Portfolio analyzer tells me $1,000 a year invested in FSEAX from 2008 to 2018 ($11,000 total) is now worth $19,000. Pretty good return, certainly not a waste of 10 years. And we're talking about young investors in this thread, so they will be contributing frequently for many years.

And as far as the US market goes, anyone here who is still in the allocation phase would love to buy a total market fund, today, at 1999 prices despite the lost decade that followed.
Bwlonge
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Re: Young Investor: Investing In A Bear Market

Post by Bwlonge »

Good point.
balbrec2
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Re: Young Investor: Investing In A Bear Market

Post by balbrec2 »

Easy to get nervous after such a long bull run and the market shows signs of volatility.
That's normal. Stick to the three fund portfolio recommended here and keep DCA as you go.
At 30 years old you may be investing for another 55 years, retirement age isn't the endgame, so the long term view is what
you should focus on. Not what the market might do tomorrow. Age in bonds is not a bad AA.
Or put it all on auto pilot and go for the appropriate
TDF. Don't look more often than quarterly to rebalance. Semi annually or yearly works ok also.
Successful investing is really as simple or difficult as you want it to be. Simple works as well
as difficult with much less work and anxiety. Good luck

balbrec2
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Re: Young Investor: Investing In A Bear Market

Post by WallStreetPhysician »

harri192 wrote: Wed Feb 21, 2018 9:58 pm I'm a relatively young investor. I'm about to turn 30 and I've only been investing since 2010 so I still consider myself relatively new to the "game". Historically I've just invested in low expense ratio index funds that stratagize to match the market. I'm talking about assets like DIA, QQQ, VOO, etc.

I however am getting fairly nervous about the way the market is looking and get the feeling that the recent correction is only the start of the troubles for the rest of this year. So my question is, what are some reasonable investment options if we assume a rough year ahead? In general I'm concerned that stocks are currently still overvalued, inflation is going to be picking up, and stocks are going to be looking less attractive as compared to bonds.
The last 7 years have been littered with "scares" that ended up not panning out (sovereign debt crisis, China troubles, Trump election, etc.). This might be the beginning of the end for the bull market, or it may just be another speed bump.

-WSP
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Re: Young Investor: Investing In A Bear Market

Post by Sandtrap »

Read About Bob, The Worst Market Timer
What happens if you only invested at market highs?
http://awealthofcommonsense.com/2014/0 ... ket-timer/

Market fluctuations represent opportunities, not hazards.
j :D
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David Jay
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Re: Young Investor: Investing In A Bear Market

Post by David Jay »

Toons wrote: Thu Feb 22, 2018 5:41 amShould look forward to an extended bear market.
Your dollars will purchase more shares at depressed prices.
+1

As the old saying goes: "The stock market is the only place where, when the products go on sale, customers head for the exits".
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Toons
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Re: Young Investor: Investing In A Bear Market

Post by Toons »

David Jay wrote: Thu Feb 22, 2018 11:24 am
Toons wrote: Thu Feb 22, 2018 5:41 amShould look forward to an extended bear market.
Your dollars will purchase more shares at depressed prices.
+1

As the old saying goes: "The stock market is the only place where, when the products go on sale, customers head for the exits".

+1
I like that ,one to remember. :happy
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Re: Young Investor: Investing In A Bear Market

Post by Tyler Aspect »

Hold 20% of your portfolio in bond located in your tax deferred account. Gradually increase your emergency cash reserve to prepare for possibility of job loss in the next recession.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.
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Re: Young Investor: Investing In A Bear Market

Post by dacalo »

harri192 wrote: Wed Feb 21, 2018 9:58 pm I however am getting fairly nervous about the way the market is looking and get the feeling that the recent correction is only the start of the troubles for the rest of this year.
I am in my late 30's and I don't know about you, but I would rather invest in a bear market than a bull market. Purchase the funds when they are cheap. I remember back in 2007/2008 some people were scared and pulled their money, while the wise ones purchased more shares. You should see what the market return has been since 2007.
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Re: Young Investor: Investing In A Bear Market

Post by WhiteMaxima »

You will be very lucky if you are young and in a bear market. Everything is on sale and you can get things cheap. It will be same lucky if you retired in bull market: everything is full or over valued so you could sell for good living.
jvini
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Re: Young Investor: Investing In A Bear Market

Post by jvini »

Pray for a correction. It's the best thing that could happen to you at your age, as long as it doesn't somehow affect your job. If you can dollar cost average into a bear market, you will be very happy in the long run.

Don't time the market. It's a loser's game. Just rebalance.

The simpler the aa, the better (in my opinion). A three fund portfolio (VTI, VXUS, BND) is very effective. If you want a tilt towards small caps or value, go ahead, but don't go too crazy trying to get the perfect amount. Base the allocation off your age or whatever lets you sleep at night. I do my age - 13 in bonds, 20% in international, and the remainder in VTI (although I have a tilt towards small caps too).

This has worked very well for me over the years. Sometimes I come to this board with questions or to just make myself feel better by confirming I'm still doing the right thing.

You'll be amazed what time and patience can do for your portfolio.
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Re: Young Investor: Investing In A Bear Market

Post by H-Town »

harri192 wrote: Wed Feb 21, 2018 9:58 pm I'm a relatively young investor. I'm about to turn 30 and I've only been investing since 2010 so I still consider myself relatively new to the "game". Historically I've just invested in low expense ratio index funds that stratagize to match the market. I'm talking about assets like DIA, QQQ, VOO, etc.

I however am getting fairly nervous about the way the market is looking and get the feeling that the recent correction is only the start of the troubles for the rest of this year. So my question is, what are some reasonable investment options if we assume a rough year ahead? In general I'm concerned that stocks are currently still overvalued, inflation is going to be picking up, and stocks are going to be looking less attractive as compared to bonds.
You should be concerned! And you should channel it to push yourself to save more and relentlessly at every pay period, no matter what happens.

Do you see what you can control and what you can't?
Time is the ultimate currency.
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Re: Young Investor: Investing In A Bear Market

Post by randomguy »

Grt2bOutdoors wrote: Thu Feb 22, 2018 6:15 am
The market looks worrisome? Jump up, clap, hoot, holler, celebrate - stocks are going on sale! Who doesn’t like buying things for cheap when they have a long time horizon? Never met a person who wanted to pay full price. Why should you be any different? And even if prices remain the same for ten years, be happy because one day prices will eventually catch up with greater economic growth meaning those who stuck with it will reap greater profits. If you bail now, when will you get back in and what happens next time you feel worrisome?

You need to separate your emotions from investing. Stay the course.
So how much Blackberry stock are you loading up on? They are having a 95% off sale. You should make a killing if you hold it a couple of years:) And obviously the same thing can apply to whole markets (see Japan). Until things bounce back you have no idea if you are buying something on sale or if your buying overpriced distressed merchandise. And part of the reason stock prices drop is because the estimates of growth are low. If they are right and the low growth shows up, there is no catch up.

And yes I know people tell themselves this story mainly because they can't seperate emotion from investing.
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Re: Young Investor: Investing In A Bear Market

Post by Grt2bOutdoors »

randomguy wrote: Thu Feb 22, 2018 2:04 pm
Grt2bOutdoors wrote: Thu Feb 22, 2018 6:15 am
The market looks worrisome? Jump up, clap, hoot, holler, celebrate - stocks are going on sale! Who doesn’t like buying things for cheap when they have a long time horizon? Never met a person who wanted to pay full price. Why should you be any different? And even if prices remain the same for ten years, be happy because one day prices will eventually catch up with greater economic growth meaning those who stuck with it will reap greater profits. If you bail now, when will you get back in and what happens next time you feel worrisome?

You need to separate your emotions from investing. Stay the course.
So how much Blackberry stock are you loading up on? They are having a 95% off sale. You should make a killing if you hold it a couple of years:) And obviously the same thing can apply to whole markets (see Japan). Until things bounce back you have no idea if you are buying something on sale or if your buying overpriced distressed merchandise. And part of the reason stock prices drop is because the estimates of growth are low. If they are right and the low growth shows up, there is no catch up.

And yes I know people tell themselves this story mainly because they can't seperate emotion from investing.
Actually I ways thinking of taking a flier on it, but I have more profitable opportunities where each dollar has a specific task to fulfill. Besides, if they are included in the various international indexes then I am already long the equity, proportionately to index weighing. BTW, if I did buy the individual equity I would have good company, many active and passive managers hold the equity. :)
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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harri192
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Re: Young Investor: Investing In A Bear Market

Post by harri192 »

Thanks for all the input. I wanted to clarify that I’m not concerned about investing in the market once the bear has begun and you can find assets on the cheap. Moreover my concern is that we just had a heck of a few good years and that if I remain invested for now, I don’t want to take the initial hit from another (perhaps larger) correction occurring.
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Re: Young Investor: Investing In A Bear Market

Post by David Jay »

harri192 wrote: Thu Feb 22, 2018 5:26 pm Thanks for all the input. I wanted to clarify that I’m not concerned about investing in the market once the bear has begun and you can find assets on the cheap. Moreover my concern is that we just had a heck of a few good years and that if I remain invested for now, I don’t want to take the initial hit from another (perhaps larger) correction occurring.
No one wants to “take the hit” but it comes with investing in the equity market. Trying to time the market is a loser’s game.

Here is something that regular contributor “Nisiprius” wrote a couple of years ago. It had such an impact on me that I made it part of my signature line:

In order to get the "risk premium" you really do have to take the risk. There's no magic formula for vastly reducing the risk of your stock market investments by simply avoiding short periods of obvious danger. If there were, everybody would do it and the stock market would not be risky and there would be no risk premium.

The stock market is risky. It is a form of greed to believe that there is some easy, effective way to get the risk premium without actually taking the risk. Many people go through a stage in which they engage in delusional thinking:
a) The stock market has had high returns. That's good, I'd like that.
b) The stock market has had high risk. I don't like that.
c) I can't accept "a" and "b" are a package deal.
d) The stock market is risky for everybody else, but not for me, because I can do something clever and get the return without the risk.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: Young Investor: Investing In A Bear Market

Post by cfs »

"I'm concerned that stocks are currently still overvalued, inflation is going to be picking up, and stocks are going to be looking less attractive . . ."

Are you kidding me? Was this quoted from one of the Nightly Business Report invited guests? My recommendation to 30 years young investors is to be one hundred (100) percent invested, placing every single penny [repeat place ALL the money] in the Vanguard Total World Stock Index Fund, VTWSX, [NOT on the ETF class for various reasons] and do NOT invest a single penny in bonds until the year 2038. My signature applies, good luck. Gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~
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Re: Young Investor: Investing In A Bear Market

Post by Grt2bOutdoors »

harri192 wrote: Thu Feb 22, 2018 5:26 pm Thanks for all the input. I wanted to clarify that I’m not concerned about investing in the market once the bear has begun and you can find assets on the cheap. Moreover my concern is that we just had a heck of a few good years and that if I remain invested for now, I don’t want to take the initial hit from another (perhaps larger) correction occurring.
No one is going to tell you with any amount of accuracy when to get in and when to get out, so get that idea out of your system. My recommendation is to read, and read lots - books like Stocks for the Long Run - Siegel, Winning the Loser's Game - Charlie Ellis, The Little Book of Common Sense Investing - Bogle, Why Smart People Make Big Money Mistakes - Belsky. Then, pick up a few books by Swedroe, Bernstein and Ferri. But get over this idea that somehow you are going to be able to sidestep any sort of adjustment that will occur. The only way you control risk is by investing in low cost funds and controlling your asset allocation. Controlling your asset allocation does not have a place for "market timing". Market timing is a losers game.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: Young Investor: Investing In A Bear Market

Post by pkcrafter »

harri192 wrote: Wed Feb 21, 2018 9:58 pm I'm a relatively young investor. I'm about to turn 30 and I've only been investing since 2010 so I still consider myself relatively new to the "game". Historically I've just invested in low expense ratio index funds that stratagize to match the market. I'm talking about assets like DIA, QQQ, VOO, etc.

The holdings you posted causes me to suggest you post your portfolio for review.

If you started investing in 2010, you have experienced a very unusual period for investors. More normal periods will usually leave you wondering what's going to happen next. There's almost always something to worry about, but you have got a lot of time ahead, so the only way to play it is stay invested. If you are nervous now, perhaps your equity allocation is really to high. What is your asset allocation?


Paul
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Re: Young Investor: Investing In A Bear Market

Post by czeckers »

Mathematically speaking, the advice that you should just remain invested in the market and ignore the noise will probably be correct. However, there is a school of thought that novice investors should be invested fairly conservatively until they've tested their risk tolerance in a bear market. Theoretical math isn't going to help you if you panic sell in the next bear market (and don't underestimate the fear and helplessness one can experience in a bear market). If you are already feeling concern over this, I would strongly recommend that you stick with 30-40% bonds in your portfolio until you see how you do in a bear market. You may give up a few percent of return over then next couple of years, but that's far better than selling after losing 50% of your portfolio in a 2008 type bear market thereby locking in a 50% loss.

Given that the Fed is signaling increasing the prime rate, I'd stick with short (VGSH) to intermediate term (VGIT) treasury bonds.

Also, as an aside, QQQ, DIA, and VOO all pretty much invest in the same thing so you're not getting any diversification by holding those separately. VOO (S&P500 Index) will give you the same returns as QQQ and DIA and I would recommend exchanging both of those either for more VOO or maybe something that can complement VOO like the extended market index (mid and small-caps) (VEXMX).

I quoted Vanguard ETFs because you mentioned VOO. Other providers have ETFs and/or mutual funds that invest in the same indexes. If you are free to choose, go with the one that offers the lowest expense ratio.
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Re: Young Investor: Investing In A Bear Market

Post by czeckers »

pkcrafter wrote: Fri Feb 23, 2018 11:40 am
harri192 wrote: Wed Feb 21, 2018 9:58 pm I'm a relatively young investor. I'm about to turn 30 and I've only been investing since 2010 so I still consider myself relatively new to the "game". Historically I've just invested in low expense ratio index funds that stratagize to match the market. I'm talking about assets like DIA, QQQ, VOO, etc.

The holdings you posted causes me to suggest you post your portfolio for review.

If you started investing in 2010, you have experienced a very unusual period for investors. More normal periods will usually leave you wondering what's going to happen next. There's almost always something to worry about, but you have got a lot of time ahead, so the only way to play it is stay invested. If you are nervous now, perhaps your equity allocation is really to high. What is your asset allocation?


Paul
I agree. Your entire investing career basically consists of the second greatest bull market the US has ever known.
The Espresso portfolio: | | 20% US TSM, 20% Small Value, 10% US REIT, 10% Dev Int'l, 10% EM, 10% Commodities, 20% Inter-term US Treas | | "A journey of a thousand miles begins with a single step."
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