I am having FOMO. Please remind me of bear markets

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whodidntante
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Re: I am having FOMO. Please remind me of bear markets

Post by whodidntante »

Whether you invest or not, you're bound to feel a level of regret at times. That's the nature of owning volatile assets when you can't stand to lose money. Consider taking up gambling so that gambling on diversified stocks and bonds seems less risky in comparison. :P
doobiedoo
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Re: I am having FOMO. Please remind me of bear markets

Post by doobiedoo »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am ..
Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that. ..
sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
Below is a reminder of the volatility of stocks.
The x-axis is time in years, e.g. D-23 is Dec 2023.
The y-axis is net worth but I've cropped out the actual dollar amounts.
Image

2008-2009 was scary.
2001-2003 was relentlessly discouraging.
Your emergency fund gives you the assurance that you can ride out the down years without selling.
Grt2bOutdoors
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Re: I am having FOMO. Please remind me of bear markets

Post by Grt2bOutdoors »

itsmeagain wrote: Sun Jul 07, 2024 3:08 pm
nisiprius wrote: Sun Jul 07, 2024 11:27 am ...
Observation #4: a problem is that the memory of all kinds of pain--kidney stones, childbirth, financial--fades with time. I can't really remember what it was like in 2008. Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse. Like Snow White and the Seven Dwarfs, I literally cannot remember all of them without checking a timeline. And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
Here's a little walk down memory lane:
https://www.cnbc.com/2009/03/06/dows-bl ... tocks.html

For example, Citigroup went from $55 to <$1. (It later did a 1:10 reverse split to remain listed.)
I forget the exact number, but I recall at one point several stocks in the bluechip DJIA were trading under $5, which is what the SEC considered penny stock territory.
I was employed by a major U.S. bank during that time - from my first hand observations and experience, in times of crisis and extreme uncertainty, the one prevailing asset which ensured your daily and long term survival was cold hard cash. For every poster saying you can get by looking at your entire portfolio as your emergency fund - well, had Ben Bernake not succeeded in convincing the U.S. Congress and Senate to put up the money to save the banks and financial system - many of you would be either bankrupt or severely harmed. For those who say a 2 year emergency fund is too much - personal finance is well, personal and each person should understand based on the facts only known to themselves just how truly risky it is to find themselves with “not enough” at the worst time. The risk of a medical professional and that of a real estate agent who depends on sales in a moribund market is night and day.

How bad was it? Citibank was 7 days away from being wiped out. The bonds it held? Triple A US government bonds? The market went from a mark of 100 or par to quotes under 50, if you could find a buyer - in the span of days. No one was giving up the one asset that meant life or death in business or your day to day standard of living. It was the beginning of a domino effect set off by the failures of Bear Stearns and Lehman Brothers. Credit card lines, personal lines of credit, home equity lines of credit - those aren’t emergency funds - in a bank failure, those facilities are gone - they will be cut to zero and you don’t have a say in the matter, what you borrowed though is still due and payable.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Wannaretireearly
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Re: I am having FOMO. Please remind me of bear markets

Post by Wannaretireearly »

Hyperchicken wrote: Sun Jul 07, 2024 5:22 pm Having an emergency fund is a good advice to people living paycheck to paycheck, or with little savings.

One with sizeable investments does not need an emergency fund. Sure they may need to sell at the market bottom if an emergency happens. Not investing part of your money because of that is textbook loss aversion.
Being forced to sell investments is not a great feeling.
Mathematically it would prob work out better to always be 100% invested above a certain level.

Psychologically it’s no fun/stressful to be forced to sell investments at low prices to pay the bills. I guess the psychology is a thing to work on…
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
invest4
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Re: I am having FOMO. Please remind me of bear markets

Post by invest4 »

* .COM: Largely uneventful as I didn’t invest in Tech funds, etc.

* Great Financial Crisis:

- 50% hit to portfolio (300k to 150k)

- Thought about, but did not pull the trigger on Roth conversion of the $150k. Bah.

- Solid emergency fund due to 4 kids and sole income (vital)

- Did not lose job (critical)

- Kept investing per plan

- House purchased years earlier at no more than 3x income and maintained value higher than purchase price throughout.

* Pandemic:

- Solid emergency fund (vital)

- Excited during drop to make larger investments while “on sale”. Otherwise continued per plan.

- Did not lose job (critical)


One can not control everything that happens, but you do have influence / control of your portfolio.

I do not invest in things I don’t understand (ex: crypto), minimize guessing and hoping (ex: tilting, individual stocks, etc.), or create a complex portfolio based upon past performance which is not the future.

I have a boring, simple, diverse portfolio that will endure for the long term.

Getting where I need to be slowly…like a river through rock.

No FOMO for me.
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arcticpineapplecorp.
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Re: I am having FOMO. Please remind me of bear markets

Post by arcticpineapplecorp. »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
1. 2008-2009 worst drawdown was -50%. why would your emergency funds go through that? You shouldn't have emergency funds in stocks. You don't want to have an emergency and not have the funds to support it because you invested it. Emergency savings should be in (usually) low yielding accounts because you can't take risk so can't get the reward. I say "usually" because you can earn 5% on savings now and that's pretty decent.

2. You don't tell us what your allocation is, you only say you are conservative and should be using a balance fund. Assuming you mean 60/40 or 50/50 then you're lower allocated to stocks than that. But we don't know because you didn't say.

3. You are getting the return of the stock market, so fear no FOMO. It's just you're getting that return (if you've indexed to the market) on that part of your portfolio that's allocated to stocks. If you want greater returns (the same market return but on a larger part of your portfolio) you'll have to accept the higher risk that goes with it.

4. you may just be in a situation where you can't afford to take more risk because of the uncertainty of income (commission) job stability, etc. The allocation that's right for you is based on your need, ability and willingness to take risk. You might have the need, but you might not have the ability or willingness. That's fine, but the tradeoff of lower returns is you may have to save more (increase savings rate) or work longer than you otherwise would if the returns allowed you to retire earlier. There are no solutions, merely tradeoffs.

5. not sure if you've seen this or not but this might be helpful:
How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/
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Random Musings
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Re: I am having FOMO. Please remind me of bear markets

Post by Random Musings »

Stick with your written investment plan. If you are comfortable with it and you are achieving your financial goals, there is no reason to go outside your need/willingness of risk.

RM
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gavinsiu
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Re: I am having FOMO. Please remind me of bear markets

Post by gavinsiu »

I remember 2008 as not that big of an event. Yes, my portfolio took a heavy hit, but my job was not affected and I totally ride it out without any issue.

The 2000 dotcom bubble burst was a totally different story. I went through several jobs in the 3 years. The stock market had 3 years of negative return, but I wasn't worry about that at the time. I was worry that I have a job. At the time I had about 12 months of expense and I got severence on some of the job and unemployment, so I was still able to weather that period without withdrawing from my portfolio. To do that, I had to make close to 2 hours each way for commute, work with some really terrible companies. I also cut my expenses down to the bone.

Note that I had 100% equity in both 2000's and 2008. The EF was consider a separate item.

I think it's important for you to have enough EF to avoid withdrawing from the stock market. Make sure you have enough cash for the time period you might be out of work while trying to figure out ways to reduce your expenses so that your EF will last. Even if your EF is high, the percentage of cash to your portfolio will decrease as your portfolio growns especially if you can keep your expenses down as your income grows.
almostretired1965
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Re: I am having FOMO. Please remind me of bear markets

Post by almostretired1965 »

:mrgreen:
sambb wrote: Sun Jul 07, 2024 9:00 am emergency fund has been a drag on our investments. Funds can always be pulled out of the market for a true emergency. I wish i wouldve invested those funds far earlier. There is greater risk keeping it in cash (not keeping up with inflation or growing).
The whole point of an emergency fund is that it allows you not panic and able to leave the bulk of your investments alone when faced with a significant negative financial event in your life. I have never had to use my emergency fund and I will be retiring shortly. Having it has given me peace of mind and I have no regrets. It is insurance, and the best outcome is to not actually need it.
Last edited by almostretired1965 on Sun Jul 07, 2024 10:31 pm, edited 1 time in total.
Dottie57
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Re: I am having FOMO. Please remind me of bear markets

Post by Dottie57 »

Stop with FOMO. You need insurance that your whole life won’t be disrupted in an emergency. Keep emergency funds liquid.

Fear of missing out is either jealousy of others, competing with others or greed. Stop the FOMO - it steals the joy of living today.
Northern Flicker
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Re: I am having FOMO. Please remind me of bear markets

Post by Northern Flicker »

No. Your emergency fund should be in a safe liquid investment. You can earn just over 5.4% today in VUSXX. What rates will do moving forward is anyone's guess.

It is legitimate to evaluate how much emergency fund you actually need, but whatever you identify should be in a safe holding: FDIC or NCUA insured accounts, treasury money market funds, perhaps series I bonds.
Dpmbball
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Re: I am having FOMO. Please remind me of bear markets

Post by Dpmbball »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
Money Market funds are paying 5.3% yearly…You can stick your emergency fund or some of it in there Capital is protected pretty much and you receive income from it instead of .05% from checking
syc
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Re: I am having FOMO. Please remind me of bear markets

Post by syc »

TheDogFather wrote: Sun Jul 07, 2024 3:03 pm Draw a line down the middle of a sheet of paper.

One one side write down how your lives would be different if you were lucky and managed to squeeze every dollar in returns by investing your emergency fund differently at higher risk.

On the other side of the page write down the consequences of a 50% drop in equity values, lasting several years during which time you were unable to find employment close to your current compensation.

Is your emergency fund still too big?
+1. Well-said.
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CyclingDuo
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Re: I am having FOMO. Please remind me of bear markets

Post by CyclingDuo »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
Larry Swedroe and Kevin Grogran in their excellent book Your Complete Guide to a Successful and Secure Retirement wrote about your careers as either "stock like" or "bond like" in helping to determine your asset allocation. It sounds like you and your wife both have careers that are very "stock like" with incomes bouncing up and down, and potential for your commissions being lowered.

Here is a snippet from their book...

For example, tenured professors, doctors, or government employees have a greater ability to take risk than either a worker in a highly cyclical industry where layoffs are common, or an entrepreneur who owns a business with cyclical earnings. The reason is that the first group’s earned income has bond-like characteristics. All other things being equal, she has a greater ability to hold stocks. The entrepreneur’s earned income has equity-like characteristics, so he should hold more bonds. In other words, investors should ask themselves, “Am I a stock or a bond?”
Larry Swedroe. Your Complete Guide to a Successful & Secure Retirement (p. 31). Harriman House. Kindle Edition.

To balance such "stock like" careers out when it comes to asset allocation, you might want to consider how your income from human capital dictates what your financial capital should be invested in and as others have mentioned - having an emergency fund that can provide for you when the "bounce" of your career incomes are down. Your current 2 year emergency fund sounds wise, but I would hesitate to recommend having it invested in anything that is not conservative in spite of any FOMO you may be feeling since your careers appear to be "stock like".

CyclingDuo
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firebirdparts
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Re: I am having FOMO. Please remind me of bear markets

Post by firebirdparts »

Money is paying 5% - this is very much the wrong time to get mad.

Have fear of missing out on that 5%.
This time is the same
rockstar
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Re: I am having FOMO. Please remind me of bear markets

Post by rockstar »

firebirdparts wrote: Mon Jul 08, 2024 9:53 am Money is paying 5% - this is very much the wrong time to get mad.

Have fear of missing out on that 5%.
This.

If the OP has two years of expenses in checking, then they’re doing it wrong.
alluringreality
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Re: I am having FOMO. Please remind me of bear markets

Post by alluringreality »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.
The following thread was from probably one of the more well educated members of the forum, yet the poster's suggestions were often rather debatable. They suggested investing emergency funds in marketable assets, based on recent historical outcomes, instead of using more traditional emergency fund assets. Currently the out of sample result for their plan is roughly 5% real below the backtest. Hopefully individuals choosing to take additional risk are familiar with how those choices may result in lower or higher account balances.
viewtopic.php?t=309472
https://www.portfoliovisualizer.com/bac ... wangt7Tab9

Typically emergency funds are held for near-term reasons, so within the following framework, it may be incongruent to invest such funds into longer-term assets.
https://disciplinefunds.com/defined-duration-investing/
Last edited by alluringreality on Mon Jul 08, 2024 1:51 pm, edited 3 times in total.
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Claudia Whitten
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Re: I am having FOMO. Please remind me of bear markets

Post by Claudia Whitten »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am
However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.
Your emergency funds are for times precisely like that--and for other "stuff happens" times. Why can't you imagine them going through that?
Claudia Whitten
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Re: I am having FOMO. Please remind me of bear markets

Post by Claudia Whitten »

Helium wrote: Sun Jul 07, 2024 10:12 am
jeffyscott wrote: Sun Jul 07, 2024 9:29 am
TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.
Here's one "famous" discussion from that time, in case you've not seen it already:
viewtopic.php?t=25126

It was not easy to even maintain even our 50/50 allocation in retirement accounts in 2008/09.
Great thread.

It's really funny contrasting that thread to every post so far in this one, lol.

It's a reminder of how complacent we can become and how easily we forget once things have been good for a while.
+1

Be fearful when others are greedy. Who said that?
unwitting_gulag
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Re: I am having FOMO. Please remind me of bear markets

Post by unwitting_gulag »

CyclingDuo wrote: Mon Jul 08, 2024 8:07 am To balance such "stock like" careers out when it comes to asset allocation, you might want to consider how your income from human capital dictates what your financial capital should be invested in and as others have mentioned - having an emergency fund that can provide for you when the "bounce" of your career incomes are down. Your current 2 year emergency fund sounds wise, but I would hesitate to recommend having it invested in anything that is not conservative in spite of any FOMO you may be feeling since your careers appear to be "stock like".
As we get older, our human capital dwindles, but our investment capital rises. The ratio of the two, becomes small. An investment mistake might be costlier than years of unemployment. Or, even slight underperformance by the portfolio (relative to... something) might overwhelm the benefits of a juicy lucrative promotion at work. None of this implies that we should put emergency funds into speculative investments, but it does mean, that how we invest, becomes less connected with our working-lives. It also means that being too conservative, of allocating wrongly, and thus missing market-gains, might become an unrecoverable loss... we can't possible work harder or longer or smarter, to make up the difference.
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Garco
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Re: I am having FOMO. Please remind me of bear markets

Post by Garco »

"Emergency Fund" has never been in our investing vocabulary. I'm retired, and our accumulated investment in tax-deferred funds as well as a brokerage account can withstand a bear market. We benefited from some added family money (inherited). We do balance our investments but nothing is designated for an emergency.
SellLow
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Re: I am having FOMO. Please remind me of bear markets

Post by SellLow »

alluringreality wrote: Mon Jul 08, 2024 10:20 am
TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.
The following thread was from probably one of the more well educated members of the forum, yet the poster's suggestions were often rather debatable. They suggested investing emergency funds in marketable assets, based on recent historical outcomes, instead of using more traditional emergency fund assets. Currently the out of sample result for their plan is roughly 8% real below the backtest and still trails holding cash. Hopefully individuals choosing to take additional risk are familiar with how those choices may result in lower or higher account balances.
viewtopic.php?t=309472
https://www.portfoliovisualizer.com/bac ... MUZc43O0ME

Typically emergency funds are held for near-term reasons, so within the following framework, it may be incongruent to invest such funds into longer-term assets.
https://disciplinefunds.com/defined-duration-investing/
Sort of. The original suggestion was to over fund the emergency fund slightly (7 instead of the conventional 6 months, for example) to account for the extra volatility.
Re-running this back test with $14000 (7 months) in the life strategy fund yields a result of $13,642 versus the $13,180 yielded by $12,000 (6 months).

The life strategy fund is trailing t bills in real terms, yet the six months worth of expenses have been preserved which is the real goal. You also now hold assets with higher expected returns than cash.

I personally would not recommend this plan to everyone, but it’s not a crazy idea.
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Re: I am having FOMO. Please remind me of bear markets

Post by coachd50 »

rockstar wrote: Mon Jul 08, 2024 9:55 am
firebirdparts wrote: Mon Jul 08, 2024 9:53 am Money is paying 5% - this is very much the wrong time to get mad.

Have fear of missing out on that 5%.
This.

If the OP has two years of expenses in checking, then they’re doing it wrong.
Agreed. Earlier in the thread, I had stated to the OP that their emergency fund is theirs and two times expenses is absolutely acceptable as an emergency fund given their situation if that’s what they think. I want to clarify I made those statements under the assumption that they currently are holding their emergency fund in something paying the 4 1/2 to 5% that is available for default risk free liquid assets right now.

Op If you were holding two times expenses in a regular checking account, not paying anything, I suggest you change quickly
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Re: I am having FOMO. Please remind me of bear markets

Post by bradpevans »

cosmos wrote: Sun Jul 07, 2024 12:26 pm With the strong likelihood that a 90%+ crash/drop is coming I am not taking emergency funds into stocks. <snip>

I am not a gambling man. :)
based on what? should we short the entire market?
rockstar
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Re: I am having FOMO. Please remind me of bear markets

Post by rockstar »

bradpevans wrote: Mon Jul 08, 2024 11:59 am
cosmos wrote: Sun Jul 07, 2024 12:26 pm With the strong likelihood that a 90%+ crash/drop is coming I am not taking emergency funds into stocks. <snip>

I am not a gambling man. :)
based on what? should we short the entire market?
In what reality would the market fall 90%? Seems like an extreme outlier.
feh
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Re: I am having FOMO. Please remind me of bear markets

Post by feh »

I would never keep emergency funds in equities.

The whole idea behind an emergency fund is that you may need it tomorrow. Why would you want that $ in equities, where it can suddenly lose significant value?
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btq96r
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Re: I am having FOMO. Please remind me of bear markets

Post by btq96r »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
I'm a little confused, because with a stout appropriate to your situation emergency fund like you have, all kinds of cash flow should be getting shoveled to investments. With the emergency fund set, next on the hit list if you're not carrying "bad" debt is a reasonable amount to retirement savings (10-15% if you can't max out), which should scratch the FOMO itch. If you're fortunate enough to max out retirement funds, you can invest in taxable, or enjoy life. Would need to know your situation details to opine further.

If nothing else, your emergency fund being safe is the right move. If the market goes down, your chances of being without work increase. Tie the two together, and you can risk a double junk punch at the worst time.
Parkinglotracer
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Re: I am having FOMO. Please remind me of bear markets

Post by Parkinglotracer »

Just search Taylor’s family experience during the depression

https://www.bogleheads.org/blog/2017/01 ... r-markets/

We have a gov cola adjusted pension and 35% of our retirement portfolio in a treasury ladder because I want to be able to minimize my maximum regret that we will need more money in the next downturn.

I don’t think any of our recent bear markets have been very long.

Always preparing for a rainy day but enjoying the bull market as of late.
Fat Tails
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Re: I am having FOMO. Please remind me of bear markets

Post by Fat Tails »

Keep your 2 year emergency fund, but invest it in a short term tbill eft or money market. You would get close to 60% of the stock market historical return with minimal risk. If the market tanks you will look like a genius.
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alluringreality
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Re: I am having FOMO. Please remind me of bear markets

Post by alluringreality »

SellLow wrote: Mon Jul 08, 2024 11:28 am The life strategy fund is trailing t bills in real terms, yet the six months worth of expenses have been preserved which is the real goal.
I think $12k instead of the default was the overfunding, which is slightly more than around $11.7k for a seventh month. The post mentions inflation a few times, uses an inflation-adjusted graph, and mentions "...if $10,000 was six months worth of expenses...", so I presume maintaining $10k after inflation was the intent. It appears that start date determines if inflation-adjusted $10k was or was not maintained. Trying to maintain a real value mainly using low nominal marketable bond rates and some stocks simply amounts to a debatable strategy in the moment, and potentially some adopters could have ended up underperforming by the attempt at outperforming.
Last edited by alluringreality on Tue Jul 09, 2024 7:40 am, edited 1 time in total.
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Re: I am having FOMO. Please remind me of bear markets

Post by Scubadude »

Grt2bOutdoors wrote: Sun Jul 07, 2024 6:01 pm
itsmeagain wrote: Sun Jul 07, 2024 3:08 pm
nisiprius wrote: Sun Jul 07, 2024 11:27 am ...
Observation #4: a problem is that the memory of all kinds of pain--kidney stones, childbirth, financial--fades with time. I can't really remember what it was like in 2008. Every time I started to relax, another iconic household name rock-of-GIbraltar financial institution would collapse. Like Snow White and the Seven Dwarfs, I literally cannot remember all of them without checking a timeline. And what I perceived as fear in the expressions and demeanors of government-authority talking heads, who failed to convince me that they understood what was happening or knew what to do about it.
Here's a little walk down memory lane:
https://www.cnbc.com/2009/03/06/dows-bl ... tocks.html

For example, Citigroup went from $55 to <$1. (It later did a 1:10 reverse split to remain listed.)
I forget the exact number, but I recall at one point several stocks in the bluechip DJIA were trading under $5, which is what the SEC considered penny stock territory.
I was employed by a major U.S. bank during that time - from my first hand observations and experience, in times of crisis and extreme uncertainty, the one prevailing asset which ensured your daily and long term survival was cold hard cash. For every poster saying you can get by looking at your entire portfolio as your emergency fund - well, had Ben Bernake not succeeded in convincing the U.S. Congress and Senate to put up the money to save the banks and financial system - many of you would be either bankrupt or severely harmed. For those who say a 2 year emergency fund is too much - personal finance is well, personal and each person should understand based on the facts only known to themselves just how truly risky it is to find themselves with “not enough” at the worst time. The risk of a medical professional and that of a real estate agent who depends on sales in a moribund market is night and day.

How bad was it? Citibank was 7 days away from being wiped out. The bonds it held? Triple A US government bonds? The market went from a mark of 100 or par to quotes under 50, if you could find a buyer - in the span of days. No one was giving up the one asset that meant life or death in business or your day to day standard of living. It was the beginning of a domino effect set off by the failures of Bear Stearns and Lehman Brothers. Credit card lines, personal lines of credit, home equity lines of credit - those aren’t emergency funds - in a bank failure, those facilities are gone - they will be cut to zero and you don’t have a say in the matter, what you borrowed though is still due and payable.
Thank you for the post.
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CyclingDuo
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Re: I am having FOMO. Please remind me of bear markets

Post by CyclingDuo »

unwitting_gulag wrote: Mon Jul 08, 2024 10:34 am
CyclingDuo wrote: Mon Jul 08, 2024 8:07 am To balance such "stock like" careers out when it comes to asset allocation, you might want to consider how your income from human capital dictates what your financial capital should be invested in and as others have mentioned - having an emergency fund that can provide for you when the "bounce" of your career incomes are down. Your current 2 year emergency fund sounds wise, but I would hesitate to recommend having it invested in anything that is not conservative in spite of any FOMO you may be feeling since your careers appear to be "stock like".
As we get older, our human capital dwindles, but our investment capital rises. The ratio of the two, becomes small. An investment mistake might be costlier than years of unemployment. Or, even slight underperformance by the portfolio (relative to... something) might overwhelm the benefits of a juicy lucrative promotion at work. None of this implies that we should put emergency funds into speculative investments, but it does mean, that how we invest, becomes less connected with our working-lives. It also means that being too conservative, of allocating wrongly, and thus missing market-gains, might become an unrecoverable loss... we can't possible work harder or longer or smarter, to make up the difference.
Agree on the emergency fund not being stored in speculative investments. I Bonds, interest bearing instruments, savings accounts, etc. should suffice.

My interpretation of the Swedroe/Grogan book was that your career, being either equity or bond like, may color the chosen asset allocation throughout the years as you move through your career. Such as, rather than being 80/20, a household may choose to be 70/30 or 60/40. Or rather than being 65/35, a household may choose to be 55/45 - and so on and so forth. Getting hit with a layoff - or double income layoff in a double income household situation such as the OP's - that could mean a year, or two years, or even three years of unemployment, or serious underemployment for a few years that could result in having to tap into some of the investments in order to sustain the expenses of a household/family until the income picks back up.

Image

There certainly have been posters in these forums that faced extended unemployment and or underemployment stretches within their careers who have spoken about how they sustained their household expenses during those down times. Whether it was the 90-91 recession, the dot-com + 9/11 fallout, the GFC, Covid, or other industry specific changes that impacted a Boglehead poster, we know that extended periods where one's human capital is not bringing in an amount that covers all household/family expenses can occur. Having an allocation that may allow one to utilize some of the portfolio to make ends meet that does not involve selling assets at or near extreme lows may or may not result in making it through such a downturn, and still end up with a secure enough retirement. The Swedroe/Grogan suggestion was aimed at addressing those "what ifs" as one plans over the decades for building their secure retirement.

CyclingDuo
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pennsylvania211
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Re: I am having FOMO. Please remind me of bear markets

Post by pennsylvania211 »

Claudia Whitten wrote: Mon Jul 08, 2024 10:25 am
Helium wrote: Sun Jul 07, 2024 10:12 am
Great thread.

It's really funny contrasting that thread to every post so far in this one, lol.

It's a reminder of how complacent we can become and how easily we forget once things have been good for a while.
+1

Be fearful when others are greedy. Who said that?
+1. This has been a great reminder thread to stay on course.

Warren Buffet said that (actually not sure if you were asking rhetorically or not)
meadowrue
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Re: I am having FOMO. Please remind me of bear markets

Post by meadowrue »

I am now convinced the market only goes up. It will only go down if/when I decide to invest a lump sum.
I’ll be sure to warn you all before I do that :sharebeer
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SellLow
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Re: I am having FOMO. Please remind me of bear markets

Post by SellLow »

alluringreality wrote: Tue Jul 09, 2024 7:28 am
SellLow wrote: Mon Jul 08, 2024 11:28 am The life strategy fund is trailing t bills in real terms, yet the six months worth of expenses have been preserved which is the real goal.
I think $12k instead of the default was the overfunding, which is slightly more than around $11.7k for a seventh month. The post mentions inflation a few times, uses an inflation-adjusted graph, and mentions "...if $10,000 was six months worth of expenses...", so I presume maintaining $10k after inflation was the intent. It appears that start date determines if inflation-adjusted $10k was or was not maintained. Trying to maintain a real value mainly using low nominal marketable bond rates and some stocks simply amounts to a debatable strategy in the moment, and potentially some adopters could have ended up underperforming by the attempt at outperforming.
My mistake, it should have been 12k of 100% VASIX (11693 final value) compared to 10k starting of t bills (10983 final value) then. A theoretical emergency would still be covered, and if one doesn’t come up you’re likely to have greater returns than cash. Results are sensitive to start and end dates.
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Re: I am having FOMO. Please remind me of bear markets

Post by alluringreality »

SellLow wrote: Wed Jul 10, 2024 3:43 am it should have been 12k of 100% VASIX (11693 final value) compared to 10k starting of t bills (10983 final value) then.
Personally I consider the overfunding idea open to discussion. If someone mainly holds a portfolio based around modern portfolio theory, they may be primarily invested in nominal bond funds and stocks. Using a balanced fund for an emergency fund typically means investing in nominal bonds and stocks. Is the original poster's intent to increase their investment in nominal bonds and stocks through their emergency fund? Do they intend to subject more of their assets to market or interest rate risk?

Often with an emergency fund people use other types of assets to potentially arrive at a non-correlated holding, although a risk portfolio could also include less correlated assets. Usually the basic idea is to invest in something else, which might not similarly decline in value at the times when nominal bond funds and stocks both happen to experience market decreases at the same time. The main purpose may simply amount to behavioral reasons or planning to meet near-term expenses.
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Re: I am having FOMO. Please remind me of bear markets

Post by White Coat Investor »

coachd50 wrote: Sun Jul 07, 2024 5:13 pm
White Coat Investor wrote: Sun Jul 07, 2024 1:48 pm
TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
2 years is a heck of an emergency fund. Why not leave 1 year invested in cash and put the 2nd year into something conservative like Wellesley.
What does "conservative" mean though. As many have bemoaned recently, the "40" in their conservative 60/40 portfolios just had a fairly significant loss. If the OP is concerned about volatile income and even employment, wouldn't the factors that would put those at risk also potentially impact that portfolio--even if it is "conservative".
I think Wellesley is 35/65 as I recall. It lost 9% in 2022 but other than that, its worst year since 2009 was -2.57%. I think lots of people would describe that as a conservative investment. The OP asked about balanced funds, I picked a very conservative one to mention.
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rich126
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Re: I am having FOMO. Please remind me of bear markets

Post by rich126 »

Probably worthless info but I just saw a story talking about how "smart" money is moving out of stocks while others are going all in on ETFs/stocks.

People often want to buy at a top and sell at the bottom.
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Re: I am having FOMO. Please remind me of bear markets

Post by 260chrisb »

TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
Okay, remember; there are bear markets! That said, FOMO is real and makes you reactionary and can be frustrating. Two years sounds about right based on your career description. Regardless of the overall percentage currently it will be reduced as you invest future money in addition to what you've currently got invested. One of the most difficult things for me as I neared retirement was the thought of having 2-3 years worth of expenses not invested as I'd always had only about a years worth in my working years. Once I got my head around it there was a very high level of comfort knowing I'd be okay during the next bear market. Also recall that it's way easy to currently get 5%+/- on CDs so it's not like you're getting no return. Get your head around it, stick to your plan that you feel good about most days and think of it as missing out on some of what you feel is normal and expected.
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Re: I am having FOMO. Please remind me of bear markets

Post by coachd50 »

White Coat Investor wrote: Wed Jul 10, 2024 4:57 pm
coachd50 wrote: Sun Jul 07, 2024 5:13 pm
White Coat Investor wrote: Sun Jul 07, 2024 1:48 pm
TrustTheMarket wrote: Sun Jul 07, 2024 8:38 am Hi all. We have an oversized emergency fund (2 years of living expenses) because our careers are volatile.

(we have commission based jobs, and our income bounces up and down. Also our industry may be lowering commissions substantially this year. So there is uncertainty moving forward.)

Our emergency fund is not invested in stocks, of course. But sometimes I think we should be using a balanced fund. I keep hearing the market is at all time highs. Sometimes I feel we are being too conservative and are missing out on gains.

However I have read stories about bear markets, like 2008-09, and how punishing they can be. I couldn’t imagine our emergency funds going through that.

I feel comfortable with our plan most days. But sometimes I have FOMO! Would love some Bogleheads words of wisdom to refer to and keep me straight.
2 years is a heck of an emergency fund. Why not leave 1 year invested in cash and put the 2nd year into something conservative like Wellesley.
What does "conservative" mean though. As many have bemoaned recently, the "40" in their conservative 60/40 portfolios just had a fairly significant loss. If the OP is concerned about volatile income and even employment, wouldn't the factors that would put those at risk also potentially impact that portfolio--even if it is "conservative".
I think Wellesley is 35/65 as I recall. It lost 9% in 2022 but other than that, its worst year since 2009 was -2.57%. I think lots of people would describe that as a conservative investment. The OP asked about balanced funds, I picked a very conservative one to mention.
Understood. I was just pointing out that very recently some board members have shown some regret and misunderstanding as their understanding of "conservative" was "would not lose value".

I thought it was an important distinction given that the OP was discussing an emergency fund and had mentioned potential income and employment volatility.
keeptruckin
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Re: I am having FOMO. Please remind me of bear markets

Post by keeptruckin »

If I was a realtor right now I would definitely want two years of cash, even if it cost me in the long run. Better safe than sorry.
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Brod
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Re: I am having FOMO. Please remind me of bear markets

Post by Brod »

My penny's worth is that if you're in a cyclical/volatile industry or sector, two years is OK. If you're getting 2% real return, even better.

Remember, the two years people are talking about as a bear market or recession seems to be peak to trough. After that, you'd still be withdrawing from your portfolio when it's potentially down for another few years. Add in inflation and even longer.

Now I'm not suggesting a 10 year EF. But 2 years or even 3 seems fine.
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