Portfolio during a recession

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
ionenergy
Posts: 13
Joined: Tue Jul 03, 2018 12:47 pm

Portfolio during a recession

Post by ionenergy » Mon Mar 18, 2019 11:53 am

Hi,
Can somebody please share what kind of portfolio ratio would be best in a recession? Would this portfolio give you gains during a recession?
Thanks in advance

bloom2708
Posts: 6381
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Portfolio during a recession

Post by bloom2708 » Mon Mar 18, 2019 3:51 pm

Take the risk you need today. Be fully invested outside of cash for living/bills and an Emergency Fund.

Invest early and often. Know your risk tolerance. Use low cost, broad market index funds. Be tax efficient. 10-20% bonds is the floor. Adjust as your portfolio grows and you get closer to retirement.

The portfolio you invest in today should be exactly the same if/when a recession comes. You have re-balance bands of 5% or 10%. You keep investing.

Anything else is market timing which requires you be correct twice (when to get out, when to get back in).

If you were to answer your own question, what do your portfolio look like today and what would you do in a recession? If you knew exactly when the recession starts?
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

User avatar
DanMahowny
Posts: 897
Joined: Sun Aug 06, 2017 8:25 pm

Re: Portfolio during a recession

Post by DanMahowny » Mon Mar 18, 2019 3:55 pm

Cash!
Funding secured

Jim180
Posts: 366
Joined: Wed Jun 26, 2013 9:47 pm

Re: Portfolio during a recession

Post by Jim180 » Mon Mar 18, 2019 4:15 pm

Probably all Government bonds but to make such a move is market timing.

pward
Posts: 391
Joined: Fri Dec 21, 2018 8:18 pm

Re: Portfolio during a recession

Post by pward » Mon Mar 18, 2019 4:24 pm

Well, if one knew a recession was coming, the best place to be would be shorting the market. That would generate substantial profits in a recession. However, good luck with the timing of that. If you're worried, a more market neutral portfolio like the permanent portfolio or the Larry portfolio might be worth considering.

Side note: what an interesting week this has been. Everyone either wants to be all in or all out the market. There is no in between! LOL.

User avatar
arcticpineapplecorp.
Posts: 4200
Joined: Tue Mar 06, 2012 9:22 pm

Re: Portfolio during a recession

Post by arcticpineapplecorp. » Mon Mar 18, 2019 4:26 pm

ionenergy wrote:
Mon Mar 18, 2019 11:53 am
Hi,
Can somebody please share what kind of portfolio ratio would be best in a recession? Would this portfolio give you gains during a recession?
Thanks in advance
what kind of portfolio ratio would be best in a period of growth?

do you want to switch between the two?

Do you know when to make the switch for each? (Hint: it's before, not after the period starts. How will you know when we're GOING TO BE in a period of recession or growth? Is it because someone told you so?)

you pick a portfolio ratio based on your need, ability and willingness to take risk. Pick one here:

https://personal.vanguard.com/us/insigh ... llocations
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

delamer
Posts: 8164
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio during a recession

Post by delamer » Mon Mar 18, 2019 4:29 pm

Your investments should be allocated according to your long-term goals and risk tolerance.

Your long-term risk tolerance doesn’t change during recessions, so neither should your portfolio.

DonIce
Posts: 601
Joined: Thu Feb 21, 2019 6:44 pm

Re: Portfolio during a recession

Post by DonIce » Mon Mar 18, 2019 5:29 pm

delamer wrote:
Mon Mar 18, 2019 4:29 pm
Your long-term risk tolerance doesn’t change during recessions, so neither should your portfolio.
Not sure that that's true. A lot of people that are getting into markets for the first time over the last 10 years (i.e. millenials) may think that their long term risk tolerance is high (since they are young and have plenty of time) but may quickly find out that their risk tolerance isn't what they thought once the next economic crisis and the market has a major drop.

Dottie57
Posts: 6379
Joined: Thu May 19, 2016 5:43 pm

Re: Portfolio during a recession

Post by Dottie57 » Mon Mar 18, 2019 5:41 pm

Ideally, You have the same allocation during all markets. None of us have working crystal balls, so timing the market is futile.


However, Youe AA can change as you age.

delamer
Posts: 8164
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio during a recession

Post by delamer » Mon Mar 18, 2019 5:44 pm

DonIce wrote:
Mon Mar 18, 2019 5:29 pm
delamer wrote:
Mon Mar 18, 2019 4:29 pm
Your long-term risk tolerance doesn’t change during recessions, so neither should your portfolio.
Not sure that that's true. A lot of people that are getting into markets for the first time over the last 10 years (i.e. millenials) may think that their long term risk tolerance is high (since they are young and have plenty of time) but may quickly find out that their risk tolerance isn't what they thought once the next economic crisis and the market has a major drop.
But that means that they inaccurately assessed their risk tolerance. That’s different then changing their allocation because of a recession, which is what the OP was suggesting.

Topic Author
ionenergy
Posts: 13
Joined: Tue Jul 03, 2018 12:47 pm

Re: Portfolio during a recession

Post by ionenergy » Mon Mar 18, 2019 7:32 pm

I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks

pward
Posts: 391
Joined: Fri Dec 21, 2018 8:18 pm

Re: Portfolio during a recession

Post by pward » Mon Mar 18, 2019 7:52 pm

ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
Well you can see here that the bogleheads 3 fund 60/40 since 1970 has a maximum drawdown of 32%, and a longest recovery time of 10 years: https://portfoliocharts.com/portfolio/t ... portfolio/

If that's too much for you to stomach you can look at some of these low volatility portfolios that have significantly lower drawdowns and recovery times:

Golden Butterfly: https://portfoliocharts.com/portfolio/golden-butterfly/
Permanent Portfolio: https://portfoliocharts.com/portfolio/p ... portfolio/
All-Seasons Portfolio: https://portfoliocharts.com/portfolio/a ... portfolio/
Larry Portfolio: https://portfoliocharts.com/portfolio/larry-portfolio/

There are many other great portfolios you can compare on that site, but those are a good place to start. There's nothing wrong with being a conservative investor, even at a younger age. As you will see on the stats of those portfolios, you can indeed get a really good return in a low volatility portfolio. It might not throw up random 30%+ gains like total stock market will some years, but it also won't have 50% drawdowns either. These portfolios are really good at providing consistent returns year in and year out, the proverbial tortoise vs the hare.

delamer
Posts: 8164
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio during a recession

Post by delamer » Mon Mar 18, 2019 8:01 pm

ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
The S&P 500 is not at an all-time high. It closed at 2931 on Sept. 20, 2018.

At 40% stocks, if stocks go down 50% then your portfolio falls 20% (assuming bonds stay flat, which is not a great assumption).

At 60% stocks under the same scenario, you lose 30% of your portfolio.

On the other hand, a 10% correction means you lose either 4% or 6%.

The core issue is that no one knows what will happen or when.

Topic Author
ionenergy
Posts: 13
Joined: Tue Jul 03, 2018 12:47 pm

Re: Portfolio during a recession

Post by ionenergy » Mon Mar 18, 2019 8:15 pm

pward wrote:
Mon Mar 18, 2019 7:52 pm
ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
Well you can see here that the bogleheads 3 fund 60/40 since 1970 has a maximum drawdown of 32%, and a longest recovery time of 10 years: https://portfoliocharts.com/portfolio/t ... portfolio/

If that's too much for you to stomach you can look at some of these low volatility portfolios that have significantly lower drawdowns and recovery times:

Golden Butterfly: https://portfoliocharts.com/portfolio/golden-butterfly/
Permanent Portfolio: https://portfoliocharts.com/portfolio/p ... portfolio/
All-Seasons Portfolio: https://portfoliocharts.com/portfolio/a ... portfolio/
Larry Portfolio: https://portfoliocharts.com/portfolio/larry-portfolio/

There are many other great portfolios you can compare on that site, but those are a good place to start. There's nothing wrong with being a conservative investor, even at a younger age. As you will see on the stats of those portfolios, you can indeed get a really good return in a low volatility portfolio. It might not throw up random 30%+ gains like total stock market will some years, but it also won't have 50% drawdowns either. These portfolios are really good at providing consistent returns year in and year out, the proverbial tortoise vs the hare.
Hi, thanks. I think this is exactly what I need. I have only invested 1/6 of my money and with adjustments like this, i’d be more comfortable in adding more funds into my vanguard account.
My only question is how do I get to change to Larry, All season or permanent? Vanguard only gave me the option of stock/bonds percentage allocations and they manages my portfolio for me.

ericcohen
Posts: 72
Joined: Wed Dec 26, 2018 9:34 pm

Re: Portfolio during a recession

Post by ericcohen » Mon Mar 18, 2019 8:20 pm

Treasuries and gold.

pward
Posts: 391
Joined: Fri Dec 21, 2018 8:18 pm

Re: Portfolio during a recession

Post by pward » Mon Mar 18, 2019 8:21 pm

ionenergy wrote:
Mon Mar 18, 2019 8:15 pm
pward wrote:
Mon Mar 18, 2019 7:52 pm
ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
Well you can see here that the bogleheads 3 fund 60/40 since 1970 has a maximum drawdown of 32%, and a longest recovery time of 10 years: https://portfoliocharts.com/portfolio/t ... portfolio/

If that's too much for you to stomach you can look at some of these low volatility portfolios that have significantly lower drawdowns and recovery times:

Golden Butterfly: https://portfoliocharts.com/portfolio/golden-butterfly/
Permanent Portfolio: https://portfoliocharts.com/portfolio/p ... portfolio/
All-Seasons Portfolio: https://portfoliocharts.com/portfolio/a ... portfolio/
Larry Portfolio: https://portfoliocharts.com/portfolio/larry-portfolio/

There are many other great portfolios you can compare on that site, but those are a good place to start. There's nothing wrong with being a conservative investor, even at a younger age. As you will see on the stats of those portfolios, you can indeed get a really good return in a low volatility portfolio. It might not throw up random 30%+ gains like total stock market will some years, but it also won't have 50% drawdowns either. These portfolios are really good at providing consistent returns year in and year out, the proverbial tortoise vs the hare.
Hi, thanks. I think this is exactly what I need. I have only invested 1/6 of my money and with adjustments like this, i’d be more comfortable in adding more funds into my vanguard account.
My only question is how do I get to change to Larry, All season or permanent? Vanguard only gave me the option of stock/bonds percentage allocations and they manages my portfolio for me.
What type of account is this? I've never seen an account that only allowed a generic stock and bond percentage and no other choices?

delamer
Posts: 8164
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio during a recession

Post by delamer » Mon Mar 18, 2019 8:25 pm

ionenergy wrote:
Mon Mar 18, 2019 8:15 pm
pward wrote:
Mon Mar 18, 2019 7:52 pm
ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
Well you can see here that the bogleheads 3 fund 60/40 since 1970 has a maximum drawdown of 32%, and a longest recovery time of 10 years: https://portfoliocharts.com/portfolio/t ... portfolio/

If that's too much for you to stomach you can look at some of these low volatility portfolios that have significantly lower drawdowns and recovery times:

Golden Butterfly: https://portfoliocharts.com/portfolio/golden-butterfly/
Permanent Portfolio: https://portfoliocharts.com/portfolio/p ... portfolio/
All-Seasons Portfolio: https://portfoliocharts.com/portfolio/a ... portfolio/
Larry Portfolio: https://portfoliocharts.com/portfolio/larry-portfolio/

There are many other great portfolios you can compare on that site, but those are a good place to start. There's nothing wrong with being a conservative investor, even at a younger age. As you will see on the stats of those portfolios, you can indeed get a really good return in a low volatility portfolio. It might not throw up random 30%+ gains like total stock market will some years, but it also won't have 50% drawdowns either. These portfolios are really good at providing consistent returns year in and year out, the proverbial tortoise vs the hare.
Hi, thanks. I think this is exactly what I need. I have only invested 1/6 of my money and with adjustments like this, i’d be more comfortable in adding more funds into my vanguard account.
My only question is how do I get to change to Larry, All season or permanent? Vanguard only gave me the option of stock/bonds percentage allocations and they manages my portfolio for me.
You can drop their advisory service and invest on your own.

Stormbringer
Posts: 808
Joined: Sun Jun 14, 2015 7:07 am

Re: Portfolio during a recession

Post by Stormbringer » Mon Mar 18, 2019 8:28 pm

ericcohen wrote:
Mon Mar 18, 2019 8:20 pm
Treasuries and gold.
Don't forget the ammunition and canned goods. :twisted:
"Compound interest is the most powerful force in the universe." - Albert Einstein

Ferdinand2014
Posts: 424
Joined: Mon Dec 17, 2018 6:49 pm

Re: Portfolio during a recession

Post by Ferdinand2014 » Tue Mar 19, 2019 12:05 am

ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
The S&P 500 is at an ‘all time high’ 1 out of every 15 trading days or 6.7% of the time since 1950 and within 2% of an ‘all time high’ 24% of the time. Subsequent to an all time high, positive returns occurred 70.9% over the following year and 67% the following 5 years.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

DonIce
Posts: 601
Joined: Thu Feb 21, 2019 6:44 pm

Re: Portfolio during a recession

Post by DonIce » Tue Mar 19, 2019 12:21 am

Ferdinand2014 wrote:
Tue Mar 19, 2019 12:05 am
The S&P 500 is at an ‘all time high’ 1 out of every 15 trading days or 6.7% of the time since 1950 and within 2% of an ‘all time high’ 24% of the time. Subsequent to an all time high, positive returns occurred 70.9% over the following year and 67% the following 5 years.
Interesting. Do you have a link for these stats?

Ferdinand2014
Posts: 424
Joined: Mon Dec 17, 2018 6:49 pm

Re: Portfolio during a recession

Post by Ferdinand2014 » Tue Mar 19, 2019 12:37 am

DonIce wrote:
Tue Mar 19, 2019 12:21 am
Ferdinand2014 wrote:
Tue Mar 19, 2019 12:05 am
The S&P 500 is at an ‘all time high’ 1 out of every 15 trading days or 6.7% of the time since 1950 and within 2% of an ‘all time high’ 24% of the time. Subsequent to an all time high, positive returns occurred 70.9% over the following year and 67% the following 5 years.
Interesting. Do you have a link for these stats?
Mostly data from Jeremy Siegel ‘Stocks for the long run’ which goes into great depth, however I came across this article which neatly summarizes essentially the same basic data, although Jeremy Siegel’s book goes back much further. The article also mixes Dow and S&P data, however they both track each other surprisingly well over time.

https://www.google.com/amp/s/tubofcash. ... highs/amp/


Another article detailing the ‘all time high’ concept. Ben Carlson from a wealth of common sense.

https://awealthofcommonsense.com/2017/0 ... ime-highs/
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

klaus14
Posts: 214
Joined: Sun Nov 25, 2018 7:43 pm

Re: Portfolio during a recession

Post by klaus14 » Tue Mar 19, 2019 2:12 am

ionenergy wrote:
Mon Mar 18, 2019 8:15 pm
pward wrote:
Mon Mar 18, 2019 7:52 pm
ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
Well you can see here that the bogleheads 3 fund 60/40 since 1970 has a maximum drawdown of 32%, and a longest recovery time of 10 years: https://portfoliocharts.com/portfolio/t ... portfolio/

If that's too much for you to stomach you can look at some of these low volatility portfolios that have significantly lower drawdowns and recovery times:

Golden Butterfly: https://portfoliocharts.com/portfolio/golden-butterfly/
Permanent Portfolio: https://portfoliocharts.com/portfolio/p ... portfolio/
All-Seasons Portfolio: https://portfoliocharts.com/portfolio/a ... portfolio/
Larry Portfolio: https://portfoliocharts.com/portfolio/larry-portfolio/

There are many other great portfolios you can compare on that site, but those are a good place to start. There's nothing wrong with being a conservative investor, even at a younger age. As you will see on the stats of those portfolios, you can indeed get a really good return in a low volatility portfolio. It might not throw up random 30%+ gains like total stock market will some years, but it also won't have 50% drawdowns either. These portfolios are really good at providing consistent returns year in and year out, the proverbial tortoise vs the hare.
Hi, thanks. I think this is exactly what I need. I have only invested 1/6 of my money and with adjustments like this, i’d be more comfortable in adding more funds into my vanguard account.
My only question is how do I get to change to Larry, All season or permanent? Vanguard only gave me the option of stock/bonds percentage allocations and they manages my portfolio for me.
You are probably using advisory services. Which is fine.
You can tell them you want 10% gold and rest split half and half between stocks and bonds.
(I would say more than 10% gold is too much.)
This will be pretty resilient for bad times. For example, if in a correction, stocks lose 1/3 of their value and gold and bonds appreciates a bit, you would lose only 10% of your total that year.

pward
Posts: 391
Joined: Fri Dec 21, 2018 8:18 pm

Re: Portfolio during a recession

Post by pward » Tue Mar 19, 2019 9:20 am

klaus14 wrote:
Tue Mar 19, 2019 2:12 am
ionenergy wrote:
Mon Mar 18, 2019 8:15 pm
pward wrote:
Mon Mar 18, 2019 7:52 pm
ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks
Well you can see here that the bogleheads 3 fund 60/40 since 1970 has a maximum drawdown of 32%, and a longest recovery time of 10 years: https://portfoliocharts.com/portfolio/t ... portfolio/

If that's too much for you to stomach you can look at some of these low volatility portfolios that have significantly lower drawdowns and recovery times:

Golden Butterfly: https://portfoliocharts.com/portfolio/golden-butterfly/
Permanent Portfolio: https://portfoliocharts.com/portfolio/p ... portfolio/
All-Seasons Portfolio: https://portfoliocharts.com/portfolio/a ... portfolio/
Larry Portfolio: https://portfoliocharts.com/portfolio/larry-portfolio/

There are many other great portfolios you can compare on that site, but those are a good place to start. There's nothing wrong with being a conservative investor, even at a younger age. As you will see on the stats of those portfolios, you can indeed get a really good return in a low volatility portfolio. It might not throw up random 30%+ gains like total stock market will some years, but it also won't have 50% drawdowns either. These portfolios are really good at providing consistent returns year in and year out, the proverbial tortoise vs the hare.
Hi, thanks. I think this is exactly what I need. I have only invested 1/6 of my money and with adjustments like this, i’d be more comfortable in adding more funds into my vanguard account.
My only question is how do I get to change to Larry, All season or permanent? Vanguard only gave me the option of stock/bonds percentage allocations and they manages my portfolio for me.
You are probably using advisory services. Which is fine.
You can tell them you want 10% gold and rest split half and half between stocks and bonds.
(I would say more than 10% gold is too much.)
This will be pretty resilient for bad times. For example, if in a correction, stocks lose 1/3 of their value and gold and bonds appreciates a bit, you would lose only 10% of your total that year.
Yep I agree with this totally, if you can do that, that should be a fine "all-weather" portfolio.

Fallible
Posts: 6886
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Portfolio during a recession

Post by Fallible » Tue Mar 19, 2019 10:38 am

ionenergy wrote:
Mon Mar 18, 2019 7:32 pm
I’m currently 80/20 (stocks/bonds) and now slowly realizing that my risk tolerance might be lower. I started with vanguard a year and a half ago and saw my funds go up, then down, the now back to breaking even.
Just looking at the news on what happened in 2009 just bothers me especially that s&p is now at an all time high. I’m willing to accept a lesser gain knowing that if recession hits, i wouldnt be affected much. If I switch to a 40/60, would that be recession proof enough where I dont lose much if it hits? I don’t plan on timing the market but plan on changing the ratio to a more recession proof with still a decent gain YoY
Thanks.
The key question to ask when deciding allocation and determining risk tolerance is how much money you can afford to lose before you'll need it. If you have to sell when the market drops, then lower equities now.

Also see the wiki on asset allocation and risk tolerance:

https://www.bogleheads.org/wiki/Asset_allocation
https://www.bogleheads.org/wiki/Risk_tolerance
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

User avatar
PurpleArc
Posts: 47
Joined: Mon Aug 14, 2017 10:29 am
Location: on the go, always

Re: Portfolio during a recession

Post by PurpleArc » Wed Mar 20, 2019 9:17 pm

DonIce wrote:
Mon Mar 18, 2019 5:29 pm
delamer wrote:
Mon Mar 18, 2019 4:29 pm
Your long-term risk tolerance doesn’t change during recessions, so neither should your portfolio.
Not sure that that's true. A lot of people that are getting into markets for the first time over the last 10 years (i.e. millenials) may think that their long term risk tolerance is high (since they are young and have plenty of time) but may quickly find out that their risk tolerance isn't what they thought once the next economic crisis and the market has a major drop.
So majorly true.

I secretly suspect if a market drops 30% many millinenials will suffer weak hands, it's human nature to want to safe what's left than to have panic looking at the market every day.

columbia
Posts: 1653
Joined: Tue Aug 27, 2013 5:30 am

Re: Portfolio during a recession

Post by columbia » Wed Mar 20, 2019 9:28 pm

Losing money (at least on paper) is extremely unpleasant. I think most folks are more risk averse than they realize and it’s too late when they do (figure that out).

No one gets a medal for being a tough guy/gal re:the aggressiveness of their portfolio. (They might get one in the form of greater wealth, of course, if a recession/crash doesn’t manifest.)

MarkRoulo
Posts: 116
Joined: Mon Jun 22, 2015 10:25 am

Re: Portfolio during a recession

Post by MarkRoulo » Wed Mar 20, 2019 9:41 pm

Ferdinand2014 wrote:
Tue Mar 19, 2019 12:05 am
The S&P 500 is at an ‘all time high’ 1 out of every 15 trading days or 6.7% of the time since 1950 ...
What I find most amazing about this statistic is that the S&P 500 wasn't created until 1957.

delamer
Posts: 8164
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio during a recession

Post by delamer » Wed Mar 20, 2019 10:15 pm

PurpleArc wrote:
Wed Mar 20, 2019 9:17 pm
DonIce wrote:
Mon Mar 18, 2019 5:29 pm
delamer wrote:
Mon Mar 18, 2019 4:29 pm
Your long-term risk tolerance doesn’t change during recessions, so neither should your portfolio.
Not sure that that's true. A lot of people that are getting into markets for the first time over the last 10 years (i.e. millenials) may think that their long term risk tolerance is high (since they are young and have plenty of time) but may quickly find out that their risk tolerance isn't what they thought once the next economic crisis and the market has a major drop.
So majorly true.

I secretly suspect if a market drops 30% many millinenials will suffer weak hands, it's human nature to want to safe what's left than to have panic looking at the market every day.
Again, the OP asked what the “best portfolio is during a recession.”

And the answer is that there is no one portfolio that is appropriate during a recession versus a different portfolio that is appropriate during a non-recession.

You may find out that your asset allocation is too aggressive for comfort once there is a stock market downturn and that may cause you to change your allocation going forward. But that isn’t the same thing as having a specific “recession” portfolio.

Ferdinand2014
Posts: 424
Joined: Mon Dec 17, 2018 6:49 pm

Re: Portfolio during a recession

Post by Ferdinand2014 » Wed Mar 20, 2019 10:41 pm

MarkRoulo wrote:
Wed Mar 20, 2019 9:41 pm
Ferdinand2014 wrote:
Tue Mar 19, 2019 12:05 am
The S&P 500 is at an ‘all time high’ 1 out of every 15 trading days or 6.7% of the time since 1950 ...
What I find most amazing about this statistic is that the S&P 500 wasn't created until 1957.
The S&P 'composite index' was created in 1923. It was set at 90 stocks by 1926 and 500 by 1957. You will find this same data used in Jack Bogle's book 'Common Sense Investing Book' which he explains and references that he says 'S&P 500", but acknowledges it was 90 stocks in 1926 and 500 by 1957. The S&P index has over a .99 correlation to total market from 1926 through current also according to data supplied by Jack Bogle in his book.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

DonIce
Posts: 601
Joined: Thu Feb 21, 2019 6:44 pm

Re: Portfolio during a recession

Post by DonIce » Wed Mar 20, 2019 11:01 pm

delamer wrote:
Wed Mar 20, 2019 10:15 pm
Again, the OP asked what the “best portfolio is during a recession.”

And the answer is that there is no one portfolio that is appropriate during a recession versus a different portfolio that is appropriate during a non-recession.
Personally I would tend to disagree. During a recession, stock markets are usually at lower valuations, and therefore represent attractive buying opportunities that don't usually last long. Whatever one's AA was before a recession, it would usually be beneficial to buy more stocks (increase AA towards stocks) while they are attractively priced.

This is of course the opposite of what most people do during recessions.

User avatar
DanMahowny
Posts: 897
Joined: Sun Aug 06, 2017 8:25 pm

Re: Portfolio during a recession

Post by DanMahowny » Thu Mar 21, 2019 10:20 am

columbia wrote:
Wed Mar 20, 2019 9:28 pm
Losing money (at least on paper) is extremely unpleasant. I think most folks are more risk averse than they realize and it’s too late when they do (figure that out).
This is very true. Perhaps members of this forum are better at enduring declines than regular citizens, but many, many people overestimate their ability to lose large amounts of cash and stick to a plan.
Funding secured

User avatar
LilyFleur
Posts: 281
Joined: Fri Mar 02, 2018 10:36 pm

Re: Portfolio during a recession

Post by LilyFleur » Thu Mar 21, 2019 11:20 am

DanMahowny wrote:
Thu Mar 21, 2019 10:20 am
columbia wrote:
Wed Mar 20, 2019 9:28 pm
Losing money (at least on paper) is extremely unpleasant. I think most folks are more risk averse than they realize and it’s too late when they do (figure that out).
This is very true. Perhaps members of this forum are better at enduring declines than regular citizens, but many, many people overestimate their ability to lose large amounts of cash and stick to a plan.
I think they overestimate their ability to lose large amounts of equities, not cash. They lack the ability to say to themselves, "It's a good asset allocation, it is age appropriate, I selected this AA so that I will not run the risk of not enough money for retirement, this is just what the market does."

People who do not have nerves of steel and who panic during recessions and cannot sleep if their portfolio is dropping--this is why it is so unfortunate that average Americans are now expected to be competent retirement fund managers of their own 401ks. The loss of the era of company pensions that were managed by people trained in pension management has not been good for our populace as a whole. Bogleheads, of course, for the most part are the exception to that.

WhiteMaxima
Posts: 1897
Joined: Thu May 19, 2016 5:04 pm

Re: Portfolio during a recession

Post by WhiteMaxima » Thu Mar 21, 2019 11:23 am

I would say stay the same AA. If you have 80/20, for example, stay the course, just rebalance and your will ride out recession.

Post Reply