I can relate to you as this is my first bear market and I have already lost over 200K. I have a slight edge over you because my spouse is not interested in dealing with it and I am (so far) not phased at all.Beliavsky wrote: ↑Thu Mar 12, 2020 10:45 pmThe common advice to decide on a stock/bond allocation and to rebalance to it periodically is unrealistic. In this market you would be selling bonds to buy stocks. VIX is 75, about 5 times its usual level. So after stocks have fallen drastically, and you have become substantially poorer, you should dial up risk? My wife is saying we need to exit stocks entirely, and I am trying to resist. If I insisted on rebalancing to get to our allocation of 2 months ago, she might divorce me.
Rebalancing out of stocks when they have outperformed bonds is feasible. There's no law saying you can't reduce risk after your investments have done well. it's the rebalancing into stocks with existing money that I oppose.
One reason stocks have fallen is that big parts of the travel and entertainment industries are being shut down. Many people will lose their jobs or have their hours cut back. If your income is stable and you are continuing to save, you can gradually rebalance into stocks by earmarking new savings for stocks.
Here are my practical advices:
1. Whatever you do, do not sell and get out. That is the worst decision possible.
2. Read “Rational Expectations” by Bill Bernstein. I always remember the part were he said that when the market drops by 50%, like in 2007, 70% of investors abandon their strategy. I do not want to be in that group.
3. If you cannot sleep at night, and you really feel like selling everything, just try to NOT LOOK. Get out of the news, abandon this forum for a few months, watch more netflix, come back at predetermined dates, twice a year (june and December 30th?)
4. If this does not work, then try to reduce your AA to a less risky one 60/40? 50/50? Or try to ride the whole crash without rebalacing.
But if you can, dont get out.