Bear Market - Mindset Expectations

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dreamjob9
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Bear Market - Mindset Expectations

Post by dreamjob9 »

The Dow Jones is down ~16% from its all time highs & the Nasdaq hit intraday bear market territory today. Many would agree, we are in the very beginning of a Bear Market. How long it will last & how far down it will go is anyone's guess?

I do not have plans to change my asset allocation or stray off course. I have spent a few hours reading old posts on bogleheads during the last true bear market 2008/09. It was painful reading these old posts. It was such an emotional devastating time for a lot of people. I pray this bear market is nowhere near as painful, but unfortunately I think it may be.

I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.

One way I feel may help me control my emotions is guessing the bottom (dow jones or S&P 500) and mathematically calculating the results. Instead of watching my money disappear slowly I have chosen a number I think my money will drop too, creating an expectation level. I've made peace with the results. If they are worse, I'll need to readjust my mind set. Below is my best guess.

The Dow Jones hit 26,828.39 set on October 3rd, 2018.
The S&P 500 hit 2,657 set on September 20th, 2018.

My best guess is the Dow drops 42% to 15,559, in late 2019/2020.

The S&P 500 drops 39% to 1620 - this puts us back at levels seen in June of 2013.

Anyone want to join me in taking their best guess? What will the bottom be for the Dow Jones and/or S&P 500 during this impending Bear market? Will the exercise of mindset expectation better prepare you for what lies ahead?

I hope this exercise helps you as much as I think it will help me. Best of luck to all of us in this coming new years!

To Health & Happiness. :sharebeer
letsgobobby
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Re: Bear Market - Mindset Expectations

Post by letsgobobby »

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soda_bandit
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Re: Bear Market - Mindset Expectations

Post by soda_bandit »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.
Right now I'm still enjoying the ride. But if I start to feel anxiety, fear, anger, or depression my strategy will be to just stop paying attention to the stock market or my net worth for a few months or a few years.

Payroll deductions to tax deferred and taxable investment accounts and investment purchases once the money arrives are on automatic. Right now I update my account balances in a spreadsheet once a month, but nothing bad would happen if I completely disengaged for a year or two beyond maybe missing a rebalancing or two.
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Jerry55
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Re: Bear Market - Mindset Expectations

Post by Jerry55 »

It's all in your mind, or is it ??? Here's MY mindset tho...beginning in 2008.

I had been investing since the DOW was around 3,200 and went thru the ups and downs knowing that I'm there for the long haul.
2008 ? Seeing the impending downfall, I was basically 50/50, but in Aug08-Mar 2009, I began moving my Bonds ALL to the S & P 500 (C Fund, TSP)
Late 2008, I directed ALL investments to the S & P 500 and not be split up again, and I stayed there til 2016. I'm a Happy Camper and glad I did.

Now ? I retired in 2012, but live just fine on my Pension, however, I've seen my mainly Stock funds (TSP C, I and S) lose about 18% so far, and in my calculations, I was sent ~ 2 years back in time. I will turn 64 in about 6 months and have decided back in 2013 that I will shore things up somewhere in 2022 - 2023, so until then, I'm staying the course.

But, like I said, that's just me and my mindset....No panic, unless the world ends.
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!
clown
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Re: Bear Market - Mindset Expectations

Post by clown »

As a retiree, I deal with this by maintaining 5 years of cash need - then 100% in index funds. Also, dividends go into the cash pot, so it's really more than 5 years need.

It's like going to a tennis game. You watch the market go up and down with little concern because history says the market will come back better than ever and you have cash in hand to ride it out. No bonds = less need to worry about interest rate moves. You just need to know how the movie ends. Those who panic don't know enough history.
Random Walker
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Re: Bear Market - Mindset Expectations

Post by Random Walker »

I think Bill Bernstein once wrote something to the effect “when the market goes up enjoy the profits. When the market goes down look forward to the increased future expected returns.”

Dave
mikeyzito22
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Re: Bear Market - Mindset Expectations

Post by mikeyzito22 »

soda_bandit wrote: Thu Dec 20, 2018 11:09 pm
dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.
Right now I'm still enjoying the ride. But if I start to feel anxiety, fear, anger, or depression my strategy will be to just stop paying attention to the stock market or my net worth for a few months or a few years.

Payroll deductions to tax deferred and taxable investment accounts and investment purchases once the money arrives are on automatic. Right now I update my account balances in a spreadsheet once a month, but nothing bad would happen if I completely disengaged for a year or two beyond maybe missing a rebalancing or two.
This is a very good post dreamjob9. If all your eggs are in the market, and you feel a sense of bearish doom or anger or sleeplessness, either change allocation or don't watch the market for a while. I love that you point out automatic withdrawals. Stay the course, because it runs in the background and is consistent. Sound advice.
Random Walker
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Re: Bear Market - Mindset Expectations

Post by Random Walker »

A great Warren Buffett quote is something to the effect “Bear markets are the mechanism for transfer of stocks back to their rightful owners.”

Dave
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Peter Foley
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Re: Bear Market - Mindset Expectations

Post by Peter Foley »

As a retiree I am in the withdrawal phase for the first time during a market downturn. The fact that I was a new Boglehead and had a written plan helped me through the 2008-2010 period. I think a written plan is important. Follow your thoughts when you were not reacting emotionally to a loss.

I'm not yet convinced we are really in a bear market. It seems more a reaction to recent non financial news. If it does continue it may provide an opportunity to convert a higher percentage of tax deferred to Roth for the same tax obligation. We will see what next year brings.
phantom0308
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Re: Bear Market - Mindset Expectations

Post by phantom0308 »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm The Dow Jones is down ~16% from its all time highs & the Nasdaq hit intraday bear market territory today. Many would agree, we are in the very beginning of a Bear Market. How long it will last & how far down it will go is anyone's guess?

I do not have plans to change my asset allocation or stray off course. I have spent a few hours reading old posts on bogleheads during the last true bear market 2008/09. It was painful reading these old posts. It was such an emotional devastating time for a lot of people. I pray this bear market is nowhere near as painful, but unfortunately I think it may be.

I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.

One way I feel may help me control my emotions is guessing the bottom (dow jones or S&P 500) and mathematically calculating the results. Instead of watching my money disappear slowly I have chosen a number I think my money will drop too, creating an expectation level. I've made peace with the results. If they are worse, I'll need to readjust my mind set. Below is my best guess.

The Dow Jones hit 26,828.39 set on October 3rd, 2018.
The S&P 500 hit 2,657 set on September 20th, 2018.

My best guess is the Dow drops 42% to 15,559, in late 2019/2020.

The S&P 500 drops 39% to 1620 - this puts us back at levels seen in June of 2013.

Anyone want to join me in taking their best guess? What will the bottom be for the Dow Jones and/or S&P 500 during this impending Bear market? Will the exercise of mindset expectation better prepare you for what lies ahead?

I hope this exercise helps you as much as I think it will help me. Best of luck to all of us in this coming new years!

To Health & Happiness. :sharebeer
The S&P closing high was 2930.75 on 9/20/18.
The average bear market is 1.4 years long and goes down 41%. I expect that the current correction will be less severe due to high growth expectations and extremely low unemployment atm. I’d say we’re a bit over half way through a bear market.
WAG 2200 February of next year. I’ll make no changes related to this guess and will continue sticking to my IPS for the foreseeable future.
ge1
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Re: Bear Market - Mindset Expectations

Post by ge1 »

As somebody else pointed out, every investor in stocks should be ready to see its holdings decline by 50% in a severe bear market and since the 2008 Financial Crisis this was always my approach. So I think your approach makes sense and is a good way to prepare yourself for a potential outcome. We should not kid ourselves though: It is very different to apply a 50% haircut to a number on spreadsheet vs. living through it day by day and seeing your net worth continue to go down and down. Even the most steadfast BH investor will have doubts and the “who is loading up the truck today?” posts will disappear and there will “Plan B” and “I had too much in stocks - what to do now” posts.

For this particulate correction / bear market, my expectation is 1400.
Valuethinker
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Re: Bear Market - Mindset Expectations

Post by Valuethinker »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm The Dow Jones is down ~16% from its all time highs & the Nasdaq hit intraday bear market territory today. Many would agree, we are in the very beginning of a Bear Market. How long it will last & how far down it will go is anyone's guess?
Actually this feels more like a correction.

There are no obvious crisis points, just a general grumpiness re valuations plus some of the usual storms (President v. Congress, trade spats etc.). I don't have the same feelings about markets that one did in 2000 (extreme overvaluation) nor 2008 (crises in financial institutions). 1990 might come closer to mind *if* there is some geopolitical event (like Saddam invading Kuwait).

In addition the Fed is raising rates but must be mindful of what financial markets are signalling. The actual raise and the policy note was just about as expected.

What *did* happen was the Fed confirmed that it is allowing Quantitative Easing to become Q Terminating (QE is QT). Despite this being well trailed, it appeared that some segments of the market just weren't prepared for it, eg high yield credit.

I do not have plans to change my asset allocation or stray off course. I have spent a few hours reading old posts on bogleheads during the last true bear market 2008/09. It was painful reading these old posts. It was such an emotional devastating time for a lot of people. I pray this bear market is nowhere near as painful, but unfortunately I think it may be.

I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.

One way I feel may help me control my emotions is guessing the bottom (dow jones or S&P 500) and mathematically calculating the results. Instead of watching my money disappear slowly I have chosen a number I think my money will drop too, creating an expectation level. I've made peace with the results. If they are worse, I'll need to readjust my mind set. Below is my best guess.

The Dow Jones hit 26,828.39 set on October 3rd, 2018.
The S&P 500 hit 2,657 set on September 20th, 2018.

My best guess is the Dow drops 42% to 15,559, in late 2019/2020.

The S&P 500 drops 39% to 1620 - this puts us back at levels seen in June of 2013.
I see them dropping another 10% and then going back up. But, then, nobody knows nothing when it comes to markets.

Anyone want to join me in taking their best guess? What will the bottom be for the Dow Jones and/or S&P 500 during this impending Bear market? Will the exercise of mindset expectation better prepare you for what lies ahead?

I hope this exercise helps you as much as I think it will help me. Best of luck to all of us in this coming new years!

To Health & Happiness. :sharebeer
One of my economics profs said "if you make a forecast never give a number. If you have to give a number never give a timeframe".
linenfort
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Re: Bear Market - Mindset Expectations

Post by linenfort »

Dividends.

Focusing on dividends and steady weekly purchases of new shares. That’s how I get through.
Random Walker wrote: Thu Dec 20, 2018 11:49 pm A great Warren Buffett quote is something to the effect “Bear markets are the mechanism for transfer of stocks back to their rightful owners.”
Love it! 👍
livesoft
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Re: Bear Market - Mindset Expectations

Post by livesoft »

I just look back at my previous experiences with losing money in my investments.

Somehow people have short memories and then layer on top of that all kinds of bad projections.

Does anybody remember the days of the 4% drops (plural!) that happened earlier in 2018 in the first week of February where the total US stock market was down 10% in about 2 weeks?

What about the 12% drop at the beginning of 2016?

One doesn't have to go back very far to find these kinds of negative returns. I already know what some folks are going to say. They will say "This time is different because of ...." Well, maybe it is, but probably it isn't.

So let me ask a question: How much lower is your total portfolio percentage-wise than it was on March 1, 2016? On February 8, 2018? Don't know? I thought so.
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helloeveryone
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Re: Bear Market - Mindset Expectations

Post by helloeveryone »

letsgobobby wrote: Thu Dec 20, 2018 11:02 pm The best time to set expectations is before establishing your asset allocation... and certainly before a bear market begins. My expectation is stocks can lose 50% at any time, for any reason, or for no reason at all, and stay down for long, long periods of time. That assumption is the basis of my 60/40 asset allocation. I don’t need to set or reset any mindset today as it was already established years ago.
this is a nice way to do it. So in my case 65% stock so it will drop as low as 32% losses. (more if bonds drop too)
grettman
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Re: Bear Market - Mindset Expectations

Post by grettman »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm
I do not have plans to change my asset allocation or stray off course. I have spent a few hours reading old posts on bogleheads during the last true bear market 2008/09. It was painful reading these old posts. It was such an emotional devastating time for a lot of people. I pray this bear market is nowhere near as painful, but unfortunately I think it may be.
Don't forget that back in 2008 it was more than a bear market --- the financial sector was in a major crisis. Household name banks were facing bankruptcy, the auto industry needed to be bailed out, banks weren't lending money, people all over were losing their jobs and their homes. A friend of mine works for FDIC as a programmer of their mainframe and he had to be called in to modify code because the bailouts were so large they exceed the capacity of some of the data fields!!

2008 sucked and maybe one day it will be repeated I doubt that this is the time. In summary, 2008 was more than just a "bear market" --- it was a total disaster that touched most people's lives... Oh and remember the gas prices ---- you couldn't give away an SUV!
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Re: Bear Market - Mindset Expectations

Post by Call_Me_Op »

The OP is assuming we are entering a protracted bear market. Absolutely no way of knowing that. Stocks may rebound next week. Nobody knows nuthin'.

But aside from that, my approach has been to always be prepared for a bear market by bearing (no pun intended) no more risk than I know I can stomach. In addition, if your equities are broadly diversified (i.e., you hold index funds), there is every reason to believe that any loss is only temporary.

I would be really nervous if I were approaching retirement with 100% in stocks in a concentrated position. But even in that case, as long as I were holding more than a few stocks, I would likely be OK as long as I didn't sell at or near the bottom.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: Bear Market - Mindset Expectations

Post by AlohaJoe »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm My best guess is the Dow drops 42% to 15,559, in late 2019/2020.
I am amused that you are able to point the exact price level of the DJIA -- 15,559 -- but aren't able to narrow the date down to more than a vague 6 month window of "late 2019/2020". Surely you should be able to pinpoint the exact day when the DJIA hits the bottom? :D
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Re: Bear Market - Mindset Expectations

Post by mancich »

For me and I think most investors, there is a direct correlation between the amount of time left in your accumulation years and the amount of fear one feels when there are large market drops like we are seeing now. Meaning, I was much less concerned when this happened in my thirties than I am now, as I get closer to retirement, because I have less time to recover from an extended bear market. Of course, my asset allocation is designed to address this, and being very conservative (53 stocks/47 bonds and cash), I sleep a little better at night. But I still feel some anxiety when I see large drops from day to day. To keep a positive mindset, I just remind myself that stocks will recover in time, and that I should stay the course and not do anything dumb in the short term. And save as much as possible. Control the controllables... :beer
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Re: Bear Market - Mindset Expectations

Post by dknightd »

livesoft wrote: Fri Dec 21, 2018 7:24 am Does anybody remember the days of the 4% drops (plural!) that happened earlier in 2018 in the first week of February where the total US stock market was down 10% in about 2 weeks?

What about the 12% drop at the beginning of 2016?
Yes, I remember those. It still surprises the market recovered so quickly. I thought both might be the beginning of the next correction/bear. Who knows, maybe this one will be.
I will be retiring in 6 months, I would like the next inevitable correction to occur before I actually retire. Mostly so I know how bad it is actually going to be. But I also know this will not be the last crazy up then down then up that will occur in the markets. Stocks seem to go up/down/sideways/bouncy for reasons I do not understand. The nature of the beast it seems . . .
If you value a bird in the hand, pay off the loan. If you are willing to risk getting two birds (or none) from the market, invest the funds. Retired 9/19. Still working on mortgage payoff.
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Cyclesafe
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Re: Bear Market - Mindset Expectations

Post by Cyclesafe »

Pundits look at what happens and devise a rationale. Whether their explanation is right or wrong is unimportant because it is likely irrelevant.

Only one thing is important: are cash flow needs addressed. That's it. Easy peasy.

Short term, cash flow is determined by income and one's emergency fund.

Long term, cash flow is determined by the stability of the financial system and economic growth.

For the latter, we must have faith that - despite hiccups along the way - stability and growth will prevail. If they don't, we might as well just start hoarding guns and canned goods.

Stay the course. If you can't sleep at night, buck up, stop sniveling, and ensure - when this is all over - that you adjust your asset allocation for a lower risk tolerance. You enjoyed the run up, now you pay the price. Stay the course.
"Plans are useless; planning is indispensable.” (Dwight Eisenhower) | "Man plans, God laughs" (Yiddish proverb)
mbasherp
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75% loss

Post by mbasherp »

Like many, I operate with the knowledge that the value of my stock funds can drop by 50% at any given time. Recent events have some talking about this possibility more. As a result, I wondered how I would react if they DID drop 50% - certainly I wouldn't be saying "we've dropped 50% so we can't go any lower because this is what I planned for." Nope. If at any time, I'm comfortable with my stocks falling 50%, I need to be comfortable applying the exact same logic when fear is everywhere.

Even at a drop of 50%, I should be comfortable staying the course in the prospect of a further 50% decline. Thus, I need to be comfortable with a 75% drop in my equities from here. The only reason I don't take this further is that a 75% decline is far enough of a statistical outlier that I will arbitrarily declare this "good enough" for a stress test and move on.
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Re: 75% loss

Post by Call_Me_Op »

mbasherp wrote: Fri Dec 21, 2018 9:17 am Like many, I operate with the knowledge that the value of my stock funds can drop by 50% at any given time. Recent events have some talking about this possibility more. As a result, I wondered how I would react if they DID drop 50% - certainly I wouldn't be saying "we've dropped 50% so we can't go any lower because this is what I planned for." Nope. If at any time, I'm comfortable with my stocks falling 50%, I need to be comfortable applying the exact same logic when fear is everywhere.

Even at a drop of 50%, I should be comfortable staying the course in the prospect of a further 50% decline. Thus, I need to be comfortable with a 75% drop in my equities from here. The only reason I don't take this further is that a 75% decline is far enough of a statistical outlier that I will arbitrarily declare this "good enough" for a stress test and move on.
Certainly. But I bet not many here could withstand a 75% drop in their equities without some very serious distress. I do agree with you, however, that it is within the realm of possibility - as scary as that thought may be.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
livesoft
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Re: Bear Market - Mindset Expectations

Post by livesoft »

The 50% drop possibility in stock funds is greatly exaggerated. The idea that things would drop 50% overnight or in a week or a month is even more greatly exaggerated. Sure, this could happen to an individual stock, but for a fund of 3000+ stocks?

Yes, stock markets have dropped 50% in the past, but look at what was happening in the one or two years before that level of decrease was reached. Also look at what was happening to get to the highwater mark before that decrease.

FEAR! UNCERTAINTY! DOUBT! Get some knowledge and some chill pills to overcome these things.
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Shallowpockets
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Re: Bear Market - Mindset Expectations

Post by Shallowpockets »

mancich wrote: Fri Dec 21, 2018 8:25 am For me and I think most investors, there is a direct correlation between the amount of time left in your accumulation years and the amount of fear one feels when there are large market drops like we are seeing now. Meaning, I was much less concerned when this happened in my thirties than I am now, as I get closer to retirement, because I have less time to recover from an extended bear market. Of course, my asset allocation is designed to address this, and being very conservative (53 stocks/47 bonds and cash), I sleep a little better at night. But I still feel some anxiety when I see large drops from day to day. To keep a positive mindset, I just remind myself that stocks will recover in time, and that I should stay the course and not do anything dumb in the short term. And save as much as possible. Control the controllables... :beer

This is a good summation of how I feel. You stay the course. Either by plan or by being paralyzed. Either way that is the behavior. Behavior is not feelings though. Part of the feelings are such that consumers may alter spendig habits to the downside. Less consumed. Less consumed equals less company profits. Equals perhaps job cutbacks. This perpetrates the drop in numbers for the stock market.
2008 is not that long ago. The memory of that is near enough that it may influence more so the consumer behavior of underspending and tightening of your budget.
Now it is nice that we are all BHs and are frugal and adept in managing our money. But, the economy does not run on that premise. It runs on the non BHs who do the spending.
In addition to any prolonged or deep stock market drop there is the lost time. When you think you have 20 years you can weather it. When you dont, it becomes a bit more anxiety producing. When in retirement you do not have cash sitting around that you want to deploy and play the buy lower game. In fact you are probably looking at any cash you have as a good thing.
So we have two camps here the long time frame working people and those nearing or in retirement. The smiles of the long horizon people is not shared by the the other half so much.
Stay the course is based on the history of the markets. At the same time, often by the same people, we hear that the past does not portend the future. Total belief is the answer, but that does not negate that some of us will feel a bit anxious as things move south.
LAFiddler
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Re: Bear Market - Mindset Expectations

Post by LAFiddler »

1. As someone still in the accumulation phase, it gives me great comfort to look at just the raw balance from last year to this year. Even with the declines in the market, my contributions guarantee a net increase in assets overall.

2. While it hurts to think that 9 months of this year's contributions were at a high point of the market, it's nice to know we'll be picking up cheap shares if things stay beat down for a little bit.

3. Plot your net worth year over year. It really puts things in perspective (hoooo boy, 2017 was an awesome year).

Like some here, I'm prepared for 50% drop, but I'm hopeful that the decline doesn't last longer than yesterday. My personal opinion is that we move mostly sideways next year.
latesaver
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Re: Bear Market - Mindset Expectations

Post by latesaver »

livesoft wrote: Fri Dec 21, 2018 9:28 am The 50% drop possibility in stock funds is greatly exaggerated. The idea that things would drop 50% overnight or in a week or a month is even more greatly exaggerated. Sure, this could happen to an individual stock, but for a fund of 3000+ stocks?

Yes, stock markets have dropped 50% in the past, but look at what was happening in the one or two years before that level of decrease was reached. Also look at what was happening to get to the highwater mark before that decrease.

FEAR! UNCERTAINTY! DOUBT! Get some knowledge and some chill pills to overcome these things.
X 1000
i keep reading posts about "if this makes you queasy wait until stocks drop 50%"

i think those that were invested during 2007-2009 are too quick to sound the alarms about the next 50% drop being right around the corner.
deltaneutral83
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Re: Bear Market - Mindset Expectations

Post by deltaneutral83 »

AlohaJoe wrote: Fri Dec 21, 2018 8:17 am
dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm My best guess is the Dow drops 42% to 15,559, in late 2019/2020.
I am amused that you are able to point the exact price level of the DJIA -- 15,559 -- but aren't able to narrow the date down to more than a vague 6 month window of "late 2019/2020". Surely you should be able to pinpoint the exact day when the DJIA hits the bottom? :D
A 42% decline on the DOW before 2020 would be three 42+% declines within 20 years which would be unprecedented just as two 42% declines inside of ten years was unprecedented in 2009. In fact, the only 30%+ declines the last 100 years were the depression, the oil crisis, tech meltdown, and the banking crisis. 30% declines are indeed rare at 4 in 100 years, if 40%+ declines become a once a decade type thing it will scare people off from ever investing I think. But I am well aware the markets are as random as ever and this could easily happen.
squirm
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Re: Bear Market - Mindset Expectations

Post by squirm »

A true bear market is when most people lost a lot of their investments, many lose their jobs, their home values have crashed and there's overall anxiety which causes marriages to break, etc. In other words there's little place to hide even if your in safe instruments because there's other factors.

I have a feeling that some are thinking a twenty percent haircut from lofty levels they'll be able to easily survive a bear market.
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HomerJ
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Re: Bear Market - Mindset Expectations

Post by HomerJ »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm The Dow Jones is down ~16% from its all time highs & the Nasdaq hit intraday bear market territory today. Many would agree, we are in the very beginning of a Bear Market. How long it will last & how far down it will go is anyone's guess?

I do not have plans to change my asset allocation or stray off course. I have spent a few hours reading old posts on bogleheads during the last true bear market 2008/09. It was painful reading these old posts. It was such an emotional devastating time for a lot of people. I pray this bear market is nowhere near as painful, but unfortunately I think it may be.
No one knows if we are in the "very beginning of a Bear Market".

Look at the some of the threads from 2011 and 2016 when the market dropped nearly 20%, but stopped and went back up.

That's just as likely as another 2008-2009.

But, sure being prepared for a 2008-2009 bear market is a good idea. One should ALWAYS be prepared for a 50% market crash starting tomorrow.

Because it could happen.
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Re: Bear Market - Mindset Expectations

Post by HomerJ »

letsgobobby wrote: Thu Dec 20, 2018 11:02 pm The best time to set expectations is before establishing your asset allocation... and certainly before a bear market begins. My expectation is stocks can lose 50% at any time, for any reason, or for no reason at all, and stay down for long, long periods of time. That assumption is the basis of my 60/40 asset allocation. I don’t need to set or reset any mindset today as it was already established years ago.
This.
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ge1
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Re: Bear Market - Mindset Expectations

Post by ge1 »

latesaver wrote: Fri Dec 21, 2018 11:03 am
livesoft wrote: Fri Dec 21, 2018 9:28 am The 50% drop possibility in stock funds is greatly exaggerated. The idea that things would drop 50% overnight or in a week or a month is even more greatly exaggerated. Sure, this could happen to an individual stock, but for a fund of 3000+ stocks?

Yes, stock markets have dropped 50% in the past, but look at what was happening in the one or two years before that level of decrease was reached. Also look at what was happening to get to the highwater mark before that decrease.

FEAR! UNCERTAINTY! DOUBT! Get some knowledge and some chill pills to overcome these things.
X 1000
i keep reading posts about "if this makes you queasy wait until stocks drop 50%"

i think those that were invested during 2007-2009 are too quick to sound the alarms about the next 50% drop being right around the corner.
True.

Or investors got spoiled in the last 15 years with the US markets always bouncing back quickly from the lows, including the 2009 lows, and are not prepared for a scenario where the market goes down a lot and stays down for a prolonged period of time.

Then again everybody who has invested in International stocks in the last 15 years knows that feeling :wink:
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Re: Bear Market - Mindset Expectations

Post by JohnDindex »

Why 50%? This forum constantly throws that figure around and I just don't understand why. Why not 70%, or 63%, I think it is silly to have these conversations.
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Re: Bear Market - Mindset Expectations

Post by JohnDindex »

ge1 wrote: Fri Dec 21, 2018 1:04 pm
latesaver wrote: Fri Dec 21, 2018 11:03 am
livesoft wrote: Fri Dec 21, 2018 9:28 am The 50% drop possibility in stock funds is greatly exaggerated. The idea that things would drop 50% overnight or in a week or a month is even more greatly exaggerated. Sure, this could happen to an individual stock, but for a fund of 3000+ stocks?

Yes, stock markets have dropped 50% in the past, but look at what was happening in the one or two years before that level of decrease was reached. Also look at what was happening to get to the highwater mark before that decrease.

FEAR! UNCERTAINTY! DOUBT! Get some knowledge and some chill pills to overcome these things.
X 1000
i keep reading posts about "if this makes you queasy wait until stocks drop 50%"

i think those that were invested during 2007-2009 are too quick to sound the alarms about the next 50% drop being right around the corner.
True.

Or investors got spoiled in the last 15 years with the US markets always bouncing back quickly from the lows, including the 2009 lows, and are not prepared for a scenario where the market goes down a lot and stays down for a prolonged period of time.

Then again everybody who has invested in International stocks in the last 15 years knows that feeling :wink:
I agree completely with your first point, it could have gone differently post 2008.

On international stocks, they have had a CAGR of over 7% for the 15 years ending 11/30, I wouldn't call that terrible. I do understand what you are saying, but I don't think it's been too bad.
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Re: Bear Market - Mindset Expectations

Post by Call_Me_Op »

JohnDindex wrote: Fri Dec 21, 2018 1:09 pm Why 50%? This forum constantly throws that figure around and I just don't understand why. Why not 70%, or 63%, I think it is silly to have these conversations.

I think people use 50% because that's more-or-less how far the broad market fell in the last few major bear markets. But it could be more.
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Re: Bear Market - Mindset Expectations

Post by ray.james »

This is how I mentally exercise to keep my risk tolerance and anxiety to a low. These days I am more nuanced in my feeling for stock market. Up/down. I am not a new investor anymore :)

Yearly I keep 2 numbers in mind - 30% down and 50% down to realize the possible wealth growth. Early this year I also decided on 33% real estate holdings as part of asset allocation. I am young and have energy to multi-task.The net impact on net worth is 20% in a good bear market. Blah! Blip!

Also 40% declines are real mess and rare as stated in the up thread. 25-35% are more like common bear market cycles.I do think the public debt obligations will be the next big one 50% albeit have no idea when it will play out.
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Re: Bear Market - Mindset Expectations

Post by HomerJ »

JohnDindex wrote: Fri Dec 21, 2018 1:09 pm Why 50%? This forum constantly throws that figure around and I just don't understand why. Why not 70%, or 63%, I think it is silly to have these conversations.
Just a big round number that makes it easy to do the math.

If I have $1.2 million, and I'm 50/50 stocks/bonds, a 50% stock market crash means I'll be down 25% or $300,000.

Same reason I'm 50/50 stocks/bonds, so the math is easy. :)

Quick, how much will you be down if your 63/37 stocks/bonds portfolio experiences a 58% stock market crash!
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Re: Bear Market - Mindset Expectations

Post by aristotelian »

Who knows. The 50% drop from peak in 2008 was one of the worst in history. I don't see anything happening right now to justify that kind of drop. It seemed like the sky was falling yesterday, but in TJ Maxx the store was packed and lines were long. I am not making a big move to buy the dip but I am staying the course and buying the market with new dollars.
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Re: Bear Market - Mindset Expectations

Post by JohnDindex »

HomerJ wrote: Fri Dec 21, 2018 1:19 pm
JohnDindex wrote: Fri Dec 21, 2018 1:09 pm Why 50%? This forum constantly throws that figure around and I just don't understand why. Why not 70%, or 63%, I think it is silly to have these conversations.
Just a big round number that makes it easy to do the math.

If I have $1.2 million, and I'm 50/50 stocks/bonds, a 50% stock market crash means I'll be down 25% or $300,000.

Same reason I'm 50/50 stocks/bonds, so the math is easy. :)

Quick, how much will you be down if your 63/37 stocks/bonds portfolio experiences a 58% stock market crash!
I wasn't saying 63% in stocks, I was talking about a 63% correction. However, assuming that bonds had zero return, you would be down 36.54%
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Re: Bear Market - Mindset Expectations

Post by FelixTheCat »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm I am interested in how others emotionally stay the course during unfriendly times.
I emotionally stay the course because of my asset allocation. The bonds allow me to sleep well. The stocks allow me to live well. It took years of trial and error but my AA works well for me and my emotions.
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Re: Bear Market - Mindset Expectations

Post by a5ehren »

I'm 32, so just buying more stocks and making sure I'm indispensable at work. I should be OK barring total company collapse.

Don't care what it gets down to, because I'm not using the money yet.
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Re: Bear Market - Mindset Expectations

Post by Scooter57 »

aristotelian wrote: Fri Dec 21, 2018 1:20 pm Who knows. The 50% drop from peak in 2008 was one of the worst in history. I don't see anything happening right now to justify that kind of drop. It seemed like the sky was falling yesterday, but in TJ Maxx the store was packed and lines were long. I am not making a big move to buy the dip but I am staying the course and buying the market with new dollars.
TJMaxx sells branded goods at very low prices. A big crowd there is a negative indicator for retail as a whole. Their prices tbis past week were lower than Walmart's on several items I looked at.
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Re: Bear Market - Mindset Expectations

Post by theplayer11 »

wife and I both maxed out our 401ks this year, so I'm looking at it like we have more money invested in the market at this time than we did last year.
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Re: Bear Market - Mindset Expectations

Post by galeno »

That's how I look at it too. But since we're retired we go with 40/60.
letsgobobby wrote: Thu Dec 20, 2018 11:02 pm The best time to set expectations is before establishing your asset allocation... and certainly before a bear market begins. My expectation is stocks can lose 50% at any time, for any reason, or for no reason at all, and stay down for long, long periods of time. That assumption is the basis of my 60/40 asset allocation. I don’t need to set or reset any mindset today as it was already established years ago.
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Re: Bear Market - Mindset Expectations

Post by Soon2BXProgrammer »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm The Dow Jones is down ~16% from its all time highs & the Nasdaq hit intraday bear market territory today. Many would agree, we are in the very beginning of a Bear Market. How long it will last & how far down it will go is anyone's guess?

I do not have plans to change my asset allocation or stray off course. I have spent a few hours reading old posts on bogleheads during the last true bear market 2008/09. It was painful reading these old posts. It was such an emotional devastating time for a lot of people. I pray this bear market is nowhere near as painful, but unfortunately I think it may be.

I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.

One way I feel may help me control my emotions is guessing the bottom (dow jones or S&P 500) and mathematically calculating the results. Instead of watching my money disappear slowly I have chosen a number I think my money will drop too, creating an expectation level. I've made peace with the results. If they are worse, I'll need to readjust my mind set. Below is my best guess.

The Dow Jones hit 26,828.39 set on October 3rd, 2018.
The S&P 500 hit 2,657 set on September 20th, 2018.

My best guess is the Dow drops 42% to 15,559, in late 2019/2020.

The S&P 500 drops 39% to 1620 - this puts us back at levels seen in June of 2013.

Anyone want to join me in taking their best guess? What will the bottom be for the Dow Jones and/or S&P 500 during this impending Bear market? Will the exercise of mindset expectation better prepare you for what lies ahead?

I hope this exercise helps you as much as I think it will help me. Best of luck to all of us in this coming new years!

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Re: Bear Market - Mindset Expectations

Post by riptide »

I wish I never invested in the stock market. I hate it. I can't stand to go through this. I haven't touched my portfolio, but it kills me to see it dropping every day. I hate it. I would be much more at peace in a protected fund that gained interest in a bank like a CD or money market. I hate these times and wish I never held stocks....
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Re: Bear Market - Mindset Expectations

Post by iasw »

I'd really rather ignore the market and my account. The 401k contributions are set, and we tend to fill the Roth IRAs early in the calendar year just to get it done.

Where I suppose I do need to pay attention is if I'm in the rebalancing zone. I'll need to check accounts from time to time to see if I need to. Perhaps just checking on it every 3 months?

Any advice for how to deal with the desire to ignore the markets with the need to rebalance?
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Re: Bear Market - Mindset Expectations

Post by MotoTrojan »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm

My best guess is the Dow drops 42% to 15,559, in late 2019/2020.
This doesn't sound too bad. I'd love to have this and start plowing some cash in. What if the dow drops 42% to 15,559, but doesn't reach that until 2028?
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Re: Bear Market - Mindset Expectations

Post by MotoTrojan »

riptide wrote: Fri Dec 21, 2018 4:03 pm I wish I never invested in the stock market. I hate it. I can't stand to go through this. I haven't touched my portfolio, but it kills me to see it dropping every day. I hate it. I would be much more at peace in a protected fund that gained interest in a bank like a CD or money market. I hate these times and wish I never held stocks....
Really hope this is a joke. Good luck.
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Re: Bear Market - Mindset Expectations

Post by Fallible »

dreamjob9 wrote: Thu Dec 20, 2018 10:26 pm ...
I am interested in how others emotionally stay the course during unfriendly times. The psychology of investing is fascinating. The most educated folks, sell near the bottom, against their better judgment. Anxiety, fear, anger, depression are all common emotions felt during the bottoms of a Bear.

One way I feel may help me control my emotions is guessing the bottom (dow jones or S&P 500) and mathematically calculating the results. Instead of watching my money disappear slowly I have chosen a number I think my money will drop too, creating an expectation level. I've made peace with the results. If they are worse, I'll need to readjust my mind set. Below is my best guess. ...
Guessing what the market might do, besides being impossible, is not exactly controlling your emotions in a market downturn. Emotional control is doing what Jack Bogle advises: "Don't just do something, stand there." Your asset allocation should have been set with downturns in mind and how you might react to them (much as letsgobobby posted upthread). It's not easy to know for certain how you will react in a volatile market, so if you've misjudged how much risk you can or want to take, lower it. Staying the course means the right course for you.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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