New investors: how did your first correction go?
New investors: how did your first correction go?
If you are new to the investing world (Fall of 2011 or later), how did you do with your first market correction? (Disclaimer: I am in no way claiming we are out of it.)
Each correction presents an opportunity for you to honestly gauge your reactions, learn from those reactions, and prepare yourself for the inevitable parade of future corrections. How did you feel? More importantly, what did you do and not do? Make a note of your equity exposure before the correction so that you can look back later and know at what levels you've been tested and how you reacted at those levels, both in percentage and absolute dollar terms. You know how your asset allocation felt during a bull, now you know how it feels during a bear. (Well... baby-bear. Bear-cub?) There is absolutely no substitute for experience in determining your risk tolerance and this knowledge will be crucial in preparing you for the next time around.
Did you feel fear yet do nothing? Award yourself points.
Did you feel fear and continue to buy despite your fear? Award yourself extra points!
Did you feel no fear at all? Perhaps consider the idea of increasing your equity allocation now that you have a better understanding of your risk tolerance. Or do nothing. Doing nothing is almost always an excellent plan!
Did you sell and use rationalizations like "no harm in sitting on the sidelines and watching for a bit"? This is called capitulation and will make you poorer over the long run.
If you sold just a little and regret it but are not too far off from your target, or even if you did not sell but you know now that you're over-exposed, perhaps consider reducing your target equity allocation - but not. right. now. The middle of a correction is the worst time to fix it! (I will caveat that by saying that it might be ok to fix it now if you know in your heart you will capitulate further if the correction goes deeper.) But better is to wait patiently until the market is at its next all-time high and THEN do something about it. Remember, if you believe in stocks for the long term, which most (all?) of us do, then by definition their "normal" state will be at or near their all-time high.
Worst case scenario - you sold all your equities and now you are kicking yourself. Wondering what to do? Subtract 25% from your pre-correction target allocation and get back in. Now. Don't even think about it, just do it! But keep in mind that this will be your equity allocation through the next bull too, no cheating and bumping it back up when the sailing gets smooth and everyone feels invincible again. You must use the NEXT correction to test this new target allocation because you failed the test this time. Remember - failing this test does not make you a failure, it just makes you human. The key is to learn from it!
Each correction presents an opportunity for you to honestly gauge your reactions, learn from those reactions, and prepare yourself for the inevitable parade of future corrections. How did you feel? More importantly, what did you do and not do? Make a note of your equity exposure before the correction so that you can look back later and know at what levels you've been tested and how you reacted at those levels, both in percentage and absolute dollar terms. You know how your asset allocation felt during a bull, now you know how it feels during a bear. (Well... baby-bear. Bear-cub?) There is absolutely no substitute for experience in determining your risk tolerance and this knowledge will be crucial in preparing you for the next time around.
Did you feel fear yet do nothing? Award yourself points.
Did you feel fear and continue to buy despite your fear? Award yourself extra points!
Did you feel no fear at all? Perhaps consider the idea of increasing your equity allocation now that you have a better understanding of your risk tolerance. Or do nothing. Doing nothing is almost always an excellent plan!
Did you sell and use rationalizations like "no harm in sitting on the sidelines and watching for a bit"? This is called capitulation and will make you poorer over the long run.
If you sold just a little and regret it but are not too far off from your target, or even if you did not sell but you know now that you're over-exposed, perhaps consider reducing your target equity allocation - but not. right. now. The middle of a correction is the worst time to fix it! (I will caveat that by saying that it might be ok to fix it now if you know in your heart you will capitulate further if the correction goes deeper.) But better is to wait patiently until the market is at its next all-time high and THEN do something about it. Remember, if you believe in stocks for the long term, which most (all?) of us do, then by definition their "normal" state will be at or near their all-time high.
Worst case scenario - you sold all your equities and now you are kicking yourself. Wondering what to do? Subtract 25% from your pre-correction target allocation and get back in. Now. Don't even think about it, just do it! But keep in mind that this will be your equity allocation through the next bull too, no cheating and bumping it back up when the sailing gets smooth and everyone feels invincible again. You must use the NEXT correction to test this new target allocation because you failed the test this time. Remember - failing this test does not make you a failure, it just makes you human. The key is to learn from it!
FIRE'd. Mid-40s.
- Taylor Larimore
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Re: New investors: how did your first correction go?
Mike:
Thank you for a very timely, informative, and action-related post!
Best wishes.
Taylor
Thank you for a very timely, informative, and action-related post!
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: New investors: how did your first correction go?
I started in late 2012.
I was a do nothing type. I've actually wondered what all the volatility talk was about. Was this a scary year... hadn't noticed.
My AA has not been more than a coupe percentage points off what it's set for, so no changes that way. Just been plugging away making contributions every couple weeks out of the paycheck.
I was a do nothing type. I've actually wondered what all the volatility talk was about. Was this a scary year... hadn't noticed.
My AA has not been more than a coupe percentage points off what it's set for, so no changes that way. Just been plugging away making contributions every couple weeks out of the paycheck.
Re: New investors: how did your first correction go?
While not my first correction, this is the first correction where I did not act like a little sissy investor. I have stayed the course, thanks to the readings I have done on this forum.
Re: New investors: how did your first correction go?
My portfolio really didn't fluctuate all that much (that I noticed at least), so I wouldn't consider this a real test yet. Wait until it drops 30-40%, then you'll see me beginning to sweat
Good luck to all and stay the course!
Good luck to all and stay the course!
Re: New investors: how did your first correction go?
What correction? Did I miss something?
Re: New investors: how did your first correction go?
I started in late 2013. Most of my new money went in during 2014, right at the peak. I chose 70/30 allocation, with 30% in international and 5-10% REIT. I wasn't really sure if I could stomach a correction with that AA, but I'm in it for long term. So I thought, what the heck. I could have DCA'd in, but opted for "time in market".
Soon enough, the correction came along. My portfolio went down almost 10%. That's plenty of money, a few years' worth of savings for me.
I didn't want to check my portfolio everyday, but couldn't help it. I wondered about all the folks on this forum who advocate "no peek". No idea how they manage it. I kept checking everyday, and it kept going down most of the days.
But I survived, so far. I did sell some, but only to TLH. I'm planning to complete the "TLH round-trip" soon. I also added new money to the extent I could. I'm still down 4-5% from the peak before correction, but hopefully it will all work out okay over next few years.
Bottomline - I think I can handle my current AA during a correction. A crash may be a different beast altogether, but we'll see when we get to that situation. For now, I'm staying course.
Soon enough, the correction came along. My portfolio went down almost 10%. That's plenty of money, a few years' worth of savings for me.
I didn't want to check my portfolio everyday, but couldn't help it. I wondered about all the folks on this forum who advocate "no peek". No idea how they manage it. I kept checking everyday, and it kept going down most of the days.
But I survived, so far. I did sell some, but only to TLH. I'm planning to complete the "TLH round-trip" soon. I also added new money to the extent I could. I'm still down 4-5% from the peak before correction, but hopefully it will all work out okay over next few years.
Bottomline - I think I can handle my current AA during a correction. A crash may be a different beast altogether, but we'll see when we get to that situation. For now, I'm staying course.
Re: New investors: how did your first correction go?
I know you asked only for recent first timers. Just to offer a perspective from an old timer, I remember my first correction back in 1997 and the 2nd in 1998, when I was a young and extremely overconfident wippersnapper at 50 years old. "Not a big deal" I remember while yawning. Then the "BIG ONE" hit in 2000-2002 when I lost 70%. I felt "sucker punched" quoting B. Bernstein. The good news is when I was much more mature at 55, I found out my risk tolerance, got properly diversified, with a bond allocation equal to my age and then I was well prepared for the 2008 meltdown, and never looked back.
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
Re: New investors: how did your first correction go?
Depressing, to say the least!
Started contributing to 401k in middle of 2013 and put in 5500 in a traditional IRA late 2014. Needless to say, I'm net negative. Personally, I'm not optimistic about stock market performance over the next decade, but oh well.
Started contributing to 401k in middle of 2013 and put in 5500 in a traditional IRA late 2014. Needless to say, I'm net negative. Personally, I'm not optimistic about stock market performance over the next decade, but oh well.
Last edited by brito11 on Fri Oct 09, 2015 10:22 am, edited 1 time in total.
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Re: New investors: how did your first correction go?
I started up my taxable account during this slight dip, and bought $10k worth of international stock. I still need to re-balance to restore my AA, but it is not too far off as is. Market timing, yes, probably. But if I didn't do it now, I will never get off my a$$ to get my taxable account started. The market dip was just an excuse to get into the market NOW.
Re: New investors: how did your first correction go?
Not new ... but earlier this year I removed the 'stock' App on my phone and removed the financial news feeds that I was receiving daily. It helped a lot.
Re: New investors: how did your first correction go?
I was actually on vacation from Aug 17 to Aug 25 so I was very surprised/distressed to find my portfolio down over 10% when I got home. Thankfully I didn't check it at all while I was on vacation as that might have impacted my enjoyment.
Although it stank to see my net worth go down for the first time since I started working, I took it as an opportunity to add new funds according to my asset allocation. I ended up contributing even more than is typical. 27 years old, 85 stocks/15 bonds, 60 US/40 Int'l.
Although it stank to see my net worth go down for the first time since I started working, I took it as an opportunity to add new funds according to my asset allocation. I ended up contributing even more than is typical. 27 years old, 85 stocks/15 bonds, 60 US/40 Int'l.
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Re: New investors: how did your first correction go?
I'm 100% stocks and didn't flinch. Not sure I would even consider that a correction (~10% drop). Kinda bummed I maxed out the IRA earlier in the year, but added a little bit to the taxable account over the past couple months.
Re: New investors: how did your first correction go?
I have seen the headlines but tuned them out as noise. Then I opened a statement and saw a decent drop for the quarter and told my spouse it was time to stop opening statements again. We are about 10 years or so from retirement and feeling ok about our AA.
Re: New investors: how did your first correction go?
I was on vacation mid August to mid September. Missed the 'correction' else I would have 'rebalanced'. I did try to but the internet connection at most places wasn't great and I was well, traveling and tired most evenings
- triceratop
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Re: New investors: how did your first correction go?
+1. Also 100% stocks here and started investing in 4Q 2014, so I was very much negative there for a while.traveler90 wrote:I'm 100% stocks and didn't flinch. Not sure I would even consider that a correction (~10% drop). Kinda bummed I maxed out the IRA earlier in the year, but added a little bit to the taxable account over the past couple months.
I learned a ton though, so I am glad it happened so early on. My actions
- 1) TLH'ed VFIAX->VTSAX at the bottom; Aug 25. This was luck but at the time it seemed like a good place to pull the trigger. Looks to save $150 on my tax bill which sounds great to me.
2) Didn't care too much at all about the net negative, which was approx. -$1900 off its peak and about -$1300 net. I thought this interesting; I always told myself I was looking at a long time horizon, 30-40+ years, but didn't know how I'd react to my first baby correction.
3) Bought VISVX, my first investment into Small Cap Value, on 10/01 and 10/02, encouraged that I didn't care about volatility at all. I am up a lot on these investments so far.
Last edited by triceratop on Fri Oct 09, 2015 10:42 am, edited 1 time in total.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: New investors: how did your first correction go?
Just opened my Vanguard account in November 2014. My reaction this August: everything's on sale! Buy ALL the stocks!
When a "real" 25%+ dip happens, I'll probably be throwing garage sales for additional portfolio funding. Very lucky to be investing with a 30+ year horizon and a rapidly growing salary.
When a "real" 25%+ dip happens, I'll probably be throwing garage sales for additional portfolio funding. Very lucky to be investing with a 30+ year horizon and a rapidly growing salary.
Re: New investors: how did your first correction go?
That's great!traveler90 wrote:I'm 100% stocks and didn't flinch. Not sure I would even consider that a correction (~10% drop). Kinda bummed I maxed out the IRA earlier in the year, but added a little bit to the taxable account over the past couple months.
For reference though, here are the deltas between 52 wk high and low for:
Total Stock Market: -16.14%
Total International: -20.19%
Emerging Markets: -31.46%
REITS: -19.72%
FIRE'd. Mid-40s.
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Re: New investors: how did your first correction go?
Been a lurker for a little while. I've gone through the full gamut over the past year. I actively day traded in mid-2014 and made a decent amount, but then that stopped happening. Then I put it all in VASGX (in early November 2014) and then made the mistake of checking it every day. Then I found this forum and read and read and read some more and realized that if I was going to succeed, I had to go about things differently. I haven't looked at my account once since just before the August correction, and inspired by the wisdom demonstrated on this forum, I didn't sell at all. Whenever I feel the desire to check my portfolio, I just visit here instead. I appreciate the forum's level-headed intelligence and experience, and it's something to which I aspire. Thirty-five years old and staying the course. Thank you.
Re: New investors: how did your first correction go?
Not a new investor here but I did make some changes. I got out of the Vanguard Health Care fund. Could not handle the volatility of biotechnology when Mrs. Clinton made her comments. Replaced this with Vanguard Growth Index fund. I also bailed out of the energy sector, sold VGENX. Increased my holdings in Wellesley Income fund. Rebalanced our 40/60 portfolio to be more aggressive at 43/57 when the market was down 10%.
Best Wishes, SpringMan
Re: New investors: how did your first correction go?
I made that mistake in 2008 on my 457 account. Got back into stocks in 2011 and completely missed the run up from 2009-2010. However, I left the funds that I pulled out from stocks in 2008 into the stable value as part of my "sleep well at night" allocation. I've continued putting in new contributions ever since. Happily, that has paid off. I'm also DCA-ing into the Roth IRA (automatic contributions from the paycheck) but have accelerated some of the contributions by dipping just a wee bit into the emergency fund and buying more on the dips (just an extra ~$100 each time).mike_slc wrote:Worst case scenario - you sold all your equities and now you are kicking yourself. Wondering what to do? Subtract 25% from your pre-correction target allocation and get back in. Now. Don't even think about it, just do it! But keep in mind that this will be your equity allocation through the next bull too, no cheating and bumping it back up when the sailing gets smooth and everyone feels invincible again. You must use the NEXT correction to test this new target allocation because you failed the test this time. Remember - failing this test does not make you a failure, it just makes you human. The key is to learn from it!
Last edited by hnzw rui on Fri Oct 09, 2015 4:21 pm, edited 1 time in total.
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Re: New investors: how did your first correction go?
Been in since the second half of 2010, only within the last year started to really pay any attention.
100% Total Stock.
Last few months I've tightened the belt and found an extra $500 per pay period to get my after tax account going more. So still negative for the year, but it's been cool to see the same money buying more and more shares.
100% Total Stock.
Last few months I've tightened the belt and found an extra $500 per pay period to get my after tax account going more. So still negative for the year, but it's been cool to see the same money buying more and more shares.
Re: New investors: how did your first correction go?
There was a correction? Didn't notice. I'm glad to know I got a good deal on some of my automatically scheduled monthly contributions.
Re: New investors: how did your first correction go?
Just started work full time a little over a year ago, so my contributions are swamping investment gains/losses right now. Hooray for stocks on sale!
Re: New investors: how did your first correction go?
Same here -- cut discretionary expenses to the bone during the last few pay periods to pick up more cheap shares in the taxable portfolio. The joys of LBYM!Purelife304 wrote:Been in since the second half of 2010, only within the last year started to really pay any attention.
100% Total Stock.
Last few months I've tightened the belt and found an extra $500 per pay period to get my after tax account going more. So still negative for the year, but it's been cool to see the same money buying more and more shares.
Re: New investors: how did your first correction go?
Been investing for 7 years now, this is the first time I've seen a correction with a substantial (to me) portfolio.
I'm 75/25 and I wasn't concerned or anything. My contributions seemed to stem the tide for a while. I learned that my AA is perfectly appropriate for me.
I'm 75/25 and I wasn't concerned or anything. My contributions seemed to stem the tide for a while. I learned that my AA is perfectly appropriate for me.
Re: New investors: how did your first correction go?
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Re: New investors: how did your first correction go?
I feel more nervous dollar cost averaging while the market keeps reaching new highs rather than nervous over any dips/corrections.
G.O.O.D.
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Re: New investors: how did your first correction go?
Knowing I still have 30+ years until retirement (25+ if I decide to retire early) and my skin in the game isn't as much, I just yawned as I watched the stock market go down. Even if my portfolio went down 50%, I can recoup that in a few years of aggressive saving if I really wanted to.
Re: New investors: how did your first correction go?
As long as you keep doing it anyway that's great. Just remember, if you believe in stocks for the long term, then by definition their "normal" state will be at or near their all-time high.dubsem wrote:I feel more nervous dollar cost averaging while the market keeps reaching new highs rather than nervous over any dips/corrections.
FIRE'd. Mid-40s.
Re: New investors: how did your first correction go?
wow, many brave souls! great job new bogleheads.
This is also my first correction. I did not enjoy it as I am 50% international. But I did not change a thing either. I have come to realize my risk tolerance better. Because I am young, I am viewing taxable and roth as my next set of liquid funds and not retirement funds. The sway in 401k did not effect me, but same percentage drop but rather much smaller dollar losses in roth seem to cause a concern. Anyway, I decided to adjust TSM/lifestratergy as key holding in roth and value/small caps move over to 401k .
I have a feeling that I will "ok" with them in roth in future when I have a mortgage/other investments reach substantial. If not they will be taxable. I do not own one today, as down payment/others area priority.
This is also my first correction. I did not enjoy it as I am 50% international. But I did not change a thing either. I have come to realize my risk tolerance better. Because I am young, I am viewing taxable and roth as my next set of liquid funds and not retirement funds. The sway in 401k did not effect me, but same percentage drop but rather much smaller dollar losses in roth seem to cause a concern. Anyway, I decided to adjust TSM/lifestratergy as key holding in roth and value/small caps move over to 401k .
I have a feeling that I will "ok" with them in roth in future when I have a mortgage/other investments reach substantial. If not they will be taxable. I do not own one today, as down payment/others area priority.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
Re: New investors: how did your first correction go?
That's good! But as time goes on this becomes less and less true. That's why each correction is important, to see how you measure up at different exposure levels. I learned different things about investing and about myself in '97/'98 than I did in '00-'02 than I did in '08 etc... more because of the absolute dollar value of the losses than the percentages.jsapiandante wrote:Knowing I still have 30+ years until retirement (25+ if I decide to retire early) and my skin in the game isn't as much, I just yawned as I watched the stock market go down. Even if my portfolio went down 50%, I can recoup that in a few years of aggressive saving if I really wanted to.
FIRE'd. Mid-40s.
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Re: New investors: how did your first correction go?
I definitely agree with you there. I'm a risk taker now at 100% equities, but if I had hundreds of thousands of dollars with my current allocation and the market dropped some 30-40-50%, I wouldn't feel the same way I did a few weeks ago. Granted, I'm hoping by then my allocation will be more conservative so I can stomach the loss a little better.mike_slc wrote:That's good! But as time goes on this becomes less and less true. That's why each correction is important, to see how you measure up at different exposure levels. I learned different things about investing and about myself in '97/'98 than I did in '00-'02 than I did in '08 etc... more because of the absolute dollar value of the losses than the percentages.jsapiandante wrote:Knowing I still have 30+ years until retirement (25+ if I decide to retire early) and my skin in the game isn't as much, I just yawned as I watched the stock market go down. Even if my portfolio went down 50%, I can recoup that in a few years of aggressive saving if I really wanted to.
Re: New investors: how did your first correction go?
Great advice to calm my nervousness. Thanks!mike_slc wrote:As long as you keep doing it anyway that's great. Just remember, if you believe in stocks for the long term, then by definition their "normal" state will be at or near their all-time high.dubsem wrote:I feel more nervous dollar cost averaging while the market keeps reaching new highs rather than nervous over any dips/corrections.
G.O.O.D.
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Re: New investors: how did your first correction go?
Honestly scared, worried ... but then held my nerves and I TLH'd portions of my total US and complete total Intl ... exchanged TBM for TLH pairs for TSM, TISM (IRA). Will switch back to TBM (in IRA) after 31 days, and take new TSM, TISM positions in taxable. Additionally, I went from 70/30 to 75/25 and increased my Intl from 30% to 40%
Re: New investors: how did your first correction go?
Same here. My cubicle-mate regularly monitors the market and it annoys me when my automatic contributions fall on the highs. My portfolio is still small enough that new contributions counteract the effect of the small dips we've had so far so the total portfolio balance is still growing. Don't think I'll be this blase when I reach the 6-figure mark so I'll probably have to add bonds by then.dubsem wrote:I feel more nervous dollar cost averaging while the market keeps reaching new highs rather than nervous over any dips/corrections.
- patrick013
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- Joined: Mon Jul 13, 2015 7:49 pm
Re: New investors: how did your first correction go?
A great time to buy stocks, not bonds tho.
Some index funds I bought in my hypothetical portfolio
have gained 2.62% since their purchase last month.
Very good entry point.
Some index funds I bought in my hypothetical portfolio
have gained 2.62% since their purchase last month.
Very good entry point.
age in bonds, buy-and-hold, 10 year business cycle
Re: New investors: how did your first correction go?
I changed nothing during the correction. I started investing in 2012 so my portfolio is still relatively small. At this point, my biweekly contributions are the driving force in the growth of my retirement portfolio and easily dwarf the returns. My total account balance kept growing, although the rate of growth noticeably slowed down during the past few weeks.
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Re: New investors: how did your first correction go?
I'm not really the target audience here since I went through 2008. Still . . .that was before I started learning about investing. I was in a target date fund only. I did keep increasing my contribution each year as I had hoped. But the only time I actually saw how my account was doing was on my quarterly statements. I do remember muttering to myself about "pouring water down a rat hole,' but I was protected from sleepless nights by my own ignorance in a way. This is the largest dip in my account value since I've started managing my own investing. I haven't always resisted the urge to peek. I think what I felt was more dismayed anxiety than actual fear. I started signing on to this forum to keep it all in perspective and kept buying by making my planned contributions. For now, I'm comfortable with my behavior, anxiety level, and asset allocation. My plan is to post here if I start thinking I should make changes in response to market movements in the hopes that cooler, more experienced Bogleheads will remind me not to panic and lock in losses. Just reading the discussions helps.
Re: New investors: how did your first correction go?
I learned and practiced how to tax loss harvest and continued contributions as previously scheduled.
But this wasn't my first correction. Although this was my first correction with what feels like a substantial amount of money.
But this wasn't my first correction. Although this was my first correction with what feels like a substantial amount of money.
A time to EVALUATE your jitters: |
viewtopic.php?p=1139732#p1139732
Re: New investors: how did your first correction go?
Total bond gave out a 2.46% distribution yield last month. How do you figure?patrick013 wrote:A great time to buy stocks, not bonds tho.
Some index funds I bought in my hypothetical portfolio
have gained 2.62% since their purchase last month.
Very good entry point.
Buy 'em all for us newbies!
Re: New investors: how did your first correction go?
I put 2/3 of a large sum of cash into indexes in July. In late August, I put in the other 1/3. In late September (S&P 1880) I TLH'ed and now have about 5 years worth of carryover losses. Now in October, my alternate funds have shot back up. It has been an interesting few months. But I will stay the course in any event. Now I need to see if I will be able to move back into original funds or only allocate new money to those funds.
- patrick013
- Posts: 3301
- Joined: Mon Jul 13, 2015 7:49 pm
Re: New investors: how did your first correction go?
My investment account is 100% stock funds. That was the return forTwins Fan wrote:Total bond gave out a 2.46% distribution yield last month. How do you figure?patrick013 wrote:A great time to buy stocks, not bonds tho.
Some index funds I bought in my hypothetical portfolio
have gained 2.62% since their purchase last month.
Very good entry point.
Buy 'em all for us newbies!
just over 1 month, not annualized BTW.
age in bonds, buy-and-hold, 10 year business cycle
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Re: New investors: how did your first correction go?
I realized that, so far, a long series of moderate negative days bothers me more than a short burst of dramatic negatives.
Re: New investors: how did your first correction go?
A little bit about myself. I graduated into the recession of 2008/2009... didn't have any money to invest at that time, I mostly felt and experienced that by not being able to find a permanent job in my field until 2011.
Correction of 2011, I had maybe $5,000 to $10,000 in the market.
Fast forward to now, I have +/- $100,000 in the market.
What was my response to the recent volatility and correction?
I am 100% equity. I increased my contribution rate and contributed some cash I had in my savings account. I did a double major in accounting and finance in undergrad so I feel fairly confident in my general investing knowledge which gave me the confidence not to become subject to panics.
1. I increased my contributions to max allowed by 401K 45%. For some reason despite it being confirmed, the first pay check after this didn't contribute at this rate making me lose some buying opportunity.
2. Continued not paying my student loans (I'm doing my MBA) so I can take full cash contribution advantage.
3. Gauged market volatility and got the feeling that market fear had pretty much flattened out and that this was my opportunity to move cash out of my savings account and into the market. I did this at 9/29. I think the market has returned something like 6% since then? I didn't get it at the bottom (was too volatile then) but I got it at a good price. I believe Dow was just over 16,000 on that day.
Correction of 2011, I had maybe $5,000 to $10,000 in the market.
Fast forward to now, I have +/- $100,000 in the market.
What was my response to the recent volatility and correction?
I am 100% equity. I increased my contribution rate and contributed some cash I had in my savings account. I did a double major in accounting and finance in undergrad so I feel fairly confident in my general investing knowledge which gave me the confidence not to become subject to panics.
1. I increased my contributions to max allowed by 401K 45%. For some reason despite it being confirmed, the first pay check after this didn't contribute at this rate making me lose some buying opportunity.
2. Continued not paying my student loans (I'm doing my MBA) so I can take full cash contribution advantage.
3. Gauged market volatility and got the feeling that market fear had pretty much flattened out and that this was my opportunity to move cash out of my savings account and into the market. I did this at 9/29. I think the market has returned something like 6% since then? I didn't get it at the bottom (was too volatile then) but I got it at a good price. I believe Dow was just over 16,000 on that day.
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Re: New investors: how did your first correction go?
I am 80/20 stocks/bonds and I felt a bit uncomfortable, but did nothing. I contemplated tax loss harvesting total international, but I couldn't make myself do it.
- ThirteenEleven
- Posts: 24
- Joined: Fri Nov 30, 2012 10:09 am
- Location: Louisville, K.Y.
Re: New investors: how did your first correction go?
I started investing in fall 2011, what a great time to start! I have tried to be very mindful that my success hasn't been due to skillful market timing but rather an impulse purchase of "A Random Walk Down Wall Street" for $5 at a Borders bankruptcy sale in summer of 2011 (so far the best $5 purchase I've made).
I've stayed the course. Hard to stay positive at work, many co-workers have panicked and sold. Despite my attempts to be an evangelistic boglehead, it's easy to get drowned out by pundits on CNBC, Bloomberg & Fox Business. However, it's encouraging to come here and see everyone weathering the "storm" together. I'm no sailor, but they say ships sail through a storm more safely in groups.
Edit: 80/20 AA (for the most part) / Have not rebalanced...yet / Brought my 401K contribution up some in Sept. (Who doesn't like a sale?)
I've stayed the course. Hard to stay positive at work, many co-workers have panicked and sold. Despite my attempts to be an evangelistic boglehead, it's easy to get drowned out by pundits on CNBC, Bloomberg & Fox Business. However, it's encouraging to come here and see everyone weathering the "storm" together. I'm no sailor, but they say ships sail through a storm more safely in groups.
Edit: 80/20 AA (for the most part) / Have not rebalanced...yet / Brought my 401K contribution up some in Sept. (Who doesn't like a sale?)
Last edited by ThirteenEleven on Fri Oct 09, 2015 11:10 pm, edited 1 time in total.
Dishonest money dwindles away, |
but whoever gathers money little by little makes it grow.
Re: New investors: how did your first correction go?
I started investing in 1983 with the purchase of my first mutual fund. My first correction was Black Monday. It was October 19, 1987 when the Dow dropped by 22% in one day. I have told the story many times on this forum and won't revisit it all here. Suffice to say that I was pretty devastated though my losses were only several hundred dollars.
Now that my portfolio is fairly large, I can see daily fluctuations in thousands of dollars. So it seems silly now that I took the temporary loss of hundreds of dollars so hard back then. But it illustrates the reality of human emotion, respect it. I wasn't alone. I tuned in Louis Rukeyser that Friday night on Wall $treet Week and old Lou tried his best to look calm and collected but I could see that he was visibly shaken. That tells you something when market veterans look a bit scared.
I wish I could say that I have mastered my emotions and that I am as cool as a cucumber through periods of market turmoil. I am calmer than before as I have been through several market corrections and the 2000-2002 and 2008-2009 bear markets. But losses still bug me even if they are temporary. It is a case where my rational self has to rule over my emotional self. It is like getting a cold every year, not enjoyable but a part of life. If you have been through it before, it is easier to deal with the next time you go through it.
One thing that really helps is to learn about stock market history. It helps give you a sense of perspective. Better days are ahead.
By the way, I still own that mutual fund I bought back in 1983.
Now that my portfolio is fairly large, I can see daily fluctuations in thousands of dollars. So it seems silly now that I took the temporary loss of hundreds of dollars so hard back then. But it illustrates the reality of human emotion, respect it. I wasn't alone. I tuned in Louis Rukeyser that Friday night on Wall $treet Week and old Lou tried his best to look calm and collected but I could see that he was visibly shaken. That tells you something when market veterans look a bit scared.
I wish I could say that I have mastered my emotions and that I am as cool as a cucumber through periods of market turmoil. I am calmer than before as I have been through several market corrections and the 2000-2002 and 2008-2009 bear markets. But losses still bug me even if they are temporary. It is a case where my rational self has to rule over my emotional self. It is like getting a cold every year, not enjoyable but a part of life. If you have been through it before, it is easier to deal with the next time you go through it.
One thing that really helps is to learn about stock market history. It helps give you a sense of perspective. Better days are ahead.
By the way, I still own that mutual fund I bought back in 1983.
A fool and his money are good for business.
- triceratop
- Posts: 5838
- Joined: Tue Aug 04, 2015 8:20 pm
- Location: la la land
Re: New investors: how did your first correction go?
Would you mind sharing with us the net total return since then on what must have amounted to $1-2k at the time? That might help put a correction in perspective when you hold a fund for 30+ years afterwards.nedsaid wrote:I started investing in 1983 with the purchase of my first mutual fund. My first correction was Black Monday. It was October 19, 1987 when the Dow dropped by 22% in one day. I have told the story many times on this forum and won't revisit it all here. Suffice to say that I was pretty devastated though my losses were only several hundred dollars.
...
By the way, I still own that mutual fund I bought back in 1983.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: New investors: how did your first correction go?
Same here. I felt annoyed and disappointed but not scared. I lumped my whole $5500 IRA contribution in the spring right around the peak I wasn't trying to time the market, just wanted to get it out of the way.kazper wrote:My portfolio really didn't fluctuate all that much (that I noticed at least), so I wouldn't consider this a real test yet. Wait until it drops 30-40%, then you'll see me beginning to sweat
The drop reinforced my decision to allocate a larger percent to fixed income than commonly recommended for my age. I don't think I would have panicked if I had a smaller allocation, but it sure felt good to have it.
I also think that this experience has taught me little about how I would respond to a 2008 magnitude crash. I used to think that my reaction to a 50% drop would basically be my reaction to a 10% drop times 5. Now I have the feeling that they're not comparable, that my reaction to a 50% drop will differ qualitatively, not just in terms of magnitude.
I hope I never have to find out, but realistically I probably will.
Last edited by sawhorse on Sat Oct 10, 2015 6:27 am, edited 1 time in total.