A time to EVALUATE your jitters

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TheDDC
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Joined: Mon Jan 08, 2018 10:11 am

Re: A time to EVALUATE your jitters

Post by TheDDC »

CheepSkate wrote: Fri Jan 03, 2020 12:10 pm Wow. This thread is some hardcore jitters therapy.

To hear how scared people were 50% or 100% or 150% ago, and how there was always some sort of economic crisis on the horizon, to read those old links - just an amazing perspective! And to read the accounts of people putting it all in money market accounts years ago :shock:

I’ve had a too-conservative AA since 2009, and it’s the reason I’m not retired. This thread brings back memories of how I listened to too much media and social media chatter, came to believe what was being repeated (the propaganda effect), and let my emotions drive without realizing it even when in the grand scheme I had many years to go and merely a few hundred grand at risk.

Yet here I am with my underwater hedges and bonds looking at the recent inverted yield curve and wondering how much further the US economy can grow at 3.5% unemployment (exactly who are these expanding businesses going to hire?). I’m looking at a graying demographic picture for the entire western world plus China that resembles Japan in about 1990 and I see policy makers who are oblivious to the connection between graying demographics and disinflation.

There’s always a worry when the only right answer has ever been to buy and hold. Yet I still can’t convince myself to go all in. The market would surely crash the very next day. :oops:
Yesterday I invested my full 2020 Roth IRA allotment. Today I decided to delete the CNBC and Stocks apps from my iPhone. Life is good.

You mention noise in your post. That's about right. See my signature.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
clip651
Posts: 1586
Joined: Thu Oct 02, 2014 11:02 am

Re: A time to EVALUATE your jitters

Post by clip651 »

CheepSkate wrote: Fri Jan 03, 2020 12:10 pm
There’s always a worry when the only right answer has ever been to buy and hold. Yet I still can’t convince myself to go all in. The market would surely crash the very next day. :oops:
That's why the answer isn't to go all in. The answer is to pick an asset allocation you can stick with (and preferably ignore), whatever may come. Not too aggressive, not too conservative for your circumstances.

And write out an IPS to remind yourself of the plan when the news or market returns tempt you to go in a different direction.

https://www.bogleheads.org/wiki/Investm ... _statement

cj
RotzehMasayim
Posts: 60
Joined: Sun Apr 07, 2019 12:48 am

Re: A time to EVALUATE your jitters

Post by RotzehMasayim »

TheDDC wrote: Fri Jan 03, 2020 12:18 pm
CheepSkate wrote: Fri Jan 03, 2020 12:10 pm Wow. This thread is some hardcore jitters therapy.

To hear how scared people were 50% or 100% or 150% ago, and how there was always some sort of economic crisis on the horizon, to read those old links - just an amazing perspective! And to read the accounts of people putting it all in money market accounts years ago :shock:

I’ve had a too-conservative AA since 2009, and it’s the reason I’m not retired. This thread brings back memories of how I listened to too much media and social media chatter, came to believe what was being repeated (the propaganda effect), and let my emotions drive without realizing it even when in the grand scheme I had many years to go and merely a few hundred grand at risk.

Yet here I am with my underwater hedges and bonds looking at the recent inverted yield curve and wondering how much further the US economy can grow at 3.5% unemployment (exactly who are these expanding businesses going to hire?). I’m looking at a graying demographic picture for the entire western world plus China that resembles Japan in about 1990 and I see policy makers who are oblivious to the connection between graying demographics and disinflation.

There’s always a worry when the only right answer has ever been to buy and hold. Yet I still can’t convince myself to go all in. The market would surely crash the very next day. :oops:
Yesterday I invested my full 2020 Roth IRA allotment. Today I decided to delete the CNBC and Stocks apps from my iPhone. Life is good.

You mention noise in your post. That's about right. See my signature.

-TheDDC
I love this post! :thumbsup :thumbsup

I also invested my full 2020 Roth IRA allotment on January 2nd! Only difference was I never had CNBC app on my phone to delete!! LOL
Colleen
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Joined: Wed Feb 15, 2017 9:58 am

Re: A time to EVALUATE your jitters

Post by Colleen »

My hubby was 100% equities from 1994-2018. We went through some crazy down markets. He used to tell me that he felt like he was trying to put the furnace flames out by tossing cash on top of the fire during the financial crisis. There was a decade in there when the 401(k) didn’t have more money in it than had been invested.

But, in time, we had a big pile of contributions and when the market took off, it was crazy how fast a pile of money turned into the first million, then second million and then the third million. That wasn’t all 401(k) money but half of it was.

My only point is that if you are young and can continuously invest a lot for a long period of time, there may be moments or years when things feel like you are getting nowhere in the stock market and that you are taking risks for no gains. But the gains, they come.
kim.gold
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Joined: Sat Jan 18, 2020 9:58 am

Re: A time to EVALUATE your jitters

Post by kim.gold »

Colleen wrote: Sun Jan 19, 2020 2:35 pm My hubby was 100% equities from 1994-2018. We went through some crazy down markets. He used to tell me that he felt like he was trying to put the furnace flames out by tossing cash on top of the fire during the financial crisis. There was a decade in there when the 401(k) didn’t have more money in it than had been invested.
Not his fault :happy It is still called "the lost decade of U.S. stocks" http://www.investingparexc.com/2018/05/ ... de-stocks/
Grt2bOutdoors
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Location: New York

Re: A time to EVALUATE your jitters

Post by Grt2bOutdoors »

kim.gold wrote: Sun Jan 26, 2020 1:50 pm
Colleen wrote: Sun Jan 19, 2020 2:35 pm My hubby was 100% equities from 1994-2018. We went through some crazy down markets. He used to tell me that he felt like he was trying to put the furnace flames out by tossing cash on top of the fire during the financial crisis. There was a decade in there when the 401(k) didn’t have more money in it than had been invested.
Not his fault :happy It is still called "the lost decade of U.S. stocks" http://www.investingparexc.com/2018/05/ ... de-stocks/
The best time to pick up bargains are during sales - there were tons of sales, but people like to pay full price when it comes to investing for their future! Why? I haven't the foggiest idea except perhaps they fail to understand what their true risk tolerance is and they fall victim to sensational news.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Vihoo
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Re: A time to EVALUATE your jitters

Post by Vihoo »

Reading this in 2020, and aside from the charts not showing up on my side (iPhone), such a great read!

I remember the crappy atmosphere, but I wasn’t an investor in 2008/2009. Starting just maxing out our 401ks as of a few years ago. The gains have been ridiculous, so it’s hard to even imagine the feeling of our portfolio dropping 10%, let alone 50%!

When it tanked in 2008/2009, I remember my Dad just kept buying. I was confused as hell. He bought more equity, more short sale RE, and just stayed consistent. His income level was high and allowed him to do so. Hope to be that level-headed as he was. However, I think having experienced more in life (coming from nothing...and then also watching the 2000 bubble in his prime years) gave him the ability to do that. He saw it as an opportunity in 2008/2009. He was worried, and pissed off like anyone else...but he seemed to have recovered from that thought quicker than others around him.

Our age during these various bear/bull markets certainly weighs on how we proceed as investors - and affects how we view the market.
anon3838
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Joined: Fri May 03, 2019 11:54 am

Re: A time to EVALUATE your jitters

Post by anon3838 »

BlackDiamond wrote: Mon Aug 19, 2019 11:16 am This 8 yr old thread just proves once again the old adage that "time in the market" is more important than "timing the market".

I've personally witnessed 4 major stock market corrections as an adult - 1987, 1990-91, 2000-01 and 2008-09. If you are young (under 40 reading this), just invest in good, solid companies with great balance sheets that have excellent growth. Trust me, you'll do MUCH better just parking it in equities over your lifetime rather than trying to get cute and thinking short-term. It's not rocket science.

If you haven't watched this Charlie Munger video, it's one of the best 11 min equity education lessons you'll ever get ;)

https://www.youtube.com/watch?v=3WkpQ4PpId4
This is an excellent 10-minute video. So many quotables...one of my favorite, and apropos for this thread:
If you're not willing to react with equanimity to a marketplace decline, of 50%, 2-3 times a century, you're not fit to be a common shareholder, and you deserve the mediocre result you're going to get. -Charlie Munger
thank you for sharing!
guyinlaw
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Re: A time to EVALUATE your jitters

Post by guyinlaw »

anon3838 wrote: Sat Feb 15, 2020 10:04 am
If you haven't watched this Charlie Munger video, it's one of the best 11 min equity education lessons you'll ever get ;)

https://www.youtube.com/watch?v=3WkpQ4PpId4
This is an excellent 10-minute video. So many quotables...one of my favorite, and apropos for this thread:
If you're not willing to react with equanimity to a marketplace decline, of 50%, 2-3 times a century, you're not fit to be a common shareholder, and you deserve the mediocre result you're going to get. -Charlie Munger
thank you for sharing!
Thank you for sharing. I need to remind myself this everyday.
Time is your friend; impulse is your enemy. - John C. Bogle
Silence Dogood
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Re: A magnificent post by Nisiprius

Post by Silence Dogood »

Taylor Larimore wrote: Sun Aug 07, 2011 7:47 am Nisiprius:

Your contributions to the Boglehead Forum are making us all better investors.

We thank you.
I remember reading this thread back in 2011, when I was still a new investor.

Nisiprius has just surpassed the 40,000 post mark. Each and every one of them has been a gem.

Thank you, nisiprius!
Vihoo
Posts: 91
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Re: A time to EVALUATE your jitters

Post by Vihoo »

Vihoo wrote: Fri Feb 07, 2020 7:47 am Reading this in 2020, and aside from the charts not showing up on my side (iPhone), such a great read!

I remember the crappy atmosphere, but I wasn’t an investor in 2008/2009. Starting just maxing out our 401ks as of a few years ago. The gains have been ridiculous, so it’s hard to even imagine the feeling of our portfolio dropping 10%, let alone 50%!

When it tanked in 2008/2009, I remember my Dad just kept buying. I was confused as hell. He bought more equity, more short sale RE, and just stayed consistent. His income level was high and allowed him to do so. Hope to be that level-headed as he was. However, I think having experienced more in life (coming from nothing...and then also watching the 2000 bubble in his prime years) gave him the ability to do that. He saw it as an opportunity in 2008/2009. He was worried, and pissed off like anyone else...but he seemed to have recovered from that thought quicker than others around him.

Our age during these various bear/bull markets certainly weighs on how we proceed as investors - and affects how we view the market.
Guess I jinxed it...only took 20 days since my post for portfolios to take a dip of 10%+! Fun begins now.
pasadena
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Re: A time to EVALUATE your jitters

Post by pasadena »

Vihoo wrote: Fri Feb 07, 2020 7:47 am Reading this in 2020, and aside from the charts not showing up on my side (iPhone), such a great read!
They're not loading for me either, on desktop. It's a shame, because they made the whole post even more amazing. If I remember correctly, it's a chart of the stock market (idk which index), starting hyper zoomed in on a downturn, looking very scary, until the last one where it's zoomed out and barely visible, if at all.
seychellois_lib
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Re: A time to EVALUATE your jitters

Post by seychellois_lib »

I am retired 3.5 years. I am pretty conservative so I decided I could stomach a 40/60 AA that's equity with broad diversification/Fixed I did the math on a 50 to 60% market downturn and decided I could manage through such an event with minor impact on lifestyle.

Although I am not enthusiastic about the market action for the last several days (not to mention the cause of this downturn!), it has been interesting in the sense it has tested my AA decision. I am pretty comfortable with how things have gone so far. While the indices are down about 13% (more or less) my overall portfolio is down about 4%. About what I was expecting in these circumstances. OK, time to stay chill.

One concern I have is to paraphrase Buffett "when the tide goes out, we find out who's in the water naked" I worry who might be naked and how ugly that might get. Who knows?

Just rebalanced in mid December to get my equity back down to the 40% but what may become challenging is my next scheduled rebalance in June/July timeframe. If the worst comes to the worst and equity is way down, do I rebalance to my 40/60 or do I simply rebalance the equity wreckage and leave the percentages wherever they may fall?

To those of you who may say my AA is overly conservative and will cost me return. Yes, I realize this. I would respond I have done precisely what is recommended by Boggleheads. Set an allocation which will allow you to psychologically endure a serious downturn. But I have to laugh. If I had dollar bills for each buck I have lost over the past week, I could completely wallpaper the interior of my house...maybe more than once!
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StormShadow
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Re: A time to EVALUATE your jitters

Post by StormShadow »

Hah! I was about to start a thread talking about exactly this. People need to relax.

All this news about COVID-19... its being overblown. I'm a physician, and I'm telling you, its being overblown. If you live in the USA, odds are that you are way way WAY more likely to die from influenza than you are from COVID-19. So far this year, we have had a grand total of one person die from COVID-19. We literally have 30,000 to 60,000 people die from influenza EVERY SINGLE year. Get your flu vaccine. Practice good hygiene.

In the meantime...

Don't try to time the market. That's a losers game.

Stick to your asset allocation. Which, btw, may need revision since I am convinced that most people vastly over-estimate their risk tolerance. Its the only way you can objectively "buy low, sell high".
noviceinvestor85
Posts: 17
Joined: Tue Jan 30, 2018 2:34 am

RE:A time to EVALUATE your jitters

Post by noviceinvestor85 »

Hi,
I've had a few Vanguard funds for the past 18 months or so and have felt smug about them until a few days ago.

FTSE Developed World ex-U.K
Lifestrategy 80% Equity Fund - Accumulation
U.S. Equity Index Fund - Accumulation
LifeStrategy® 100% Equity Fund - Accumulation
FTSE Developed World ex-U.K - Accumulation

I'm in my early 40's and nowhere near retirement. I've seen my funds increase in value by 27.49% at the peak to a low of 2.69% now. I can afford to just wait it out and hope that Coronavirus doesn't get too bad, but the question is should I?
FoolMeOnce
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Re: RE:A time to EVALUATE your jitters

Post by FoolMeOnce »

noviceinvestor85 wrote: Mon Mar 02, 2020 8:26 am I can afford to just wait it out and hope that Coronavirus doesn't get too bad, but the question is should I?
Yes.
CashFlo
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Re: A time to EVALUATE your jitters

Post by CashFlo »

At the start of the year I had too much in cash (by six figures). I knew it. The money was proceeds from a home sale. I won't need the capital for 10-15 years when I plan to step back from full-time work. But I was uncomfortable deploying all of that cash into the market as many financial planners would advise with my long time horizon (time in the market vs timing). I have no guilt or misgivings about buying last week, if effect rolling back the calendar almost a full year, because what I did had a purpose and strategy behind it. The dividends will be reinvested and I have a plan to DCA the rest. I am comfortable with the long-term prospects.

Jitters? No.
Plan? Yes.
squirm
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Re: A time to EVALUATE your jitters

Post by squirm »

You're going to have to have a plan or acceptance that stocks could go down and stay down for a very long time. To think after every downturn is a straight v shaped recover is insane.
minimalistmarc
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Re: A time to EVALUATE your jitters

Post by minimalistmarc »

squirm wrote: Thu Mar 05, 2020 2:22 pm You're going to have to have a plan or acceptance that stocks could go down and stay down for a very long time. To think after every downturn is a straight v shaped recover is insane.
I find V shaped recoveries immensely frustrating as there is so little time to accumulate at lower prices.

I hope they go down and stay down for many years. I like buying equities and never sell.
Leesbro63
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Re: A time to EVALUATE your jitters

Post by Leesbro63 »

minimalistmarc wrote: Thu Mar 05, 2020 2:42 pm
squirm wrote: Thu Mar 05, 2020 2:22 pm You're going to have to have a plan or acceptance that stocks could go down and stay down for a very long time. To think after every downturn is a straight v shaped recover is insane.
I find V shaped recoveries immensely frustrating as there is so little time to accumulate at lower prices.

I hope they go down and stay down for many years. I like buying equities and never sell.
But isn’t it all about buying earnings per share? If there’s an economic slowdown and you buy stocks nominally cheaper, are you REALLY buying cheaper if the earnings are less?
minimalistmarc
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Re: A time to EVALUATE your jitters

Post by minimalistmarc »

Leesbro63 wrote: Fri Mar 06, 2020 7:22 am
minimalistmarc wrote: Thu Mar 05, 2020 2:42 pm
squirm wrote: Thu Mar 05, 2020 2:22 pm You're going to have to have a plan or acceptance that stocks could go down and stay down for a very long time. To think after every downturn is a straight v shaped recover is insane.
I find V shaped recoveries immensely frustrating as there is so little time to accumulate at lower prices.

I hope they go down and stay down for many years. I like buying equities and never sell.
But isn’t it all about buying earnings per share? If there’s an economic slowdown and you buy stocks nominally cheaper, are you REALLY buying cheaper if the earnings are less?
Cheaper yes, better value not necessarily.

I think prices will be a lot higher than this in 20 - 50 years
MishkaWorries
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Re: A time to EVALUATE your jitters

Post by MishkaWorries »

What if I don't have any jitters? Does that mean my AA was too conservative? Before the correction I was feeling a little disappointed I was missing out on the run up.

Now we're down about 20% and I think maybe I should readjust my AA to a more aggressive stance. I don't need most of these savings for 10-15 years.
We plan. G-d laughs.
ginrummy
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Re: A time to EVALUATE your jitters

Post by ginrummy »

MishkaWorries wrote: Mon Mar 09, 2020 9:25 pm What if I don't have any jitters? Does that mean my AA was too conservative? Before the correction I was feeling a little disappointed I was missing out on the run up.

Now we're down about 20% and I think maybe I should readjust my AA to a more aggressive stance. I don't need most of these savings for 10-15 years.

Well you could estimate the amount you might have been down if you were aggressive, treat that like house money and start to go in. Personally, I’m going back in slowly. Setting limits at prices that reflect another 5%, another 7% drop. If those trades don’t go through, great! Some emerging and international choices could reach near 5 year lows. Interesting if you are looking to add those to your allocation.
ginrummy
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Re: A time to EVALUATE your jitters

Post by ginrummy »

Vihoo wrote: Mon Mar 09, 2020 10:16 pm
When it comes to investing...sure everyone is losing, but I’m looking forward to when the dust settles a bit rather than plowing money in during continued chaos.
What do you think will indicate that the dust has settled?
Chesterfield
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Re: A time to EVALUATE your jitters

Post by Chesterfield »

MishkaWorries wrote: Mon Mar 09, 2020 9:25 pm What if I don't have any jitters? Does that mean my AA was too conservative? Before the correction I was feeling a little disappointed I was missing out on the run up.

Now we're down about 20% and I think maybe I should readjust my AA to a more aggressive stance. I don't need most of these savings for 10-15 years.
Are you actively maintaining your AA during this 20% drop? For example, I rebalance at +/-5% to maintain my 50/50-ish portfolio. At market peak on Feb 19, I was at 52/48 (3 funds portfolio equities/fixed income). During the past week or so (today was low 6 figures loss), I had to actively sell a lot of bonds/cash to invest into equities to bring it back up to 50/50 AA. I'm still accumulating & don't need these investments for a while.

I suspect my true jitters will reveal themselves though when the market drops 40-55%: 1) If I can continue (and happily) rebalance back to my current 50/50 AA, then my AA is too low. 2) If instead, I don't sell but also don't add to maintain my AA then my AA is about right. 3) If I start selling/lose sleep at night then my current AA is too high. So what I'm saying is wait until the market drops further before you readjust your AA?
Monsterflockster
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Re: A time to EVALUATE your jitters

Post by Monsterflockster »

Chesterfield wrote: Mon Mar 09, 2020 11:13 pm
MishkaWorries wrote: Mon Mar 09, 2020 9:25 pm What if I don't have any jitters? Does that mean my AA was too conservative? Before the correction I was feeling a little disappointed I was missing out on the run up.

Now we're down about 20% and I think maybe I should readjust my AA to a more aggressive stance. I don't need most of these savings for 10-15 years.
Are you actively maintaining your AA during this 20% drop? For example, I rebalance at +/-5% to maintain my 50/50-ish portfolio. At market peak on Feb 19, I was at 52/48 (3 funds portfolio equities/fixed income). During the past week or so (today was low 6 figures loss), I had to actively sell a lot of bonds/cash to invest into equities to bring it back up to 50/50 AA. I'm still accumulating & don't need these investments for a while.

I suspect my true jitters will reveal themselves though when the market drops 40-55%: 1) If I can continue (and happily) rebalance back to my current 50/50 AA, then my AA is too low. 2) If instead, I don't sell but also don't add to maintain my AA then my AA is about right. 3) If I start selling/lose sleep at night then my current AA is too high. So what I'm saying is wait until the market drops further before you readjust your AA?
I didn’t think it would drop this low. Could keep going... at this point I’m in until the economy collapses or bounces back. Prefer the later.
MishkaWorries
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Re: A time to EVALUATE your jitters

Post by MishkaWorries »

Chesterfield wrote: Mon Mar 09, 2020 11:13 pm
MishkaWorries wrote: Mon Mar 09, 2020 9:25 pm What if I don't have any jitters? Does that mean my AA was too conservative? Before the correction I was feeling a little disappointed I was missing out on the run up.

Now we're down about 20% and I think maybe I should readjust my AA to a more aggressive stance. I don't need most of these savings for 10-15 years.
Are you actively maintaining your AA during this 20% drop? For example, I rebalance at +/-5% to maintain my 50/50-ish portfolio. At market peak on Feb 19, I was at 52/48 (3 funds portfolio equities/fixed income). During the past week or so (today was low 6 figures loss), I had to actively sell a lot of bonds/cash to invest into equities to bring it back up to 50/50 AA. I'm still accumulating & don't need these investments for a while.

I suspect my true jitters will reveal themselves though when the market drops 40-55%: 1) If I can continue (and happily) rebalance back to my current 50/50 AA, then my AA is too low. 2) If instead, I don't sell but also don't add to maintain my AA then my AA is about right. 3) If I start selling/lose sleep at night then my current AA is too high. So what I'm saying is wait until the market drops further before you readjust your AA?
Good points Chesterfield. My AA is off about 2-3 % so I think I'll do a little rebalancing. I also upped my equities for my future contributions.

I think those two things will be enough. At least I did something. I just have this strong need to

DO SOMETHING!
We plan. G-d laughs.
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prudent
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Re: A time to EVALUATE your jitters

Post by prudent »

Some off-topic posts were removed.
bltn
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Re: A time to EVALUATE your jitters

Post by bltn »

Colleen wrote: Sun Jan 19, 2020 2:35 pm My hubby was 100% equities from 1994-2018. We went through some crazy down markets. He used to tell me that he felt like he was trying to put the furnace flames out by tossing cash on top of the fire during the financial crisis. There was a decade in there when the 401(k) didn’t have more money in it than had been invested.

But, in time, we had a big pile of contributions and when the market took off, it was crazy how fast a pile of money turned into the first million, then second million and then the third million. That wasn’t all 401(k) money but half of it was.

My only point is that if you are young and can continuously invest a lot for a long period of time, there may be moments or years when things feel like you are getting nowhere in the stock market and that you are taking risks for no gains. But the gains, they come.
Congratulations on sticking with your investing program and continuing to contribute, during good times and bad.

I was a dozen years into my investing history, before I realized that dollar cost averaging mostly into index funds was the way to go. Twenty five years later I evaluated our position for financial security, and I surprised myself.!?! I guess I didn't t pay much attention to the totals until almost the end. Like Jack said said in an AAII interview, continue to index, and don t look at your statements until time to retire. You ll be amazed at your accumulation.
random_walker_77
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Re: A time to EVALUATE your jitters

Post by random_walker_77 »

It's such a shame the original tinypic images are gone. I went searching through internet archives (wayback machine & archive.vn) and couldn't find anyplace that'd cached it. The google cached snapshot of this thread also doesn't have it.

However, entering the link URL into google as a search term did turn up some cached images that I think cover most of the original images.

for example:
https://www.google.com/search?q=http:// ... AXoECAQQAw
or
https://www.google.com/search?q=http:// ... 45&bih=807

These roughly match my memory of this post. I'm pretty sure that #1-3 and 5-6 are right, but am uncertain about the 4th one (regarding the 1930s)

Do these look right?

[edited to remove these, since 2pedals has the correct full-size versions]
Last edited by random_walker_77 on Sun Mar 15, 2020 4:35 pm, edited 1 time in total.
2pedals
Posts: 1988
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Re: A time to EVALUATE your jitters

Post by 2pedals »

The following is what I believe to be nisiprius's original 2011 post with the tinypic images replaced.
nisiprius wrote: Sun Aug 07, 2011 7:00 am I want to say this carefully. This is not an optimistic "stay the course" post and it's not a pessimistic "OMG do something" post. It's directed at people who are feeling very uncomfortable. I want to point out some things to think about, things that are hopefully truisms that everyone can see are correct once they're pointed out.

Your investment plan needs to be in tune with your own personal willingness to take financial risk. Your tolerance for financial risk is what it is. Only you know what it is. Nobody else can tell you what it should be. Different people are really and truly different. And your tolerance for financial risk is not necessarily the same as your tolerance for other kinds of risk.

You may not know what stock market risk is really like, and you may not know what your own risk tolerance really is. This is, if nothing else, a good opportunity to assess both.

What we have today is about a 10-15% decline in the S&P over the last month or so, coupled with a feeling of seismic shifts in the financial world. A sense that the earth is moving under our feet. A sense that events are happening that are going to make it into the history books. The general mood is summarized in this headline:

El-Erian: downgrade heralds new era -- (waybackmachine link)

Heralds new era! Strong stuff. Let's not argue about whether it's true or not, let's agree that it feels that way right now. Like there's been a turning point, a division between an old era and a new era, and therefore past history is no longer a guide to the future.

And here's my point: it always feels that way. That's always what a big downturn feels like. It's not a number, 10% or 15%. It's a sense that there's been a break, the ground has shifted, the rules have changed.

We love drama and after the fact the reality often turns out to be boring. Imagine thinking that, see, it wasn't so bad! But that's later. And sometimes it is a turning point and sometimes it is that bad.

When you're deciding what your risk tolerance is, it's not a tolerance for the number 10 or the number 15 or the number 25. It's not a tolerance for an "A" turning into a "+". It's a tolerance for accepting genuinely-scary, nothing-like-this-has-ever-happened-before, heralds-a-new-era news events.

Now, the next set of truisms. Nobody knows what's going to happen. No, really. I don't care what the best experts are saying or what the futures do or what happens tonight in Asia. On Monday, stocks might shoot right back up. Or they might plunge some more. Or they might diddle around for weeks leaving us all on tenterhooks and then plunge some more, Or not.

We see this:

Image

Well, we really don't know what will happen. It might be almost nothing... it might be like the start of this period in 1998 and it could bounce back in a few months.

Image

It might be the start of another 50% plunge like 2008-2009. Awful, but over in a couple of years.

Image

It might be like the start of this period in 1937 when stocks plunged about 50% as in 2008-9, but didn't come back for about a decade. (I'm using a long-lived stock market mutual fund as a proxy for "the market," but it's close enough).

Image

It might be like Japan in 1990, down for two decades and still down.

Image

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."

Unfortunately, if you look at all this and conclude that your exposure to the stock market is higher than your risk tolerance, there aren't any good options. It is absolutely a personal decision. The only sure way to reduce stock market risk substantially is to cut back on your stock allocation. Diversification, fiddling around with different flavors of stock, it's all bandaids. When stocks plunge, they plunge. So the S&P drops 50% and your portfolio drops 46%, big deal.

And when the stock market is falling, you can't cut back on your stock market risk without locking in a loss. It's a tough one and a personal decision. You absolutely have to measure one against the other. It's crazy to even suggest a course of action to anyone else and I'm not going to try.

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.
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Re: A time to EVALUATE your jitters

Post by random_walker_77 »

2pedals wrote: Sun Mar 15, 2020 3:05 pm The following is what I believe to be nisiprius's original 2011 post with the tinypic images replaced.
Thank you! That looks great, with full-size images to boot. May I ask how you found it, or if you'd kept a local copy? I'll edit my post to remove my images, since yours look way better (and more correct)
2pedals
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Re: A time to EVALUATE your jitters

Post by 2pedals »

random_walker_77 wrote: Sun Mar 15, 2020 4:31 pm
2pedals wrote: Sun Mar 15, 2020 3:05 pm The following is what I believe to be nisiprius's original 2011 post with the tinypic images replaced.
Thank you! That looks great, with full-size images to boot. May I ask how you found it, or if you'd kept a local copy? I'll edit my post to remove my images, since yours look way better (and more correct)
Steps for each image:
1) Use the forum quote tool to find the original tinypic link defined in the BBCode (text between img] & [/img )
2) Search the waybackmachine to find the tinypic graphic on one of the given saved dates
3) Use a snapshot (flameshot software) of the waybackmachine results
4) Save the snapshot to a png file

Steps after all snapshot images are saved:
5) Upload all the images to Postimage.org (select do not resize my image with no expiration date)
6) Copy the direct links (large graphics) given back from Postimage.org
7) Delete the tinypic link between the img] & [/img BBCode found in step 1 and replace by pasting the new appropriate direct link
8) Check for errors using preview
9) Submit when satisfied

The image copy is saved in the cloud on the postimage.org website. Can be retrieved using the direct links.
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Re: A time to EVALUATE your jitters

Post by 260chrisb »

Very well said and thank you!
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Re: A time to EVALUATE your jitters

Post by nisiprius »

Thank you very much, 2pedals. Fixed now.

I'm amazed that you're using postimage.org... it was offline for quite a while and I quit using it. Any thoughts from anyone on whether postimage.org or imgur.com (which I just used in making the repairs) has a longer life expectancy?
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.
Angst
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Re: A time to EVALUATE your jitters

Post by Angst »

2pedals wrote: Sun Mar 15, 2020 3:05 pm The following is what I believe to be nisiprius's original 2011 post with the tinypic images replaced.
[Snip...]

Thank you for all the work resurrecting nisi's pics!
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Re: A time to EVALUATE your jitters

Post by 2pedals »

The original post is a classic and I am glad nisiprius restored it.

random_walker_77 started the idea to restore the post and deserves most of the credit. I helped finish the job. I don't know which image hosting is the best.
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Re: A time to EVALUATE your jitters

Post by Barry Barnitz »

Hi all:

This topic is also produced (with downloaded images) on our site's blog. Here is the blog version: A time to EVALUATE your jitters.

regards,
Additional administrative tasks: Financial Page bogleheads.org. blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; La Guía Bogleheads® España site.
mooudn
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Re: A time to EVALUATE your jitters

Post by mooudn »

nisiprius wrote: Sun Aug 07, 2011 7:00 am
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."

Unfortunately, if you look at all this and conclude that your exposure to the stock market is higher than your risk tolerance, there aren't any good options. It is absolutely a personal decision. The only sure way to reduce stock market risk substantially is to cut back on your stock allocation. Diversification, fiddling around with different flavors of stock, it's all bandaids. When stocks plunge, they plunge. So the S&P drops 50% and your portfolio drops 46%, big deal.

And when the stock market is falling, you can't cut back on your stock market risk without locking in a loss. It's a tough one and a personal decision. You absolutely have to measure one against the other. It's crazy to even suggest a course of action to anyone else and I'm not going to try.

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.
how do you post pictures here? i d like to post a screen shot of my portfolio but cant figre out how.
random_walker_77
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Re: A time to EVALUATE your jitters

Post by random_walker_77 »

mooudn wrote: Wed Mar 18, 2020 7:01 pm
how do you post pictures here? i d like to post a screen shot of my portfolio but cant figre out how.
take a look at this page, which explains how to post pictures: https://www.bogleheads.org/wiki/Posting ... eads_forum
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Re: A time to EVALUATE your jitters

Post by Tejfyy »

nisiprius wrote: Sun Aug 07, 2011 7:00 am 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.
I don't love drama, I get sucked into it and thus actively avoid it. The toll it takes on my health and well-being is figured into my risk tolerance.

The "boring" reality is that capitalism doesn't work but for the very very few. It sucks. It tramples the less fortunate, the marginalized and the vulnerable. I invest so as to not become more marginalized and more vulnerable than I am. And I’m a very well educated White woman of 60.

So in times like these, my contempt for this system reigns. My eyes roll almost out of their sockets watching overly-fed people panic shop and hoard. Compassion for their plight is suffocated.

I feel justified in the desire to blame something and someone. Outrage consumes me. So I look for wisdom and find it here, and create my own: WATCH ME LIVE ON $5 A DAY SUCKERS! HA HA HA!!!
l1am
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Re: A time to EVALUATE your jitters

Post by l1am »

I’m in my mid 30’s and started investing w/ VG 4 years ago (kinda late I know, I was raised very frugal and struggled to invest into potentially losing investments). Ever since then I’ve been researching and learning (mostly on here and wiki), and generally excited to see my investments pay off.

Some months were down, most were up, but overall the volatility was worth the returns. 80/20 AA.

Today, I looked at my portfolio and for the first time I’m in the red. This month has wiped out all the past months. It’s a weird realization that I’d have been technically better off never investing the money over the past 4 years and having it in CDs/savings. It didn’t hit me until the returns went to negative.

I’m not selling. I’m staying the course and actually have some cash-in-hand and ready to continue investing over time, trying to ignore the “noise”. I’m sticking to the plan.

Any words of wisdom?
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Re: A time to EVALUATE your jitters

Post by nisiprius »

l1am wrote: Thu Mar 19, 2020 2:12 am I’m in my mid 30’s and started investing w/ VG 4 years ago (kinda late I know, I was raised very frugal and struggled to invest into potentially losing investments). Ever since then I’ve been researching and learning (mostly on here and wiki), and generally excited to see my investments pay off.

Some months were down, most were up, but overall the volatility was worth the returns. 80/20 AA.

Today, I looked at my portfolio and for the first time I’m in the red. This month has wiped out all the past months. It’s a weird realization that I’d have been technically better off never investing the money over the past 4 years and having it in CDs/savings. It didn’t hit me until the returns went to negative.

I’m not selling. I’m staying the course and actually have some cash-in-hand and ready to continue investing over time, trying to ignore the “noise”. I’m sticking to the plan.

Any words of wisdom?
"It’s a weird realization that I’d have been technically better off never investing the money over the past 4 years and having it in CDs/savings. It didn’t hit me until the returns went to negative." That is exactly how I felt in 2008. It's quite one thing to talk about being a certain percentage down. It's quite another to realize that years of patient savings, salting away a meaningful chunk of one's salary, scrimping, foregoing nice things for years and year and years, has just gotten shot to hell, just totally shot to hell. To the extent that other people are depending on you, you feel as if you have failed them. In 2008-2009, in theory "I knew this could happen," but I wasn't prepared for how it would feel.

Yes, there is a qualitative difference between "foregone gains, missed out, could have done better" and "lost money." And there is a qualitative difference between "the stock market is down," and "the stock market is down and everything else in the world seems to be falling apart, too."

I can assure you that you are not the only person who feels "weird." Fred Schwed wrote:
In 'Where are the Customers'' Yachts?', in 1940, Fred Schwed wrote:Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature.... [No] description that I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.
And the Victorian writer, Samuel Butler, wrote:
In reality, money losses are the hardest to bear of any by those who are old enough to comprehend them.... Suicide is a common consequence of money losses; it is rarely sought as a means of escape from bodily suffering.
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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Aptenodytes
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Re: A time to EVALUATE your jitters

Post by Aptenodytes »

Very enlightening discussion.

It has been helpful for me to a have little box in my portfolio tracking sheet, right next to my balance, that shows me very starkly what my holdings would be if stocks fell by 50%. I started doing it several years ago to help me make sure I had enough liquid non-stock funds on hand to be able to rebalance in such a scenario (most of my non-equities are in TIAA Traditional Annuity (the non-liquid kind). But even though the purpose was checking on liquidity, I found that seeing that number almost every day helped normalize what is happening now. I think it is part of why I am not at all nervous about the market right now (I've no pretense that I'll be calm under any storms, but for now I'm good).

Another way to put the point is -- you can use your logical brain to create an optimal AA. But you should also tap into your emotional brain to add elements to your strategy that help you avoid anxiety. You don't have to set the logical optimum, buckle your seat belt, and ride the anxiety out as if it were an uncontrollable force of nature. For me visualizing plausible worst case scenarios regularly (and visualizing the transfer of such large sums from fixed income to equities, with the exact account and fund specified) is part of the emotional strategy.
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Re: A time to EVALUATE your jitters

Post by tvubpwcisla »

Aptenodytes wrote: Thu Mar 19, 2020 5:34 am Very enlightening discussion.

It has been helpful for me to a have little box in my portfolio tracking sheet, right next to my balance, that shows me very starkly what my holdings would be if stocks fell by 50%. I started doing it several years ago to help me make sure I had enough liquid non-stock funds on hand to be able to rebalance in such a scenario (most of my non-equities are in TIAA Traditional Annuity (the non-liquid kind). But even though the purpose was checking on liquidity, I found that seeing that number almost every day helped normalize what is happening now. I think it is part of why I am not at all nervous about the market right now (I've no pretense that I'll be calm under any storms, but for now I'm good).

Another way to put the point is -- you can use your logical brain to create an optimal AA. But you should also tap into your emotional brain to add elements to your strategy that help you avoid anxiety. You don't have to set the logical optimum, buckle your seat belt, and ride the anxiety out as if it were an uncontrollable force of nature. For me visualizing plausible worst case scenarios regularly (and visualizing the transfer of such large sums from fixed income to equities, with the exact account and fund specified) is part of the emotional strategy.
This is a great idea and strategy. Thanks for sharing.
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Re: A time to EVALUATE your jitters

Post by Leesbro63 »

I just reread the Nisiprisus original post. One thing that stands out is that it DOES always seem like "the thing" is a gamechanger that's never been seen before. I was born in 1960 and only remember the 1973 oil shock from the perspective of a young teen. But even then I remember hearing about how we were running out of oil and how our lives could become bleak from it etc. And I remember the dread in the 1979-80 oil/hostages/Iran/"malaise" era. I remember my dad upset that gas was going to go to $3/gallon (from about 60 cents just before the Iranian revolution). And there was the dread of 9/11 and 2008. I don't imagine the Cuban Missile Crisis or the JFK assassination and only remember a little of the 1968 turmoil. The world can always end on any given day. This too will be bad and many will sadly die. But from a financial perspective we'll probably just add to the national debt (we still have a long way to go to catch Japan) and get on with consuming. Stocks will take a bad hit...whatever that means...but probably recover within a few years.

My point that this IS something new, But like the other "somethings new" we'll probably muddle through.
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Re: A time to EVALUATE your jitters

Post by Slambert »

Here is an excellent video from Ben Felix that sums up "stay the course". https://www.youtube.com/watch?v=9PYsVkPtcXk
"The greatest enemy of a good plan is the dream of a perfect plan."-Carl von Clausewitz
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Re: A time to EVALUATE your jitters

Post by CMLAW1 »

Colleen wrote: Sun Jan 19, 2020 2:35 pm My hubby was 100% equities from 1994-2018. We went through some crazy down markets. He used to tell me that he felt like he was trying to put the furnace flames out by tossing cash on top of the fire during the financial crisis. There was a decade in there when the 401(k) didn’t have more money in it than had been invested.

But, in time, we had a big pile of contributions and when the market took off, it was crazy how fast a pile of money turned into the first million, then second million and then the third million. That wasn’t all 401(k) money but half of it was.

My only point is that if you are young and can continuously invest a lot for a long period of time, there may be moments or years when things feel like you are getting nowhere in the stock market and that you are taking risks for no gains. But the gains, they come.
From a young guy like myself, thank you Colleen!
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Re: A time to EVALUATE your jitters

Post by hagridshut »

I feel like I am watching the failure of the "defined contribution" system, again.

Some people can withstand the emotional suffering and stick to their IPS. Many, maybe even most, cannot.

In 2009, I watched people wreck their retirement. They sold low, never bought back in, ruined their portfolios, and had no hope of retirement. An old age of working odd jobs, or doing menial labor, or signing up with "gig economy" apps, just to get by, is their fate. 10 years later, it looks like the same is happening again.
Taking a break as of 2 Mar. 2021; First Principles: (1) Diversify (2) Low Cost (3) Stay the Course | 3-Fund Index Portfolio
squirm
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Re: A time to EVALUATE your jitters

Post by squirm »

hagridshut wrote: Sat Mar 21, 2020 1:28 pm I feel like I am watching the failure of the "defined contribution" system, again.

Some people can withstand the emotional suffering and stick to their IPS. Many, maybe even most, cannot.

In 2009, I watched people wreck their retirement. They sold low, never bought back in, ruined their portfolios, and had no hope of retirement. An old age of working odd jobs, or doing menial labor, or signing up with "gig economy" apps, just to get by, is their fate. 10 years later, it looks like the same is happening again.
A friend of mine cashed out back in 2009 (or maybe 2010). I always told him to when you invest in the stock market, expect half of it to vanish at some point. If you can't fathom that, then figure out how you want to invest. I think the problem over the last several years has been trying to get a reasonable income, thus investors went out further and further on that limb (basically leveraged investments). Now it's come crashing down.
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