2020 COVID Crash Lessons

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ImmigrantSaver
Posts: 320
Joined: Tue Nov 22, 2016 6:24 pm

Re: 2020 COVID Crash Lessons

Post by ImmigrantSaver » Sat Mar 21, 2020 11:47 am

mrspock wrote:
Sat Mar 21, 2020 11:23 am
tealeaves wrote:
Sat Mar 21, 2020 11:14 am
ImmigrantSaver wrote:
Sat Mar 21, 2020 7:38 am
louiethelilac wrote:
Sat Mar 21, 2020 4:45 am
I have learned that my tolerance for stock fund declines is much higher than for bond fund declines.
Same for me. I agonized about losing a couple thousand in Muni holdings way more than losing over 100k in stocks. Makes no logical sense to me!
I think the feeling of agony makes perfect sense if you believe the "bonds are for safety" mantra (as so many do). Far more unnerving to experience declines in magnitude that you never expected for your "safe money". But if you hold on it's also logical to anticipate a rebound within a tolerable time period.
What bothers me is that as rebalancing bands his, my IPS says to rebalance. I have no choice but to sell these bonds at a loss to do so. This was not part of the scenario I had imagined in my head. I'll have to run the math still, but I really wonder if holding a rebalancing band worth of intermediate treasuries would have been the better move in hindsight. I suspect the tax drag might be greater than my bond losses right now, which would make me feel better (as I did the right thing to begin with), but I sure am curious.
Fortunately I don't need to use my muni fund to rebalance as it's the money for downpayment rather than retirement (mental accounting I know :? )
But if I had to, I would think about it this way: I am selling something that is down 2% and buying something that is down 10%, which means I am making 8% when things recover. At least that's how I am thinking about rebalancing from US to international :oops:

ImmigrantSaver
Posts: 320
Joined: Tue Nov 22, 2016 6:24 pm

Re: 2020 COVID Crash Lessons

Post by ImmigrantSaver » Sat Mar 21, 2020 11:49 am

Bluce wrote:
Sat Mar 21, 2020 9:10 am
ImmigrantSaver wrote:
Sat Mar 21, 2020 7:38 am
louiethelilac wrote:
Sat Mar 21, 2020 4:45 am
I have learned that my tolerance for stock fund declines is much higher than for bond fund declines.
Same for me. I agonized about losing a couple thousand in Muni holdings way more than losing over 100k in stocks. Makes no logical sense to me!
Stop checking your PF value!

Take a look in, say, September.
I know you are right! It's mostly for rebalancing I look

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Spinola
Posts: 220
Joined: Fri Nov 16, 2018 1:32 pm

Re: 2020 COVID Crash Lessons

Post by Spinola » Sat Mar 21, 2020 11:55 am

EFF_fan81 wrote:
Sat Mar 21, 2020 11:43 am
if you turn the ship back to port every time there are storm clouds on the horizon, will you ever reach your destination?
True. :beer

Reefguy
Posts: 2
Joined: Sat Mar 21, 2020 12:17 pm

Re: 2020 COVID Crash Lessons

Post by Reefguy » Sat Mar 21, 2020 12:54 pm

Asset allocation works....until it doesn’t:

https://realmoney.thestreet.com/investi ... n-15271581

Dandy
Posts: 6158
Joined: Sun Apr 25, 2010 7:42 pm

Re: 2020 COVID Crash Lessons

Post by Dandy » Sat Mar 21, 2020 1:39 pm

I'm a moderate to conservative investor and feel it is surprising how a long bull market tends to dull the risk. You know it but you don't really feel it because it has been so good for so long.

ValuationsMatter
Posts: 105
Joined: Mon Mar 09, 2020 2:12 am

Re: 2020 COVID Crash Lessons

Post by ValuationsMatter » Sun Mar 22, 2020 12:03 pm

Valuations Matter!

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topper1296
Posts: 655
Joined: Fri Apr 03, 2009 10:50 pm
Location: Nashville TN

Re: 2020 COVID Crash Lessons

Post by topper1296 » Tue Mar 24, 2020 11:39 pm

Don't think there is any new here that someone else didn't bring up, but here are mine.

1- Prefer mutual funds over ETFs, but will continue to use some ETF's.
2- Have my age x 60% for my bond allocation. Will bump that to age x 80%. Yes, I know bonds are expensive right now and will gradually increase using my regular 401K contributions.
3- Total bond index is my core bond holding, but will tilt more to intermediate term treasuries.
4- Cash is king. Will also explore utilizing CD's as part of my cash component.
5- Paying off my mortgage early is sounding more and more attractive as a low risk, tax free return.
6- Will lower my allocation to international stocks and REITS by 5% each. have to reduce somewhere if going to increase my bond exposure
7- Not very BH'ish, but was happy with my individual stock holdings. They held up better than the market as a whole.

APX32
Posts: 67
Joined: Sat May 27, 2017 1:22 pm

Re: 2020 COVID Crash Lessons

Post by APX32 » Wed Mar 25, 2020 2:17 am

1. I overestimated my risk tolerance. Even a very conservative 50-50 allocation (just turned 44, about 10 years from planned retirement) was not conservative enough. Watching $80k vanish in 2 weeks was too much. Adjustments have been made and they will not change much when things eventually settle down, I’m mostly done with stocks.

2. I have newfound respect for cash. That’s perhaps the biggest lesson for me. When there’s indiscriminate selling going on, there’s no safety in bonds, LTTs, gold, bitcoin, everyone is in a mad cash towards the safety of cash. I will now focus on building and maintaining a large cash position (minimum 5 years expenses) going forward.

3. I will make every effort to pay off my mortgage within the next 5 years. What a piece of mind that will be when the next pandemic/crisis hits, and hit it will, sooner than expected.

4. Take advantage of extreme volatility and market moves. I’ve done it a few times during this madness and made some coin in the low 5-figures which helped mitigate the losses, but I could’ve done better.
8% SPY | 5% GLD | 87% Cash

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