When the market crashes...

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Kathys
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When the market crashes...

Post by Kathys » Thu Apr 26, 2018 4:00 pm

I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?

retiredjg
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Re: When the market crashes...

Post by retiredjg » Thu Apr 26, 2018 4:05 pm

No, that is not better. In fact, it is a good thing to be able to buy the stocks you want at lower prices than they were before the crash.

Keeping it in a savings account until the market recovers just means you'll pay more for each share you buy. Keep on buying during a crash. In fact, buy more if you can.
Last edited by retiredjg on Thu Apr 26, 2018 4:29 pm, edited 1 time in total.

rebellovw
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Re: When the market crashes...

Post by rebellovw » Thu Apr 26, 2018 4:06 pm

When it crashes - and we have had some minor drops last couple months - I keep buying as per my AA plan. If anything - I'm picking up some deals so that when the market recovers - it will recover faster for me.

hithere
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Re: When the market crashes...

Post by hithere » Thu Apr 26, 2018 4:06 pm

"Buy when there's blood in the streets, even if the blood is your own."

That's the best time to buy, don't waste the opportunity by holding your cash in a savings account.

MotoTrojan
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Re: When the market crashes...

Post by MotoTrojan » Thu Apr 26, 2018 4:08 pm

I just buy whenever the money comes to me, makes it so much easier :).

rebellovw
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Re: When the market crashes...

Post by rebellovw » Thu Apr 26, 2018 4:12 pm

Well Your emergency fund should be in a savings account that is not wasteful and I think you should probably fight the urge to buy more stocks than your plan allows. I've been tempted to buy more now that the market is down - but who knows - it can go down way further.

My plan is to only buy with the money that goes to stock and bonds. And nothing out of savings.

zerosandones
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Re: When the market crashes...

Post by zerosandones » Thu Apr 26, 2018 4:14 pm

I'm a very new boglehead myself but I believe the recommended advice would be: don't try to time the market, you don't know if the market is going to keep crashing, do nothing, or go way up tomorrow (and studies show even the "best" experts have no idea). Instead, figure out what you want your asset allocation to be (% in stocks and bonds) based on how comfortable you are with risk, and invest a consistent amount according to that plan on a regular basis.

To answer your specific question though: when the market is crashing, it actually means stocks are cheap, so it's a better time to invest. Of course, since we have no idea what's going to happen (crashing further or recovering), your best bet is to not worry about that in the first place, make a plan and stick to it.

Here's some more info regarding determining your desired asset allocation and coming up with an investment plan: https://www.bogleheads.org/wiki/Boglehe ... art-up_kit :)

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ruralavalon
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Re: When the market crashes...

Post by ruralavalon » Thu Apr 26, 2018 4:43 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
In my opinion it's best to continue making regular contributions every pay period, no matter what the market is doing at the moment or has done in the recent past.

Market timing (waiting for a good time to buy) is a fool's errand. No one can successfully do that consistently. If you wait for a good day to buy, you will never know if the next day, or the next week, or the next month, or the next year might be an even better time to buy.

It was always my policy to invest whenever I had extra money available to invest.

Besides, when the market has crashed that means that stocks can be bought at a lower price. What is bad about buying at a lower price? Isn't buying at a lower price a good idea?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

tesuzuki2002
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Re: When the market crashes...

Post by tesuzuki2002 » Thu Apr 26, 2018 5:06 pm

retiredjg wrote:
Thu Apr 26, 2018 4:05 pm
No, that is not better. In fact, it is a good thing to be able to buy the stocks you want at lower prices than they were before the crash.

Keeping it in a savings account until the market recovers just means you'll pay more for each share you buy. Keep on buying during a crash. In fact, buy more if you can.
It depends... I held out buying stock in Jan and am Buying at a lower price point today than I would have 3 months ago... But I just got lucky... we could have been much higher...

If you have extra cash... just invest... and keep doing it.

tesuzuki2002
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Re: When the market crashes...

Post by tesuzuki2002 » Thu Apr 26, 2018 5:10 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
My bonus is coming this week! 15% in cash... I've already picked my investments (VTSAX, VTIAX, VBR, BKR.B) and can't wait for it to hit my account tomorrow!

staythecourse
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Re: When the market crashes...

Post by staythecourse » Thu Apr 26, 2018 5:12 pm

I have learned very few things investing last decade. One of which is you make pretty good money not bailing out of your plan when the market thins out, but make a TON of money when you keep investing when the market thins. It is like putting a booster rocket on your portfolio value. Always reminds me of the analogy of Dr. Bernstein in "IAA" (paraphrasing): Feels like your throwing your money down a rat hole. Right now it is REITS for me. Every month I throw money into it and it stinks, but I know from previous experience it will be rewarded. When WHO KNOWS.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

WhiteMaxima
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Re: When the market crashes...

Post by WhiteMaxima » Thu Apr 26, 2018 5:17 pm

Always have some cash on hand in case of big sales on Wall Street. if you are bonehead BH who don't believe market timing, just put all your money into a your target AA and take your emotion away from investing.

dacalo
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Re: When the market crashes...

Post by dacalo » Thu Apr 26, 2018 5:33 pm

Investing when the prices are "normal" but stopping abruptly when the prices are lower. Think about that, this that make sense? Me? I am buying more. :beer

Kathys
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Re: When the market crashes...

Post by Kathys » Thu Apr 26, 2018 5:35 pm

Thanks all. So the consensus is "don't worry and do nothing or invest more" I can do that :D

delamer
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Re: When the market crashes...

Post by delamer » Thu Apr 26, 2018 5:43 pm

First, most 401(k) plans have an investment option similar to a money market fund. So you don’t need to avoid your 401(k) — or IRA — if you want to invest in a cash equivalent.

Second, if you buy shares of stock after the market crashes, you are buying at sale prices. You get more shares for your dollar. So it is a good time to buy.

Third, the opportunity to put away money in tax-deferred/tax-advantaged is limited. If you don’t do it this year, you can’t make up for that lost chance and just double up next year. Not to mention losing any employer match.

KlangFool
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Re: When the market crashes...

Post by KlangFool » Thu Apr 26, 2018 5:46 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
Kathys,

My AA is 61/39. There is always something on sale. I am buying bond now. When the stock market crashes, I will buy stock. 40% of my portfolio is in Wellington Fund (65/35). I just keep putting money into it. It will buy whatever that is on sale for the moment.

KlangFool

lostdog
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Re: When the market crashes...

Post by lostdog » Thu Apr 26, 2018 7:32 pm

WhiteMaxima wrote:
Thu Apr 26, 2018 5:17 pm
Always have some cash on hand in case of big sales on Wall Street. if you are bonehead BH who don't believe market timing, just put all your money into a your target AA and take your emotion away from investing.
Kathy's,

Don't market time. Keep investing no matter what. Time in the market is better than timing the market.

Bogleheadish are not boneheads.

youngpleb
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Re: When the market crashes...

Post by youngpleb » Thu Apr 26, 2018 7:57 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
That's literally the opposite of what you should do. It might be difficult, but really during a crash you should be investing every spare penny from a profit view (although I guess that is market timing). But the important thing is to just keep up the regular investing.
27. Always learning.

metalworking
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Re: When the market crashes...

Post by metalworking » Thu Apr 26, 2018 8:06 pm

Did that in 2008-2009 with my retirement. I didn't pull anything out thankfully but new contributions went into money market. Regret doing that to this day as my balances would be so much higher today. Expensive lesson learned.

bayview
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Re: When the market crashes...

Post by bayview » Thu Apr 26, 2018 9:14 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
Perhaps the one “maybe” would be if you don’t have a solid emergency fund. If the market crashes, your income might soon follow, and you might have to spend down savings for a bit.

So take a look at that first, and make sure your savings buffer is adequate, but then go pick up some bargains if you can.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

tibbitts
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Re: When the market crashes...

Post by tibbitts » Thu Apr 26, 2018 9:24 pm

Kathys wrote:
Thu Apr 26, 2018 5:35 pm
Thanks all. So the consensus is "don't worry and do nothing or invest more" I can do that :D
No, you can't. Of course you worry, unless you have so much invested that it just doesn't matter to you. You try to overcome that and continue with your plan. But unlike what everybody else says, I won't tell you there's a guaranteed pot of gold at the end of the rainbow. Maybe your portfolio will never recover. It would be much better if the market just climbed at a few percent above inflation every year. Most people who claim they wouldn't worry in a market downturn would also put 100% of their portfolio in 3+% I-bonds today if they could.

RudyS
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Re: When the market crashes...

Post by RudyS » Thu Apr 26, 2018 9:45 pm

delamer wrote:
Thu Apr 26, 2018 5:43 pm
First, most 401(k) plans have an investment option similar to a money market fund. So you don’t need to avoid your 401(k) — or IRA — if you want to invest in a cash equivalent.

Second, if you buy shares of stock after the market crashes, you are buying at sale prices. You get more shares for your dollar. So it is a good time to buy.

Third, the opportunity to put away money in tax-deferred/tax-advantaged is limited. If you don’t do it this year, you can’t make up for that lost chance and just double up next year. Not to mention losing any employer match.


That third point is really important! I must add, it is a good idea to follow your asset allocation; i.e., as stocks become a smaller precentage of your portfiolio, buy more. Same for bonds. You might look at other threads and the wiki to get more insight.

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CyclingDuo
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Re: When the market crashes...

Post by CyclingDuo » Thu Apr 26, 2018 10:57 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
You will want to continue to contribute each paycheck so you get the company match (free money!) in your 401K. Over the years you will buy shares at market highs, market lows, and everything between. Many of us bought each and every month on automatic pilot (or every 2 weeks depending on your company's pay periods) right through 1999-2002, and again from 2007-2009.

The money you put in your IRA could be done at anytime between now and next April's tax filing deadline if you feel more comfortable waiting for what appears to be a better bargain. No reason you have to do it all at once if it makes you sleep better at night.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

PFInterest
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Re: When the market crashes...

Post by PFInterest » Thu Apr 26, 2018 11:05 pm

Kathys wrote:
Thu Apr 26, 2018 4:00 pm
I've been thinking, when the market crashes is it better not to put money in 401K and IRA, just keep what is there there but any new money perhaps it's better to keep in a savings account?
When the market crashes you buy as much as you can. We can compare the difference from your savings account after.

tibbitts
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Re: When the market crashes...

Post by tibbitts » Fri Apr 27, 2018 7:59 am

metalworking wrote:
Thu Apr 26, 2018 8:06 pm
Did that in 2008-2009 with my retirement. I didn't pull anything out thankfully but new contributions went into money market. Regret doing that to this day as my balances would be so much higher today. Expensive lesson learned.
It was not a lesson learned. It easily could have turned out that the market today would be below the lows of 2009, and that you would not see higher prices for the rest of your lifetime. You are just observing an outcome and now wish your strategy had been optimal for the outcome. It's like stopping at a railroad track gate that's closing while the person in the next lane sneaks under it (and makes it across) - and based on that experience, deciding it's a good idea. Usually, it will turn out well and you'll get to your destination faster. Sometimes it might not.

Many of us either lost our jobs or saw our income drop dramatically from customers pulling back during the last downturn. Everybody says to keep investing or invest more, but those are mostly people who didn't see their income either eliminated or eroded. It's a completely different psychological experience when that happens.

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Earl Lemongrab
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Re: When the market crashes...

Post by Earl Lemongrab » Fri Apr 27, 2018 12:53 pm

I'll give the little talk I do when this comes up. In 2007, I got serious about investing. I researched and developed a plan. I reworked what I had in Roth and 401(k), and brought in a few 100k from cash to buy ETFs in taxable. I managed to get that done right about the peak before the slide that became the crash of 2008-2009.

What I did was follow that plan I made. I did tax-loss harvesting in taxable (I still have five figures of losses I'm using each year to reduce taxes) and rebalanced. New money continued to be invested according to the asset allocation. Even with new contributions, it took until 2010 to get back to where I started. However, because I had been buying all those stock ETFs and funds while the stock market was depressed, when it took off my portfolio did as well.

Get out of the idea that you can somehow outguess the market. There was no particular reason back then to think that March 2009 was the bottom. In fact, a lot of the talk was about "dead cat bounce" and "double-dip recession". But that didn't happen. It was the real thing.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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