I am having FOMO. Please remind me of bear markets

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TrustTheMarket
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I am having FOMO. Please remind me of bear markets

Post by TrustTheMarket »

Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
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retiredjg
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Re: I am having FOMO. Please remind me of bear markets

Post by retiredjg »

It sounds like a 2 year emergency fund is a good idea for you. Especially if your industry is the kind that loses income when times get tough for the population as a whole (which I imagine would apply to many commission dependent jobs).

Yes, you are missing out on some gains. That is the price you pay for having cash available when you need it. Think of it as an insurance premium - feels "wasted" until you need it. Invaluable when you do need it.
sambb
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Re: I am having FOMO. Please remind me of bear markets

Post by sambb »

emergency fund has been a drag on our investments. Funds can always be pulled out of the market for a true emergency. I wish i wouldve invested those funds far earlier. There is greater risk keeping it in cash (not keeping up with inflation or growing).
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Re: I am having FOMO. Please remind me of bear markets

Post by dcabler »

sambb wrote: Sun Jul 07, 2024 9:00 am emergency fund has been a drag on our investments. Funds can always be pulled out of the market for a true emergency. I wish i wouldve invested those funds far earlier. There is greater risk keeping it in cash (not keeping up with inflation or growing).
That's been my view as well. Emergency funds made a lot of sense when we were young and something like a loss of a job could have imposed a true hardship. But there's a point where one's investments have grown enough that between high-limit credit cards and only a day or so to sell and receive proceeds that staying fully invested begins to become more attractive.

Cheers.
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Rocinante Rider
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Re: I am having FOMO. Please remind me of bear markets

Post by Rocinante Rider »

Find an asset allocation, including the size of an "emergency" fund, that makes sense for your situation. Your target is "good enough." The perfect allocation is visible only in the rear view mirror. Your personal good enough allocation will always have winners and losers in the mix. That's not only okay, but just the way it should be.
Breezy
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Re: I am having FOMO. Please remind me of bear markets

Post by Breezy »

FOMO is real, for sure! But you have very good reasons for having a large emergency fund, and you should be making nearly 5% on that money, so sit tight.

My note to self in my IPS:
Don’t be greedy when times are good. Maintain a safe cushion. Things can turn fast & you don’t want to have to sell as the market is crashing. That was a big lesson from people who’ve lived through crashes. Don’t be greedy when times are good.
When times are bad, re-read this classic Bogleheads thread, A Time To Evaluate Your Jitters: viewtopic.php?f=10&t=79939
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jeffyscott
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Re: I am having FOMO. Please remind me of bear markets

Post by jeffyscott »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.
Here's one "famous" discussion from that time, in case you've not seen it already:
viewtopic.php?t=25126

It was not easy to even maintain even our 50/50 allocation in retirement accounts in 2008/09.
Helium
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Re: I am having FOMO. Please remind me of bear markets

Post by Helium »

jeffyscott wrote: Sun Jul 07, 2024 9:29 am
TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.
Here's one "famous" discussion from that time, in case you've not seen it already:
viewtopic.php?t=25126

It was not easy to even maintain even our 50/50 allocation in retirement accounts in 2008/09.
Great thread.

It's really funny contrasting that thread to every post so far in this one, lol.

It's a reminder of how complacent we can become and how easily we forget once things have been good for a while.
HomeStretch
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Re: I am having FOMO. Please remind me of bear markets

Post by HomeStretch »

FOMO and excessive fear of bear markets are emotional reactions to investing. Don’t let either extreme dictate your investment strategy.

Keep your large emergency fund if that helps you sleep well at night. Then set a reasonable portfolio asset allocation that you and spouse can live with. Then try to tune out the noise and keep from fiddling with your portfolio.
N.Y.Cab
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Re: I am having FOMO. Please remind me of bear markets

Post by N.Y.Cab »

How is your asset allocation? Our emergency fund is part of an overall balanced portfolio so it’s not really missing out on anything. Peter Lynch said: Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.
CuriousGeorgeTx
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Re: I am having FOMO. Please remind me of bear markets

Post by CuriousGeorgeTx »

My parents were born in 1930 & 1931 and grew up in the shadow of the Great Depression. Their parents lived through it. They fared better than most (both worked for government at one level or another). But the family lore they passed down gives me FOMO of a market crash that helps me with FOMO of a run up.

Consider this from Investopedia https://www.investopedia.com/timeline-o ... es-5217820

You can invest the rest aggressively because you have the downside risk covered.
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Re: I am having FOMO. Please remind me of bear markets

Post by pasadena »

So the thing with EF as an income replacement fund, is that bad bear markets often, though not always, coincide with bad job markets. So you may lose 20-50% of your investments, lose your job *and* have a hard time finding a new job - and if you do, it may be at a lower salary.

Psychologically, it can be very hard to have to sell investments when they are down so much. I know that was my issue during COVID. I was scared I'd lose my job, and decided to sell some stocks to replenish my non-existent cash position. Helped me sleep at night, but I did lose money, and it was a hard choice to make.

See 2008-2011. See also 2022. I know it wasn't too bad, it wasn't long, but we saw a lot of posts from people who'd had FOMO in 2021 and couldn't hold. The job market held, though, except in some sectors, especially tech.

Now 2 years may or may not be too much for you - the question is how much you need to sleep at night.
rockstar
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Re: I am having FOMO. Please remind me of bear markets

Post by rockstar »

What percentage of your portfolio is 2x expenses?
7eight9
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Re: I am having FOMO. Please remind me of bear markets

Post by 7eight9 »

"Maximum Tolerable Loss" -- Not just a fear factor (aka Plan B).

viewtopic.php?t=30085

One of my all-time favorite threads from the GFC era.
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rule of law guy
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Re: I am having FOMO. Please remind me of bear markets

Post by rule of law guy »

emergency funds are for YOUR emergency. you dont want those funds to decline in the event of a national emergency
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er999
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Re: I am having FOMO. Please remind me of bear markets

Post by er999 »

Is the rest of your portfolio 100% stocks? I’d look at what percentage your emergency fund is as a portion of fixed income as overall it still may be reasonable. Also you can post on what exactly you have your emergency fund in and could get some tips.
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Re: I am having FOMO. Please remind me of bear markets

Post by nisiprius »

Observation #1: 2020 was an anomaly. It was the shortest, and, measured by Morningstar's "pain index," least painful crash in stock market history, by a large amount. I believe it has been psychologically harmful to young investors who are now cocksure, based on 2020, that they have high risk tolerance.

Observation #2: the scary thing in a bear market is not the percentage. It's the "unchartedness." It doesn't make sense. This isn't the airliner's wings flexing a lot, it's noticing that an engine is on fire. It isn't an oncoming semi getting a little close to the double line because it is slightly cutting a corner on a turn, it's an oncoming semi that is over the line--far enough to make your car rock and make you steer a bit to the right.

Observation #3: it is a really bad idea to make changes in your portfolio based on your intuition. If you didn't write it down in advance, don't do it. Your intuition might be right this time, but it's just not a good practice. It is especially doubtful if what you are doing is based on a feeling that the stock market is less risky than you used to think it was. Believe it or not, in 2007 I personally was thinking I'd been a fraidycat and was considering increasing my stock allocation; I'm quite glad I didn't really do it. See Minsky moment. I don't think you can predict the end of a "Minsky cycle," but I do think stock market crashes are usually preceded by a widespread feeling that stocks are less risky than previously thought.

Observation #4: a problem is that the memory of all kinds of pain--kidney stones, childbirth, financial--fades with time. I can't really remember what it was like in 2008. Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse. Like Snow White and the Seven Dwarfs, I literally cannot remember all of them without checking a timeline. And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
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Re: I am having FOMO. Please remind me of bear markets

Post by nisiprius »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am...I keep hearing the market is at all time highs...
That's because, since 1950, the stock market has hit all-time highs an average of 16 times per year. You keep hearing it because it keeps doing it.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: I am having FOMO. Please remind me of bear markets

Post by Al the Knife »

I started investing in stocks in the late’90s. As of March 2009, I had lost money on every dollar I had invested in the stock market. At that moment in time, I would have done better had I stuffed cash under my mattress.

Not long after, I needed to do a home renovation project. Fortunately, I had kept some of my wealth in cash/bonds since before the crash. Otherwise, I would have had to sell stocks at a loss or go into debt to fund the project.

Since then, stocks have done very well, of course. But before I pat myself on the back because of my high net worth, I have to remind myself about what happened in the past and what might (or probably will) happen in the future. If/when the market crashes again, it might not recover in my lifetime (e.g. Japan 1989).

Diversifying into bonds and cash is never a bad idea.
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Re: I am having FOMO. Please remind me of bear markets

Post by Flashes1 »

FOMO is arguably the most powerful psychological force in personal investing. I'm currently fighting FOMO regarding small-to-mid size stock index funds. It hurts my soul comparing their returns to the S&P 500. I keep telling myself they'll rebound when rates decline but what worries me is the nagging feeling knowing the 500 outperformed them when rates were near zero.

It's hard....................
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Re: I am having FOMO. Please remind me of bear markets

Post by AdmiralJJ »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
With regard to maybe using a balanced fund, my 60/40 balanced fund declined 33% from 2021-22 and still has not recovered. My target date funds did the same and are not close to recovering. The reminder was that bond funds don't alway provide ballast; that was an academic point in my 40s but very much a reality check 15 years later. If that moves me away from the Boglehead ideal, so be it.

I'm happy to be making 5% with my 'emergency fund' sitting in SPAXX. And I'll be happy when it's at 2.5% too.
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Re: I am having FOMO. Please remind me of bear markets

Post by Wannaretireearly »

Previous bear markets I’ve been deep into accumulation mode.
The number of accumulation years is on one hand now.
I cannot compare my reaction in the past to today.

I’ll contrast this and say I cannot really seperate emergency fund from the rest of my portfolio. So, a true test of my ef is my AA imo. I consider bonds/munis plus small money market as my ef.

Op: look broadly at your portfolio, now do you think you’ve been too cautious? What is your overall AA? That matters more imo. Perhaps you have been too cautious if less than 50% stock.
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Re: I am having FOMO. Please remind me of bear markets

Post by bombcar »

If you’re both real estate agents, you could be hit with a triple whammy - market cools off or drops, commissions drop, and savings drop.

Two years in money market funds sounds about right - consider what your “second career” might be if everything goes south.

It happened in 2008 and the number of agents went down considerably almost overnight; no deals were available.
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Re: I am having FOMO. Please remind me of bear markets

Post by one_speed »

2 years isn't so big that it will derail growth of retirement savings.

You may have 5x or 10x annual spending saved now.
But by the time you have 20x or more saved, the 2x cash (or cash-like) fund is just 10% or less of asset allocation.

Great insurance for the (opportunity) cost.
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Re: I am having FOMO. Please remind me of bear markets

Post by Beensabu »

The market is volatile, and you should not trust it with your emergency fund.
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Re: I am having FOMO. Please remind me of bear markets

Post by cosmos »

With the strong likelihood that a 90%+ crash/drop is coming I am not taking emergency funds into stocks. Spidy sense is tingling now after a decade of very good stock runs. This has been a really good runup but having all my EF invested and hitting a massive crash/correction would be a dinosaur extinction event now being over 50. I had just started summer jobs when black monday hit so of course no issue there but I was in my early 30s when dotcom imploded but also mostly dodged it as I had just only recently started making real money and while the company imploded I was able to find steady work just 3 months later. Just as that was in the rearview mirror the GFC hit but while we took a pounding I was still prime earning years and avoided layoffs and stayed employed.

This time is likely to be different and if I were to get laid off or have company implode again will be very difficult to find work in a young market. Not even the EF will save me then but can provide a lifeline for awhile. I cannot fathom having 9-12 months of expenses in a HCOL area also in the stock market and vanishing along with the job. And yes, I think it will likely be 5X worse than GFC next time around.

I am not a gambling man. :)
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Re: I am having FOMO. Please remind me of bear markets

Post by JakeyLee »

TrustTheMarket,
Sounds like you have a valid reason for two years expenses in emergency fund. But that money can still be working for you. Money markets are currently paying over 5%. Short term t-bills are still fairly attractive.

My father was an iron worker. He made good money. But sometimes, outta the blue, major construction would dry up (economy, disasters, union upheaval, etc..) and he’d suddenly have several months off with little to zero pay. This kind of instability called for different tactics. His tactic was “max tax deferred accounts early, and overloaded the HYSA.” Oh, and family stay-cations. You do what you gotta do. :beer
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dawgs
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Re: I am having FOMO. Please remind me of bear markets

Post by dawgs »

One of the greatest current financial writers is Morgan Housel. He explains how he keeps a very large amount of safe money, like yourself. When the markets start to go south, he never panics....Never sells his stocks... Maybe you are right where you need to be.
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Re: I am having FOMO. Please remind me of bear markets

Post by coachd50 »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses)

Says who? Your situation is YOUR situation- therefore YOUR emergency fund should fit that. Fluctuating and volatile income should lead to a different personal financial structure than someone with a federal government job and vested pension.

When i start to experience any FOMO I think about the realities of risk and reward as well as utility. I also do a little thought exercise about an investment that is not allowed to be discussed here. But when I think about FOMO and “what could have been” I think to myself “If I would have been tipsy and bought say 100 “shares” of the investment when it was $0.10 a share- would I REALLY have kept and rode it up to the current level? “.

I realize the answer is probably “no”- and therefore I will never really be in an opportunity to miss out more than that- so why expose myself to such a risk.
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Re: I am having FOMO. Please remind me of bear markets

Post by johnegonpdx »

FOMO is easier to dispel if you look at the full distribution curve of returns for the asset allocation you now covet. If you are willing to buy the downside of the curve (both the historical probability/frequency of loss and the severity of those losses), then by all means, shift your investments.
heisenberg.
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Re: I am having FOMO. Please remind me of bear markets

Post by heisenberg. »

Threads like this make me want to reduce equities and increase my EF..

It has been said before, but another vote to keep as is given it sounds like your job prospects are likely highly correlated with the stock market
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Re: I am having FOMO. Please remind me of bear markets

Post by vfinx »

The Psychology of Money (Housel) has some space dedicated to the topic of unconventionally large emergency funds. I found it helpful.
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Re: I am having FOMO. Please remind me of bear markets

Post by abc132 »

Is the purpose of the 2x expenses to get market returns or to have an emergency fund?

It shouldn't be there because of bear markets. It should be there so you can cover any emergency without an even bigger concern of what the market will do than you have now.

You will be scared of a bear in unemployment just like you are scared of missing out on returns now. That 2x expenses helps prevent behavioral mistakes like withdrawing everything from the market because you are unemployed and scared the market might drop. You are subject to behavioral mistakes if you have FOMO. It always works against you so the only good answer is to understand why you own the 2x expenses and get rid of the FOMO.
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Re: I am having FOMO. Please remind me of bear markets

Post by AlohaBill »

One day in 1987, I sat in my office at the University of Petroleum and Minerals wondering what I was going to tell my wife. In Dhahran, Saudi Arabia news travel very slowly. But then I learned that I wasn’t the only one investing. The teaching community was abuzz with worry. The drop in one day was over 20%. We were saving for a house when we would return stateside in 1989. We were invested in 25% stock, but that translated to an uncomfortable loss. Would it continue to fall? I felt panicky and stupid. When I got home and told my wife, she was her strong self (she mostly cared about raising her kids). This was comforting and a good lesson for me. In two years we had all our money back and bought our house in 1989.
That was my first bear and the only one that psychologically affected me. The 2000 -2003 bear was livable and 2009 passed by. We’ve been lucky living in a country that can grow financial year after year.😱
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Re: I am having FOMO. Please remind me of bear markets

Post by White Coat Investor »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
2 years is a heck of an emergency fund. Why not leave 1 year invested in cash and put the 2nd year into something conservative like Wellesley.
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Re: I am having FOMO. Please remind me of bear markets

Post by like2read »

Just like a football team, it is best to have a good offense and a good defense.

Bull markets are the best time to plan for the eventuality of the tide heading out. A book that jolted me alert a bit, to remember to be mindful of downturns, and plan accordingly, was The Great Depression: A Diary: by Benjamin Roth
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Re: I am having FOMO. Please remind me of bear markets

Post by unwitting_gulag »

FOMO is less about asset allocation (too much in bonds or cash?) than in the kinds of equities in which one invests. In recent years, the trend has been:

* Large cap does better than midcap or especially small-cap
* Growth does better than value
* US does much better than ex-US.

FOMO would be felt by those who didn't prioritize US large-cap growth above everything else; in other words, those who diversified. Pretty much anything exterior to the S&P 500 has been a drag on performance. It's not about large emergency funds, too much cash, insufficient risk... than the kind of allocation that one does, within the risky portion of one's portfolio.
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Re: I am having FOMO. Please remind me of bear markets

Post by NostraHistoria »

You are doing the right thing. Keep your emergency fund in cash. Do not invest it.
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Re: I am having FOMO. Please remind me of bear markets

Post by KlangFool »

OP,

On 1/1/2009, my employer laid off 50% of its employees and 80% of my department. I can "Sleep Well At Night" (SWAN) because of my 2 to 3 years of emergency fund.

Inflation only matters in the long run. If you cannot survive in the coming recession or the short term. inflation would not matter to you. You have to survive in order to succeed.

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Re: I am having FOMO. Please remind me of bear markets

Post by Fallible »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
I would not call your emergency fund "oversized" if it is right for your situation, which it appears to be. The real concern here is that your FOMO, with its psychological and emotional impacts, is tempting you to take on more risk than you can handle. And even here, you probably are doing as well as most investors, i.e., feeling "comfortable" with your plan "most days" and only "sometimes" suffering the temptation of FOMO. It's the "good enough" we should be striving for as good enough really is petty darn good for us humans.

In my case and despite some 37 years of investing (indexing), even when I resist temptation and stay the course, I know another bout of FOMO awaits to some degree or another. I've written about it in my IPS and that has helped, but the real lesson is to ignore stock market doings I can never predict and find something else useful and rewarding to do.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: I am having FOMO. Please remind me of bear markets

Post by dogagility »

Only you know you. I never had an emergency fund during my entire career. Doesn't mean you shouldn't have some non-volatile investment set aside.
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Re: I am having FOMO. Please remind me of bear markets

Post by TheDogFather »

Draw a line down the middle of a sheet of paper.

One one side write down how your lives would be different if you were lucky and managed to squeeze every dollar in returns by investing your emergency fund differently at higher risk.

On the other side of the page write down the consequences of a 50% drop in equity values, lasting several years during which time you were unable to find employment close to your current compensation.

Is your emergency fund still too big?
itsmeagain
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Re: I am having FOMO. Please remind me of bear markets

Post by itsmeagain »

nisiprius wrote: Sun Jul 07, 2024 11:27 am ...
Observation #4: a problem is that the memory of all kinds of pain--kidney stones, childbirth, financial--fades with time. I can't really remember what it was like in 2008. Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse. Like Snow White and the Seven Dwarfs, I literally cannot remember all of them without checking a timeline. And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
Here's a little walk down memory lane:
https://www.cnbc.com/2009/03/06/dows-bl ... tocks.html

For example, Citigroup went from $55 to <$1. (It later did a 1:10 reverse split to remain listed.)
I forget the exact number, but I recall at one point several stocks in the bluechip DJIA were trading under $5, which is what the SEC considered penny stock territory.
Wannaretireearly
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Re: I am having FOMO. Please remind me of bear markets

Post by Wannaretireearly »

TheDogFather wrote: Sun Jul 07, 2024 3:03 pm Draw a line down the middle of a sheet of paper.

One one side write down how your lives would be different if you were lucky and managed to squeeze every dollar in returns by investing your emergency fund differently at higher risk.

On the other side of the page write down the consequences of a 50% drop in equity values, lasting several years during which time you were unable to find employment close to your current compensation.

Is your emergency fund still too big?
Great thought exercise. Makes me want to further increase my emergency fund from half a years expenses to at least 1-2 years of ready cash/MM/fixed income/Muni bonds
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
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warner25
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Re: I am having FOMO. Please remind me of bear markets

Post by warner25 »

cosmos wrote: Sun Jul 07, 2024 12:26 pm With the strong likelihood that a 90%+ crash/drop is coming I am not taking emergency funds into stocks.... yes, I think it will likely be 5X worse than GFC next time around.
Wow, even as a US stock market skeptic / pessimist myself, I'm impressed. It's not out of the question, though. I like to point out that even a 50-60% drop would only bring the S&P 500 down to the median Shiller PE, historically. So, theoretically, that kind of drop could occur even without S&P 500 earnings crashing to 2008-2009 levels.
nisiprius wrote: Sun Jul 07, 2024 11:27 am Observation #1: 2020 was an anomaly. It was the shortest, and, measured by Morningstar's "pain index," least painful crash in stock market history, by a large amount. I believe it has been psychologically harmful to young investors who are now cocksure, based on 2020, that they have high risk tolerance.
Interesting, and wise. I'm unfamiliar with the "pain index" but this explains why so many of us, who experienced both, have said that 2020 felt nothing like 2008-2009. It seems that 2020 also taught the "lesson" to many people that the government can and will make crashes short and recoveries quick, so a crash like cosmos is talking about is no longer a possibility.
nisiprius wrote: Sun Jul 07, 2024 11:27 am...Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse... And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
Yep. I remember thinking that it was all over in October of 2008 with the Emergency Economic Stabilization Act and Warren Buffett's "Buy American" op-ed. I thought it was over again in December of 2008 after the market had tanked another 20%. Then, when the indices just kept falling everyday from January through early March of 2009, I started laughing at the absurdity of it.
Last edited by warner25 on Sun Jul 07, 2024 4:56 pm, edited 1 time in total.
nonnie
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Re: I am having FOMO. Please remind me of bear markets

Post by nonnie »

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Last edited by nonnie on Sun Jul 07, 2024 11:03 pm, edited 1 time in total.
rockstar
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Re: I am having FOMO. Please remind me of bear markets

Post by rockstar »

itsmeagain wrote: Sun Jul 07, 2024 3:08 pm
nisiprius wrote: Sun Jul 07, 2024 11:27 am ...
Observation #4: a problem is that the memory of all kinds of pain--kidney stones, childbirth, financial--fades with time. I can't really remember what it was like in 2008. Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse. Like Snow White and the Seven Dwarfs, I literally cannot remember all of them without checking a timeline. And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
Here's a little walk down memory lane:
https://www.cnbc.com/2009/03/06/dows-bl ... tocks.html

For example, Citigroup went from $55 to <$1. (It later did a 1:10 reverse split to remain listed.)
I forget the exact number, but I recall at one point several stocks in the bluechip DJIA were trading under $5, which is what the SEC considered penny stock territory.
I remember walking into a Target store to buy Christmas presents during that period of time, and it was pretty much empty. And lots of stuff was on sale. But since then the market has come back.

It's really about how long it takes to recover, not that the market won't ever go down. And when things to do go south, it's a good time to buy everything, which is why I'm totally cool with a 2x emergency fund.
unwitting_gulag
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Re: I am having FOMO. Please remind me of bear markets

Post by unwitting_gulag »

itsmeagain wrote: Sun Jul 07, 2024 3:08 pm
nisiprius wrote: Sun Jul 07, 2024 11:27 am ...
Observation #4: a problem is that the memory of all kinds of pain--kidney stones, childbirth, financial--fades with time. I can't really remember what it was like in 2008. Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse. Like Snow White and the Seven Dwarfs, I literally cannot remember all of them without checking a timeline. And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
Here's a little walk down memory lane:
https://www.cnbc.com/2009/03/06/dows-bl ... tocks.html

For example, Citigroup went from $55 to <$1. (It later did a 1:10 reverse split to remain listed.)
I forget the exact number, but I recall at one point several stocks in the bluechip DJIA were trading under $5, which is what the SEC considered penny stock territory.
Pain is easier to bear, if it's universal. Targeted and narrow pain, is far worse. When everything is falling, nothing is falling.

What we've seen in recent years, is very uneven rise. One segment of one market - US large-caps - seems to have disavowed gravity, and gotten away with it. Elsewhere, performance might charitably be termed, "realistic". In the next bear market, whenever that comes, what bodes for the "realistic" investments? Will they fall, as far as the gravity-defiers? That is the real pain! On the rise, we don't rise as much. On the fall, we suffer just as much.
coachd50
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Re: I am having FOMO. Please remind me of bear markets

Post by coachd50 »

White Coat Investor wrote: Sun Jul 07, 2024 1:48 pm
TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
2 years is a heck of an emergency fund. Why not leave 1 year invested in cash and put the 2nd year into something conservative like Wellesley.
What does "conservative" mean though. As many have bemoaned recently, the "40" in their conservative 60/40 portfolios just had a fairly significant loss. If the OP is concerned about volatile income and even employment, wouldn't the factors that would put those at risk also potentially impact that portfolio--even if it is "conservative".
Hyperchicken
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Re: I am having FOMO. Please remind me of bear markets

Post by Hyperchicken »

Having an emergency fund is a good advice to people living paycheck to paycheck, or with little savings.

One with sizeable investments does not need an emergency fund. Sure they may need to sell at the market bottom if an emergency happens. Not investing part of your money because of that is textbook loss aversion.
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