Relaxing in America during this current market drop

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Ron Scott
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Relaxing in America during this current market drop

Post by Ron Scott » Thu Oct 11, 2018 7:06 am

I am a recent retirees and I recently lost a lot of money in equities. “Lost“ is of course a relative term because my portfolio is still significantly higher than it was a while back.

But I am relaxed about it, for three reasons:

First, and primary, I have very low expectations for the market. I have been amazed at the returns during my lifetime but have not planned for similar returns in the future. The world is a vastly different place than was when I grew up and I do not expect the market to behave the way it did in the past.

Second, I have seen the market rise and fall many times and I hope to see many more. This is the way it is and I cannot change it.

Finally, I don’t have many choices regarding my investments. About 40% of my investable assets is in equities and I do not plan to rebalance. While I may buy more stock at a much much lower point it will not be a lot and I will not be materially affected one way or the other.

Ohmmm...
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

Purelife304
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Re: Relaxing in America during this current market drop

Post by Purelife304 » Thu Oct 11, 2018 7:26 am

I really don't get the noise right now around the markets. I hadn't been paying attention, and just looked it up. If things are bad now, we must have lived in the dark ages just 6 months ago because we are still well above those levels. Knowing this is what helps me relax
:sharebeer

heyyou
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Re: Relaxing in America during this current market drop

Post by heyyou » Thu Oct 11, 2018 3:49 pm

In retirement and with only two years of 5 digit Roth conversions still available, I'm welcoming the next multi-year drop, before the eventual recovery. I apologize for being so self-centered.

Nate79
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Re: Relaxing in America during this current market drop

Post by Nate79 » Thu Oct 11, 2018 4:25 pm

The only way you lost a lot of money is if your account size is very large because as a percentage the current market blip has been pretty small drop compared to a market downturn.

So I don't get the whole "a lot" statement.

Ron Scott
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Re: Relaxing in America during this current market drop

Post by Ron Scott » Thu Oct 11, 2018 10:12 pm

Nate79 wrote:
Thu Oct 11, 2018 4:25 pm
The only way you lost a lot of money is if your account size is very large because as a percentage the current market blip has been pretty small drop compared to a market downturn.

So I don't get the whole "a lot" statement.
So it’s not the point of the thread, but would have to know where I’m invested and what I have to “get” it.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

Finridge
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Re: Relaxing in America during this current market drop

Post by Finridge » Thu Oct 11, 2018 11:58 pm

Ron Scott wrote:
Thu Oct 11, 2018 10:12 pm


So it’s not the point of the thread, but would have to know where I’m invested and what I have to “get” it.
Do share.

Dandy
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Re: Relaxing in America during this current market drop

Post by Dandy » Fri Oct 12, 2018 7:29 am

Good approach. I can't say I'm relaxed but I'm not worried. I also have a modest allocation to equities -43% a few days ago.
I also agree that I'm not likely to make heavy buys into equities. But, after some really bad days, like we have just had, I may make some modest equity buys in my TIRA or Roth accounts -- as long as equities remain 43% or less.

In fact minutes before I read your post I did just that. Nothing major just a bit of a tweak to equities when they are down.

The main reason why I don't get worried is that I have enough drawdown invested in short term bonds and FDIC products to take me to age 90.

Olemiss540
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Re: Relaxing in America during this current market drop

Post by Olemiss540 » Fri Oct 12, 2018 10:13 am

What market drop? My target date funds maintain my asset allocation, so really no need to track day to day noise.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

staythecourse
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Re: Relaxing in America during this current market drop

Post by staythecourse » Fri Oct 12, 2018 10:27 am

This is why I like the 2 bucket technique. Your first is enough to cover all monthly liabilities for 5-10 years in principle stable investments (SS, pensions, SPIA, MM, CD, bank account, etc...) then the rest in equities. This way what happens UP or DOWN in the market does not matter on a day to day or even year to year basis. This way the focus on equities is simply what happens at 5+ year stretches.

Then refill the first bucket only if equities have risen greater then x%. If not do nothing. Repeat and rinse each year.

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

Ron Scott
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Re: Relaxing in America during this current market drop

Post by Ron Scott » Fri Oct 12, 2018 10:46 am

Dandy wrote:
Fri Oct 12, 2018 7:29 am
The main reason why I don't get worried is that I have enough drawdown invested in short term bonds and FDIC products to take me to age 90.
That sounds pretty relaxing to me...
Olemiss540 wrote:
Fri Oct 12, 2018 10:13 am
What market drop? My target date funds maintain my asset allocation, so really no need to track day to day noise.
You can read the thread in a more general nature, to refer to more lasting drops in market value.

It is an interesting strategy to change your asset allocation every year or so like these funds do. Do you think about risk tolerance at all or just pick a fund based on age and let it all happen?
staythecourse wrote:
Fri Oct 12, 2018 10:27 am
This is why I like the 2 bucket technique. Your first is enough to cover all monthly liabilities for 5-10 years in principle stable investments (SS, pensions, SPIA, MM, CD, bank account, etc...) then the rest in equities. This way what happens UP or DOWN in the market does not matter on a day to day or even year to year basis. This way the focus on equities is simply what happens at 5+ year stretches.
This seems robust, especially the longer the stable investments can carry you.

5 - 10 years is a big spread and could account for a significant variance in allocations. Do you take a stab at calculating the # of years in stable?
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

sport
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Re: Relaxing in America during this current market drop

Post by sport » Fri Oct 12, 2018 10:58 am

My allocation target is 35% +/- 5%. Over the last two days, it dropped from 39% to 38%. Nothing to get excited about.

staythecourse
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Re: Relaxing in America during this current market drop

Post by staythecourse » Fri Oct 12, 2018 11:01 am

Ron Scott wrote:
Fri Oct 12, 2018 10:46 am
staythecourse wrote:
Fri Oct 12, 2018 10:27 am
This is why I like the 2 bucket technique. Your first is enough to cover all monthly liabilities for 5-10 years in principle stable investments (SS, pensions, SPIA, MM, CD, bank account, etc...) then the rest in equities. This way what happens UP or DOWN in the market does not matter on a day to day or even year to year basis. This way the focus on equities is simply what happens at 5+ year stretches.
This seems robust, especially the longer the stable investments can carry you.

5 - 10 years is a big spread and could account for a significant variance in allocations. Do you take a stab at calculating the # of years in stable?
Not anywhere close to retiring, but have toyed with the idea when I do retire. You are correct the asset allocation would be MUCH difference based on 5-10 years of cash equivalents, but that has been my point n this mental exercise. This is the proper way to figure out asset allocation for the retiree and not, "hey I think 40/60 sound good". It should be figure out how much principle stable money you need for 5-10 years (the range is based on your personal comfort level of being apprehensive of a prolonged equity drop) and then the rest in equities. Figure that part out THEN your asset allocation gets figured out after the fact. Sort of working backwards.

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

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GerryL
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Re: Relaxing in America during this current market drop

Post by GerryL » Fri Oct 12, 2018 11:14 am

Ron Scott wrote:
Thu Oct 11, 2018 7:06 am
I am a recent retirees and I recently lost a lot of money in equities. “Lost“ is of course a relative term because my portfolio is still significantly higher than it was a while back.

But I am relaxed about it, for three reasons:

First, and primary, I have very low expectations for the market. I have been amazed at the returns during my lifetime but have not planned for similar returns in the future. The world is a vastly different place than was when I grew up and I do not expect the market to behave the way it did in the past.

Second, I have seen the market rise and fall many times and I hope to see many more. This is the way it is and I cannot change it.

Finally, I don’t have many choices regarding my investments. About 40% of my investable assets is in equities and I do not plan to rebalance. While I may buy more stock at a much much lower point it will not be a lot and I will not be materially affected one way or the other.

Ohmmm...
I have a fourth reason:
Since I am in the lucky situation of not having to rely much on my investments for living expenses, I will be able to reinvest large portions of my RMDs (which start next year) in my taxable account. So although I could be selling low I'd also be buying low. And more quickly reducing the balance in my tIRA, which would shrink future RMDs a bit. (I realize that not everyone has the option of reinvesting RMDs.)

WhiteMaxima
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Re: Relaxing in America during this current market drop

Post by WhiteMaxima » Fri Oct 12, 2018 11:18 am

I don't think people should take this dip too easily, it could be the prelude of big correction. Interest rate is going up. If you are too heavy in high PE stocks (The FANG), then you should dial down a bit.

Ron Scott
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Re: Relaxing in America during this current market drop

Post by Ron Scott » Fri Oct 12, 2018 11:25 am

WhiteMaxima wrote:
Fri Oct 12, 2018 11:18 am
I don't think people should take this dip too easily, it could be the prelude of big correction. Interest rate is going up. If you are too heavy in high PE stocks (The FANG), then you should dial down a bit.
Pessimism in the market is not popular in these parts but I for one believe it's healthy.

It is far easier to prepare for difficult times than predict them.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

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JoMoney
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Re: Relaxing in America during this current market drop

Post by JoMoney » Fri Oct 12, 2018 12:24 pm

Ron Scott wrote:
Fri Oct 12, 2018 11:25 am
WhiteMaxima wrote:
Fri Oct 12, 2018 11:18 am
I don't think people should take this dip too easily, it could be the prelude of big correction. Interest rate is going up. If you are too heavy in high PE stocks (The FANG), then you should dial down a bit.
Pessimism in the market is not popular in these parts but I for one believe it's healthy.

It is far easier to prepare for difficult times than predict them.
I think Bogleheads have a fair balance of pessimism and optimism. There's plenty of examples/threads going both ways... and I think that's healthy. Different views need to conflict so as to stay on course. If you have one side pushing with no resistance it becomes overly tilted and skews off course or spins in circles.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Olemiss540
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Re: Relaxing in America during this current market drop

Post by Olemiss540 » Fri Oct 12, 2018 2:48 pm

Ron Scott wrote:
Fri Oct 12, 2018 10:46 am
Dandy wrote:
Fri Oct 12, 2018 7:29 am
The main reason why I don't get worried is that I have enough drawdown invested in short term bonds and FDIC products to take me to age 90.
That sounds pretty relaxing to me...
Olemiss540 wrote:
Fri Oct 12, 2018 10:13 am
What market drop? My target date funds maintain my asset allocation, so really no need to track day to day noise.
You can read the thread in a more general nature, to refer to more lasting drops in market value.

It is an interesting strategy to change your asset allocation every year or so like these funds do. Do you think about risk tolerance at all or just pick a fund based on age and let it all happen?
I pick a fund based on its asset allocation and glide path and with no respect to the "dates".
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

texasdiver
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Re: Relaxing in America during this current market drop

Post by texasdiver » Fri Oct 12, 2018 3:09 pm

In my early 50s and still buying/saving for at least another 10 years. So every drop in the market is just a buying opportunity. This one was perfectly timed such that the montly 401k contribution went through at close of business yesterday. So it's all good.

At least that's what I tell myself. We left things 100% on autopilot (monthly 401k contributions to target date index funds) all through the 2008 financial crisis and it all worked out that time. So not going to stress about this noise either

I'll have time to worry about where the market it at in 10 years when we start to actually make withdrawals.

Mr. Jelly
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Re: Relaxing in America during this current market drop

Post by Mr. Jelly » Fri Oct 12, 2018 3:33 pm

Go ahead and relax. For now. I do believe that prices and interest will have a real impact after the first of the year. I think it'd be prudent to be staged for it. I'm not sure how though.

Ron Scott
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Re: Relaxing in America during this current market drop

Post by Ron Scott » Fri Oct 12, 2018 10:45 pm

Mr. Jelly wrote:
Fri Oct 12, 2018 3:33 pm
Go ahead and relax. For now. I do believe that prices and interest will have a real impact after the first of the year. I think it'd be prudent to be staged for it. I'm not sure how though.
Some people with $5m are less prepared for a downturn in comparison to others with $1m and the reason is obvious.

Your lifestyle and portfolio combine to form a system that is either robust or fragile to down markets.

Those who need to spend a relatively high % of assets for living expenses, count on higher returns from equities, and those who may need to sell equities at a low to fund living expenses are relativity fragile to market volatility.

Those who spend a relatively low % of assets for living expenses, can live with relatively low returns, and those will not need to sell equities at a low to fund living expenses are relativity robust.

There is no need to predict why or when a downturn will occur. Being prepared for it is sufficient.

Be robust.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

ginstwin
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Re: Relaxing in America during this current market drop

Post by ginstwin » Sat Oct 13, 2018 9:41 am

staythecourse wrote:
Fri Oct 12, 2018 10:27 am
This is why I like the 2 bucket technique. Your first is enough to cover all monthly liabilities for 5-10 years in principle stable investments (SS, pensions, SPIA, MM, CD, bank account, etc...) then the rest in equities. This way what happens UP or DOWN in the market does not matter on a day to day or even year to year basis. This way the focus on equities is simply what happens at 5+ year stretches.

Then refill the first bucket only if equities have risen greater then x%. If not do nothing. Repeat and rinse each year.

Good luck.
1.I like this approach . I am retired . So that I fully understand it are you saying that in the 5-10 year "Bucket" your balance should be lets say 7 years of expenditure less any pension income . So as an example if my expenses are 100k per year and my stable pension income is 60k I should have a "Bucket" of 7*40 = $280,000 invested in high yield safe assets. I like the 3 fund approach so I assume The Balance follows the 3 fund approach ?

2. How and when do I replenish the "Bucket" . Assuming after year one it has reduced by 40k do I transfer 40k from my 3 funds or if equities have fallen do i do nothing and wait ?

Thanks

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