A time to EVALUATE your jitters

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VictoriaF
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Re: Nobel prize for Nisiprius

Post by VictoriaF » Wed Aug 17, 2011 6:14 pm

baw703916 wrote:
VictoriaF wrote: P.S. I have missed this recent market drama because I was away with limited access to the Internet. That was very fortunate. While those with the access to the news were preparing for a cataclysm, my greatest worry was to get into the Catacombs before they have closed for the day.


Getting back out is also important! :D

Brad


The place if full of bones. That would have been the coolest place to spend a night, provided I got back out eventually.

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Re: Japan

Post by nisiprius » Wed Aug 17, 2011 7:54 pm

airahcaz wrote:Can anyone opine on how the Japanese chart is taken into account, or if it is just for demonstration?
They are all just illustrations. They are things that have happened and therefore could happen. The final chart is not supposed to prove that the others don't matter, or that they can be brushed aside, but I thought it would be just as tendentious to show only bad illustrations as to show only one good illustration. Somehow we need to accept all the conflicting information, accept uncertainty, and invest anyway.
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Re: Japan

Post by airahcaz » Wed Aug 17, 2011 8:27 pm

nisiprius wrote:
airahcaz wrote:Can anyone opine on how the Japanese chart is taken into account, or if it is just for demonstration?
They are all just illustrations. They are things that have happened and therefore could happen. The final chart is not supposed to prove that the others don't matter, or that they can be brushed aside, but I thought it would be just as tendentious to show only bad illustrations as to show only one good illustration. Somehow we need to accept all the conflicting information, accept uncertainty, and invest anyway.


Agreed, just wasn't sure if you were including it in a comparison of say the Total World, including Japan...
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Post by unclemick » Sun Sep 25, 2011 10:08 am

Excellent thread.

heh heh heh - outstanding example of why I love this forum. 8-)

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Post by graveday » Sun Sep 25, 2011 9:53 pm

Who is this Herald and what is his era?

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Re: A time to EVALUATE your jitters

Post by tfb » Mon Feb 20, 2012 11:13 am

nisiprius wrote:What I'm saying is that this is a good time for evaluation. The risk is here. Don't exaggerate it--we all love drama, but reality is usually more boring than we expect. Don't brush it aside, look it in the eye as carefully as you can. And then look at how you really feel about it--not how you'd like to feel or how you think you're supposed to feel.

And one final thought. If we're lucky, and the stock market comes back at least part way and seems to stabilize for a while... or if it comes roaring back and soars (yes, that' could happen, too)... don't forget how you feel right now. If you feel that you are close to the edge of your risk tolerance right now, then you have too much in stocks. If you manage to tough it out and we get a calm spell, don't forget how you feel now and at least consider making an adjustment then.

Now is an excellent time to reflect on this. What did we learn? Is the memory fading now only after 6 months? What did you do when the market was down? What should you do now? What will you do when it happens again?
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Re: A time to EVALUATE your jitters

Post by bayview » Thu Jun 25, 2015 6:16 pm

A bump for those who might not have seen this linked in the current (June 2015) link viewtopic.php?f=10&t=168261
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: A time to EVALUATE your jitters

Post by CUBuffs » Thu Jan 07, 2016 11:32 am

Thanks Nisiprius!
I just saw your post because ray.james referenced it in the lengthy "Stocks are in a free fall" thread. Your post is very timely now and I'm sure it will continue to be timely as we experience these normal business cycles.
Thanks again for sharing your vast wisdom and calming us down!
Best wishes,
Mike

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Re: A time to EVALUATE your jitters

Post by Bushido1 » Thu Jan 07, 2016 10:57 pm

I guess even if this was written in 2011 applies to now (2016)? Right?

Or is there any difference worth mention in it?

Thanks for the great post.

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Re: A time to EVALUATE your jitters

Post by pkcrafter » Thu Jan 07, 2016 11:01 pm

guess even if this was written in 2011 applies to now (2016)? Right?

Right!

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Re: A time to EVALUATE your jitters

Post by oragne lovre » Sun Jan 10, 2016 4:03 pm

A good thread to peruse, just in case some Bogleheads may feel more jittery in upcoming weeks or ... months :happy
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Re: A time to EVALUATE your jitters

Post by LadyGeek » Sun Jan 10, 2016 5:14 pm

This thread is now in the Investing - Theory, News & General forum (general investing).
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Re: A time to EVALUATE your jitters

Post by mickeyd » Tue Jan 12, 2016 1:16 pm

I recall reading and responding to Nisi's post of over 4 years ago. The post is timeless and as accurate today as then and will be accurate 4+ years from now.

If you have not done so, it's a keeper. :moneybag
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Re: A time to EVALUATE your jitters

Post by Cruiser » Wed Jan 13, 2016 11:39 pm

I'll add my thanks to the ever-growing list. I actually read the first post without realizing the timestamp from over four years ago; funny how history seems to repeat itself. Well thought-out post; speaks the truth that I'm sure many are thinking but either have a hard time putting into words or otherwise would rather not think about, indicating an asset allocation that isn't right for them.

As for me, I'm perfectly fine with my asset allocation (100% equities: 80% US, 20% international). I have decades of investing ahead of me, so when the markets dip, I'm looking for any excess cash I may have to pour into the market, on top of my regular DCA investments.

The tortoise always wins.
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Re: A time to EVALUATE your jitters

Post by Rodc » Thu Jan 14, 2016 9:33 am

And one final thought. If we're lucky, and the stock market comes back at least part way and seems to stabilize for a while... or if it comes roaring back and soars (yes, that' could happen, too)... don't forget how you feel right now.


Too late.

Did something important happen in 2011?
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: A time to EVALUATE your jitters

Post by jwillis77373 » Fri Jan 15, 2016 10:29 am

Stable.. well thought out.. careful.

Amazing post Nispirus.

.. my analogies are always something like .. "don't look if you don't want to know how sausage is made. This how the market works."

Which feels so inadequate and snide by comparison.

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Re: A time to EVALUATE your jitters

Post by avenger » Fri Jan 15, 2016 11:37 am

I am so thankful to have found this forum when I did. I've only been investing for a little over four years. I came up with a reasonable asset allocation plan, and have been motivated to pay off a huge mountain of debt. This has all been dictated by my IPS, which I pulled out to re-read this week.

Thanks!
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [3 fund portfolio: VTI, VXUS, SV fund (yield 3.01%)]

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Re: A time to EVALUATE your jitters

Post by HurdyGurdy » Fri Jan 15, 2016 1:47 pm

Could this post be made a sticky one in the forum?

:beer

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Re: A time to EVALUATE your jitters

Post by LadyGeek » Fri Jan 15, 2016 11:51 pm

^^^ Good idea. This thread is now stuck to the top of the Investing - Theory, News & General forum.
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Re: A time to EVALUATE your jitters

Post by letsgobobby » Sat Jan 16, 2016 12:56 am

Cruiser wrote:I'll add my thanks to the ever-growing list. I actually read the first post without realizing the timestamp from over four years ago; funny how history seems to repeat itself. Well thought-out post; speaks the truth that I'm sure many are thinking but either have a hard time putting into words or otherwise would rather not think about, indicating an asset allocation that isn't right for them.

As for me, I'm perfectly fine with my asset allocation (100% equities: 80% US, 20% international). I have decades of investing ahead of me, so when the markets dip, I'm looking for any excess cash I may have to pour into the market, on top of my regular DCA investments.

The tortoise always wins.

How long have you been investing serious money?

Welcome to the board.

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Re: A time to EVALUATE your jitters

Post by jcjc » Sat Jan 16, 2016 9:33 am

I'm a fairly new member. This is my favorite post thus far. Happy it was posted for us newcomers to see.

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Re: A time to EVALUATE your jitters

Post by loves2read » Sat Jan 16, 2016 2:38 pm

http://www.etf.com/sections/index-inves ... nopaging=1

I was on another website's investing forum and saw similar instances where past threads echoed the same sentiments about not responding emotionally to market situations like this month's...
Swedroe's column is just another seasoned point of view supporting that idea

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Re: A time to EVALUATE your jitters

Post by mickeyd » Sat Jan 16, 2016 3:32 pm

Quote from above link



Warren Buffett is probably the most highly regarded investor of our era. Read his statements carefully regarding efforts to time the market:


•“Inactivity strikes us as intelligent behavior.”
•“The only value of stock forecasters is to make fortune-tellers look good.”
•“We continue to make more money when snoring than when active.”
•“Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.”
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Re: A time to EVALUATE your jitters

Post by oldzey » Sat Jan 16, 2016 3:50 pm

nisiprius wrote:But not to overweight the pessimism, let me add one more chart. Where's last week's plunge? When I expand the scale, it's actually there. The data being plotted includes it. But apparently it's so tiny it just gets rounded off or vanishes at screen pixel resolution!

Image

The point is, the last few weeks were a time when some risk showed up, and your job is to process it. The temptation is to deal with the discomfort by choosing a prediction. Don't. Your job is to confront the reality of that uncertainty, that you do not know what will happen, and can only make the roughest guesses as to the likelihood of all these scenarios.

Hopefully, you can say "well, yeah, I knew all that. I'd much rather see the market go up and I feel anxious, but I'm able to stay the course."


Looks like MFS Massachusetts Investors Tr A (MITTX) has done quite well since 6/30/2011:

Image
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Re: A time to EVALUATE your jitters

Post by fortyofforty » Sat Jan 16, 2016 4:42 pm

I don't know what percentage of stocks versus bonds I'd be able to hold not to feel bad during market downturns and, especially, crashes. 60/40 still takes quite a hit, for example, and comparing how it did with more risky stock percentages is meaningless. I think once you've experienced a number of crashes and severe slides, you just have to have faith that the market will, in time, come back and rise again. I just keep dollar-cost-averaging into the slide, and hold on for the ride.
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Re: A time to EVALUATE your jitters

Post by More Please » Sat Jan 16, 2016 10:09 pm

Thanks so much for this invaluable post. I read it for the first time tonight and think it should be on the editorial page of the WSJ. I'm printing it out and putting it under glass on my bedside table. Thank you!!

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Re: A time to EVALUATE your jitters

Post by zmm » Sun Jan 17, 2016 1:24 pm

What do you all think of this:
[OT link removed by admin LadyGeek]

I know that "nobody knows what will happen in the markets". However, this person's predictions are coming true one by one... could this really be the start of the dollar's collapse and lead to "making the whole financial system dysfunctional"?

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Re: A time to EVALUATE your jitters

Post by bayview » Sun Jan 17, 2016 8:38 pm

zmm wrote:What do you all think of this:
[OT link removed by admin LadyGeek]

I know that "nobody knows what will happen in the markets". However, this person's predictions are coming true one by one... could this really be the start of the dollar's collapse and lead to "making the whole financial system dysfunctional"?

Even without the removed link, I highly doubt it.

But he probably made a few coins by your linking on his article. And that's the underlying reason for this sort of article. That's why it's called "financial porn."
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Re: A time to EVALUATE your jitters

Post by Peculiar_Investor » Mon Jan 18, 2016 8:40 am

loves2read wrote:http://www.etf.com/sections/index-investor-corner/swedroe-keep-calm-and-step-forward?nopaging=1

I was on another website's investing forum and saw similar instances where past threads echoed the same sentiments about not responding emotionally to market situations like this month's...
Swedroe's column is just another seasoned point of view supporting that idea

In case you missed it, Larry already started a topic to discuss the article, see viewtopic.php?f=10&t=181924
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Re: A time to EVALUATE your jitters

Post by convert949 » Mon Jan 18, 2016 10:17 am

Best summary I have ever seen! I remember when the DOW was at 900 down from 1500 and the headlines read "DOW at 3000 by years end". I always try to remember what I have learned from Jack Bogle, Wade Pfau, Larry Swedrow, Bill Bernstein and now Nisi :P

Thanks to you all, I must be OK as I am still sleeping well...

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Re: A time to EVALUATE your jitters

Post by fourwedge » Tue Jan 19, 2016 11:14 am

No Jitters for me yet! I'm still looking at this as a nice sale and I'm sleeping like a baby :sharebeer :moneybag

I guess my allocation is still ok
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Re: A time to EVALUATE your jitters

Post by Clever_Username » Wed Jan 20, 2016 11:22 am

I think this past few ... weeks? months? ... has been the first time there's been a notable drop in the market during which I've had any sizable investment. I haven't had any jitters yet that I'm aware of, but I should make note of any feelings so I can properly evaluate my risk tolerance when/if I reevaluate my desired asset allocation: currently aimed 32% bonds, 68% stocks, reflecting age in bonds directly, although I am currently under-weight in stocks and have been for a bit. My monthly 403(b) contributions are done at 25/75 to bring this closer to balance.

So I guess I might get to find out if I was overly conservative in my asset allocation the past few years.
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Re: A time to EVALUATE your jitters

Post by archii » Wed Jan 27, 2016 9:10 pm

Well, having $400K in my cash account really helps temper down my jitters... And offers opportunity where others may fear to tread :D

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Re: A time to EVALUATE your jitters

Post by gmaynardkrebs » Thu Jan 28, 2016 6:30 pm

archii wrote:Well, having $400K in my cash account really helps temper down my jitters... And offers opportunity where others may fear to tread :D

If you have SS and $400K in cash, I'd say you are doing great! However, there is a case for cowardice to be made here as well -- $400K won't buy that big a life annuity -- I think a little less than a modest SS pension if you index for inflation.

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Re: A time to EVALUATE your jitters

Post by archii » Fri Jan 29, 2016 6:51 pm

gmaynardkrebs wrote:
archii wrote:Well, having $400K in my cash account really helps temper down my jitters... And offers opportunity where others may fear to tread :D

If you have SS and $400K in cash, I'd say you are doing great! However, there is a case for cowardice to be made here as well -- $400K won't buy that big a life annuity -- I think a little less than a modest SS pension if you index for inflation.


I'm not holding ALL cash by any means, but it does make up about 8% of my portfolio. It's a bit high for cash yes, but I like to hold 3 years of living expenses as well as having dry powder on hand.

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Re: A time to EVALUATE your jitters

Post by linenfort » Wed Feb 10, 2016 7:58 pm

Well, I wish I could have read these words of wisdom during my first downturn. It would've helped a lot!
Good stuff.
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Re: A time to EVALUATE your jitters

Post by Valuethinker » Wed Mar 02, 2016 11:00 am

fortyofforty wrote:I don't know what percentage of stocks versus bonds I'd be able to hold not to feel bad during market downturns and, especially, crashes. 60/40 still takes quite a hit, for example, and comparing how it did with more risky stock percentages is meaningless. I think once you've experienced a number of crashes and severe slides, you just have to have faith that the market will, in time, come back and rise again. I just keep dollar-cost-averaging into the slide, and hold on for the ride.


Here's the bad news: they don't always recover. And least not quickly.

Japan since 1990, of course.

But also 1929-1939 in USA (the rallies were followed by spectacular busts, I think the actual bottom was 1941?).

And 1968-1980 in the USA - inflation was a big part of the story, but basically bond and stock investors got *hammered*.

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Re: A time to EVALUATE your jitters

Post by nisiprius » Wed Mar 02, 2016 11:26 am

Valuethinker wrote:But also 1929-1939 in USA (the rallies were followed by spectacular busts, I think the actual bottom was 1941?)...
One table of "declines" (from the SBBI yearbook--objective in the sense that I didn't pick the dates) basically gives it as two back-to-back seven-year bear markets:

Peak Aug 1929, Trough May 1932, Decline 79.00%, Recovery Nov. 1936
Peak Feb 1937, Trough March 1938, Decline 49.93%, Recovery Feb. 1945.

1935 and 1936 was two of the best years in stock market history, with a returns of 47.7% and 33.9% respectively. As you see, the crash in 1937 was about the same magnitude and lasted longer than 2008-2009 and yet it's almost completely forgotten because of having been preceded by a worse one.

I can't even imagine what it must have felt like in 1937, just thinking you were finally out of the woods and then getting clobbered again.

Think of 1929-1945 the next time someone tells you that the "average length of a bear market" is some small number of years. Yeah, because 1929-1945 gets counted as two 7-year bear markets, and just a few percent less in 1936 and it would count as a single 15-year bear market.
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Re: A time to EVALUATE your jitters

Post by Toons » Wed Mar 02, 2016 11:29 am

15 years of "buying low" :happy
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Re: A time to EVALUATE your jitters

Post by gmaynardkrebs » Wed Mar 02, 2016 11:41 am

Valuethinker wrote:
fortyofforty wrote:I don't know what percentage of stocks versus bonds I'd be able to hold not to feel bad during market downturns and, especially, crashes. 60/40 still takes quite a hit, for example, and comparing how it did with more risky stock percentages is meaningless. I think once you've experienced a number of crashes and severe slides, you just have to have faith that the market will, in time, come back and rise again. I just keep dollar-cost-averaging into the slide, and hold on for the ride.

Here's the bad news: they don't always recover. And least not quickly. Japan since 1990, of course.
But also 1929-1939 in USA (the rallies were followed by spectacular busts, I think the actual bottom was 1941?).
And 1968-1980 in the USA - inflation was a big part of the story, but basically bond and stock investors got *hammered*.

I agree with this, and I also have to point out that the reality may be even more troubling than what is said here. Time is not the "great healer" it is portrayed. The basic intuition is this: while it is true that time gives equities more time to outperform bonds and cash (what most investors recognize), it also gives stocks more time for a crash (what most investors fail fully to grasp). Many economists, including the late (great) Paul Samuelson, were quite convinced that the latter effect dominated long term equity returns. Of course, the debate rages on, but what is striking is how many investors (97% according to Robert Shiller) seem to think there is no debate at all -- that it's simply a matter of riding out the dips.

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Re: A time to EVALUATE your jitters

Post by Jeff Albertson » Wed Mar 02, 2016 2:19 pm

from the Economist's Buttonwood:
Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School are the acknowledged experts on global investment returns, having compiled data covering 22 countries over more than a century. As of February 2013, the longest period of negative real returns from US equities was 16 years. But it was 19 years for global equities (and 37 for world ex-US), 22 for Britain, 51 for Japan, 55 for Germany and 66 for France. Such periods are much longer than most small investors would have the patience to wait.

http://www.economist.com/blogs/buttonwood/2016/01/investing

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Re: A time to EVALUATE your jitters

Post by Fieldsy1024 » Sat Mar 19, 2016 3:56 pm

I consider investing as sort of gambling. Index funds are your good cards, picking just one stock is putting all your chips in hoping for a gut shot straight, chasing the market is chasing straights and flushes.

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Re: A time to EVALUATE your jitters

Post by BahamaMan » Sat Mar 19, 2016 4:08 pm

gmaynardkrebs wrote:I agree with this, and I also have to point out that the reality may be even more troubling than what is said here. Time is not the "great healer" it is portrayed. The basic intuition is this: while it is true that time gives equities more time to outperform bonds and cash (what most investors recognize), it also gives stocks more time for a crash (what most investors fail fully to grasp). Many economists, including the late (great) Paul Samuelson, were quite convinced that the latter effect dominated long term equity returns. Of course, the debate rages on, but what is striking is how many investors (97% according to Robert Shiller) seem to think there is no debate at all -- that it's simply a matter of riding out the dips.


The real reality which is even more troubling than what you posted, is that once you reach age 65 and have friends that are in their 80s, stock and bond returns are the very least of your worries. It is your health...Most all of my friends in their 80s have major health issues... Funerals happen much more often than Full Moons. Yes, we all plan our money to last well beyond age 100... But the reality is much more grim. You are right "Time is not the "great healer", but, in all probability, you will suffer sooner than your portfolio will.

Have a Great Day! :happy

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Re: A time to EVALUATE your jitters

Post by Dimitri » Sat Mar 19, 2016 4:29 pm

Fieldsy1024 wrote:I consider investing as sort of gambling. Index funds are your good cards, picking just one stock is putting all your chips in hoping for a gut shot straight, chasing the market is chasing straights and flushes.


Or is betting on one stock (or individual stocks on general) putting in all your chips on AA? Those who chase straights and flushes go home on Greyhound buses. Those who bet on Dividend Aristocrats ...http://www.marketwatch.com/story/heres- ... 2015-01-09 Well, they seem to do kind of better.
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Fieldsy1024
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Re: A time to EVALUATE your jitters

Post by Fieldsy1024 » Sat Mar 19, 2016 5:40 pm

:greedy Once in a while I am a sucker for those flushes or straights

If I hit one out of 4 I'm happy

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HomerJ
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Re: A time to EVALUATE your jitters

Post by HomerJ » Sat Mar 19, 2016 6:31 pm

Clever_Username wrote:I should make note of any feelings so I can properly evaluate my risk tolerance


Good point.

I am 50/50 and never felt nervous during the last drop (Vanguard Total Stock only dropped 10% though from Jan 1st - man people were freaking out).

So I'm happy with 50/50...

I expect another 50% drop before I retire... Maybe it won't happen, but I'm prepared for it.

In 4 years (I'm 9 years from retirement), I'll start building a 5-year CD ladder, and slowly move to 30/50/20 stocks/bonds/cash.

gmaynardkrebs
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Re: A time to EVALUATE your jitters

Post by gmaynardkrebs » Sun Mar 20, 2016 7:23 am

HomerJ wrote:...
So I'm happy with 50/50...
I expect another 50% drop before I retire... Maybe it won't happen, but I'm prepared for it....

Do you mean a permanent (or at least decades long) 50% drop? Or are you assuming a bounce back?

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mickeyd
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Re: A time to EVALUATE your jitters

Post by mickeyd » Sun Mar 20, 2016 12:44 pm

Here we are once again.

Financial crisis is averted and the S&P500 is back to where it started in January. All hair fires seem to have been extinguished.

Next topic, "What's your favorite color?"
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

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JackieRA
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Re: A time to EVALUATE your jitters

Post by JackieRA » Sun Mar 20, 2016 1:34 pm

What a perfectly timed post for me! I am a new investor to this forum and mostly a new investor overall. I just finished my investment plan and got a realistic view of my holdings. I have to admit I was a bit unnerved at seeing some short-term paper losses, but I am staying the course. I followed the 10 investing rules for beginners and have faith that I am on track. Your post underscored that I must stay focused on the overall investment plan and not on the quick fix, or quick gain.
" An investment in knowledge pays the best interest." Benjamin Franklin

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linenfort
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Re: A time to EVALUATE your jitters

Post by linenfort » Sun Mar 20, 2016 7:14 pm

mickeyd wrote:Here we are once again.

Financial crisis is averted and the S&P500 is back to where it started in January. All hair fires seem to have been extinguished.

Next topic, "What's your favorite color?"


Dare I say red?
Did anyone else play Acquire as a child?

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