Boglehead investing through a major downturn

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Brianmcg321
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Re: Boglehead investing through a major downturn

Post by Brianmcg321 » Fri Nov 08, 2019 3:17 pm

Clever_Username wrote:
Fri Nov 08, 2019 2:11 pm
Brianmcg321 wrote:
Fri Nov 08, 2019 8:50 am
I rejoiced as everything was going on sale. By then end of 2009, my account was already above pre 2008 levels. I was 100% equities at the time.

Now it might take two yearsif we had a similar downturn. But my portfolio is much larger and my allocation is more conservative.
It sounds as though your expected decline in such a situation, at least as far as a percent of your portfolio, is smaller.

Meanwhile, my allocation is so conservative (age in bonds, and have actively debated more-than-age in bonds) : I don't know how I'll react in a downturn, as I was barely invested in 2008.

No, I didn’t expect it. Just staying the course. I was only 35 at the time looking at a 20-25 year time horizon, and my bi-weekly deposits were more than the decline. Also, I really didn’t check it that often.

As big as my portfolio is now, I wouldn’t be able to make up that much of a decline with my deposits.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

StealthRabbit
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Re: Boglehead investing through a major downturn

Post by StealthRabbit » Fri Nov 08, 2019 3:18 pm

OP, (whoops...absent since May 2019) Are you going to Retire Early? (didn't note your 'exit plan' from income) That is pretty important in planning an overall strategy at age 50 (I pulled the plug at age 49, no spousal safety gate).

Survived a bundle of downturns since 1970 and a LOT of benefit (buying opportunity / gains).

1) determine your AA comfort level, realizing with a double income you will have PLENTY accumulated. (keep risk appropriate, as you don't need to take much risk, and may not need much investment gain, tho it really multiplies your future benefit)
2) Have a plan, stick with the plan, sleep well and keep your hands off the controls.

3) Keep invested 100% in Matching opportunities.
4) Transition to Roth 401k as available / reasonable for your current tax situation. (I hope to be 50/50 Roth / Taxable deferred by age 70.5) My 401k Roth contributions late in career were a huge help.
5) Buy 60/40 during downturns (if that is your AA)
6) Buy 100% Equities during upside (rise takes much longer than the fall, = lower cost basis)
7) Consider other investment strategies to improve taxes in retirement (I will probably own a few businesses / commercial props for personal tax benefit only). Depreciation alone (on a secure investment property) can be huge offset to earned income (at current tax rates). I also use DAF contributions set aside for future gifting (appreciated assets).

When / if you FIRE, take a few yrs off of the income plan and do some aggressive Roth conversions (at lower tax rates.) A projected LT snapshot (including RMD / tax hits) indicated my accumulated portfolio at death would be 2x if I did Roth conversions from age 65 - 70.5 (equivalent to previous earnings)

I would get some significant tax planning advice projected for your next 40 yrs. NOT from a CPA ! (Wealth planner specifically knowledgeable on taxation)
The choices you make tomorrow and in the next 10 yrs will have a significant effect on your future outflows.

Taxation can change, don't count on it being lower.
Easy to run numerous future tax scenarios based on current and 'sunset' (2025) of current tax plan.
Tax planning will likely benefit you. (and your estate), maybe more so than your 'late stage investment choices'. (post age 50)

Congrats, you will do fine.
Last edited by StealthRabbit on Fri Nov 08, 2019 3:24 pm, edited 1 time in total.

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ruralavalon
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Re: Boglehead investing through a major downturn

Post by ruralavalon » Fri Nov 08, 2019 3:19 pm

2008 was terrifying. I was about 3 years from retirement.

I continued my regular contributions every pay period, also contributed bonus money, and bought stock index funds. I exchanged money from Treasury bonds to stock index funds. We did not sell any stock fund.

Our asset allocation did change from 65/35 to 50/50.

It was difficult, but we did stay the course except for the change in asset allocation.
Last edited by ruralavalon on Fri Nov 08, 2019 4:44 pm, edited 1 time in total.
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milktoast
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Re: Boglehead investing through a major downturn

Post by milktoast » Fri Nov 08, 2019 3:58 pm

I think it all depends on what happens to your income.

2000 I was all in tech stocks (mostly my own employer) and lost my job. Employer stock worth zero. Had to liquidate a lot of my remaining stocks to keep my house. Wipe out. Disaster. If I had some bonds, TSM, or even all tech stocks and none from my own employer I would have done fine.

2008 I kept my job. Lost 40% of my income. I was diversified and had an emergency fund. Was still able to contribute max to 401k. Didn't have to draw down my taxable account due to belt tightening.

Wish I had been able to buy more at the bottom. But I consider 2008 a victory.

KyleAAA
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Re: Boglehead investing through a major downturn

Post by KyleAAA » Fri Nov 08, 2019 4:55 pm

I didn't really notice the recession, tbh. My portfolio wasn't huge at the time. I would probably pay more attention now. But for me, it was a complete non-event, portfolio-wise. Careerwise, the startup I was working for ran into trouble and most of us were laid off.

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Clever_Username
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Re: Boglehead investing through a major downturn

Post by Clever_Username » Fri Nov 08, 2019 7:52 pm

Brianmcg321 wrote:
Fri Nov 08, 2019 3:17 pm
Clever_Username wrote:
Fri Nov 08, 2019 2:11 pm
Brianmcg321 wrote:
Fri Nov 08, 2019 8:50 am
I rejoiced as everything was going on sale. By then end of 2009, my account was already above pre 2008 levels. I was 100% equities at the time.

Now it might take two yearsif we had a similar downturn. But my portfolio is much larger and my allocation is more conservative.
It sounds as though your expected decline in such a situation, at least as far as a percent of your portfolio, is smaller.

Meanwhile, my allocation is so conservative (age in bonds, and have actively debated more-than-age in bonds) : I don't know how I'll react in a downturn, as I was barely invested in 2008.

No, I didn’t expect it. Just staying the course. I was only 35 at the time looking at a 20-25 year time horizon, and my bi-weekly deposits were more than the decline. Also, I really didn’t check it that often.

As big as my portfolio is now, I wouldn’t be able to make up that much of a decline with my deposits.
Sorry, I wrote my comment poorly. I didn't mean "you expect a decline," but rather I meant "if there is a decline, the likely drop in your portfolio is a smaller percent now than it would have been then."
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

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whodidntante
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Re: Boglehead investing through a major downturn

Post by whodidntante » Fri Nov 08, 2019 7:54 pm

theplayer11 wrote:
Sun May 05, 2019 3:01 pm
I have lived long enough to realize that when there is blood in the streets...buy as much as you can
Where did the money to buy as much as you can come from? I just stay fully invested.

bltn
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Re: Boglehead investing through a major downturn

Post by bltn » Fri Nov 08, 2019 8:59 pm

I continued to dollar cost average into the stock market during the 2000 and 2008 crises. Theoretically dollar cost average investing works best when the stock market is down.
We had about 70 % of our investments in the market at both of those times. But my job was secure so I just kept on investing. I had a good job and time on my side, so I didn't t worry about the downturns.

yogesh
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Re: Boglehead investing through a major downturn

Post by yogesh » Sun Nov 10, 2019 5:01 pm

In 2008 we had depleted everything in buying first home and started paying back 401k loan with max contributions so it worked out well in accumulating at low. I like keeping 12 month emergency cash around for worst (job loss). If job isn’t impacted I will buy equities on sale. If I look back those target date funds did the trick best.
Emergency: FDIC | Taxable: VTMFX | Retirement: TR2040

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