How Do You React After a Market Decline?

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chris319
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How Do You React After a Market Decline?

Post by chris319 »

How do you react emotionally to a substantial market decline?

I'd be lying if I said I didn't have some emotional response. "Mildly deflated" describes how I feel viscerally, and that lasts for about five minutes. It certainly doesn't ruin my day and in no way do I panic. No extremes of emotion. My rational self tells me that substantial declines come with the territory, not every day can be an up day and a big drop could be an opportunity to buy at cheaper prices, so I'm self healing in that respect.
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minimalistmarc
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Re: How Do You React After a Market Decline?

Post by minimalistmarc »

I’m flawed. When the market dips a little I hope it dips a lot more and stays down for long enough (preferably around 10 years) while I complete my accumulation of shares. I’m always a bit disappointed when it rapidly rebounds.

That being said if there was another bull market from this point I can definitely retire at any stage, so I’m routing for both sides!
mr_brightside
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Re: How Do You React After a Market Decline?

Post by mr_brightside »

BUY

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David Althaus
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Re: How Do You React After a Market Decline?

Post by David Althaus »

Here's few action items you may find useful:
1. An Investment Policy Statement can help you stay the course when emotions are at a fever pitch.
2. Stick with the 3 fund portfolio. When markets go down it can provide provide peace of mind that it will get better.
3. Adopt and stick to an asset allocation where you are more comfortable when the market goes south.

All the best
Ramjet
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Re: How Do You React After a Market Decline?

Post by Ramjet »

I don't really do anything and probably have much less of an emotional response than most

I will however, consider front loading IRA contributions for the year if the decline is significant enough

That is the extent of my market timing, no selling here, too long to go until retirement
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Mr. Rumples
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Re: How Do You React After a Market Decline?

Post by Mr. Rumples »

Having been through these before, I react calmly. Its too late to do anything - if one was inclined to. My strategy, for lack of a better term, is to be prepared, ride it out and when I was younger and had perhaps some extra $, buy. I can always look at my Confederate bonds and Benjamin $2 and remind myself we have been through worse where I live.
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Re: How Do You React After a Market Decline?

Post by z3r0c00l »

Are we talking March 2020 or a minor one-day decline such as yesterday?

For the former, my reaction is to trim spending, search for new sources of income, and invest as much as possible. I have found my reaction to recession to be a mixture of gallows humor and for some odd reason, a burst of productive energy. It feels like the right time to shift gears and readjust financially and professionally. Granted I have only had two so far.

For the latter, I don't do anything at all since stocks are apparently up today almost as much as they went down yesterday. It isn't even worth your energy to follow these one-day moves since they are so frequently reversed. I do like to update my spreadsheet a few times per week.
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climber2020
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Re: How Do You React After a Market Decline?

Post by climber2020 »

It depends.

If I'm still working and getting a paycheck, then no problem; I get to buy stocks on the cheap.

In March 2020, I unexpectedly found myself abruptly not working and unable to make any money despite being in a profession that historically has great job security. I'm fortunate that it was temporary, but it was quite disconcerting being forced to close the office while the stock market was imploding.
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tennisplyr
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Re: How Do You React After a Market Decline?

Post by tennisplyr »

I stop looking at market data...this too shall pass
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Re: How Do You React After a Market Decline?

Post by Paradise »

I think I might be a rare person here, but I kind of celebrate since it means I can swap bonds for stock and make more money.
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JoeRetire
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Re: How Do You React After a Market Decline?

Post by JoeRetire »

chris319 wrote: Wed May 05, 2021 4:26 am How do you react emotionally to a substantial market decline?
I don't.

I've always been in the market for the long term. Declines haven't caused me to react either financially or emotionally.

I worked at a financial services company during 2008. A few coworkers were panicking when the market dropped and many of our customers went out of business or were acquired. I just shrugged and tried to calm them down. Perhaps my coworkers had the wrong asset allocation plan. Or perhaps they were just younger and had less experience with market fluctuations.
Last edited by JoeRetire on Wed May 05, 2021 7:44 am, edited 2 times in total.
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TheLaughingCow
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Re: How Do You React After a Market Decline?

Post by TheLaughingCow »

As a young accumulator I love market declines. I am hoping for a big one any day now.
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winterfan
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Re: How Do You React After a Market Decline?

Post by winterfan »

Mr. Rumples wrote: Wed May 05, 2021 5:41 am Having been through these before, I react calmly. Its too late to do anything - if one was inclined to.
This is my reaction too. I think, "I can't sell now, so I may as well just hang on."
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dziuniek
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Re: How Do You React After a Market Decline?

Post by dziuniek »

chris319 wrote: Wed May 05, 2021 4:26 am How do you react emotionally to a substantial market decline?

I'd be lying if I said I didn't have some emotional response. "Mildly deflated" describes how I feel viscerally, and that lasts for about five minutes. It certainly doesn't ruin my day and in no way do I panic. No extremes of emotion. My rational self tells me that substantial declines come with the territory, not every day can be an up day and a big drop could be an opportunity to buy at cheaper prices, so I'm self healing in that respect.
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BlackStrat
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Re: How Do You React After a Market Decline?

Post by BlackStrat »

I’m still learning but it sounds like a great time to do Roth conversions.
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Brianmcg321
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Re: How Do You React After a Market Decline?

Post by Brianmcg321 »

I turn it to the Golf Channel.
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Padlin
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Re: How Do You React After a Market Decline?

Post by Padlin »

It's been a long time but big drops have given me an opportunity to see how I react to them for future use. A couple times I've rebalanced during the drops, but I do find it hard to do when the drops are really big, I'm pretty conservative. Other times I've tweaked my AA a tad during the next rebalance. I have yet to see how I do now that I'm retired with no income till SS kicks in. I was traveling and didn't notice the one in 2020, had other things to be concerned with.

I tend to not pay attn to the news when the market drops, it helps.
Last edited by Padlin on Wed May 05, 2021 7:07 am, edited 1 time in total.
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Re: How Do You React After a Market Decline?

Post by Silverado »

tennisplyr wrote: Wed May 05, 2021 6:31 am I stop looking at market data...this too shall pass
I do about the same. I generally tap on the spreadsheet that tracks a lot of our investments (401k are in non tickered CIT) about every day. However, when there are daily downs I normally pass. I’ll go in after a larger dip like last March, Dec 18, etc when I figure it is time for a rebalance.
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Re: How Do You React After a Market Decline?

Post by Exchme »

When I was young and accumulating, everything went into the market, but markets taking big drops usually coincided with recessions which stopped raises, promotions and put my job in peril, so we felt the same fear as everyone else, but we never sold.

In last year's March madness, I bought some S&P 500 in 3 small batches as the market was falling. Don't let anyone fool you - it was, and always will be, incredibly hard to fight your emotions and go against the crowd.
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Re: How Do You React After a Market Decline?

Post by UpperNwGuy »

In March 2020 I did some tax loss harvesting. I didn't do any rebalancing into stocks because I had been on the verge of rebalancing out of stocks when the decline began. The whole month-long event took me from my upper rebalancing band down to my lower band without crossing into actionable territory. I don't remember feeling any strong emotions about the market decline. I've always approached investing with a willingness to take what the market gives me and not to have unrealistic expectations.
Last edited by UpperNwGuy on Wed May 05, 2021 7:18 am, edited 3 times in total.
Astones
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Re: How Do You React After a Market Decline?

Post by Astones »

I never experienced one, but there are good chances that I'll react badly.

All the theory works well in my head but I already feel that it won't be the same when the situation will get real.
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JPH
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Re: How Do You React After a Market Decline?

Post by JPH »

"Just stand there."
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Re: How Do You React After a Market Decline?

Post by finfire »

I fund my work 401k automatically, so it 's funded regardless of what is happening on the days.
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Re: How Do You React After a Market Decline?

Post by Johm221122 »

I rebalance
Actually if it's a large drop, I increase my stock allocation a little. I see it as an opportunity to buy stocks cheap.

Also when we have bull market, I rebalance to manage my risk. I'm 100% comfortable with my asset allocation
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watchnerd
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Re: How Do You React After a Market Decline?

Post by watchnerd »

chris319 wrote: Wed May 05, 2021 4:26 am How do you react emotionally to a substantial market decline?
Relieved.

Like a weight is lifted off my shoulders.

I don't like frothy markets.
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goldendad
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Re: How Do You React After a Market Decline?

Post by goldendad »

I generally buy more index funds. If I was ok owning at the higher price .........
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Re: How Do You React After a Market Decline?

Post by Tamalak »

At the bottom of the covid crash (though I didn't know it was the bottom at the time) I called my friend while drunk and complained about how much money I was losing. I generally felt, as the OP said, 'deflated'. No panic and definitely no urge to sell at any point - if anything, the urge to sell comes when the market is high (like now).
Swivelguy
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Re: How Do You React After a Market Decline?

Post by Swivelguy »

I think the Q1 2020 "crash" got an eyebrow raise out of me.
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GerryL
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Re: How Do You React After a Market Decline?

Post by GerryL »

In 2008 I saw the panic around me. My portfolio had just gone over $1M, and then it was back down to six figures. People were saying it was going to get worse. You need to do something. But I had no idea what that something was. So I decided I would "embrace my ignorance" and just keep on doing what I had been doing. Well, I did stop checking my net worth each week.
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Metsfan91
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Re: How Do You React After a Market Decline?

Post by Metsfan91 »

chris319 wrote: Wed May 05, 2021 4:26 am How do you react emotionally to a substantial market decline?

I'd be lying if I said I didn't have some emotional response. "Mildly deflated" describes how I feel viscerally, and that lasts for about five minutes. It certainly doesn't ruin my day and in no way do I panic. No extremes of emotion. My rational self tells me that substantial declines come with the territory, not every day can be an up day and a big drop could be an opportunity to buy at cheaper prices, so I'm self healing in that respect.
I am in accumulation phase. Every time market drops, I check my wallet to see if any spare change left which could be used to buy stocks on sale.
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asset_chaos
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Re: How Do You React After a Market Decline?

Post by asset_chaos »

I check my accounts little enough that only market declines large or fast enough to become bantered about on bogleheads come to my notice. That way I'm oblivious to all but the most severe market declines. My responses to severe down turns have varied from shrugs and do nothing to very reluctant and nervous rebalancing.

Just because "this time it's different" may never be true about the markets in general, it will be true about you. You will be different at every market downturn. Your age, portfolio size, life responsibilities, job security, etc are not static and may make your response to the next market downturn different from your responses to all market downturns you previously experienced.
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Re: How Do You React After a Market Decline?

Post by mrspock »

chris319 wrote: Wed May 05, 2021 4:26 am How do you react emotionally to a substantial market decline?

I'd be lying if I said I didn't have some emotional response. "Mildly deflated" describes how I feel viscerally, and that lasts for about five minutes. It certainly doesn't ruin my day and in no way do I panic. No extremes of emotion. My rational self tells me that substantial declines come with the territory, not every day can be an up day and a big drop could be an opportunity to buy at cheaper prices, so I'm self healing in that respect.
Sort of like George Costanza after the death of Susan: with restrained jubilation. I was counting the points until my rebalance bands hit, and then after they hit...I kinda just "forgot" to rebalance back to bonds for a while.

I also stop counting the value of my portfolio, and start counting shares and then just covert back dollars at the price last all time high. I could care less what the price of my index funds are during a crash, if it was worth X before it will be worth X again sometime in the future. So by running this math it reminds me what the shares were worth -- will be worth again, not what some short sighted investors might be willing to pay for them today because suddenly they think they are fortune tellers.
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Re: How Do You React After a Market Decline?

Post by RobLyons »

It's all reverse psychology. With me, I get excited/enthusiastic for the sales. I invest more with every large drop.
Last year I scooped up a lot of VTSAX in the $60-$70 range.
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Re: How Do You React After a Market Decline?

Post by Freefun »

Major market moves up or down is handled by my rebalancing.
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Re: How Do You React After a Market Decline?

Post by sureshoe »

I see a lot of "I don't react or care! I love it when the market drops!"

I think I sorta believe that, but let's be honest - we haven't had a real smackdown for over 12 years. It's easy to get excited when we've basically been in a bull market since the Great Recession.

When Covid hit, it was the first time in a long time that I had to take a deep breath. And if everyone on here is saying they did nothing but celebrate, that's a hard thing for me to believe. I too bought more, but this came back MUCH MUCH faster than I expected.

My net worth in 2009 was reasonably small compared to now. I took a pretty big hit in 2020. As I get older, I might be slight more defensive, but if we saw a 40% market drawdown and $1-$2M evaporated in a month? Oof. I'd convince myself to stay, but it would be hard. You don't make that up quickly by throwing in a few extra dollars.

For the main question, on day-to-day stuff, I try not to even look at my portfolio more than once a week or two, particularly if there is bad news.
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Re: How Do You React After a Market Decline?

Post by sls239 »

Generally my first reaction is to cut spending.
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Re: How Do You React After a Market Decline?

Post by Nowizard »

It differs depending on whether it is a day or so or prolonged.

Tim
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Re: How Do You React After a Market Decline?

Post by ddurrett896 »

I'll check my stock app, but won't log into my accounts to see the balances until it's back up.
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Re: How Do You React After a Market Decline?

Post by Xrayman69 »

I have been attentive to investing now about 20 years (after the tech bubble and after my first job out of school).

Dipped feet in from 2001-2005 with individual stocks and NO knowledge of money/investing management. After 2006 started some BH principles (unknowingly) and have stuck with it. Buy accordingly to my AA ebey first day of the trading month for taxable accounts (without exception), buy every Friday (taxable account), buy on the 15th (or there about if on a weekend) 529 plan. First day of every year place funds into process for Backdoor ROTH.

If the market drops 10% will buy from discretionary funds (Ie mental funds that would go to vacations or new car). If goes down another 5-10% will do the same (mini double down per-se). Have been fortunate that this “strategy “ has worked out well over the previous 15 years (2008-09, 2013, 2020).

In summary mostly mechanical with some bits of emotion in buying more as opposed to selling in fear.
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Re: How Do You React After a Market Decline?

Post by Nate79 »

Once we had a taxable account I focused on tax loss harvesting. Otherwise in retirement accounts I would focus on rebalancing as needed.
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Re: How Do You React After a Market Decline?

Post by firebirdparts »

I want to buy stuff.
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Re: How Do You React After a Market Decline?

Post by jpdion »

Retired now, but in the past investing was on autopilot - dollar cost averaging with contributions every two weeks from the paycheck. Some twinges of nervousness here and there, but never wavered and tried to switch off the autopilot. Once retired set an asset allocation and haven't fiddled with it except for rebalancing and some profit skimming on the upside. It helps to have a pension and two good Social Security checks coming in for sure.
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Re: How Do You React After a Market Decline?

Post by ChiGal1962 »

In the past, I was mildly concerned, but didn't change anything. Still did automatic 401k deposits, ran a few future calculations and kept an eye on it.

I retired last month, so I have a feeling I'll react somewhat differently, but the plan is to continue on the path. I have quite a bit of discretionary funding in my budget, so tightening the belt is always an option, depending on how deep and how long the downturn is.
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Re: How Do You React After a Market Decline?

Post by chuckb84 »

jpdion wrote: Thu May 06, 2021 10:17 am Retired now, but in the past investing was on autopilot - dollar cost averaging with contributions every two weeks from the paycheck. Some twinges of nervousness here and there, but never wavered and tried to switch off the autopilot. Once retired set an asset allocation and haven't fiddled with it except for rebalancing and some profit skimming on the upside. It helps to have a pension and two good Social Security checks coming in for sure.
Same here. Unless I hit a rebalance band, I have nothing to do. March 2020 was my first test of this since retirement and we followed the IPS and made money.
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Re: How Do You React After a Market Decline?

Post by Tattarrattat »

+20% drop, I buy lots more SP500. Then gradually rebalance back to goal over the next year or two. Come to think of it, I can only recall doing this two or three times. 2020 for sure was the biggest. Also did to lesser degree in 2008, and another in between, maybe 2018?
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chris319
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Re: How Do You React After a Market Decline?

Post by chris319 »

It helps to have a pension and two good Social Security checks coming in for sure.
For sure. I am very lucky. My former employer used to have a pension plan and I was grandfathered into it. I am very lucky. This gives me the luxury of being able to have an "income' component and a "growth" component. The income component covers living expenses; the growth component is ETF investments and the like.
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Re: How Do You React After a Market Decline?

Post by secondopinion »

chris319 wrote: Wed May 05, 2021 4:26 am How do you react emotionally to a substantial market decline?
"I wish I had more money to invest."
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Re: How Do You React After a Market Decline?

Post by Nicolas »

When the market declines substantially I quit looking at my accounts, as much as I can anyway. It helps.
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Re: How Do You React After a Market Decline?

Post by Yarlonkol12 »

Relief, I’ve got 20-30 more years of contributions to make
corp_sharecropper
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Re: How Do You React After a Market Decline?

Post by corp_sharecropper »

tennisplyr wrote: Wed May 05, 2021 6:31 am I stop looking at market data...this too shall pass
This. I have an amazing capacity to stick my head in the sand. I just stop looking.

That works for retirement accounts.

In taxable I use leverage, so I have to at least look. That said, I have a far more robust/diversified/hedged asset allocation in taxable so I don't see the same blood bath as those portfolios driven by 90%+ equity risk (looking at you Mr. 60/40 TSM/TBM "balanced" portfolio).
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