Who worries about a bear market in stocks?

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2015
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Re: Who worries about a bear market in stocks?

Post by 2015 » Sat Oct 13, 2018 11:06 am

2015 wrote:
Sat Oct 13, 2018 11:03 am
vested1 wrote:
Sat Oct 13, 2018 10:07 am
2)

(c) Those who stumbled blindly through life, oblivious to the basics of investing and planning for retirement (me). Through sheer luck in timing and the fortunate circumstance of finding this site 6 years prior to retirement I managed to do well before it was too late to do anything about it. I suspect there are many who fit into this category, and who like me, resent being generalized by someone who hasn't walked a mile in their shoes.

Making assumptions about the abilities and mindset of others concerning investing, or anything else for that matter, fosters division. I imagine that for the over 3,000 readers who have viewed this thread, there are over 3,000 who don't appreciate being categorized by a stranger on the internet.

Retired for nearly 3 years, 60/40, and planning on increasing equity allocation incrementally after age 70. Where's my category?
That is one "Bad Mama Jama" post, vested1, and thank you for it. Your first two sentences characterize my circumstances entirely. I don't know how I was fortunate enough to succeed despite my many many blunders. I so much agree with many authors today who assert that so much of life is about no more than luck (even though our ego just loves to attribute it to skill or know-how).

I also affirm Klangfool's sentiment above, except in my case being conservative and paranoid since being in the womb has served me very very well. Looking far down the road and taking action in advance of when necessary (whether I felt like it or not) has been the key to overcoming what I lacked in knowledge. I wouldn't want anyone to have to walk in my shoes as my entire life has been characterized by self-sacrifice and hard hard work. Except for the exceptionally gifted or those born into wealth, I've not been able to find any other road to success (Brian Tracy attests to this as well).

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Re: Who worries about a bear market in stocks?

Post by Mickey7 » Sat Oct 13, 2018 11:53 am

+1 vested1
+1 2015

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Earl Lemongrab
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Re: Who worries about a bear market in stocks?

Post by Earl Lemongrab » Sat Oct 13, 2018 1:00 pm

CULater wrote:
Fri Oct 12, 2018 3:39 pm
Sorry for those who haven't heard Bill Bernstein's advice "If you've won the game, then stop playing." Translated: if you've saved enough to support a reasonable lifestyle, then get out of stocks and eliminate that risk.
I'm not sure that's what Bernstein meant. If so, then I strongly disagree with it. There are many situations that will be very different than a "reasonable lifestyle". I'm really sure he didn't mean to bail out of stocks completely. Bonds plus some stocks have traditionally had higher returns and lower volatility.

100% bonds is far from risk-free.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Artsdoctor
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Re: Who worries about a bear market in stocks?

Post by Artsdoctor » Sat Oct 13, 2018 5:19 pm

Dr. Bernstein is certainly not a proponent of bailing from equities altogether. Like everyone, his philosophy has evolved over time but I know that he is a big proponent of taking care of necessities first. You can call it a Liability Matched Portfolio approach or "safety-first" philosophy but he and many people refer to taking care of needs first. "If you've won the game" refers to have the financial wherewithal to support those needs beyond question. Now, he also fully acknowledges that there are "wants" in addition to "needs." If you have your needs taken care of (about as close to guaranteed safe as can be), then by all means invest in your Risk Portfolio. If you make money in the risk portfolio, you buy yourself a new iPad; if the market tanks, you keep the old one. Above all, his focus has been on avoiding the need to buy cat food to eat because you've invested badly.

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Re: Who worries about a bear market in stocks?

Post by watchnerd » Sat Oct 13, 2018 6:05 pm

Artsdoctor wrote:
Sat Oct 13, 2018 5:19 pm
Above all, his focus has been on avoiding the need to buy cat food to eat because you've invested badly.
Was there a time when cat food was cheaper than it is now?

Because my cat's food is $0.43 / oz or $6.88 / lb.

I can buy hamburger cheaper than that, let alone beans and rice.
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Artsdoctor
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Re: Who worries about a bear market in stocks?

Post by Artsdoctor » Sat Oct 13, 2018 6:41 pm

I don’t know why he hates cat food so much. He also doesn’t like shopping carts in the underpass.

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Re: Who worries about a bear market in stocks?

Post by Carol88888 » Sat Oct 13, 2018 9:21 pm

What's wrong with wanting to make as money as possible? Don't tell me it's greedy. That's just a subjective value judgement.

I am 100% stocks. If it goes down, I buy more.

Works for me.

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watchnerd
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Re: Who worries about a bear market in stocks?

Post by watchnerd » Sat Oct 13, 2018 9:33 pm

Carol88888 wrote:
Sat Oct 13, 2018 9:21 pm
What's wrong with wanting to make as money as possible? Don't tell me it's greedy. That's just a subjective value judgement.

I am 100% stocks. If it goes down, I buy more.

Works for me.
If you're retired, how do you buy more?

With your social security check?
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Re: Who worries about a bear market in stocks?

Post by columbia » Sat Oct 13, 2018 9:55 pm

lostdog wrote:
Sat Oct 13, 2018 8:15 am
MnD wrote:
Fri Oct 12, 2018 10:26 pm
Don't feed the troll.
+2


Only 49% of Americans invest. Most live paycheck to paycheck. I don't think many Americans think about it much if not at all. Most are just concerned about paying the next set of bills and saving up for Black Friday. If they do notice a crash it's either posted on their social media or the nightly news mentions it. Most ha e no skin in the game.

CULater is either anxiety ridden or trolling.
I diminish know how/why one could interpret a poster expressing concerns over market a troll.

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Re: Who worries about a bear market in stocks?

Post by KlangFool » Sat Oct 13, 2018 10:01 pm

columbia wrote:
Sat Oct 13, 2018 9:55 pm
lostdog wrote:
Sat Oct 13, 2018 8:15 am
MnD wrote:
Fri Oct 12, 2018 10:26 pm
Don't feed the troll.
+2


Only 49% of Americans invest. Most live paycheck to paycheck. I don't think many Americans think about it much if not at all. Most are just concerned about paying the next set of bills and saving up for Black Friday. If they do notice a crash it's either posted on their social media or the nightly news mentions it. Most ha e no skin in the game.

CULater is either anxiety ridden or trolling.
I diminish know how/why one could interpret a poster expressing concerns over market a troll.
columbia,

If the same poster had posted the similar thread/topic over and over again and provide no actionable steps. You can do a quick search on the OP and decide for yourself.

KlangFool

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HomerJ
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Re: Who worries about a bear market in stocks?

Post by HomerJ » Sat Oct 13, 2018 10:12 pm

CULater wrote:
Fri Oct 12, 2018 10:29 am
There are three groups of stock investors:

1) Young investors with a long time horizon until retirement. They don't have to worry about a bear market because they should have a large allocation to stocks and a bear market gives them the opportunity to buy more shares at lower prices.

2) Older investors who are at or near retirement and will be or are living off their retirement portfolios. There are two subgroups:

(a) those who were smart enough and able to invest heavily in stocks when they were younger and who held on and kept buying more no matter what happened to stock prices along the way. These investors have "won the game" and should be mostly out of stocks now (except for discretionary funds), so it is immaterial to them what the stock market is doing.

(b) those who were dumb enough or unable to invest heavily in stocks when they were younger and stay invested. They don't have enough money, or fear they don't have enough money, to live comfortably off their retirement savings. As a result they are in the unfortunate position of having to either accept the risk of investing non-discretionary funds in the Wall Street casino, or plan for a less comfortable and financially insecure retirement.

So, it seems to me that only group 2b are the ones that should give a hoot about a bear market in stocks. There must be a lot of 2b's around here. Everybody else should have something better to do with their time, yes?

It seems to me that based on your posts, that you are a 2b. I would suggest to 2b people to plan on a less comfortable retirement, or work longer. Taking more risk close to or in retirement is too dangerous.
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HomerJ
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Re: Who worries about a bear market in stocks?

Post by HomerJ » Sat Oct 13, 2018 10:14 pm

CULater wrote:
Fri Oct 12, 2018 11:08 am
In my view, those who have accumulated enough savings to retire comfortably should follow William Bernstein's advice to get out of stocks. Stocks can be counted on only as a long term investment asset. You should be prepared to hold for 15-20 years without liquidating before you should be willing to accept that risk, and most people in retirement aren't able to do that since that period of time consumes most of your retirement horizon.

The only other justification for allocating non-discretionary funds to stocks is that you believe that this offers a diversification benefit when combined with bonds or other safer assets; i.e, a better risk-adjusted return. Over the long run, an allocation to stocks of no more than 20% provided a better risk-adjusted return than 0% in stocks (courtesy of Portfolio Visualizer). So, it makes sense to me that you should only carry up to 20% in stocks in retirement (of non-discretionary capital). Any more than that is gambling: accepting non-optimal risk for a hoped-for return.

So, if you must, 20% in stocks seems like the best decision. But 0% should be the goal.
Inflation is still something worry about. I would not recommend 0% in stocks, but 20% is certainly doable. Me, I'll probably never be less than 40%.

Retirement can certainly last more than 15-20 years, so there's nothing wrong with having some money in stocks.

But I do agree that one should certainly have a more conservative AA as one approaches or enters retirement.
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Re: Who worries about a bear market in stocks?

Post by HomerJ » Sat Oct 13, 2018 10:16 pm

CULater wrote:
Fri Oct 12, 2018 3:39 pm
Sorry for those who haven't heard Bill Bernstein's advice "If you've won the game, then stop playing." Translated: if you've saved enough to support a reasonable lifestyle, then get out of stocks and eliminate that risk. In my opinion, the goal of saving and investing is to get to the point where you don't need to invest in stocks anymore. Some people act like investing in stocks is something other than a means toward an end, or they seem to have no idea whatsoever what their end goal is. It makes no sense to keep a significant portion of your capital in an asset as risky as stocks just for the heck of it or because you are so naive as to expect there has to be a payoff for your bravado.

Swedroe discusses taking investment risk based on "need, willingness, and ability," and you should accept risk based on which of these is the smallest not which is the largest. If you've been any good at saving and investing, then by the time you retire and start living off your nestegg hopefully you have a very small need to accept the risk of stocks - at least for financial security. Now, if you have some extra dough to throw around beyond that, or to put away for bequests, you might feel putting that into stocks is acceptable.

For the life of me, I just don't get why somebody thinks it's a good idea to keep any more money in stocks than you are forced to based on need. Might be a good idea to figure out the difference between "need" and "want" and invest accordingly.
This is mainstream thought here on Bogleheads... Why do you post this like this is new to us?
The J stands for Jay

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Re: Who worries about a bear market in stocks?

Post by Carol88888 » Sat Oct 13, 2018 10:17 pm

watchnerd wrote:
Sat Oct 13, 2018 9:33 pm
Carol88888 wrote:
Sat Oct 13, 2018 9:21 pm
What's wrong with wanting to make as money as possible? Don't tell me it's greedy. That's just a subjective value judgement.

I am 100% stocks. If it goes down, I buy more.

Works for me.
If you're retired, how do you buy more?

With your social security check?

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Re: Who worries about a bear market in stocks?

Post by Carol88888 » Sat Oct 13, 2018 10:24 pm

My passive income is much more than I need to live on so I always have a surplus to invest.

I think I would feel very differently - and arrange my assets very differently - if I knew I had to sell assets to live off of. Then I would want to hold bonds and/or cash so that I never had to sell low.

Note that Warren Buffett didn't instruct his wife to go to all bonds after his death. He instructed her to have 90% in an index fund like Vanguard's S&P 500 and only 10% in short term treasuries.

Stocks far outperform bonds in each 20 year period. I think I've got 20 years or more (I hope) so it seems rational for me to be all in stocks.

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watchnerd
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Re: Who worries about a bear market in stocks?

Post by watchnerd » Sat Oct 13, 2018 11:06 pm

Carol88888 wrote:
Sat Oct 13, 2018 10:24 pm
My passive income is much more than I need to live on so I always have a surplus to invest.

I think I would feel very differently - and arrange my assets very differently - if I knew I had to sell assets to live off of. Then I would want to hold bonds and/or cash so that I never had to sell low.
Right...so Bernstein's "don't play the game if you don't have to" would apply in that case.

Having a passive income stream that is more than you can live on is not the reality for most folks. Even those with high net worth are usually looking at some kind of SWR.
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Re: Who worries about a bear market in stocks?

Post by HomerJ » Sun Oct 14, 2018 12:21 am

Carol88888 wrote:
Sat Oct 13, 2018 10:24 pm
Stocks far outperform bonds in each 20 year period. I think I've got 20 years or more (I hope) so it seems rational for me to be all in stocks.
Stocks out performed in the past. It's quite probable they will in the future. But it's not guaranteed. You act like stocks are risk-free.
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Re: Who worries about a bear market in stocks?

Post by ddurrett896 » Sun Oct 14, 2018 6:33 am

“In a bear market, money returns to its rightful owner.”

Bring it!

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Re: Who worries about a bear market in stocks?

Post by TN_Boy » Sun Oct 14, 2018 11:12 am

HomerJ wrote:
Sat Oct 13, 2018 10:16 pm
CULater wrote:
Fri Oct 12, 2018 3:39 pm
Sorry for those who haven't heard Bill Bernstein's advice "If you've won the game, then stop playing." Translated: if you've saved enough to support a reasonable lifestyle, then get out of stocks and eliminate that risk. In my opinion, the goal of saving and investing is to get to the point where you don't need to invest in stocks anymore. Some people act like investing in stocks is something other than a means toward an end, or they seem to have no idea whatsoever what their end goal is. It makes no sense to keep a significant portion of your capital in an asset as risky as stocks just for the heck of it or because you are so naive as to expect there has to be a payoff for your bravado.

Swedroe discusses taking investment risk based on "need, willingness, and ability," and you should accept risk based on which of these is the smallest not which is the largest. If you've been any good at saving and investing, then by the time you retire and start living off your nestegg hopefully you have a very small need to accept the risk of stocks - at least for financial security. Now, if you have some extra dough to throw around beyond that, or to put away for bequests, you might feel putting that into stocks is acceptable.

For the life of me, I just don't get why somebody thinks it's a good idea to keep any more money in stocks than you are forced to based on need. Might be a good idea to figure out the difference between "need" and "want" and invest accordingly.
This is mainstream thought here on Bogleheads... Why do you post this like this is new to us?
But he also says (earlier in the thread), that the goal should be 0% stocks. Which I think is very not the mainstream thought on bogleheads.

The problem is that "won the game" and "stop playing" are not crisply defined. To me, winning the game means I have enough in a mixed stock/bond portfolio to withdraw 4%ish (or less after SS kicks in) and support the retirement lifestyle I want.

I don't think that is what it means to CULater.

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Re: Who worries about a bear market in stocks?

Post by garlandwhizzer » Sun Oct 14, 2018 1:46 pm

Culater wrote:
For the life of me, I just don't get why somebody thinks it's a good idea to keep any more money in stocks than you are forced to based on need. Might be a good idea to figure out the difference between "need" and "want" and invest accordingly.
It depends on how you define "need" and what your asset base and time frame is. One big problem with income streams from nominal bonds and annuities is long term inflation in addition to lower expected long term returns. If your retirement has a long time frame, it is IMO a big mistake to put it all in nominal bonds/annuities which assure a steady nominal income stream but not a steady stream of real inflation adjusted income. Lifespans have increased dramatically and the average 60 year old male has an expected lifespan of 21.5 years. That is the average figure including all the very unhealthy, so planning ahead for someone in good health should add a considerable fudge factor to that in case you live longer than average. The average for females at age 60 is 24.5 years. It seems entirely rational therefore for a 60 year old man to plan for an absolute minimum of 25 years of retirement and for a 60 year old woman to plan for at least 30 years of retirement. So the question becomes what happens to nominal payments after 25 or 30 years of cumulative inflation? That is not predictable accurately beforehand by anyone.

In long periods of rising inflation and rising interest rates such as 1940 to 1980, total bond returns were considerably negative in real inflation adjusted dollars for 4 decades running. You are in very deep trouble with nominal bonds and annuities in such circumstances. Don't confuse nominal bonds or annuities with safety. Bonds are less volatile than stocks for sure which offers emotional balm during bear markets, but it's important to realize that emotional balm is not long term financial security. I personally believe that unless retirees have sufficient assets to fund their entire anticipated long retirement in TIPS, stocks should always be a considerable portion of their portfolios because of stocks' greater expected long term returns and their better long term protection from the cumulative ravages of inflation.

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Earl Lemongrab
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Re: Who worries about a bear market in stocks?

Post by Earl Lemongrab » Sun Oct 14, 2018 2:06 pm

The problem is that the game doesn't end until you do, and the rules change all of the time. You might be able to roll through retirement with a sustainable 4% but things can happen. For me, as I don't have LTC insurance, extensive stays in skilled care of one sort or another is possible. In that case I want the best and the money to pay for it. There might be things we can't even really plan for.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: Who worries about a bear market in stocks?

Post by finite_difference » Mon Oct 15, 2018 2:12 pm

KlangFool wrote:
Fri Oct 12, 2018 11:01 am
OP,

It is very simple.

Those that are not prepared for a bear market worry about the bear market.

I have a very simple philosophy in life. If I am worried about something, I would take action to prepare for it. I would not let my worry linger around. It makes my life relatively stress free.

KlangFool
+1.

Have an emergency fund, be prepared to cut expenses if needed, and otherwise have faith in the Boglehead way (I.e. your 3–fund portfolio/modified 3-fund portfolio/IPS). What else can you do?
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