U.S. stocks in free fall

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jfn111
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Re: U.S. stocks in free fall

Post by jfn111 » Wed Feb 13, 2019 4:28 pm

HomerJ wrote:
Wed Feb 13, 2019 12:35 pm
jfn111 wrote:
Fri Jan 18, 2019 7:53 pm
I went 80% cash today at the close. It may be a brilliant move or... :oops:
So the market is up about 5% since this move. In less than a month.

You may still be proven correct. The market could drop 20% from here. But if it keeps going up, how do you decide at what point to get back in the market? After it goes up another 10%, 15%, 20%? The odds of a crash would be even higher then, right?

What if it does drop 20% from here, do you buy back in then, or wait for it to drop further? What if you wait, and it heads back up 10%. Jump back in before it gets back to your original sell point? Or wait longer and see it was a dead-cat bounce? Maybe it will drop again.

Do you have a plan? Market-timing is hard. You have to make decision after decision after decision. Once you get back in, you'll have to keep paying attention so you can decide when to get out again.

Just going on hunches for your next dozen market-timing decisions is not likely to end well.
Good questions. I haven't decided yet on my next move. I've pretty much locked in a 5%+ return if the market stays flat for the rest of the year. I may just sit out the rest of the year and decide next year what I want to do.

H-Town
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Re: U.S. stocks in free fall

Post by H-Town » Wed Feb 13, 2019 4:48 pm

jfn111 wrote:
Wed Feb 13, 2019 4:28 pm
HomerJ wrote:
Wed Feb 13, 2019 12:35 pm
jfn111 wrote:
Fri Jan 18, 2019 7:53 pm
I went 80% cash today at the close. It may be a brilliant move or... :oops:
So the market is up about 5% since this move. In less than a month.

You may still be proven correct. The market could drop 20% from here. But if it keeps going up, how do you decide at what point to get back in the market? After it goes up another 10%, 15%, 20%? The odds of a crash would be even higher then, right?

What if it does drop 20% from here, do you buy back in then, or wait for it to drop further? What if you wait, and it heads back up 10%. Jump back in before it gets back to your original sell point? Or wait longer and see it was a dead-cat bounce? Maybe it will drop again.

Do you have a plan? Market-timing is hard. You have to make decision after decision after decision. Once you get back in, you'll have to keep paying attention so you can decide when to get out again.

Just going on hunches for your next dozen market-timing decisions is not likely to end well.
Good questions. I haven't decided yet on my next move. I've pretty much locked in a 5%+ return if the market stays flat for the rest of the year. I may just sit out the rest of the year and decide next year what I want to do.
Maybe a mix of 50/50 portfolio will help? Set it and forget it? No?

revhappy
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Re: U.S. stocks in free fall

Post by revhappy » Thu Feb 14, 2019 4:35 am

I sold about 5% of my portfolio in equities yesterday. I was 50% allocated and now I am 45%. I wondering if I should sell SPY 250 PUTs for Dec 2019, it gives me 3.5% additional yield and if markets goes that low, I am ok buying back what I sold for 275. Any thoughts?

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oldcomputerguy
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Re: U.S. stocks in free fall

Post by oldcomputerguy » Thu Feb 14, 2019 6:25 am

revhappy wrote:
Thu Feb 14, 2019 4:35 am
I sold about 5% of my portfolio in equities yesterday. I was 50% allocated and now I am 45%. I wondering if I should sell SPY 250 PUTs for Dec 2019, it gives me 3.5% additional yield and if markets goes that low, I am ok buying back what I sold for 275. Any thoughts?
Sounds to me like market timing. What is your desired asset allocation? 50% equities? 45%? Or is it jumping around?
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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nisiprius
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Re: U.S. stocks in free fall

Post by nisiprius » Thu Feb 14, 2019 6:47 am

LiterallyIronic wrote:
Wed Feb 13, 2019 12:48 pm
Admiral wrote:
Wed Feb 13, 2019 11:53 am
Many of us were stocking up when it was $38 in 2009... :beer
The rest of us were trying to find jobs. :(
Indeed.

In The Great Depression, A Diary, Benjamin Roth, who was a young lawyer, constantly laments how difficult the Depression is on "professional men." He wasn't completely out of work or selling apples, but he does frequently express frustration at being surrounded by buying opportunities--both for stocks and real estate--and completely unable to take advantage of them.

I won't debate the merits of "buying the dips" in a small way, like a 5% drop on a "really bad day." But, beyond that, the statistics that show how well you would have done "just" by continuing to buy stocks steadily during major, secular bear markets are deeply flawed.

John Jakob Raskob's September, 1929 article, "Everybody Ought to Be Rich," said that people could reach financial independence in twenty years by investing $15 per month:
If he invests in good common stocks and allows the dividends and rights to accumulate, he will at the end of twenty years have at least eighty thousand dollars and an income from investments of around four hundred dollars a month. He will be rich.
($15/month in 1929 = $218/month today; $400/month = $5,800/month today).

There were two problems with that statement. The first is that by "good common stocks," he means the stocks that he, himself, had been clever enough to pick for an investment plan he ran for managers at General Motors, and it assumed an annual rate of return twice that of the stock market as a whole. Second, of course, is that the idea of saving $15/month must have rung very hollow for most salaried workers over the next fifteen years.
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.

revhappy
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Re: U.S. stocks in free fall

Post by revhappy » Thu Feb 14, 2019 8:19 am

oldcomputerguy wrote:
Thu Feb 14, 2019 6:25 am
revhappy wrote:
Thu Feb 14, 2019 4:35 am
I sold about 5% of my portfolio in equities yesterday. I was 50% allocated and now I am 45%. I wondering if I should sell SPY 250 PUTs for Dec 2019, it gives me 3.5% additional yield and if markets goes that low, I am ok buying back what I sold for 275. Any thoughts?
Sounds to me like market timing. What is your desired asset allocation? 50% equities? 45%? Or is it jumping around?
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.

Silk McCue
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Re: U.S. stocks in free fall

Post by Silk McCue » Thu Feb 14, 2019 8:27 am

revhappy wrote:
Thu Feb 14, 2019 8:19 am
oldcomputerguy wrote:
Thu Feb 14, 2019 6:25 am
revhappy wrote:
Thu Feb 14, 2019 4:35 am
I sold about 5% of my portfolio in equities yesterday. I was 50% allocated and now I am 45%. I wondering if I should sell SPY 250 PUTs for Dec 2019, it gives me 3.5% additional yield and if markets goes that low, I am ok buying back what I sold for 275. Any thoughts?
Sounds to me like market timing. What is your desired asset allocation? 50% equities? 45%? Or is it jumping around?
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers

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Taj_Mahalo
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Re: U.S. stocks in free fall

Post by Taj_Mahalo » Thu Feb 14, 2019 9:14 am

Wow - HUGE drop of 1.2%.....

What a joke. Haven't we all known that Retail has been sinking for a while? SMH - It never ceases to amaze me how something such as this can cause a panic.
Income is not wealth. Wealth is not income. Both are equally as important and either is capable of producing the other.

marcopolo
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Re: U.S. stocks in free fall

Post by marcopolo » Thu Feb 14, 2019 9:19 am

Taj_Mahalo wrote:
Thu Feb 14, 2019 9:14 am
Wow - HUGE drop of 1.2%.....

What a joke. Haven't we all known that Retail has been sinking for a while? SMH - It never ceases to amaze me how something such as this can cause a panic.
It amazes me what some people call a panic. :sharebeer
Once in a while you get shown the light, in the strangest of places if you look at it right.

revhappy
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Re: U.S. stocks in free fall

Post by revhappy » Thu Feb 14, 2019 9:21 am

Taj_Mahalo wrote:
Thu Feb 14, 2019 9:14 am
Wow - HUGE drop of 1.2%.....

What a joke. Haven't we all known that Retail has been sinking for a while? SMH - It never ceases to amaze me how something such as this can cause a panic.
Many small things add up, Germany gdp growth came in at 0%. The whole world is slowing down. It is just a matter of time it hits US. With US outperforming so much, guess who will get hit the most in the next plunge.

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Taj_Mahalo
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Re: U.S. stocks in free fall

Post by Taj_Mahalo » Thu Feb 14, 2019 9:25 am

marcopolo wrote:
Thu Feb 14, 2019 9:19 am
Taj_Mahalo wrote:
Thu Feb 14, 2019 9:14 am
Wow - HUGE drop of 1.2%.....

What a joke. Haven't we all known that Retail has been sinking for a while? SMH - It never ceases to amaze me how something such as this can cause a panic.
It amazes me what some people call a panic. :sharebeer
No panic here - simply staying the course! Just find it amusing how the media uses certain trigger words in the articles that convey news like this.
Income is not wealth. Wealth is not income. Both are equally as important and either is capable of producing the other.

marcopolo
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Re: U.S. stocks in free fall

Post by marcopolo » Thu Feb 14, 2019 10:05 am

Taj_Mahalo wrote:
Thu Feb 14, 2019 9:25 am
marcopolo wrote:
Thu Feb 14, 2019 9:19 am
Taj_Mahalo wrote:
Thu Feb 14, 2019 9:14 am
Wow - HUGE drop of 1.2%.....

What a joke. Haven't we all known that Retail has been sinking for a while? SMH - It never ceases to amaze me how something such as this can cause a panic.
It amazes me what some people call a panic. :sharebeer
No panic here - simply staying the course! Just find it amusing how the media uses certain trigger words in the articles that convey news like this.
I was just pointing out your hyperbolic over-reaction to the media's admittedly hyperbolic over-reaction. Sure there are some headlines, but there is hardly any sign "panic", as you called it.
Once in a while you get shown the light, in the strangest of places if you look at it right.

quantAndHold
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Re: U.S. stocks in free fall

Post by quantAndHold » Thu Feb 14, 2019 11:30 am

LiterallyIronic wrote:
Wed Feb 13, 2019 12:48 pm
Admiral wrote:
Wed Feb 13, 2019 11:53 am
H-Town wrote:
Wed Feb 13, 2019 11:21 am
TheTimeLord wrote:
Wed Feb 13, 2019 10:43 am
J G Bankerton wrote:
Wed Feb 13, 2019 8:26 am
Is it time to move back in?
Do you really need to post the same exact thing in 2 different threads. This is not a humble brag.
viewtopic.php?f=10&t=257573&start=550#p4379253
J G Bankerton wrote:
Wed Feb 13, 2019 8:31 am
LOL I don't know how he feels if he knows that he could have bought VTI at $50 price point years ago.

I guess you got to get excited about something, right?
Many of us were stocking up when it was $38 in 2009... :beer
The rest of us were trying to find jobs. :(
This best investment of my life was managing to stay employed through that period, so that I could continue investing. I’m living off of that now.

Of course, I only knew his in retrospect. At the time, I was just going on faith that it would all work out.

LiterallyIronic
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Re: U.S. stocks in free fall

Post by LiterallyIronic » Thu Feb 14, 2019 11:57 am

quantAndHold wrote:
Thu Feb 14, 2019 11:30 am
LiterallyIronic wrote:
Wed Feb 13, 2019 12:48 pm
Admiral wrote:
Wed Feb 13, 2019 11:53 am
H-Town wrote:
Wed Feb 13, 2019 11:21 am
TheTimeLord wrote:
Wed Feb 13, 2019 10:43 am


Do you really need to post the same exact thing in 2 different threads. This is not a humble brag.
viewtopic.php?f=10&t=257573&start=550#p4379253
LOL I don't know how he feels if he knows that he could have bought VTI at $50 price point years ago.

I guess you got to get excited about something, right?
Many of us were stocking up when it was $38 in 2009... :beer
The rest of us were trying to find jobs. :(
This best investment of my life was managing to stay employed through that period, so that I could continue investing. I’m living off of that now.

Of course, I only knew his in retrospect. At the time, I was just going on faith that it would all work out.
I believe it. For me it wasn't "managing to stay employed" that was the problem. I graduated university in December 2008 and after two months of job-hunting, when my bank account had dried up to under $40, had to take a tech support job in a call center for $9.50/hour. I wasn't in a position to start investing at all until 2012 when I had worked my way up to $13/hour, when I started putting away two or three thousand per year (whatever I could scrape together in April), and couldn't invest regularly until 2016 when I had already missed the run-up. Ten years after graduation and all I have is $72k for retirement. I could sure go for a crash down to sub-20,000 right about now.

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Thu Feb 14, 2019 12:15 pm

Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.

marcopolo
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Re: U.S. stocks in free fall

Post by marcopolo » Thu Feb 14, 2019 12:18 pm

LiterallyIronic wrote:
Thu Feb 14, 2019 11:57 am
quantAndHold wrote:
Thu Feb 14, 2019 11:30 am
LiterallyIronic wrote:
Wed Feb 13, 2019 12:48 pm
Admiral wrote:
Wed Feb 13, 2019 11:53 am
H-Town wrote:
Wed Feb 13, 2019 11:21 am


LOL I don't know how he feels if he knows that he could have bought VTI at $50 price point years ago.

I guess you got to get excited about something, right?
Many of us were stocking up when it was $38 in 2009... :beer
The rest of us were trying to find jobs. :(
This best investment of my life was managing to stay employed through that period, so that I could continue investing. I’m living off of that now.

Of course, I only knew his in retrospect. At the time, I was just going on faith that it would all work out.
I believe it. For me it wasn't "managing to stay employed" that was the problem. I graduated university in December 2008 and after two months of job-hunting, when my bank account had dried up to under $40, had to take a tech support job in a call center for $9.50/hour. I wasn't in a position to start investing at all until 2012 when I had worked my way up to $13/hour, when I started putting away two or three thousand per year (whatever I could scrape together in April), and couldn't invest regularly until 2016 when I had already missed the run-up. Ten years after graduation and all I have is $72k for retirement. I could sure go for a crash down to sub-20,000 right about now.
Yeah, that was a pretty tough situation to graduate into. I have sympathy for your plight back then, and you took the best job you could find.

The last ten years have seen great improvement in the job market, what have you done to improve your situation in the intervening years? Any plans to try to improve it going forward?
Once in a while you get shown the light, in the strangest of places if you look at it right.

28fe6
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Re: U.S. stocks in free fall

Post by 28fe6 » Thu Feb 14, 2019 12:25 pm

retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Thu Feb 14, 2019 12:31 pm

28fe6 wrote:
Thu Feb 14, 2019 12:25 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.
I wholeheartedly agree, savings rate is the #1 thing especially in the early years (at my age, my portfolio regular goes up and down DAILY 2x my ANNUAL savings rate, so it no longer matters much.) I don't think the actual % is all that important except that the investor should realize it takes skin in the game to get returns. He by the way appears to be going backwards from 50/50 saying he just reduced equity exposure by 5%.

revhappy has a returns chart on another thread and the savings rate appears to be healthy. but the due to the way he did his chart, market returns are hard to see.

veggivet
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Re: U.S. stocks in free fall

Post by veggivet » Thu Feb 14, 2019 12:34 pm

Savings rate and time IN the market are, in my opinion, the most important predictors of investment success.
If you watch your pennies, your dollars will take care of themselves.

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ruralavalon
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Re: U.S. stocks in free fall

Post by ruralavalon » Thu Feb 14, 2019 12:41 pm

Of the factors you can control, the savings rate is probably the most important at least early in your investing life.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

sreynard
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Re: U.S. stocks in free fall

Post by sreynard » Thu Feb 14, 2019 12:52 pm

28fe6 wrote:
Thu Feb 14, 2019 12:25 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.
That is true, if you are young. For older folks saving 30% isn't going to make much difference to their net worth. You really start noticing it when you make or loose more in a typical day than you contribute in a month or a year. Then allocation is way more significant than savings rate. Hence "all the energy expending on this forum over AA."

Independent George
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Re: U.S. stocks in free fall

Post by Independent George » Thu Feb 14, 2019 1:02 pm

LiterallyIronic wrote:
Thu Feb 14, 2019 11:57 am
I believe it. For me it wasn't "managing to stay employed" that was the problem. I graduated university in December 2008 and after two months of job-hunting, when my bank account had dried up to under $40, had to take a tech support job in a call center for $9.50/hour. I wasn't in a position to start investing at all until 2012 when I had worked my way up to $13/hour, when I started putting away two or three thousand per year (whatever I could scrape together in April), and couldn't invest regularly until 2016 when I had already missed the run-up. Ten years after graduation and all I have is $72k for retirement. I could sure go for a crash down to sub-20,000 right about now.
$72k after ten years is more than I had after ten years.

I started my career with a job at a public accounting firm in 2001... right as the dot com bubble was crashing and Enron killed Arthur Anderson. After paying off my Stafford loans, I gradually saved my money until I had enough to fulfill my dream of home ownership, putting down a 20% deposit on a condo... in 2007. I soon took a significant pay cut in 2009, followed by a couple years of stagnant wages. On my worst day in early 2009, I had negative net worth.

Between the lower income and the need to re-grow my reserve capital (which was now earning miniscule interest), my retirement contributions dropped considerably just as we were entering the new bull market. I still maxed out my Roth IRA and contributed to the employer match on my 401k, but I was contributing significantly less than I had been at exactly the best time to be investing. Circumstances basically pushed me into being the worst kind of market timer - I didn't sell anything, but right when stocks were at their cheapest, I was buying the least.

Through it all, despite a modest salary (inflation adjusted, I am earning less today than I did at age 30), things have turned out pretty well for me despite that compounding of bad decisions and bad luck. At age 42, my net worth is over 5x my salary (4x considering just my retirement accounts) - this is low by Boglehead standards and lower than it could have been, but astronomical compared to the average American. All I did was keep living below my means and saving the excess; even as that excess declined with my means, I kept saving and investing - and things turned out alright. Worse than they could have been, but far better than most.

I think that comparing your finances to a best case scenario ("What if I waited two years and bought my home?" "What if I took that money and put it in the market at the bottom in 2008?") is just as damaging as comparing yourself to your neighbors and trying to keep up. I made a series of bad decisions that probably cost me a few hundred thousand dollars; I can't help but be disappointed in it. Nonetheless, those decisions are a sunk cost; all I can do is make better decisions going forward. Just because things did not turn out as well as they could have, doesn't mean things turned out badly; beating yourself up over it does not help, and may make things worse if you fixate on them instead of moving forward.

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Re: U.S. stocks in free fall

Post by ruralavalon » Thu Feb 14, 2019 1:15 pm

"Independent George" wrote: . . . . . All I did was keep living below my means and saving the excess; even as that excess declined with my means, I kept saving and investing - and things turned out alright. Worse than they could have been, but far better than most.

I think that comparing your finances to a best case scenario ("What if I waited two years and bought my home?" "What if I took that money and put it in the market at the bottom in 2008?") is just as damaging as comparing yourself to your neighbors and trying to keep up. I made a series of bad decisions that probably cost me a few hundred thousand dollars; I can't help but be disappointed in it. Nonetheless, those decisions are a sunk cost; all I can do is make better decisions going forward. Just because things did not turn out as well as they could have, doesn't mean things turned out badly; beating yourself up over it does not help, and may make things worse if you fixate on them instead of moving forward.
Excellent advise for all :) . Focus on what can be done now, don't focus on what might have been done in the past if things had been different.
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TheTimeLord
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Re: U.S. stocks in free fall

Post by TheTimeLord » Thu Feb 14, 2019 1:25 pm

sreynard wrote:
Thu Feb 14, 2019 12:52 pm
28fe6 wrote:
Thu Feb 14, 2019 12:25 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.
That is true, if you are young. For older folks saving 30% isn't going to make much difference to their net worth. You really start noticing it when you make or loose more in a typical day than you contribute in a month or a year. Then allocation is way more significant than savings rate. Hence "all the energy expending on this forum over AA."
Let's see if your portfolio is 20x expenses and you are saving 33% then assume expenses equal 66% so annually you would be adding 6 months of expenses or 2.5% annually. If you have 25x it is 2% if you had 10x it would be 5%. My portfolio does not vary by 2% or more on a typical day. And for someone who can save 50% then assuming expenses are also 50% you end up adding 1 year of expenses which is 5% for 20x, 4% for 25x and 10% for 10x. You don't even want to think about the number for someone saving 66%.
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HomerJ
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Re: U.S. stocks in free fall

Post by HomerJ » Thu Feb 14, 2019 1:39 pm

LiterallyIronic wrote:
Thu Feb 14, 2019 11:57 am
couldn't invest regularly until 2016 when I had already missed the run-up. Ten years after graduation and all I have is $72k for retirement.
FYI, I graduated in 1992, but didn't start investing seriously until 1998.

So I missed that run-up and felt the same way you do. But I saved and saved all through the 2000s, and all that money tripled in the last run-up.

There will be another one. Keep saving and 10-15 years from now, you'll have a nice nest-egg ready for the next bull market.

(or maybe we'll get another 5 years of this one) :)
The J stands for Jay

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Re: U.S. stocks in free fall

Post by HomerJ » Thu Feb 14, 2019 1:41 pm

28fe6 wrote:
Thu Feb 14, 2019 12:25 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.
This. Very good post... I've been 50/50 for years now, and I won't be suffering. But I'm also saving a ton, so I don't NEED the heartache and stress of a high equity portfolio to make my goals.
The J stands for Jay

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Re: U.S. stocks in free fall

Post by retiringwhen » Thu Feb 14, 2019 2:15 pm

HomerJ wrote:
Thu Feb 14, 2019 1:41 pm
This. Very good post... I've been 50/50 for years now, and I won't be suffering. But I'm also saving a ton, so I don't NEED the heartache and stress of a high equity portfolio to make my goals.
I will point out that the poster in question (revhappy) was for a long-time at 17 to 35% equities and appears to be reverting to those levels. That is very different than even 50%. 50/50 is defensible for even moderately aggressive savers.

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Re: U.S. stocks in free fall

Post by LiterallyIronic » Thu Feb 14, 2019 2:34 pm

Independent George wrote:
Thu Feb 14, 2019 1:02 pm
$72k after ten years is more than I had after ten years.

I started my career with a job at a public accounting firm in 2001... right as the dot com bubble was crashing and Enron killed Arthur Anderson. After paying off my Stafford loans, I gradually saved my money until I had enough to fulfill my dream of home ownership, putting down a 20% deposit on a condo... in 2007. I soon took a significant pay cut in 2009, followed by a couple years of stagnant wages. On my worst day in early 2009, I had negative net worth.

Between the lower income and the need to re-grow my reserve capital (which was now earning miniscule interest), my retirement contributions dropped considerably just as we were entering the new bull market. I still maxed out my Roth IRA and contributed to the employer match on my 401k, but I was contributing significantly less than I had been at exactly the best time to be investing. Circumstances basically pushed me into being the worst kind of market timer - I didn't sell anything, but right when stocks were at their cheapest, I was buying the least.
Indeed there could always be a worse situation, so it's good to look on the bright side.
marcopolo wrote:
Thu Feb 14, 2019 12:18 pm
Yeah, that was a pretty tough situation to graduate into. I have sympathy for your plight back then, and you took the best job you could find.

The last ten years have seen great improvement in the job market, what have you done to improve your situation in the intervening years? Any plans to try to improve it going forward?
That's quite the story, so buckle up. After I graduated in 2008, with a BS in Business Management, I got that tech support job that paid $9.50/hour. That was less than I had been making at my student job ($10.50/hour), but I couldn't do that after graduation. I changed majors multiple times throughout my degree, and took time off to work in the middle, so I was actually already 25 when I got my BS. But at least I didn't have any debt. I floundered around for a couple months not finding work, until I took the tech support job to at least hold me over - I had started as a CS student, switched to IT later, then later still is when I switched to Business Management, after not being able to hack it in CS or IT. Anyway, I had been wondering if I should move back to my home state or stick around near where I went to school, when I got set up on a blind date. I didn't know it yet, but that girl would eventually become my wife.

Since I was dating someone, I decided to stick around and just keep doing the tech support job while keeping some feelers out for something better. In late 2009, I heard about a new call center that was opening up and was looking for a manager. I had call center experience and a degree in Management, so I applied and got the job. Of course, being a brand-new start-up, it only paid me $12.50/hour, but it was a step up. Unfortunately, it, like many start-ups, folded. In 2010, I took my skills to a temp agency to see what they had for me. I took a job that was "almost programming" for $13/hour. I did this job for three years, learning more about programming, and getting raises to $16/hour in the meantime.

Most of my money in the 2010-2011 window went to rent or paying for my wife's education. She graduated and became a machinist, but that only started at $9.50/hour. We now had two degrees between the both of us, neither one being used in any way (mine in Management and hers in Public Health).

In 2013, though, I decided that I should get an actual degree in the programming world so I could get a better job in the field. I went back to school, studying CS. I only needed six classes in order to get a Certificate of Programming, so I thought I'd at least start with that. At this point, my wife was up to $12.50/hour, but I stopped working and all our money was back to going towards rent or my tuition. After I took the first few classes, I figured I should go all the way to an Associates Degree in CS, since that wasn't too much more. I got that in 2014, after a year-and-a-half in school. I then worked for one semester, which kept us in the black, but then went back to get the BS in CS.

During my senior year, 2016, I only had a few classes left, and they were all offered at night, so I took a full-time job during the day. I was started at $50k as a software developer. After six months, they bumped me to $55k. Six months later, I officially graduated and they bumped me to $60k. I had taken my first CS class as a freshman in September 2001 and took my last CS final exam in December 2016. Made it through without any student loans.

Early 2017 we had our first (and so far, only) kid, and late 2017 we bought our first house with 29% down.

In 2018, my salary got a slight increase to $63,500. But then, in late 2018, I switched jobs, which came with a salary bump to $75k.

So, from making $9.50/hour with no benefits in 2009 to $75k with four weeks vacation, 6% 401k matching, and health insurance in 2018, along with getting married, having a kid, and buying a house. Never give up; never surrender.

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Re: U.S. stocks in free fall

Post by Independent George » Thu Feb 14, 2019 2:50 pm

LiterallyIronic wrote:
Thu Feb 14, 2019 2:34 pm
So, from making $9.50/hour with no benefits in 2009 to $75k with four weeks vacation, 6% 401k matching, and health insurance in 2018, along with getting married, having a kid, and buying a house. Never give up; never surrender.
By Grabthar's hammer, what a savings!

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Re: U.S. stocks in free fall

Post by marcopolo » Thu Feb 14, 2019 3:31 pm

LiterallyIronic wrote:
Thu Feb 14, 2019 2:34 pm

So, from making $9.50/hour with no benefits in 2009 to $75k with four weeks vacation, 6% 401k matching, and health insurance in 2018, along with getting married, having a kid, and buying a house. Never give up; never surrender.
That is pretty good progress. Thanks for sharing.
You now have CS degree, and several years of experience as a developer? That salary seems really low for that level.
New grads are routinely getting more than that for development roles. Someone with a few years of experience should be able to command more than that, i would think.

Good luck to you.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: U.S. stocks in free fall

Post by HomerJ » Thu Feb 14, 2019 4:56 pm

marcopolo wrote:
Thu Feb 14, 2019 3:31 pm
New grads are routinely getting more than that for development roles.
90% of them are not. So "routinely" is the wrong word.

(Doing a google search I see numbers ALL over the board, but the averages are in the $50k-$70k range)
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marcopolo
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Re: U.S. stocks in free fall

Post by marcopolo » Thu Feb 14, 2019 6:07 pm

HomerJ wrote:
Thu Feb 14, 2019 4:56 pm
marcopolo wrote:
Thu Feb 14, 2019 3:31 pm
New grads are routinely getting more than that for development roles.
90% of them are not. So "routinely" is the wrong word.

(Doing a google search I see numbers ALL over the board, but the averages are in the $50k-$70k range)
"routinely" might have been too strong. But, I think your 90% not being in that category is too pessimistic.

NACE is a pretty respected source for this type of data.
https://www.naceweb.org/job-market/comp ... ojections/

Scroll to the bottom, there is a table of average starting salaries in 2017. It was $65.5k back in 2017. Probably closer to $70k today.
That seems consistent with other sources I have seen saying median starting salaries a little over $70k.

Also remember, the numbers above also include graduates that end up in support roles that pay less than development. So, for SW grads actually doing SW development work, the median would be even higher. That would also be consistent with the anecdotal evidence from my son who is graduating in a few months.

By all indications the job market for technical professions is quite good right now.


Back on topic:

What happened to all the purported "panic" this morning from the poor retail sales data?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: U.S. stocks in free fall

Post by retiringwhen » Thu Feb 14, 2019 6:27 pm

marcopolo wrote:
Thu Feb 14, 2019 6:07 pm
Back on topic:

What happened to all the purported "panic" this morning from the poor retail sales data?
Mr. Bankerton's Algo's had a kanipchen, but it all settled out after a few minutes.

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Re: U.S. stocks in free fall

Post by revhappy » Thu Feb 14, 2019 11:06 pm

retiringwhen wrote:
Thu Feb 14, 2019 12:31 pm
28fe6 wrote:
Thu Feb 14, 2019 12:25 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am
revhappy wrote:
Thu Feb 14, 2019 8:19 am
I used to always have very low allocation, of 17-35%. I am 39 years old. But in 2017 Aug, I started ramping it up reached 50% right at the peak in around Oct 2018 and in Dec when markets tanked, I didnt have courage to add anymore, but I didnt sell anything either. After watching my networth drop so much and now recover, I dont want to see another drop like that, with no courage to invest more. I think I would rather go into the drop with money to invest.
Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.
I wholeheartedly agree, savings rate is the #1 thing especially in the early years (at my age, my portfolio regular goes up and down DAILY 2x my ANNUAL savings rate, so it no longer matters much.) I don't think the actual % is all that important except that the investor should realize it takes skin in the game to get returns. He by the way appears to be going backwards from 50/50 saying he just reduced equity exposure by 5%.

revhappy has a returns chart on another thread and the savings rate appears to be healthy. but the due to the way he did his chart, market returns are hard to see.
Thanks guys, yes my savings rate is very good. But my circumstances are a bit different than most on this forum. I am an Indian national working in Singapore as an expat. So my earnings and savings rate are high compared to if I worked in India. I don't have residency in Singapore, so I will have to most likely retire in India which is pretty cheap.

My skills are pretty average and I don't have the drive and ambition to work hard forever and will look at opportunities to retire early if possible, may be I will be forced to retire early, if the job market turns bad and my skills become redundant.

Hence, I don't like taking a lot of risk with my money especially when I didn't take risk when I was younger and markets were cheaper. Now with markets in 7 or 9th innings like some expert put it, it will be gut wrenching to see my portfolio take a plunge and at the same time I lose my job etc.

My current networth 630k USD is pretty good to retire in India frugally, even though I am still 39. So I feel I have partially won the game already and should I still play?

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Re: U.S. stocks in free fall

Post by Admiral » Fri Feb 15, 2019 12:46 pm

revhappy wrote:
Thu Feb 14, 2019 11:06 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:31 pm
28fe6 wrote:
Thu Feb 14, 2019 12:25 pm
retiringwhen wrote:
Thu Feb 14, 2019 12:15 pm
Silk McCue wrote:
Thu Feb 14, 2019 8:27 am


Your fear will cost you dearly in the long run.

Cheers
I will confidently suggest that having such a low equities asset allocation (anything under 50%) at your age will relegate you to have a greatly reduced quality of life in retirement or at least a delayed retirement of up to a decade.... I hope at least you have the non-equities in something other than cash, like a intermediate term bond fund!

I gritted my teeth and tried to not look and kept my equities at 80 to 85% until I was 50 years old. It has paid off even with 3 major bear markets in the mean time (1987, 2000-1, 2008-9). you are choosing current comfort for long-term loss and regret.
Allocation is not as important as savings rate. He is not dooming himself by being 50/50. He may be dooming himself if he isn't saving enough. Just knowing AA doesn't tell us enough to judge.

If he stays at 50/50 and saves 30%, he will be far better off than someone who is 100/0 but saves 15%. After all, he will have the same amount of stocks, and will have even more bonds on top of that. In fact, he may be ahead of the 15%/100/0 guy with only say 20%/50/50.

If all the energy expended on this forum over AA were instead expended on savings rate, retirement prospects would be a lot better I think. Too many people agonizing over 60/40 vs. 50/50 vs. 70/30 rather than agonizing over how they might be able to save a bit more per month.
I wholeheartedly agree, savings rate is the #1 thing especially in the early years (at my age, my portfolio regular goes up and down DAILY 2x my ANNUAL savings rate, so it no longer matters much.) I don't think the actual % is all that important except that the investor should realize it takes skin in the game to get returns. He by the way appears to be going backwards from 50/50 saying he just reduced equity exposure by 5%.

revhappy has a returns chart on another thread and the savings rate appears to be healthy. but the due to the way he did his chart, market returns are hard to see.
Thanks guys, yes my savings rate is very good. But my circumstances are a bit different than most on this forum. I am an Indian national working in Singapore as an expat. So my earnings and savings rate are high compared to if I worked in India. I don't have residency in Singapore, so I will have to most likely retire in India which is pretty cheap.

My skills are pretty average and I don't have the drive and ambition to work hard forever and will look at opportunities to retire early if possible, may be I will be forced to retire early, if the job market turns bad and my skills become redundant.

Hence, I don't like taking a lot of risk with my money especially when I didn't take risk when I was younger and markets were cheaper. Now with markets in 7 or 9th innings like some expert put it, it will be gut wrenching to see my portfolio take a plunge and at the same time I lose my job etc.

My current networth 630k USD is pretty good to retire in India frugally, even though I am still 39. So I feel I have partially won the game already and should I still play?
You might benefit from this exercise:
2. What’s the value below which you never want your portfolio to fall?

Think of this as your “freak out” point. You may be that rare fearless investor who doesn’t have one. But many folks do: If their short-term losses are severe enough, there’s a chance they’ll lose all stomach for risk. At that juncture, many folks simply freeze, neither seizing the buying opportunity nor selling in a panic. But others start making drastic and damaging portfolio changes.

The truth is, unless you’ve been through a bear market or two, you probably don’t know whether you have a breaking point or what it is. But the following exercise may help.

Let’s say your investment portfolio is currently worth $500,000 and you’d be devastated to see it fall below $400,000, equal to a $100,000 loss. In a bear market—defined as a stock market drop of 20% or more—the average decline is around 35%.

If your stocks tumbled 35% and you wanted to limit your total dollar loss to $100,000, how much should you allocate to stocks? If you divide $100,000 by 0.35, you have your answer: $285,700. In other words, if you had $285,700—or 57%—of your $500,000 in stocks, and share prices fell 35%, your overall portfolio’s value wouldn’t fall below $400,000.
Source: https://humbledollar.com/2018/10/warning-shot/

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TheTimeLord
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Re: U.S. stocks in free fall

Post by TheTimeLord » Fri Feb 15, 2019 12:53 pm

Admiral wrote:
Fri Feb 15, 2019 12:46 pm

You might benefit from this exercise:
2. What’s the value below which you never want your portfolio to fall?

Think of this as your “freak out” point. You may be that rare fearless investor who doesn’t have one. But many folks do: If their short-term losses are severe enough, there’s a chance they’ll lose all stomach for risk. At that juncture, many folks simply freeze, neither seizing the buying opportunity nor selling in a panic. But others start making drastic and damaging portfolio changes.

The truth is, unless you’ve been through a bear market or two, you probably don’t know whether you have a breaking point or what it is. But the following exercise may help.

Let’s say your investment portfolio is currently worth $500,000 and you’d be devastated to see it fall below $400,000, equal to a $100,000 loss. In a bear market—defined as a stock market drop of 20% or more—the average decline is around 35%.

If your stocks tumbled 35% and you wanted to limit your total dollar loss to $100,000, how much should you allocate to stocks? If you divide $100,000 by 0.35, you have your answer: $285,700. In other words, if you had $285,700—or 57%—of your $500,000 in stocks, and share prices fell 35%, your overall portfolio’s value wouldn’t fall below $400,000.
Source: https://humbledollar.com/2018/10/warning-shot/
I have implemented a stress test similar to this which I use to help me determine my AA, although this drives it towards dollars not percentages.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Admiral
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Re: U.S. stocks in free fall

Post by Admiral » Fri Feb 15, 2019 3:11 pm

The Dow has gone from:
26,800 (Oct 3) to
21,760 (Dec 24) to
25,820 (today, and counting)

This market is not for the weak kneed among us!

Stay the course! :sharebeer

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Re: U.S. stocks in free fall

Post by GoldenFinch » Fri Feb 15, 2019 3:56 pm

Admiral wrote:
Fri Feb 15, 2019 3:11 pm
The Dow has gone from:
26,800 (Oct 3) to
21,760 (Dec 24) to
25,820 (today, and counting)

This market is not for the weak kneed among us!

Stay the course! :sharebeer
Stepping back and looking at the big picture alway gives a clearer perspective of where we are! :sharebeer

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HomerJ
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Re: U.S. stocks in free fall

Post by HomerJ » Fri Feb 15, 2019 5:53 pm

TheTimeLord wrote:
Fri Feb 15, 2019 12:53 pm
Admiral wrote:
Fri Feb 15, 2019 12:46 pm

You might benefit from this exercise:
2. What’s the value below which you never want your portfolio to fall?

Think of this as your “freak out” point. You may be that rare fearless investor who doesn’t have one. But many folks do: If their short-term losses are severe enough, there’s a chance they’ll lose all stomach for risk. At that juncture, many folks simply freeze, neither seizing the buying opportunity nor selling in a panic. But others start making drastic and damaging portfolio changes.

The truth is, unless you’ve been through a bear market or two, you probably don’t know whether you have a breaking point or what it is. But the following exercise may help.

Let’s say your investment portfolio is currently worth $500,000 and you’d be devastated to see it fall below $400,000, equal to a $100,000 loss. In a bear market—defined as a stock market drop of 20% or more—the average decline is around 35%.

If your stocks tumbled 35% and you wanted to limit your total dollar loss to $100,000, how much should you allocate to stocks? If you divide $100,000 by 0.35, you have your answer: $285,700. In other words, if you had $285,700—or 57%—of your $500,000 in stocks, and share prices fell 35%, your overall portfolio’s value wouldn’t fall below $400,000.
Source: https://humbledollar.com/2018/10/warning-shot/
I have implemented a stress test similar to this which I use to help me determine my AA, although this drives it towards dollars not percentages.
Dollar amount is probably easier to handle and conceptualize than percentages.
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Re: U.S. stocks in free fall

Post by aj76er » Fri Feb 15, 2019 10:15 pm

For those of you skittish about market movements, buy a small amount of UPRO (3X leveraged S&P) and watch it bounce around for a while. It makes VTI volatility look calm and soothing :)
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Re: U.S. stocks in free fall

Post by LadyGeek » Sat Feb 16, 2019 7:53 pm

A number of off-topic posts have been removed. As a reminder, see: General Etiquette
Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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Re: U.S. stocks in free fall

Post by oriol » Fri Mar 08, 2019 5:10 am

Here we go again, flirting with 200MA :|

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Re: U.S. stocks in free fall

Post by revhappy » Fri Mar 08, 2019 5:29 am

I am in 90% cash :) I hope central bankers don't bail out the equity investors this time, please. Let the markets plunge to whereever it wants to.

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Re: U.S. stocks in free fall

Post by Rus In Urbe » Fri Mar 08, 2019 7:19 am

This thread-title is completely hyperbolic of course. Free Fall? Not yet. But it could happen soon.

Over the past 2 years, in preparation for my retirement (starting December) and also in response to the protracted, heated bull market, I've been Battening Down The Hatches, with the following outcome:

30/70AA ---- DH's accounts that are subject to RMDs.
70/30AA ---- My accounts that won't be subject to RMDS for another six years.
50/50AA ---- Taxable accounts, including a five-year CD ladder for "fun money"
SS --------That DH gets; SS combined with his RMDs pay our basic expenses

We are currently at a 3% WR relative to NW (though we won't be actually withdrawing that for six years, as detailed above).
IF the market dropped 50% (now that's free fall!), it would impact equities and constitute a 25% drop in our 50/50AA NW, which would still give allow us a 4% WR.

So, while I'd hate to see all the delicious gains of this year erased (which seem to be happening yesterday and perhaps again today), I'm sleeping well.

All one can do is this: Batten Down The Hatches (an appropriately nautical term for a Vanguard investor) and......sail on! :wink:
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Re: U.S. stocks in free fall

Post by DanMahowny » Fri Mar 08, 2019 10:23 am

revhappy wrote:
Fri Mar 08, 2019 5:29 am
I am in 90% cash :) I hope central bankers don't bail out the equity investors this time, please. Let the markets plunge to whereever it wants to.
My feelings are the same. Greedy people are not victims.

My portfolio is short term treasuries and Tesla short (very large), and some gold.

Let's go!
Funding secured

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Re: U.S. stocks in free fall

Post by greg24 » Fri Mar 08, 2019 10:38 am

China market down 4% and a disappointing jobs report. Could be an interesting day.

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Re: U.S. stocks in free fall

Post by drk » Fri Mar 08, 2019 10:42 am

Rus In Urbe wrote:
Fri Mar 08, 2019 7:19 am
This thread-title is completely hyperbolic of course. Free Fall? Not yet. But it could happen soon.
Note the timing of the first post.

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Re: U.S. stocks in free fall

Post by LiterallyIronic » Fri Mar 08, 2019 10:48 am

revhappy wrote:
Fri Mar 08, 2019 5:29 am
I am in 90% cash :) I hope central bankers don't bail out the equity investors this time, please. Let the markets plunge to whereever it wants to.
I'm 90% stock. Crash is fine with me. I could go for an opportunity to buy stock for cheaper and I'm still 15 years from retirement.

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Re: U.S. stocks in free fall

Post by alfaspider » Fri Mar 08, 2019 10:50 am

Always fun when the non-BH investors show up to the party :mrgreen:

I will repeat the mantra: nobody knows what will happen tomorrow or even later today. Most people who try to jump in and out of the market get burned. There were a lot of predictions of doom in December last year- those who went cash during that time period missed a big recovery. Perhaps this is setting up as the next big crash, but if it is, I have 30+ years to wait.

But, since we are making predictions, I will say that this doesn't feel like a big crash is coming. Jobs reports are volatile and employment is still quite low. Other than the trade war (which could end suddenly), there's not an obvious catalyst for a big drop in the same way there was in 2008. Remember that the likes of Bear Sterns had already failed suddenly months before the 2008 crash. Nothing like that has happened recently.

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Re: U.S. stocks in free fall

Post by livesoft » Fri Mar 08, 2019 11:12 am

greg24 wrote:
Fri Mar 08, 2019 10:38 am
China market down 4% and a disappointing jobs report. Could be an interesting day.
If you had not posted that, then I would have not discerned that from price changes in my ETFs. How do you explain that not much has happened today?
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