I freaked out…now what?

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rbaldini
Posts: 1407
Joined: Mon Mar 23, 2015 3:20 pm

Re: I freaked out…now what?

Post by rbaldini » Thu May 21, 2020 11:41 pm

Get back in right now. If that sounds scary, pick a more conservative asset allocation (more bonds). Be tougher.

sixtyforty
Posts: 451
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Location: USA

Re: I freaked out…now what?

Post by sixtyforty » Fri May 22, 2020 8:10 am

I would recommend;

(1) Take this questionare from Vanguard to help determine what asset allocation fits your risk profile and time until retirement etc.
https://personal.vanguard.com/us/FundsInvQuestionnaire

(2) Based on results from (1), I would start dollar cost averaging back into the market. Backtest results show that lump sum investments do better over the long run, but in this instance it's more about mitigating the emotional aspect, IMO. If you invest all your money at one time, and the market plummets you might be emotionally challenged to sell again.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

Nowizard
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Joined: Tue Oct 23, 2007 5:33 pm

Re: I freaked out…now what?

Post by Nowizard » Fri May 22, 2020 8:25 am

One way to look at it is that you were considering changing your allocations and did so, but over-corrected. Evaluate what would be a strong portfolio going forward, using the excellent wisdom of posters on this site. Then act. Also, you may have reduced losses if what you sold was in taxable accounts.

Tim

Tom_T
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Re: I freaked out…now what?

Post by Tom_T » Fri May 22, 2020 8:27 am

I've been in your position in the past. There are two main issues, in my opinion.

1. When to get back in. This is why you shouldn't get out, because you will never feel comfortable about getting back in. Market is dropping? "I can't get back in now, the market is dropping." Market is rising? "Oh, no, I might be buying at the top, this is a bad time to get in." You see? You will be paralyzed. There is never going to be a "comfortable" time to get in. There will always be a zillion things going on in the world, and given the state of the world, market volatility probably isn't going away. And for market timers, the market is amazingly adept at making you zig when you should have zagged.

2. As others have said, you need an asset allocation that lets you sleep and takes your future plans into account. If you're at 50/50, and the market crashes 50%, you're down 25 percent. Is that okay? 30/70, you're down 15 percent. Is that okay? What number is okay?

DesertGator
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Re: I freaked out…now what?

Post by DesertGator » Fri May 22, 2020 9:51 am

I'm going to sound critical but my goal is to be helpful.

Since you now know you are someone that can "freak out" and go against your own (pretty good) advice, perhaps you should put something in place to prevent that from happening again. Wouldn't it be crazy if you DCA'd into the market over the next 4-6 months, then another little wave of COVID rears its' ugly head, and you freak out again and sell low? Or maybe China does something crazy and you sell? Or the gold market collapses? Or the cicadas don't reappear?

I don't normally suggest people consider a financial adviser with AUM, but for you perhaps you should consider Vanguard's PAS service. You'd have to talk to a CFP before acting on any freak out that you might want to do. You'd have an educated, non-commissioned adviser to bounce your thoughts off off, help you interpret current events in light of your investments & goals and help you make the best decisions possible.

Again, I don't normally recommend this approach since I don't think most people need it. But you KNOW you should stay the course, and couldn't hold yourself to that course. This is one possible aid to support you in doing what you say you want to do.

randomguy
Posts: 8930
Joined: Wed Sep 17, 2014 9:00 am

Re: I freaked out…now what?

Post by randomguy » Fri May 22, 2020 10:29 am

nanameg wrote:
Thu May 21, 2020 7:48 pm
randomguy wrote:
Thu May 21, 2020 7:19 pm
FelixTheCat wrote:
Thu May 21, 2020 3:26 pm
evonboeck wrote:
Thu May 21, 2020 1:44 pm
I’ve never sold on fear in my life and know better, but on 3/13 I sold 100% of my investments.

My investments were about a 50/50 allocation.
You have the wrong AA for you since you sold based on fear. Maybe 40/60 is a better AA for your tolerance level.
You really think 40/60 would have made a difference? I doubt 10/90 would have. Fear isn't rational. Being 7% down instead of 8% isn't going to change anything. You are going to be afraid no matter what happens.
I think more knowledge helps quell fear. Reading this forum and the wiki here helps. Fear isn’t rational ...but more knowledge can help quell fear during the next negative market event. As does reading this forum.
I don't know what helps with fear. But I think the idea that losing only 20% of your money instead of 30% is far too simplistic. You can have all the knowledge in the world but the voice in your head saying that "this time is different. Stocks are going down and will stay down" will always be there. And sometimes people will listen to that voice. Go read the 2008-9 threads about long time posters capitulating.

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Sheepdog
Posts: 5541
Joined: Tue Feb 27, 2007 3:05 pm
Location: Indiana, retired 1998 at age 65

Re: I freaked out…now what?

Post by Sheepdog » Fri May 22, 2020 10:41 am

Tom_T wrote:
Fri May 22, 2020 8:27 am
I've been in your position in the past. There are two main issues, in my opinion.

1. When to get back in. This is why you shouldn't get out, because you will never feel comfortable about getting back in. Market is dropping? "I can't get back in now, the market is dropping." Market is rising? "Oh, no, I might be buying at the top, this is a bad time to get in." You see? You will be paralyzed. There is never going to be a "comfortable" time to get in. There will always be a zillion things going on in the world, and given the state of the world, market volatility probably isn't going away. And for market timers, the market is amazingly adept at making you zig when you should have zagged.

2. As others have said, you need an asset allocation that lets you sleep and takes your future plans into account. If you're at 50/50, and the market crashes 50%, you're down 25 percent. Is that okay? 30/70, you're down 15 percent. Is that okay? What number is okay?
I like this. Very good.
Just because it isn't your fault doesn't mean it isn't your responsibility....Josh Reid Jones

JLJL
Posts: 445
Joined: Wed Jan 08, 2014 11:10 pm

Re: I freaked out…now what?

Post by JLJL » Fri May 22, 2020 11:44 am

evonboeck wrote:
Thu May 21, 2020 5:00 pm
In summary, I'm near retirement(60) and have 900K that I need to get back in the market. 80% of it pretax. In my mind I need to pick a date and start cost averaging back in (w/3 fund approach). Somehow that date is still somewhere in October for me or at least at some major downturn. If anyone has a better idea I'm all ears.
Thanks for the feedback.
You have about 700k in pre-tax money, retirement vehicles, and $200k in taxable. Let's assume that taxable is all on top of a secure emergency fund, which in your case is critical since you are losing your job?

A rhetorical question... is it harder for you to see losses in that taxable money? It shouldn't but for me I mentally account for those dollars differently than my pretax money, even though it's all for retirement.

Here is a thought. Make sure the taxable money is sitting somewhere secure but flexible, like CapOne 360 Performance savings, or Ally no penalty CD. You can get I think 1.3% and maybe some bonuses. Before you do that, have you fully funded your pretax accounts? Now might be a great time to shovel $6k/12k married and more if catch-up into a Roth. You said you are contributing, make sure it is the whole amount.

Then take all your pretax money in your IRAs and 401k/b/whatever and put it into the nearest target date fund with 25-40% stocks. Accounting for your taxable which is safe but earning something, you'll be in let's say 30/70 allocation, target date, well balanced and diversified, with your tougher-emotion taxable money in a safe place but earning something. Get it in play, you could do those things today and it'll feel better and you won't wake up Monday and next week and next month to a crash that will bankrupt you emotionally. A crash will feel ok because you 'protected' your taxable, and can then put that in at a lower price. Things may go up, but then you'll feel glad you got a nice piece back in.

Note that transactions happening in a trading day for these various funds will take place at market close price. If you do something crazy on a weekend, then you have to wait all through Monday to see what happens and you're stuck with the trade. Wait till after the 3pm hour on a trading day if making these moves so you know about where you are. Surely you are aware stocks are down a bit today. Maybe this afternoon is the right time to quickly make your 2020 IRA contributions in full, move your IRA/401k into a smart fund, and park your taxable in a "high yield" savings.

FWIW, I agree with the folks that say to pick your AA and put it all in today, but if that's too tough which it sounds like it is, the above plan gets you in at about 30/70. I'm not sure the 3-fund portfolio makes sense because placement and balancing require decisions and discipline. Target date funds all around might make more sense. You're not alone in this mental and emotional gymnastics obviously!

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FelixTheCat
Posts: 1785
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Re: I freaked out…now what?

Post by FelixTheCat » Fri May 22, 2020 1:35 pm

randomguy wrote:
Thu May 21, 2020 7:19 pm
FelixTheCat wrote:
Thu May 21, 2020 3:26 pm
evonboeck wrote:
Thu May 21, 2020 1:44 pm
I’ve never sold on fear in my life and know better, but on 3/13 I sold 100% of my investments.

My investments were about a 50/50 allocation.
You have the wrong AA for you since you sold based on fear. Maybe 40/60 is a better AA for your tolerance level.
You really think 40/60 would have made a difference? I doubt 10/90 would have. Fear isn't rational. Being 7% down instead of 8% isn't going to change anything. You are going to be afraid no matter what happens.
Yes. I was 60/40 in 2008 and sold out. I dialed my AA to 50/50 and I sleep like a baby.
Felix is a wonderful, wonderful cat.

muffins14
Posts: 196
Joined: Wed Oct 26, 2016 4:14 am

Re: I freaked out…now what?

Post by muffins14 » Fri May 22, 2020 1:47 pm

What is your justification for waiting until October?

randomguy
Posts: 8930
Joined: Wed Sep 17, 2014 9:00 am

Re: I freaked out…now what?

Post by randomguy » Fri May 22, 2020 1:50 pm

FelixTheCat wrote:
Fri May 22, 2020 1:35 pm
randomguy wrote:
Thu May 21, 2020 7:19 pm
FelixTheCat wrote:
Thu May 21, 2020 3:26 pm
evonboeck wrote:
Thu May 21, 2020 1:44 pm
I’ve never sold on fear in my life and know better, but on 3/13 I sold 100% of my investments.

My investments were about a 50/50 allocation.
You have the wrong AA for you since you sold based on fear. Maybe 40/60 is a better AA for your tolerance level.
You really think 40/60 would have made a difference? I doubt 10/90 would have. Fear isn't rational. Being 7% down instead of 8% isn't going to change anything. You are going to be afraid no matter what happens.
Yes. I was 60/40 in 2008 and sold out. I dialed my AA to 50/50 and I sleep like a baby.
Is waking up every 3 hours screaming really a good outcome?. I feel like a lot of people have never had kids or they are blocking out the memories.......

Honestly every situation is different. I had no problem sleep through 2000-10 at basically 100% stocks (i.e. had 3 months of cash as EF). I worried a lot more in 2020 at 70/30 than I ever did back then as a result of orders of magnitude richer and a couple decades older. But we aren't remotely talking about the level of worry where you even think about selling. I figure by the time I worry, it is far to late to act:)

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