Lessons from this crash

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jay22
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Lessons from this crash

Post by jay22 »

What are the lessons that BHs have learned from this crash?

Not that it is over or everything will be rosy going forward!
mikep
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Re: Lessons from this crash

Post by mikep »

Stocks and bonds market fluctuate.

Keep rebalancing according to your AA.
livesoft
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Re: Lessons from this crash

Post by livesoft »

Well, I haven't thought of it as a crash since it has taken longer than 2 weeks or a month to get here and it is not over yet. A lesson is that how people name this experience shades their opinions of it.
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PersonalFinanceJam
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Re: Lessons from this crash

Post by PersonalFinanceJam »

I don't really consider this a crash. I consider this a normal pull back in the market, it may be steeper and faster than we would like but so far this seems like normal market gyrations. For me it just re-enforces the notion that bond durations matter and while holding some cash can seem pointless at times, it's also kinda nice.

My DW and I are hopefully about 10 years out from early retirement. This current pull back re-enforces the plan when we get a few years out in addition to increasing the overall percentage of fixed income in our portfolio, we should also shorten the duration and add a bit more cash. That's not now, so for the time being all of our contributions are to equity because that's what is below target in the portfolio.
notoriousMG
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Re: Lessons from this crash

Post by notoriousMG »

Sticking to my investment goal is what I learned. I sold all my stocks in January 2020 and was in cash until I knew my job was secure and slowly moved into the market again. I am definitely upside down a lot at the moment, but since I feel better about having my job and put some money in savings, I am holding onto my stocks and buying monthly from my salary despite the "crash".

I watch the drop daily and clench my teeth and remember the goal. I cannot predict everything so I try to practice self-compassion. While I feel bad for any people here who are near retirement and held too much stock, I have always felt that if your average return over 30 years is 4% it is somewhat of a miracle. My family has been through three bankruptcies due to recessions and war, and in the end, we're grateful to be alive and to just have a little bit of money on the side. Health, especially mental health is paramount. Money can help with all health aspects, but it is not enough to truly buy happiness.

Stick to your goals, and if you cannot, forgive yoursef.
Last edited by notoriousMG on Thu May 12, 2022 12:19 pm, edited 1 time in total.
Normchad
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Re: Lessons from this crash

Post by Normchad »

Well. I don’t think we’ve had a crash yet. We may be in the starting stages of a deep slide, but we don’t know that.

I’ve been through crashes before. They were always very sudden. Think dropping 25% in one day.

The thing that is hard to explain to people, is .*how it feels*. For me, it was nauseating. I felt physically *queasy*.

I was already well educated on all this stuff. I had a plan. I stuck to my plan. I was very confident in myself. But I was surprised by how it felt.

I completely understand why people panic during these times. It’s hard not too. Even Ben Stein panicked, if I remember correctly.
Last edited by Normchad on Thu May 12, 2022 12:20 pm, edited 1 time in total.
delamer
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Re: Lessons from this crash

Post by delamer »

No new lessons.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
bagastuff
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Re: Lessons from this crash

Post by bagastuff »

I found this forum in the middle of this correction because "tech is the future" quit holding up as an investment plan and I had to understand why.
TheoLeo
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Re: Lessons from this crash

Post by TheoLeo »

QT = bear market
QE = bull market
jjj_22
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Re: Lessons from this crash

Post by jjj_22 »

I think one lesson is, if you think this is a "crash" you need to recalibrate your expectations.
DesertDiva
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Re: Lessons from this crash

Post by DesertDiva »

There was a crash? When did this happen? :shock:
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firebirdparts
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Re: Lessons from this crash

Post by firebirdparts »

DesertDiva wrote: Thu May 12, 2022 12:22 pm There was a crash? When did this happen? :shock:
Black Swan event. Unprecedented in all of human history.
A fool and your money are soon partners
balbrec2
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Re: Lessons from this crash

Post by balbrec2 »

DesertDiva wrote: Thu May 12, 2022 12:22 pm There was a crash? When did this happen? :shock:
+1
seems like an orderly retreat so far
WhiteMaxima
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Re: Lessons from this crash

Post by WhiteMaxima »

stay calm stay the course and stay invested.
drk
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Re: Lessons from this crash

Post by drk »

My lesson: some people are really, really panicky about markets and the economy.
Phyneas
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Re: Lessons from this crash

Post by Phyneas »

1) Buy bonds for what you know they'll do (the duration, type, yield, and allocation %), not what you hope they'll do (cushion equities in a downturn).

2) Any asset allocation that is based on back-tests and strategies has a concentration risk of 100%, and if that strategy fails, the portfolio design fails too.

3) You can be sure that whatever it is that people are piling into will be the thing that fails the hardest (probably not a new lesson).

4) There is a bit too much rigidity, and maybe even dogmatism in here, imo, regarding portfolio construction. Ideas like shortening bond length, going to TIPS, buying commodities, were all pooh-poohed over the last year and a bit, even with inflation and interest rate hikes staring everyone in the face. Even though there are specialist threads detailing alternative strategies, there is generally a lot of push-back on alternative ideas, and while 9/10 that may be the right answer, providing it robotically in any and all situations without really thinking about the context of what is around you as an investor, is not optimal.

5) What goes up must come down, and vice-versa. A lot of people said that claims interest rates had to go up eventually had been proven wrong continually, until they weren't, It isn't ever different this time, nothing goes up, or down, fprever.

6) To be a bit cheeky ... gold did what it was supposed to do.
Last edited by Phyneas on Thu May 12, 2022 12:30 pm, edited 1 time in total.
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Itster
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Re: Lessons from this crash

Post by Itster »

"This time it's different." </not>
KlangFool
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Re: Lessons from this crash

Post by KlangFool »

OP,

1) I am lucky.

2) When you have enough, you should take some money out of the market.

3) On July 2020, I reached my FI number of 1.5 million. I had enough. So, for every 60K increase in my portfolio, I take 30K out to pay down my mortgage.

4) Now, my portfolio is back down to 1.5 million. But, I had taken out 120K to pay down my mortgage.

KlangFool
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Gecko10x
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Re: Lessons from this crash

Post by Gecko10x »

Rising rates + inflation wasn't accounted for in my asset allocation to my liking.
carminered2019
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Re: Lessons from this crash

Post by carminered2019 »

Normal correction for a healthy market, I would not call this a crash.
bugleheadd
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Re: Lessons from this crash

Post by bugleheadd »

nothing new

stay the course

invest cash once available
Gecko10x
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Re: Lessons from this crash

Post by Gecko10x »

Phyneas wrote: Thu May 12, 2022 12:27 pm
4) There is a bit too much rigidity, and maybe even dogmatism in here, imo, regarding portfolio construction. Ideas like shortening bond length, going to TIPS, buying commodities, were all pooh-poohed over the last year and a bit, even with inflation and interest rate hikes staring everyone in the face. Even though there are specialist threads detailing alternative strategies, there is generally a lot of push-back on alternative ideas, and while 9/10 that may be the right answer, providing it robotically in any and all situations without really thinking about the context of what is around you as an investor, is not optimal.
While I agree, I feel like alternatives are more accepted and discussed than they were when I joined.
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HMSVictory
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Re: Lessons from this crash

Post by HMSVictory »

History doesn't repeat itself but it sure rhymes!

The market moves in cycles. Ups and downs - just ride the wave!

This is my 4th boom and bust cycle in 30 years of investing. You get used to it and find other things to spend you time/energy on.
Stay the course!
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a_posteriori
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Re: Lessons from this crash

Post by a_posteriori »

I am somewhat surprised by the price movement (down) of a large state-specific municipal bond fund I have owned for over 20 years compared to a famous long-in-business 60/40 fund and a long-in-business large stock fund I also own! What "worries" me is that correlations between all "normal" investing assets are higher now than ever before. If you just look at the magnitudes and signs of the price drops in the Vanguard article, link at bottom, you will see the last two corrections prices of both stocks and bonds went negative together. This fact appears to indicate stock and bond markets are now getting more and more correlated. Just stating the results of an observation on my part! Buy on the dips? :happy

https://investor.vanguard.com/investor- ... d-consider
Mr.BB
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Re: Lessons from this crash

Post by Mr.BB »

I don't think of this as a crash. When it hits 20% that will be bear market territory correction. To paraphrase the best point of view I read on this site regarding market corrections and crashes was that a market decline of 20%-25% is normal. When you start having a 30%-40% or more of a decline it shows you that there is some fundamental problem with the system.
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jay22
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Re: Lessons from this crash

Post by jay22 »

VTI down 20%+
Nasdaq 100 down ~ 30%

VTI is around Dec 2020 levels.

Yeah, this is definitely a crash/bear market, not a normal market pullback.
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jay22
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Re: Lessons from this crash

Post by jay22 »

HMSVictory wrote: Thu May 12, 2022 12:35 pm History doesn't repeat itself but it sure rhymes!

The market moves in cycles. Ups and downs - just ride the wave!

This is my 4th boom and bust cycle in 30 years of investing. You get used to it and find other things to spend you time/energy on.
How did you respond in your 1st or 2nd bust cycle? That must have been different than this time.
Call_Me_Op
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Re: Lessons from this crash

Post by Call_Me_Op »

Nothing new. Make a plan, write it down, stick to it. Implicit in this is to understand that in which you are investing. That seems to be where many have not done so well.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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ray.james
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Re: Lessons from this crash

Post by ray.james »

I would say too early to have this thread. 2008 thread is just pure gold.
viewtopic.php?t=207809
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
carminered2019
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Re: Lessons from this crash

Post by carminered2019 »

jay22 wrote: Thu May 12, 2022 12:41 pm VTI down 20%+
Nasdaq 100 down ~ 30%

VTI is around Dec 2020 levels.

Yeah, this is definitely a crash/bear market, not a normal market pullback.
you must be a new or a young investor.
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jay22
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Re: Lessons from this crash

Post by jay22 »

carminered2019 wrote: Thu May 12, 2022 12:46 pm
jay22 wrote: Thu May 12, 2022 12:41 pm VTI down 20%+
Nasdaq 100 down ~ 30%

VTI is around Dec 2020 levels.

Yeah, this is definitely a crash/bear market, not a normal market pullback.
you must be a new or a young investor.
Maybe. Or my definition of crash is different than yours.
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CommitmentDevice
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Re: Lessons from this crash

Post by CommitmentDevice »

This dip reinforces for me that I have a good risk tolerance for sticking to the plan. My emotional state hasn't fluctuated at all due to the recent market drop, let alone making me want to change my asset allocation. I'm in this for the long game and expect the value of my holdings to fluctuate.
Marseille07
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Re: Lessons from this crash

Post by Marseille07 »

Gecko10x wrote: Thu May 12, 2022 12:29 pm Rising rates + inflation wasn't accounted for in my asset allocation to my liking.
I think this is an important lesson. People here often claim "stay the course," but one grave possibility is that some posters might be on the wrong course, and they'd be better served switching the course than staying.
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CommitmentDevice
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Re: Lessons from this crash

Post by CommitmentDevice »

CommitmentDevice wrote: Thu May 12, 2022 12:49 pm This dip reinforces for me that I have a good risk tolerance for sticking to the plan. My emotional state hasn't fluctuated at all due to the recent market drop, let alone making me want to change my asset allocation. I'm in this for the long game and expect the value of my holdings to fluctuate.
Counterfactual - maybe I'm just feeling financially secure overall, despite stock/bond returns, due to employment situation and home value.
bagastuff
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Re: Lessons from this crash

Post by bagastuff »

I will cop to being a younger investor. I joined the work force and made more money than I needed to spend starting in 2008. Technically I lived through the GFC but I was not paying attention to it except to pick up a house at a decent price in 2011. Oh, how I long for the days when my income was 10x my savings account... this year has been instructive.

The dotcom bust was a crash because Nasdaq was down 80%. But back then all the tech stocks were super speculative. Now FAANG companies are established businesses that rake in money hand over fist so being down 30% seems more meaningful. Meanwhile, recent IPOs and pandemic darlings and meme stocks are -60-80%. So I think it's fair to say this is a "crash" for certain sectors, and for certain portfolios (can you blame folks who started investing during lockdown for not being bogleheads?).

Perhaps "crash" is not the right word, yet --- sudden and brutal regime change?
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HomerJ
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Re: Lessons from this crash

Post by HomerJ »

I will admit I was surprised by how much Total Bond Fund went down.

I mean, I'm not one of those people who think bond funds never go down, and I'm not worried at all. Higher dividends are good, and Total Bond will recover over time. In the long run, higher interest rates will be helpful for me.

But I was surprised that it went down this far, this fast...

Guess the lesson I learned is to be diversified on the fixed-income side...

Which, by pure luck, I was...

I have slowly been moving money into IBonds over the past decade... and our 401ks didn't have Total Bond, so we were using stable-value funds and short-term treasury funds, AND I had recently accumulated 4 years of cash\CDs to help my wife sleep at night.

So I've done okay during this period on the fixed-income side.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Tundrama
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Re: Lessons from this crash

Post by Tundrama »

jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?

Not that it is over or everything will be rosy going forward!
Gosh, I spent a whole ten minutes trying to think of something.

30 years in the Market.

Final answer - ‘Lessons Learned’….absolutely none
lgs88
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Re: Lessons from this crash

Post by lgs88 »

jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?
...
My asset allocation is more appropriate (more conservative) than it was in March of 2020.

Market turbulence alone is less concerning than market turbulence coupled with the sky falling.

In March of 2020, it felt like the sky was falling and that the global economy was threatened with cataclysm. Now, it feels like... stocks are going down.
merely an interested amateur
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Godot
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Re: Lessons from this crash

Post by Godot »

jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?
Stop checking accounts so often!
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Ramjet
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Re: Lessons from this crash

Post by Ramjet »

It confirmed my high risk tolerance and that 100% stocks is fine for me until closer to retirement
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GAAP
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Re: Lessons from this crash

Post by GAAP »

The primary lesson for me is that people are remarkably brilliant at finding ways to make the same old mistakes.

ARKK -61.36% YTD at the moment, for example.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
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HMSVictory
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Re: Lessons from this crash

Post by HMSVictory »

jay22 wrote: Thu May 12, 2022 12:42 pm
HMSVictory wrote: Thu May 12, 2022 12:35 pm History doesn't repeat itself but it sure rhymes!

The market moves in cycles. Ups and downs - just ride the wave!

This is my 4th boom and bust cycle in 30 years of investing. You get used to it and find other things to spend you time/energy on.
How did you respond in your 1st or 2nd bust cycle? That must have been different than this time.
They are all different but they have the same characteristics; a huge run up, euphoria, then the pop and the mass exodus.

If you read the book; Devil Take the Hindmost - a history of financial speculation you will see this is nothing new. Like I said it rhymes.

First cycle I lost almost my entire portfolio in Janus hot funds (about $40k) at the time. That lesson made me 10-20x that amount over the years.

Second cycle I profited greatly (07-09 GFC) by snapping up a property on fire sale and continuing to invest heavily in equities.
Stay the course!
secondopinion
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Re: Lessons from this crash

Post by secondopinion »

Godot wrote: Thu May 12, 2022 1:05 pm
jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?
Stop checking accounts so often!
Checking accounts? Do you mean retirement accounts? I have to check my checking account to make sure I am not overspending what is in there to avoid carrying credit card debt.
Last edited by secondopinion on Thu May 12, 2022 1:14 pm, edited 1 time in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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HMSVictory
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Re: Lessons from this crash

Post by HMSVictory »

GAAP wrote: Thu May 12, 2022 1:10 pm The primary lesson for me is that people are remarkably brilliant at finding ways to make the same old mistakes.

ARKK -61.36% YTD at the moment, for example.
Janus Funds were the predecessor to ARKK.

Up dramatically, huge inflows of new investor funds, bubble pops and fund performance craters. Same old story over and over again!
Stay the course!
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Re: Lessons from this crash

Post by sailaway »

I have learned that many people didn't learn much from the previous crashes.
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Re: Lessons from this crash

Post by gogreen »

jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?

Not that it is over or everything will be rosy going forward!
Crash? If anybody considered it a crash I’d strongly suggest to revisit AA and the chosen portfolio :sharebeer
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Scott S
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Re: Lessons from this crash

Post by Scott S »

bagastuff wrote: Thu May 12, 2022 12:20 pm I found this forum in the middle of this correction because "tech is the future" quit holding up as an investment plan and I had to understand why.
Welcome aboard! :beer
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max12377
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Re: Lessons from this crash

Post by max12377 »

I learned that the goal of the government is to continue to make the dollars we hold worth less until they become worthless.
stocknoob4111
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Re: Lessons from this crash

Post by stocknoob4111 »

that markets and sentiment can change on a dime and irrational exuberance and speculative excesses always meets a day of reckoning and it's important not to ignore it but to incorporate it into your planning especially closer to retirement...
Last edited by stocknoob4111 on Thu May 12, 2022 1:28 pm, edited 1 time in total.
Marseille07
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Re: Lessons from this crash

Post by Marseille07 »

stocknoob4111 wrote: Thu May 12, 2022 1:27 pm that markets and sentiment can change on a dime and irrational exuberance and speculative excesses always meets a day of reckoning and it's important not to ignore it but to incorporate it into your planning especially closer to retirement...
It's a tough situation because even if you downshifted from 100/0 to 60/40 before you retire, the 60/40 is doing poorly this year. Basically we're in a situation where Boglehead portfolios do poorly across the board, ranging from 0/100 to 100/0.
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