How does one emotionally keep it together during market swings?

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nasrullah
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Re: How does one emotionally keep it together during market swings?

Post by nasrullah » Fri Mar 02, 2018 4:16 pm

GrayS26 wrote:
Sun Feb 11, 2018 3:59 pm
thanks
  • Basically read everything listed on the wiki here.
  • Understand why you are setting an AA and what the reality of that AA means for you.
  • Remember you are investing with a specific future target in mind.
  • Understand that the elements for success are how much you save, what your expenses are, and that you stay the course and don't deviate.
  • Write your IPS - define your goals, your AA over time, your rebalancing bands, your TLH, etc...
  • Ignore the talking heads on TV - they have no clue what's going on.
Getting educated will take time. It will create more questions, find answers to those questions. Repeat this until you are comfortable.

I have a 75/25 AA. *Technically* I should be more aggressive for my age but this is what works for me. I like having a larger buffer in bonds for my level of risk. I will be at 75/25 for another 7 years, then will update my IPS and evaluate if it's time to increase bonds or stay the course. I know what my equity exposure is, and what that could mean in the market. It would suck, but these numbers work for me.
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

RRAAYY3
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Re: How does one emotionally keep it together during market swings?

Post by RRAAYY3 » Fri Mar 02, 2018 4:21 pm

220volt wrote:
Fri Mar 02, 2018 3:27 pm
RRAAYY3 wrote:
Fri Mar 02, 2018 3:18 pm
220volt wrote:
Fri Mar 02, 2018 3:10 pm
To me the only thing that does it is having a sizable cash at all times. Lot more than needed. For one: It helps me sleep better. And 2. Allows me to buy more when things go south. I've got cought naked (no cash) many times when market was down and having no cash to rely on or to buy more, was very uncofortable.
I don't care if that cash is not doing anything or losing to inflation, It helps me manage my own risk and sanity.
And that’s all that matters ... do what works for you. I’m slowly building back up my cash reserves after buying a new car paid in full and “buying the dip” in February - which hasn’t turned out too well yet, but whatever that money is for 20 years from now

I never understand why cash is so ridiculed on here .. especially with interest rates rising/high yield savings accounts
Yep, I have all my cash in Capital One 360 (1.50%) and I don't even look at my cash position just sitting there as a "loss", but as an investment in my well being. That money keeps me happy knowing it's there, so i can concetrate on other things. So I think of it as a good investment since it still gives me great "phsycological" return. Return on investment doesn't have to be all monetary.
Thank you! I wouldn’t have been able to pay for a car in full, max my Roth, invest another 10K to rebalance and go on about my normal day to day without a larger cash position to start ...

All I’m doing now is laughing at the volatility while my high yield savings builds back up - ultimately allowing me the flexibility to do whatever I want with it, including buying during the next correction

Some people go way too far with every penny of theirs needing to be “put to work”. Cash > Bonds right now, that’s all I know

tesuzuki2002
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Re: How does one emotionally keep it together during market swings?

Post by tesuzuki2002 » Sat Mar 03, 2018 12:21 am

limeyx wrote:
Thu Mar 01, 2018 7:25 pm
tesuzuki2002 wrote:
Mon Feb 12, 2018 4:12 pm
limeyx wrote:
Sun Feb 11, 2018 9:59 pm
GrayS26 wrote:
Sun Feb 11, 2018 3:59 pm
thanks
Don't look or watch the news ?
The market swung??
I didn't say that :)


Good point. Not sure why that quoted you!

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AtlasShrugged?
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Re: How does one emotionally keep it together during market swings?

Post by AtlasShrugged? » Sat Mar 03, 2018 8:13 am

GrayS26...I recently did a experiment with my Excel based IPS. I made a chart where I plotted the percent increase/decrease from the previous month. Now keep in mind I am contributing to my 401K and Roth IRA, so there is a big bias to an increase month over month. From a psychological perspective, I think that is a good thing - it is sort of comforting. Nonetheless, the results were very revealing.

In the 38 months since December 2014, my portfolio declined 5 times month over month (after contributions). That's right, a measly five times. The biggest decline was in August 2015, with a 5.5% decline (from July 2015). Last month, (February 2018) my portfolio declined a puny 1.9% from January. For the year, I am 'down' by 0.4% overall (after contributions). With 10 months to go.....Lots of chances to reverse that decline. :happy

I was a little 'worried' until I made that chart. Then I felt a lot better. Why? Because there are so many more 'up' months than 'down' months. Yeah, I get discouraged from time to time, but mostly it is having an IPS, keeping it up-to-date, and just keep plugging away at it. I mean, what else can you really do?
“If you don't know, the thing to do is not to get scared, but to learn.”

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Rick Ferri
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Re: How does one emotionally keep it together during market swings?

Post by Rick Ferri » Sat Mar 03, 2018 9:10 am

Is this topic about exploring what happens if the stock market doesn’t recover from a downturn before we die? If that’s the case, it seems we would have more important things to worry about.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

RRAAYY3
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Re: How does one emotionally keep it together during market swings?

Post by RRAAYY3 » Sat Mar 03, 2018 9:28 am

Rick Ferri wrote:
Sat Mar 03, 2018 9:10 am
Is this topic about exploring what happens if the stock market doesn’t recover from a downturn before we die? If that’s the case, it seems we would have more important things to worry about.
This is exactly why I choose not to worry too much

It has always gone up, depressions / world wars / etc.

People are greedy and rich people aren’t going to let it stop making them money.

Again, “It’s all BS.” - my friend, who spends his life analyzing the markets

longinvest
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Re: How does one emotionally keep it together during market swings?

Post by longinvest » Sat Mar 03, 2018 9:51 am

The world's stock markets have averaged approximately a 5% real return since 1900 (and bond markets 2% real) on average. But, stock markets misbehave, Japan's stock market being a good example of this.

Instead of hoping for a fast-enough recovery, I prefer to consider the scenario where stock markets lose 50% of their value and use this as the starting point for future 5% average returns (with lots of volatility, of course).

In practical words, I would test my financial plans and emotions considering the case where my stock allocation was subject to a one-time loss of 50% with no fast recovery*, only normal future growth after that. If such a loss would break my plans or affect my emotions too much, I would dial down the stock allocation appropriately. Then, I would go and sleep like a baby, not worrying about future market crashes.

* Actually, I consider two independent scenarios: (1) an immediate 50% loss, or (2) a future 50% loss just after retirement.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic / international) stocks / domestic (nominal / inflation-indexed) long-term bonds | VCN/VXC/VLB/ZRR

jpdion
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Re: How does one emotionally keep it together during market swings?

Post by jpdion » Sat Mar 03, 2018 10:12 am

One way to weather the ups and downs is to first have a plan that includes a year or two of cash that you spend out of, and replenish when your risky stuff is rewarding you. For me, rebalancing includes not only the bonds-stocks balance, but the cash balance as well. Ideally, I'd like to end the year with about the same dollar value in cash I started with through periodic rebalancing during the year. Having a plan, and the discipline to follow it - with some flexibility - eases the emotions of the daily fluctuations. At least that's what works for me.

michaeljc70
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Re: How does one emotionally keep it together during market swings?

Post by michaeljc70 » Sat Mar 03, 2018 10:34 am

Don't look or if you happen to see it in the news (or can't help looking) just think it doesn't matter because it will come back and be even higher sooner or later.

gotester2000
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Re: How does one emotionally keep it together during market swings?

Post by gotester2000 » Sat Mar 03, 2018 1:39 pm

I keep 5 year expenses in fixed returns and rest in equity. I am more active buying when market is making corrections as my vision is extreme long term.

BogleWogle
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Re: How does one emotionally keep it together during market swings?

Post by BogleWogle » Sat Mar 03, 2018 8:49 pm

Personally, the biggest benefit of index investing is accepting market returns for what they were, are & will be.

If you are confident in the fact that index investing is the right strategy, it becomes a matter of determining asset allocation and rebalancing bands.

Beyond that, it’s a matter of focusing on the controllable contributing factors to successful investing: savings rate, tax efficiency & consistency. All else is out of our control. Accepting this allows one to focus on the things they can control.

Save as much as you can, as soon as you can & stay the course.

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gasman
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Re: How does one emotionally keep it together during market swings?

Post by gasman » Sat Mar 03, 2018 8:53 pm

Sell down to the sleeping point. I have always felt better after adjusting my IPS downward on equity ownership.

sharukh
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Re: How does one emotionally keep it together during market swings?

Post by sharukh » Thu Oct 18, 2018 4:15 am

gasman wrote:
Sat Mar 03, 2018 8:53 pm
Sell down to the sleeping point. I have always felt better after adjusting my IPS downward on equity ownership.
+1

Also reading completely something unrelated to money, not even bogleheads forum. Something like fictional novel or binge watch a series on Netflix.

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mrspock
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Re: How does one emotionally keep it together during market swings?

Post by mrspock » Fri Oct 19, 2018 12:47 am

BogleWogle wrote:
Sat Mar 03, 2018 8:49 pm
Personally, the biggest benefit of index investing is accepting market returns for what they were, are & will be.

If you are confident in the fact that index investing is the right strategy, it becomes a matter of determining asset allocation and rebalancing bands.

Beyond that, it’s a matter of focusing on the controllable contributing factors to successful investing: savings rate, tax efficiency & consistency. All else is out of our control. Accepting this allows one to focus on the things they can control.

Save as much as you can, as soon as you can & stay the course.
+1 indexing really destressed my investing life, the combined stress of picking the “right” stocks and weathering the stomach churning ups and downs of each stock is replaced with less frequent market corrections. Also, I find the rebalancing & TLH’ing therapedic in a way as its something constructive I can do during these downturns.

This all said, I am somewhat interested in getting the next bear market “over with” as I don’t think you *really* know how emotional you will be until one of these hits. Also curious how many “FIRE” blogs there will be then too :D .

GRP
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Re: How does one emotionally keep it together during market swings?

Post by GRP » Fri Oct 19, 2018 1:17 am

We can think of all kinds of different strategies to emotionally calm ourselves during market downturns. Honestly though, I think the easiest way to keep it together is to simply invest with a lower risk portfolio.

Ari
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Re: How does one emotionally keep it together during market swings?

Post by Ari » Fri Oct 19, 2018 3:40 am

iceport wrote:
Sun Feb 11, 2018 4:58 pm
It's interesting that we're already 11 replies deep and nobody's yet mentioned the obvious:

Read the Bogleheads forum!
On the other hand, if it wasn't for this forum, I'd have no idea about any swings in the market. But there are constantly threads on this forum talking about what the market is doing. Fortunately, you guys are mostly just talking about the US market, which is a small part of my portfolio. But there have also been threads about EM underperforming, which I had no idea of until I read it here. If I could just stay away from Bogleheads, it'd be a lot easier to not know how my investments are doing.

Fortunately, I'm a very unemotional guy and mostly just react with a shrug (so far!).
All in, all the time.

lostdog
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Re: How does one emotionally keep it together during market swings?

Post by lostdog » Fri Oct 19, 2018 8:21 am

Ari wrote:
Fri Oct 19, 2018 3:40 am
iceport wrote:
Sun Feb 11, 2018 4:58 pm
It's interesting that we're already 11 replies deep and nobody's yet mentioned the obvious:

Read the Bogleheads forum!
On the other hand, if it wasn't for this forum, I'd have no idea about any swings in the market. But there are constantly threads on this forum talking about what the market is doing. Fortunately, you guys are mostly just talking about the US market, which is a small part of my portfolio. But there have also been threads about EM underperforming, which I had no idea of until I read it here. If I could just stay away from Bogleheads, it'd be a lot easier to not know how my investments are doing.

Fortunately, I'm a very unemotional guy and mostly just react with a shrug (so far!).
I react the same as you. I guess a plus to this forum can help you stay the course. Seeing others start panic threads and getting good advice to stay the course can help.

kabootle
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Re: How does one emotionally keep it together during market swings?

Post by kabootle » Fri Oct 19, 2018 9:06 am

Does anyone have advice on how to calm down a partner, that does not handle swings as relaxed as hoped?

My wife and I invested in some standard ETFs (msci world, etc) as part of our investment strategy. However, she was shocked the other day to discover that "a part of our money is gone". I tried to explain her that this is to be expected and that by investing steadily every month we could actually profit from these corrections.

I'm worried though that she's gonna insist on selling our investments at the worst time if the market really drop at some point in an effort to protect what we have instead of waiting it out.

As additional information: we have decided already to have about 35-40% of bonds to have less exposure to swings of the market.

sport
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Re: How does one emotionally keep it together during market swings?

Post by sport » Fri Oct 19, 2018 10:10 am

kabootle wrote:
Fri Oct 19, 2018 9:06 am
Does anyone have advice on how to calm down a partner, that does not handle swings as relaxed as hoped?

My wife and I invested in some standard ETFs (msci world, etc) as part of our investment strategy. However, she was shocked the other day to discover that "a part of our money is gone". I tried to explain her that this is to be expected and that by investing steadily every month we could actually profit from these corrections.

I'm worried though that she's gonna insist on selling our investments at the worst time if the market really drop at some point in an effort to protect what we have instead of waiting it out.

As additional information: we have decided already to have about 35-40% of bonds to have less exposure to swings of the market.
You might show her a long term chart of an index, such as the S&P500. She will be able to see that there are ups and downs along the way while the long term trend is up. Down markets are normal and are to be expected. You have to put up with them if you want the gains that come with up markets. Timing the market reliably is not possible.

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