A time to EVALUATE your jitters

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Dontwasteit
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Re: A time to EVALUATE your jitters

Post by Dontwasteit » Thu Mar 15, 2018 11:01 pm

Nisiprius...That was a great read. I printed it out and have it taped to my desk. Thank you so much.

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fortyofforty
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Re: A time to EVALUATE your jitters

Post by fortyofforty » Fri Mar 16, 2018 6:08 am

Buying up.

Buying down.

Buying when it jumps around.

For those who haven't experienced them before, market moves like this are perfectly normal. They are far less worrisome and damaging than long term bear markets, that are also, unfortunately, perfectly normal.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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Cycle
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Re: A time to EVALUATE your jitters

Post by Cycle » Fri Mar 16, 2018 6:58 am

Our taxable and 401k contributions are automatic and our AA is fixed, so all I can do is rebalance if the AA strays from target

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Dutchgirl
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Re: A time to EVALUATE your jitters

Post by Dutchgirl » Wed May 30, 2018 4:54 pm

Nisiprius: Thank you for this post. It remains a great read even many years later, every time I look at it again. Dutchgirl

kaeltor
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Re: A time to EVALUATE your jitters

Post by kaeltor » Sat Jun 09, 2018 12:00 am

Just saw that this 2011 post is about a 500 point drop in the Dow Jones...

In February the Dow plunged 1175, more than double.

I am still here, things are looking up (for now)


2011: https://www.nytimes.com/2011/08/07/busi ... ef=economy

http://money.cnn.com/2018/02/05/investi ... index.html

minskbelarus47
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Re: A time to EVALUATE your jitters

Post by minskbelarus47 » Thu Jul 26, 2018 9:11 am

All the charts show how the stock market (as in equities) performed.

How did the bond market perform in those time periods?

As my equities continue on this upward trend (nice but evaluating jitters), are bonds an alternative? Cash? Inverse ETF's? I am around 50 equities and the rest in bonds/tips and cash. And I am 70, so my time horizon is different.

Is the three fund portfolio a defensive AA, assuming 48/12/40?

I appreciate this well thought our article

MB

DJP1944
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Re: A time to EVALUATE your jitters

Post by DJP1944 » Thu Sep 20, 2018 9:31 am

As the DJIA and S&P hit new intra-day highs again today, it feels timely to bump this thread again. I would imagine it's easy to have jitters when the market pulls back significantly, but does anyone else get jitters on this continued run up?

goblue100
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Re: A time to EVALUATE your jitters

Post by goblue100 » Thu Sep 20, 2018 9:50 am

kaeltor wrote:
Sat Jun 09, 2018 12:00 am
Just saw that this 2011 post is about a 500 point drop in the Dow Jones...

In February the Dow plunged 1175, more than double.

I am still here, things are looking up (for now)
Pretty much the same percentage. 500 points with a 12,000 DJI, and 1175 with a 25,000 DJI. Just a pimple on the the butt of an elephant.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

HEDGEFUNDIE
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Re: A time to EVALUATE your jitters

Post by HEDGEFUNDIE » Thu Sep 20, 2018 11:03 am

DJP1944 wrote:
Thu Sep 20, 2018 9:31 am
As the DJIA and S&P hit new intra-day highs again today, it feels timely to bump this thread again. I would imagine it's easy to have jitters when the market pulls back significantly, but does anyone else get jitters on this continued run up?
Given how many threads we have seen around here by people wanting to pull back their equity allocations, clearly yes.

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wwhan
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Re: A time to EVALUATE your jitters

Post by wwhan » Tue Sep 25, 2018 1:08 pm

Well, if one has the right stock allocation for the ability to sleep at night, one should not have jitters.

At 45% to 50% stock allocation, I look at a big selloff, as an opportunity to buy.

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Johnnie
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Re: A time to EVALUATE your jitters

Post by Johnnie » Tue Oct 02, 2018 6:53 pm

Time to evaluate my jitters about getting killed by value and international tilts in the midst of an "all time high" US growth-stock market.

Will I be a genius laughing my way to the bank when the "crazytown" tech-and-growth domestic mega-caps plunge off of "CAPE Fear," while value and internationals revert to the mean in the other direction?

Or am I a schmuck for believing the wise guys who made such good arguments for the tilts based on historical data. (I'm talking to you Larry, Paul, Ben, et al ! :wink: )
(To be fair there are other arguments related to, well, "persistence, pervasiveness, robustness to various definitions, implementability, and intuitive risk- or behavioral-based explanations.")

Evaluation: If my equity allocation was 100% in cap-weighted domestic stocks I might be among the hordes of angst-ridden "end is nigh" worriers, comforted only by the fact that I would be making a bundle right now! (Oh the humanity.)

This entire post comes with a :wink: : Well I know that he who lives by the tilt can die by the tilt, that the darkest hour is just before the capitulation/blowoff (or, it might be 10 years out or never), that a lot of investing is just luck, etc. etc. etc. If good things happen for my "book" I'll be sure to balance this talk with a fulsome gloat. :greedy
"I know nothing."

alwyn
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Re: A time to EVALUATE your jitters

Post by alwyn » Fri Oct 05, 2018 11:54 am

netbenefits is overloaded today...

As someone who even before the current dip figured out that I'm being too aggressive, is it prudent to ride out the dip no matter how big and rebalance afterwards?

My aggressiveness theory was based on only having a 20 year investment horizon to go from 0 to retired.

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triceratop
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Re: A time to EVALUATE your jitters

Post by triceratop » Fri Oct 05, 2018 11:59 am

I managed to lock myself out of my brokerage account with incorrect password attempts, so even if I wanted to change my allocation I could not. :)
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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IcedDog
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Re: A time to EVALUATE your jitters

Post by IcedDog » Sat Oct 06, 2018 11:52 pm

triceratop wrote:
Fri Oct 05, 2018 11:59 am
I managed to lock myself out of my brokerage account with incorrect password attempts, so even if I wanted to change my allocation I could not. :)
Well, that's one way of staying the course :D

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Re: A time to EVALUATE your jitters

Post by yousha » Tue Oct 09, 2018 10:36 pm

I believe the advice is sound. Aside from interest rates rising (Normalization). I am puzzled as to the factors causing this downturn. Nothing I can see that would propel the Market to slide. Perhaps the adage....the market will do what the market will do is a possible explanation. Fundamentals are positive. Economy is doing very well. Globally nothing out of the ordinary. World tensions remain unchanged. Midterms? If one can observe a causal incident(s) it would make it easier to accept this downturn. I am confused. Who knows how low this market can go. What I understand the prudent thing to do...is nothing. If your portfolio is not what you want it to be interns of equities or bonds then one could consider making a change. So...we sit and wait.

DJP1944
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Re: A time to EVALUATE your jitters

Post by DJP1944 » Wed Oct 10, 2018 3:02 pm

Any jitters today...geez.

S&P down 94....3.3%

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Eagle33
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Re: A time to EVALUATE your jitters

Post by Eagle33 » Thu Oct 11, 2018 12:06 am

DJP1944 wrote:
Wed Oct 10, 2018 3:02 pm
Any jitters today...geez.

S&P down 94....3.3%
Lowest point since 7/11/2018 - no reason to panic.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

protagonist
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Re: A time to EVALUATE your jitters

Post by protagonist » Thu Oct 11, 2018 12:43 am

MindBogler wrote:
Sat Jun 24, 2017 2:29 pm
A Japanese investor with a reasonable allocation to global stocks would have ended up just fine. Japan is exhibit A on why international diversification is important for all investors.
Yet in 2008, when Washington sneezed, the entire world caught a cold. My international investments underperformed my US investments.
The global economy is very interconnected. Japan was not significant enough to drag the entire world down with it. The USA is, and did.

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CaliJim
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Re: A time to EVALUATE your jitters

Post by CaliJim » Thu Oct 11, 2018 12:48 am

omg. DID SOMETHING HAPPEN TODAY. goodness.... NOW i'M GOING TO HAVE TO GO look... (LAUNCHING QUICKEN....) hmmm.... not too much of a change. I love the old 45/55 allocation. with a good tilt to shorter term bonds. hmm... looks like smoooth sailing. down 1.3% at the port level. phew. dodged a small bullet. not too bad. not worth getting upset or taking some action or getting worried.
I did lose more than the cost of a small boat....but hey.... it's only money and if DW doesn't catch wind... I'll be OK!
After all, when it goes up this much, I don't think.... I need to run out and buy a boat. I just let it ride. Key to a calm life is... "Don't react."
-calijim- | | For more info, click this Wiki

typical.investor
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Re: A time to EVALUATE your jitters

Post by typical.investor » Thu Oct 11, 2018 5:47 am

yousha wrote:
Tue Oct 09, 2018 10:36 pm
I believe the advice is sound. Aside from interest rates rising (Normalization). I am puzzled as to the factors causing this downturn. Nothing I can see that would propel the Market to slide. Perhaps the adage....the market will do what the market will do is a possible explanation. Fundamentals are positive. Economy is doing very well. Globally nothing out of the ordinary. World tensions remain unchanged. Midterms? If one can observe a causal incident(s) it would make it easier to accept this downturn. I am confused. Who knows how low this market can go. What I understand the prudent thing to do...is nothing. If your portfolio is not what you want it to be interns of equities or bonds then one could consider making a change. So...we sit and wait.
I do believe some higher inflation has been seen in the US related to tariffs and that it’s been said impact the Chinese economy.

"Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the IMF about financial stability risks and continued trade tension all driving uncertainty,"

“It was hawkish commentary from Fed policy makers that triggered the sudden sell off in Treasuries last week and sent long-term yields to their highest in seven years.

The surge made stocks look less attractive compared to bonds while also threatening to curb economic activity and profits.”

I don’t think it matters if rates are moving to normal. What matters is how equities were priced and if values were predicated on low rates and inflation, then I guess it’s to be expected.

Mr.BB
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Re: A time to EVALUATE your jitters

Post by Mr.BB » Thu Oct 11, 2018 6:06 am

An excellent reminder and very wise words from Nisiprius from the first post in Aug 2011.

"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." :thumbsup
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

noviceinvestor85
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Re: A time to EVALUATE your jitters

Post by noviceinvestor85 » Thu Oct 11, 2018 2:20 pm

I recently invested in a Vanguard U.S. Equity Index Fund - Accumulation, it's lost almost 6% since mid September! Should I sell now and look to reinvest when the market picks back up? There are no exit charges.

jvini
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Re:

Post by jvini » Thu Oct 11, 2018 2:28 pm

NateW wrote:
Sun Aug 07, 2011 10:15 am
Thank you Nisiprius for providing these words of wisdom, guidance and sound advice during these suddenly challenging times. You are absolutely correct about not moving out of stocks as the market is falling. You do lock in your losses.

I was almost in 100% stocks in 2007/2008 (before I found the Bogleheads) and did not know any better. I rode the market all the way down and back up without selling. When calm began to ensue in the market, at about 3/4 of the way back up to last week's level, I balanced more into bonds in several stages. I just moved from 30% to 40% bonds about three weeks ago because I was very uncomfortable with the greater number of bad economic reports and with a market that was bouncing around a bit, without going higher, just like about 3 years ago.

The Bogelheads Forum is instrumental in my understanding of the way one should invest.

--Nate
I had almost the same experience. I'm now 10 years older and have about a 60/40 allocation. I learned the hard way in 2008 but also stuck to my plan and adjusted when I was back to even. It wasn't easy, but it proved worth it. Nisiprius' post is fantastic. I remember how I felt in 2008. I know how I feel now. Thanks in large part to Bogleheads, I feel much better now and am more prepared for downturns. What a great group! ALSO for anyone younger and/or panicking, it has helped me to invest by a set of hard fast rules. I'm sure people will take issue with this, but it's served me well. My bond holdings are age - 13. I am comfortable with that risk. I will not go more than 50% in bonds and hope to always stay 60/40 regardless of age when I reach that point. I rebalance once a year around my birthday. I own (for the most part) three funds. Total U.S. market 80% of my equity allocation. Total international 20% of my equity allocation. And a total market bond fund BND which, as I said is at my age - 13 which is almost 40%.
Last edited by jvini on Thu Oct 11, 2018 3:23 pm, edited 1 time in total.

Mr.BB
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Re: A time to EVALUATE your jitters

Post by Mr.BB » Thu Oct 11, 2018 2:44 pm

noviceinvestor85 wrote:
Thu Oct 11, 2018 2:20 pm
I recently invested in a Vanguard U.S. Equity Index Fund - Accumulation, it's lost almost 6% since mid September! Should I sell now and look to reinvest when the market picks back up? There are no exit charges.
If you sell now, you will have locked in your losses. Allow the market time to recovery.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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BeBH65
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Re: A time to EVALUATE your jitters

Post by BeBH65 » Thu Oct 11, 2018 9:54 pm

noviceinvestor85 wrote:
Thu Oct 11, 2018 2:20 pm
I recently invested in a Vanguard U.S. Equity Index Fund - Accumulation, it's lost almost 6% since mid September! Should I sell now and look to reinvest when the market picks back up? There are no exit charges.
On "average", the stockmarkets have a correction (-10%) every year, loose -15% every 3 years, go -20% every 6 years, and once in a while go -30%,-40%,-50% and might not have recovered after several years. (DJIA 1948-2017 - source americanfunds - search for 'history of declines')

What happens now is totally normal. What does your IPS (see our wiki) tell you to do when the market drops with 6%?

Edited for corrections
Last edited by BeBH65 on Fri Oct 12, 2018 12:51 am, edited 3 times in total.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

Cascade425
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Re: Re:

Post by Cascade425 » Fri Oct 12, 2018 12:07 am

jvini wrote:
Thu Oct 11, 2018 2:28 pm
NateW wrote:
Sun Aug 07, 2011 10:15 am
Thank you Nisiprius for providing these words of wisdom, guidance and sound advice during these suddenly challenging times. You are absolutely correct about not moving out of stocks as the market is falling. You do lock in your losses.

I was almost in 100% stocks in 2007/2008 (before I found the Bogleheads) and did not know any better. I rode the market all the way down and back up without selling. When calm began to ensue in the market, at about 3/4 of the way back up to last week's level, I balanced more into bonds in several stages. I just moved from 30% to 40% bonds about three weeks ago because I was very uncomfortable with the greater number of bad economic reports and with a market that was bouncing around a bit, without going higher, just like about 3 years ago.

The Bogelheads Forum is instrumental in my understanding of the way one should invest.

--Nate
I had almost the same experience. I'm now 10 years older and have about a 60/40 allocation. I learned the hard way in 2008 but also stuck to my plan and adjusted when I was back to even. It wasn't easy, but it proved worth it. Nisiprius' post is fantastic. I remember how I felt in 2008. I know how I feel now. Thanks in large part to Bogleheads, I feel much better now and am more prepared for downturns. What a great group! ALSO for anyone younger and/or panicking, it has helped me to invest by a set of hard fast rules. I'm sure people will take issue with this, but it's served me well. My bond holdings are age - 13. I am comfortable with that risk. I will not go more than 50% in bonds and hope to always stay 60/40 regardless of age when I reach that point. I rebalance once a year around my birthday. I own (for the most part) three funds. Total U.S. market 80% of my equity allocation. Total international 20% of my equity allocation. And a total market bond fund BND which, as I said is at my age - 13 which is almost 40%.
Thanks for sharing your allocations above. How does this differ in taxable accounts vs Roth or Traditional IRA/401k accounts?

Mrxyz
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Re: A time to EVALUATE your jitters

Post by Mrxyz » Fri Oct 12, 2018 12:21 am

Perhaps this has already been discussed....
Is there any rationale in keeping money ready to invest during 'downtime' or RBDs? Like dry powder?
Or is there no need to do anything but keep contributing to the portfolio (3 fund in my case) investing every month a given amount ? -THIS is probable the correct answer.

Thanks

jvini
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Re: A time to EVALUATE your jitters

Post by jvini » Fri Oct 12, 2018 3:12 am

Some people certainly keep some powder dry, but to me that was basically timing the market. While the powder was sitting there, the market may have risen 50 percent. If you can dollar cost average, that to me is taking advantage of lower stock prices. Also, if you see your allocation is 10 percent or so out of whack, you can rebalance out of bonds into equities, assuming the money is in a tax advantaged account, or rebalance by allocating more money into equities going forward until your allocations are back to where you want them.

Mrxyz
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Re: A time to EVALUATE your jitters

Post by Mrxyz » Fri Oct 12, 2018 4:08 am

jvini wrote:
Fri Oct 12, 2018 3:12 am
Some people certainly keep some powder dry, but to me that was basically timing the market. While the powder was sitting there, the market may have risen 50 percent. If you can dollar cost average, that to me is taking advantage of lower stock prices. Also, if you see your allocation is 10 percent or so out of whack, you can rebalance out of bonds into equities, assuming the money is in a tax advantaged account, or rebalance by allocating more money into equities going forward until your allocations are back to where you want them.
Thanks.
Knew it. Anytime, I start getting new ideas and 'smarter' thoughts...........I am wrong. Investing is very boring........but I like it that way!

Mr.BB
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Re: A time to EVALUATE your jitters

Post by Mr.BB » Fri Oct 12, 2018 7:26 am

Mrxyz wrote:
Fri Oct 12, 2018 4:08 am
jvini wrote:
Fri Oct 12, 2018 3:12 am
Some people certainly keep some powder dry, but to me that was basically timing the market. While the powder was sitting there, the market may have risen 50 percent. If you can dollar cost average, that to me is taking advantage of lower stock prices. Also, if you see your allocation is 10 percent or so out of whack, you can rebalance out of bonds into equities, assuming the money is in a tax advantaged account, or rebalance by allocating more money into equities going forward until your allocations are back to where you want them.
Thanks.
Knew it. Anytime, I start getting new ideas and 'smarter' thoughts...........I am wrong. Investing is very boring........but I like it that way!
Your bonds can actually act as dry powder if the market comes down hard enough. You may need to rebalance anyway depending on your allocation needs.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

Leesbro63
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Re: A time to EVALUATE your jitters

Post by Leesbro63 » Fri Oct 12, 2018 9:43 am

Unless it’s like 1973-4 where BOTH stocks AND BONDS get pounded

staythecourse
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Re: A time to EVALUATE your jitters

Post by staythecourse » Fri Oct 12, 2018 9:48 am

Just wanted to reiterate this may be the best single post I have read on this forum. It was when I first read it and still is.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

MindBogler
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Re: A time to EVALUATE your jitters

Post by MindBogler » Fri Oct 12, 2018 11:20 pm

protagonist wrote:
Thu Oct 11, 2018 12:43 am
MindBogler wrote:
Sat Jun 24, 2017 2:29 pm
A Japanese investor with a reasonable allocation to global stocks would have ended up just fine. Japan is exhibit A on why international diversification is important for all investors.
Yet in 2008, when Washington sneezed, the entire world caught a cold. My international investments underperformed my US investments.
The global economy is very interconnected. Japan was not significant enough to drag the entire world down with it. The USA is, and did.
The idea that the US can't experience a long period of underperformance without the world tagging along is going to get a lot of people on this forum in big trouble some day. I don't know when this will be true but I suspect it will occur in my lifetime. The cost associated with international diversification is worth the risk of periodic underperformance.

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Garco
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Re: A time to EVALUATE your jitters

Post by Garco » Mon Oct 15, 2018 4:22 am

At Monday preopen I have one firm resolution. I will not trade. There is no other action that I can take with any confidence. I don’t need any cash from my investments for another month, when I must take a quarterly RMD from my main tax deferred investment account.

That RMD will come from cash (money market account: MMA) in my retirement plan. It is for markets like this that I took money from my equities holdings some time ago and have maintained about 2 years of estimated RMD in the MMA.

I’m not feeling good about this market situation but I’m glad I took this approach. Then there’s that old joke: “Don’t panic. Wait 3 months. If It’s still a problem, THEN panic.”

johnsac
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Re: A time to EVALUATE your jitters

Post by johnsac » Mon Oct 29, 2018 11:08 pm

I add my voice to those above saying thanks. I am on bogleheads for just a few months now and am 90% in equities and 10% bonds, 44 years old and not stressed at this point about the ups and downs we see lately, but your post does give me extra peace of mind, so thank you!

typical.investor
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Re: A time to EVALUATE your jitters

Post by typical.investor » Tue Oct 30, 2018 12:53 am

MindBogler wrote:
Fri Oct 12, 2018 11:20 pm
protagonist wrote:
Thu Oct 11, 2018 12:43 am
MindBogler wrote:
Sat Jun 24, 2017 2:29 pm
A Japanese investor with a reasonable allocation to global stocks would have ended up just fine. Japan is exhibit A on why international diversification is important for all investors.
Yet in 2008, when Washington sneezed, the entire world caught a cold. My international investments underperformed my US investments.
The global economy is very interconnected. Japan was not significant enough to drag the entire world down with it. The USA is, and did.
The idea that the US can't experience a long period of underperformance without the world tagging along is going to get a lot of people on this forum in big trouble some day. I don't know when this will be true but I suspect it will occur in my lifetime. The cost associated with international diversification is worth the risk of periodic underperformance.

If you’ve been US until now, you’ll be fine for awhile. It’s those acccumulating who will likely see lower returns by only buying the stocks with the highest valuations.

Well it’s their money.

Anyway, currency wise, I think it’d true that when the US is in a downturn (as measure in output) that other countries currencies appreciate even if they are doing worse in terms of output gap.

It’s an effect of valuation. Similarly, the US could do (and probably will do) better than other counties economically, but foreign equities could return more. That’s because US stocks could under-perform relative to the expectations they are priced at, and foreign stocks could surpass theirs.

Most importantly at time like these, I think it’s important to have picked an allocation you can stick with.

If that’s US only for you, I really think that’s the best. Not for me though.

kuttolas
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Re: A time to EVALUATE your jitters

Post by kuttolas » Fri Nov 23, 2018 1:49 pm

Thank you nispirius for the timely post. I couldn't have come across this at a better time in my life.

Although this is not my first exposure to major market fluctuations, I was seriously considering to not invest for a while. I first started investing for the first time in Sep-2008, two weeks before the bottom fell out of the market. Those downturns did not bother me because I had very little money to loose and and was an opportunity to buy cheap. However 10 years later, it's a different story, We have significant amount saved up in Roth IRA and 401(k). Even small blips changes value by thousands of dollars and I find myself completely unprepared to handle the emotions that comes with market fluctuations.

So once again thank you for putting this post together

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nisiprius
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Re: A time to EVALUATE your jitters

Post by nisiprius » Fri Nov 23, 2018 3:18 pm

Mark Twain wrote:"A body might stump his toe, and take pison, and fall down the well, and break his neck, and bust his brains out, and somebody come along and ask what killed him, and some numskull up and say, ‘Why, he stumped his toe.’"
Leesbro63 wrote:
Fri Oct 12, 2018 9:43 am
Unless it’s like 1973-4 where BOTH stocks AND BONDS get pounded
Where did you get the idea that bonds "got pounded" in 1973-1974? "Both went down" isn't the same as "both got pounded."

2015 Ibbotson SBBI Classic Yearbook
Stocks: 1973, -14.7%; 1974, -26.5%; break his neck and bust his brains out.
Long-term corporate bonds, 1973 +1.1%, 1974 - 3.1%; stumped his toe.
Long-term government bonds, 1973 -1.1%, 1974 +4.4%; stumped his toe.
Intermediate-term government bonds, 1973 +4.6%, 1974 +5.7%; didn't even stump his toe.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: A time to EVALUATE your jitters

Post by Leesbro63 » Fri Nov 23, 2018 5:03 pm

nisiprius wrote:
Fri Nov 23, 2018 3:18 pm
Mark Twain wrote:"A body might stump his toe, and take pison, and fall down the well, and break his neck, and bust his brains out, and somebody come along and ask what killed him, and some numskull up and say, ‘Why, he stumped his toe.’"
Leesbro63 wrote:
Fri Oct 12, 2018 9:43 am
Unless it’s like 1973-4 where BOTH stocks AND BONDS get pounded
Where did you get the idea that bonds "got pounded" in 1973-1974? "Both went down" isn't the same as "both got pounded."

2015 Ibbotson SBBI Classic Yearbook
Stocks: 1973, -14.7%; 1974, -26.5%; break his neck and bust his brains out.
Long-term corporate bonds, 1973 +1.1%, 1974 - 3.1%; stumped his toe.
Long-term government bonds, 1973 -1.1%, 1974 +4.4%; stumped his toe.
Intermediate-term government bonds, 1973 +4.6%, 1974 +5.7%; didn't even stump his toe.
What about in “real terms”, with the effect of inflation (that I think was high)?

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Re: A time to EVALUATE your jitters

Post by nisiprius » Fri Nov 23, 2018 6:15 pm

Leesbro63 wrote:
Fri Oct 12, 2018 9:43 am
Unless it’s like 1973-4 where BOTH stocks AND BONDS get pounded
I wrote:Where did you get the idea that bonds "got pounded" in 1973-1974? "Both went down" isn't the same as "both got pounded."
Leesbro63 wrote:What about in “real terms”, with the effect of inflation (that I think was high)?
Inflation affects stocks and bonds equally. It doesn't just selectively affect bonds.

Inflation was 8.8% in 1973 and 12.2% in 1974.

So, intermediate-term government bonds--which admittedly did better than the long-term bond categories, but are also closer to the kind of investing many of us do--in real terms lost -3.85% in 1973, -5.80% in 1984, averaging -4.8% per year.

By comparison, inflation-adjusted, stocks lost -21.59% in 1973, -34.46% in 1974, averaging -28.3% per year.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: A time to EVALUATE your jitters

Post by Leesbro63 » Fri Nov 23, 2018 8:58 pm

nisiprius wrote:
Fri Nov 23, 2018 6:15 pm
Leesbro63 wrote:
Fri Oct 12, 2018 9:43 am
Unless it’s like 1973-4 where BOTH stocks AND BONDS get pounded
I wrote:Where did you get the idea that bonds "got pounded" in 1973-1974? "Both went down" isn't the same as "both got pounded."
Leesbro63 wrote:What about in “real terms”, with the effect of inflation (that I think was high)?
Inflation affects stocks and bonds equally. It doesn't just selectively affect bonds.

Inflation was 8.8% in 1973 and 12.2% in 1974.

So, intermediate-term government bonds--which admittedly did better than the long-term bond categories, but are also closer to the kind of investing many of us do--in real terms lost -3.85% in 1973, -5.80% in 1984, averaging -4.8% per year.

By comparison, inflation-adjusted, stocks lost -21.59% in 1973, -34.46% in 1974, averaging -28.3% per year.
So, in real terms, how much did a 50/50 investor, using intermediate bonds, lose from the end of 1972 to the end of 1974?

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Re: A time to EVALUATE your jitters

Post by nisiprius » Fri Nov 23, 2018 10:35 pm

Leesbro63 wrote:
Fri Nov 23, 2018 8:58 pm
nisiprius wrote:
Fri Nov 23, 2018 6:15 pm
Leesbro63 wrote:
Fri Oct 12, 2018 9:43 am
Unless it’s like 1973-4 where BOTH stocks AND BONDS get pounded
I wrote:Where did you get the idea that bonds "got pounded" in 1973-1974? "Both went down" isn't the same as "both got pounded."
Leesbro63 wrote:What about in “real terms”, with the effect of inflation (that I think was high)?
Inflation affects stocks and bonds equally. It doesn't just selectively affect bonds.

Inflation was 8.8% in 1973 and 12.2% in 1974.

So, intermediate-term government bonds--which admittedly did better than the long-term bond categories, but are also closer to the kind of investing many of us do--in real terms lost -3.85% in 1973, -5.80% in 1984, averaging -4.8% per year.

By comparison, inflation-adjusted, stocks lost -21.59% in 1973, -34.46% in 1974, averaging -28.3% per year.
So, in real terms, how much did a 50/50 investor, using intermediate bonds, lose from the end of 1972 to the end of 1974?
-3.85% the first year, -5.80% the second year, -9.65% using approximate mental addition, -9.4% doing the accurate calculation.

For stocks, -48.6% total over the full two-year period.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: A time to EVALUATE your jitters

Post by Leesbro63 » Sat Nov 24, 2018 8:05 pm

So a 50/50 investor lost about 1/3 of his/her nest egg in 24 months. Seems pretty close to a pounding to me.

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Re: A time to EVALUATE your jitters

Post by 4ransom » Sat Nov 24, 2018 8:43 pm

Thanks Misiprius-been reading the forum since the Morningstar days. I mostly just skim through but I am always keeping an eye out for the BUTTERFLY. Your posts are informative, factual, easy to understandable, ect. Please keep up the great job and thanks again,

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Re: A time to EVALUATE your jitters

Post by Yukon » Sun Nov 25, 2018 6:59 am

Leesbro63 wrote:
Sat Nov 24, 2018 8:05 pm
So a 50/50 investor lost about 1/3 of his/her nest egg in 24 months. Seems pretty close to a pounding to me.
Stocks got pounded. Portfolios with stocks got pounded. Bonds did not get pounded.
Don't Work Forever.

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Re: A time to EVALUATE your jitters

Post by Leesbro63 » Sun Nov 25, 2018 7:44 am

Yukon wrote:
Sun Nov 25, 2018 6:59 am
Leesbro63 wrote:
Sat Nov 24, 2018 8:05 pm
So a 50/50 investor lost about 1/3 of his/her nest egg in 24 months. Seems pretty close to a pounding to me.
Stocks got pounded. Portfolios with stocks got pounded. Bonds did not get pounded.
But they didn't provide the much safety, if any, either. OK, I guess I'm nitpicking and will leave it at that. My point is, perhaps, that most of us have never lived (as mature investors, at least) through a period where both stocks AND bonds went down together. And maybe even real estate too, which, I seem to remember, did well during the inflationary '70s, but might not do as well during the next stock/bond downturn. (I'm also guessing that more of us have real estate as an investment now than back then because the individual investor didn't have access to REITS).

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Re: A time to EVALUATE your jitters

Post by Yukon » Sun Nov 25, 2018 9:28 am

Leesbro63 wrote:
Sun Nov 25, 2018 7:44 am
Yukon wrote:
Sun Nov 25, 2018 6:59 am
Leesbro63 wrote:
Sat Nov 24, 2018 8:05 pm
So a 50/50 investor lost about 1/3 of his/her nest egg in 24 months. Seems pretty close to a pounding to me.
Stocks got pounded. Portfolios with stocks got pounded. Bonds did not get pounded.
But they didn't provide the much safety, if any, either. OK, I guess I'm nitpicking and will leave it at that. My point is, perhaps, that most of us have never lived (as mature investors, at least) through a period where both stocks AND bonds went down together. And maybe even real estate too, which, I seem to remember, did well during the inflationary '70s, but might not do as well during the next stock/bond downturn. (I'm also guessing that more of us have real estate as an investment now than back then because the individual investor didn't have access to REITS).
Can't argue with that. Bonds will offer safety, until they don't. For me, true safety comes in having a large enough portfolio to take the potential pounding from all 3 (stocks/bonds/RE) at the same time. It's a tough number to calculate but I tend to believe William Bernstein's 2% withdrawal rate is bullet proof. A 2 million portfolio would pay out 40k and after a 50% hair cut the now 1 million portfolio paying 40k would still be "only" 4%. Not perfectly safe but hopefully diversification might lessen the 50% haircuts.
Don't Work Forever.

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