How to overcome regrets/fears?

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ChrisO
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How to overcome regrets/fears?

Post by ChrisO » Fri Sep 14, 2018 10:32 am

Hello everyone, I am still a greenhorn when it comes to investing, but I feel like I learned a lot in the passed year.

I m 29 and been investing in a work roth 401k for about 3 years. I made the "error" early this year by sort of "market timing". I seen that emerging markets beat the S&P 500 in 2017 and and thought they would do the same this year so I put 20% of my investments into emerging markets. My 401k already has high fees so I couldn't beat the S&P 500 the year before so I was thinking I could maybe do it by doing this move. My 401k also doesn't have any total US market mutual funds.....it's options aren't the best. Skip a bit, then the big tariffs project came out! Now china's stock market is down around 20% for the year. The issue is the tariffs haven't even been fully implemented yet so that would pull china's market down even more. Of course the tariffs could affect the US market too depending how this geopolitical issue ends up.

So should I just try to stick it out and keep the 20% into emerging markets even with the possibility (high?) that china's market could go down more or switch over to more domestic stock until the whole tariff issues is over then go back to emerging? That feeling of regret :(

P.S. I also plan to open a Roth IRA in the next couple of months most likely with fidelity for the ZERO total US stock market 85% and 15% total international market (probably not the zero one since I heard that one doesn't have small caps). This way I can leave it and not try to time things again :oops: . I m leaving my job and transferring the roth 401k hopefully sometime next year.

EdLaFave
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Re: How to overcome regrets/fears?

Post by EdLaFave » Fri Sep 14, 2018 11:00 am

I think it is statistically likely that your commitment to Roth accounts is sub-optimal.

I apologize for being blunt, but I believe the way you currently think about investing is dangerous. You seem to believe that you can read the news, make predictions about the market, and adjust your portfolio to take advantage of those predictions. People who embrace this approach will significantly under perform the market.

In my view you should:

1. Pick a stock/bond allocation that you can live with when stocks lose half their value.
2. Pick a international/domestic allocation that you can live with forever.
3. Abandon the idea of making bets on certain portions of the market (like emerging markets).
4. Put that plan in writing and never deviate from it.

...I actually think you're a great candidate for an all-in-one fund like a Vanguard Target Date or LifeStrategy fund because owning a single fund will prevent you from making harmful changes. Perhaps that option isn't possible in your 401k though.

To answer the question in the title... You overcome fears by building a widely diversified portfolio with a stock/bond mix that won't leave you in tears when stocks crash as you know they will. You overcome regrets by understanding that you should learn from the past but what is done is done and there is no value in dwelling on it.

Good luck to you.
Last edited by EdLaFave on Fri Sep 14, 2018 11:11 am, edited 1 time in total.

RickBoglehead
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Re: How to overcome regrets/fears?

Post by RickBoglehead » Fri Sep 14, 2018 11:05 am

Overcoming regrets is impossible for a human being. If you write down your strategy, setup your asset allocation, invest and sit back, and earn 11% for the year, and THEN your brother in-law shows you that he earned 145% by investing in ABC company, sold it and it's a booked gain, you'll have regrets.

The good news is that when he loses 49% in a year, and forgets to tell you, you won't have regrets.

Vanguard Fan 1367
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Re: How to overcome regrets/fears?

Post by Vanguard Fan 1367 » Fri Sep 14, 2018 11:08 am

Bogle says that he can't time the market and he doesn't know anyone who knows anyone who can time the market. At 29 I would recommend that you consider buying a low fee index fund, Bogle and I would prefer Unites States rather than emerging or international, and maybe some sort of low fee bond fund. A mix to consider would be 70 percent stock fund and 30 percent bond fund which would be doing it according to your age.

To avoid the regrets/fears Bogle suggests that after you buy those funds that you don't look at the statements until it is time to retire. (Yes he is exaggerating because of things like rebalancing). But he thinks that the ideal holding time for a mutual fund is forever.

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jakehefty17
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Re: How to overcome regrets/fears?

Post by jakehefty17 » Fri Sep 14, 2018 11:19 am

Hello!

I'm 27 and have been investing for around the same timeframe. From what I've learned on this forum and elsewhere, I'd offer you this advice:

1. The best way to overcome fears/regrets is to decide on your asset allocation and stick to it. Trust in your decision.

2. Don't chase performance. Especially in retirement accounts, as it will effect your long-term gains.

Investing in retirement should invoke a well thought out long-term strategy. If you have the money to chase returns and play the short-game, I'd make a taxable play account. This is gambling though. Don't gamble on your retirement.

Good luck!
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

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peterinjapan
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Re: How to overcome regrets/fears?

Post by peterinjapan » Fri Sep 14, 2018 11:26 am

I just hold my nose and jump in, and only check my stocks...every damn day because I can't help it.

When they go up, I get the dopamine shot I know I'm addicted to. When they go down, I feel bad, and share dank memes on /r/wallstreetbets

TXJeff
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Re: How to overcome regrets/fears?

Post by TXJeff » Fri Sep 14, 2018 11:28 am

I’m also recently recovered from trying to beat the market and invest in individual stocks. What helped me was first, reading a couple of the Boglehead recommended books, then creating an Investment Policy Statement.
Book list here:https://www.bogleheads.org/wiki/Books:_ ... nd_reviews.
Investment Policy Statement info and examples here: https://www.bogleheads.org/wiki/Investm ... _statement .

Creating an investment policy statement will will take you through the process of really nailing down your investment philosophy and goals. From there, deciding what actions to take when will become much, much simpler. And almost certainly more effective.

Also, the links above will help you understand that there is a difference between strategy and result. You can have a solid strategy (like a three fund porfolio with an 80/20 asset allocation) that, in a given year, results in a loss of money. But you can’t say that the strategy is now no good. It just had a not-so-good short term result. Much research shows that its long term outcome is most likely excellent. And you are in it for the long term—at 29, the very long term!

ChrisO
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Re: How to overcome regrets/fears?

Post by ChrisO » Fri Sep 14, 2018 11:30 am

EdLaFave wrote:
Fri Sep 14, 2018 11:00 am
I think it is statistically likely that your commitment to Roth accounts is sub-optimal.

I apologize for being blunt, but I believe the way you currently think about investing is dangerous. You seem to believe that you can read the news, make predictions about the market, and adjust your portfolio to take advantage of those predictions. People who embrace this approach will significantly under perform the market.

In my view you should:

1. Pick a stock/bond allocation that you can live with when stocks lose half their value.
2. Pick a international/domestic allocation that you can live with forever.
3. Abandon the idea of making bets on certain portions of the market (like emerging markets).
4. Put that plan in writing and never deviate from it.

...I actually think you're a great candidate for an all-in-one fund like a Vanguard Target Date or LifeStrategy fund because owning a single fund will prevent you from making harmful changes. Perhaps that option isn't possible in your 401k though.

To answer the question in the title... You overcome fears by building a widely diversified portfolio with a stock/bond mix that won't leave you in tears when stocks crash as you know they will. You overcome regrets by understanding that you should learn from the past but what is done is done and there is no value in dwelling on it.

Good luck to you.
Yea I know now, I thought I could make a good prediction with some data, but I see now it is much harder than that. I had too much pride from my academic past. I do plan to do the 2 or 3 index strategy. I might re-balance it one a year or using the 5%/25% rule back to my allocation but not anymore than that.
It's just that "fear of missing out".

pkcrafter
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Re: How to overcome regrets/fears?

Post by pkcrafter » Fri Sep 14, 2018 12:58 pm

Chris, investing is for the looooong term, in your case maybe 30 more years working and another 30 years in retirement, therefore, listening to daily "noise" is a total waste of time. Buy the market and spend your time doing something else. The big picture, Chris.

I also saw in an earlier post you were going 90-95% in stocks. First, most seasoned posters here will not recommend more than 80% in stock, and secondly, because you have some behavioral issues, a lower stock allocation is correct, at least until you get some experience holding and riding volatility. Find the right asset allocation and then hold. There really isn't much more to it than that.

Note on your current 401k. Your company may be a prime target for a law suit because of the high fees. All funds are A class, which means front end load, but I assume the loads are waived. Many companies with high fees will throw in at least one reasonable cost S&P500 fund to prevent that. You might want to toss that at your boss when you leave. :happy

https://www.thestreet.com/story/1312935 ... mings.html
It's just that "fear of missing out".
Yes, FOMO

http://networthadvice.com/fear-of-missi ... rst-enemy/

Regarding FOMO, consider this:

1. The S%P500 beats 80% of all investing schemes over 20 year periods, and its been over 90% for last 10 years.
2. That 20% at the top is not consistent and cannot be identified in advance, there is rotation. What this means is some investors have to get lucky once in awhile - a condition of luck.
3. Sixty-five percent of mutual funds went out of business over the past 15 years. Were the 35% that survived better or just luckier?
4. There are 3 kinds of information - exclusive, limited, and common. Guess where you and I are? If you want to play games, guess who is likely to be on the other side.

https://www.marketwatch.com/story/why-w ... 2017-04-24


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

ChrisO
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Re: How to overcome regrets/fears?

Post by ChrisO » Fri Sep 14, 2018 2:11 pm

pkcrafter wrote:
Fri Sep 14, 2018 12:58 pm

Thanks for the links :D

Wow didn't know that about the lawsuits. Yea nearly all my funds are class A. All my equity options are class A but one "open class"? still 1.06% The bonds are class A or a class R4?

pkcrafter
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Re: How to overcome regrets/fears?

Post by pkcrafter » Fri Sep 14, 2018 2:29 pm

ChrisO wrote:
Fri Sep 14, 2018 2:11 pm
pkcrafter wrote:
Fri Sep 14, 2018 12:58 pm

Thanks for the links :D

Wow didn't know that about the lawsuits. Yea nearly all my funds are class A. All my equity options are class A but one "open class"? still 1.06% The bonds are class A or a class R4?
I mentioned that class A front end loads (commission) are normally waived in 401k plans, so your funds probably do not charge the commish. Two of the bond funds are class A and one is R shares.
R share funds are a share class of mutual funds designated as a retirement share class, hence the letter 'R.'


https://www.thebalance.com/what-are-mut ... es-2466763

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

fulltilt
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Re: How to overcome regrets/fears?

Post by fulltilt » Fri Sep 14, 2018 5:30 pm

ChrisO wrote:
Fri Sep 14, 2018 10:32 am
Hello everyone, I am still a greenhorn when it comes to investing, but I feel like I learned a lot in the passed year.

I m 29 and been investing in a work roth 401k for about 3 years. I made the "error" early this year by sort of "market timing". I seen that emerging markets beat the S&P 500 in 2017 and and thought they would do the same this year so I put 20% of my investments into emerging markets. My 401k already has high fees so I couldn't beat the S&P 500 the year before so I was thinking I could maybe do it by doing this move. My 401k also doesn't have any total US market mutual funds.....it's options aren't the best. Skip a bit, then the big tariffs project came out! Now china's stock market is down around 20% for the year. The issue is the tariffs haven't even been fully implemented yet so that would pull china's market down even more. Of course the tariffs could affect the US market too depending how this geopolitical issue ends up.

So should I just try to stick it out and keep the 20% into emerging markets even with the possibility (high?) that china's market could go down more or switch over to more domestic stock until the whole tariff issues is over then go back to emerging? That feeling of regret :(

P.S. I also plan to open a Roth IRA in the next couple of months most likely with fidelity for the ZERO total US stock market 85% and 15% total international market (probably not the zero one since I heard that one doesn't have small caps). This way I can leave it and not try to time things again :oops: . I m leaving my job and transferring the roth 401k hopefully sometime next year.
Don't sweat it. Take this as a learning experience. You can't predict the market. I can't predict the market. No one can. If you are feeling regret after losing a little bit of money in EM, maybe you need to rethink your risk tolerance.

Don't make things overly complicated. If i had the chance to start over at the beginning of my investing career, without a doubt i think the best course of action would be to keep things simple. Invest in the 401k to get the match in whatever you determine to be the least bad option. Start a Roth and max it out as soon as you can. Personally, i think a target date fund is the best choice. It takes all of the guesswork out of it so the only thing you have to focus on is your savings rate. It rebalances itself so you don't have to fret about that either. Your savings rate is *the most important thing* to worry about. The second most important is your stock/bond split. Any tilts or over weighting make a difference but the difference pales in comparison to the previous two.

Save half your raise each time you get one until you get your savings rate to where it needs to be. Save up some cash for a rainy day, or a down payment on a house or whatever.

You're on the right track. :beer

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Kenkat
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Re: How to overcome regrets/fears?

Post by Kenkat » Fri Sep 14, 2018 6:53 pm

I will add the old cliche “it’s not timing the market, it’s time in the market”.

I would calculate how much you actually lost in total dollars by investing 20% in Emerging Markets vs. something like an S&P 500 fund. Compare that to how much you have saved this year. At your age, I would guess that your savings rate will very quickly replace what you have “lost”. Better to have learned this lesson early when the dollars at stake are relatively small and you have plenty of time to recover. So let it go...

wolf359
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Re: How to overcome regrets/fears?

Post by wolf359 » Fri Sep 14, 2018 7:08 pm

ChrisO wrote:
Fri Sep 14, 2018 10:32 am
My 401k already has high fees so I couldn't beat the S&P 500 the year before so I was thinking I could maybe do it by doing this move.
The question you didn't ask was:

"My 401k has high fees. What strategy should I follow?"

The answer is:
1. Invest up to the company match.
2. Invest additional funds into a Roth IRA up to the max.
3. Invest any additional funds into the 401k up to the max.

If you did this, then you still have significant funds in the 401k. Invest in the lowest expense fund they have available, and balance it out with the rest of your portfolio. Think of your portfolio asset allocation in totality. You're 29, you'll eventually leave and switch to another company. So all you're doing is keeping the costs down and maximizing your contributions until you can transfer to a decent plan.

You'll eventually have a lower cost retirement plan. Don't lose the deferred tax space by failing to invest or taking unnecessary losses.
I m leaving my job and transferring the roth 401k hopefully sometime next year.
And there you go.

If you swing for the fences before you're ready to, you'll pull too much risk. That's when regrets/fears come in.

401k investing is the easiest and least fearful investing that I do. The money goes in automatically, and I never miss it out of my paycheck. I only look at the balance once a year, when selecting new assets. Since I can't touch it until retirement, it's in my mind as future money, and doesn't impact me day-to-day.

If something happened to my emergency fund or taxable investments/savings -- that could impact me, especially if I lost my job. Sure, it's mental accounting, but if you systematically build those up, you could build up an emergency buffer of several years.

Build up your core investments first, and make sure you'll achieve your goals though those. Then, you can afford to take on the riskier asset classes.

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Toons
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Re: How to overcome regrets/fears?

Post by Toons » Fri Sep 14, 2018 7:49 pm

Experience is just applied failure
Think About It :happy
It makes life interesting and challenging.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

sschullo
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Re: How to overcome regrets/fears?

Post by sschullo » Fri Sep 14, 2018 7:58 pm

Regrets are usually based on lost opportunities or mistakes. So, be aware of new opportunities, as they bite us on the bottom often, and learn from mistakes.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

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