"I lost $25K today"--Does it really feel like that?

[samclem]

Did I think it was the same thing as permanently losing a physical item? Of course not. But, again, he knew I wasn't using the term "lost" in the literal, forever sense.

But, of course, your net worth had really changed. If you'd sold out before the dip, you'd have had lots more money. Now it's gone. And yet, your right. It's not like losing a tangible thing.

I know I feel the hurt from a lost $1-2 from a price mistake at the grocery checkout counter or losing $5-10 from letting an offer expire or misplacing a gift card. If I don't focus on actively forgetting those losses and putting them in context, they can bug me, maybe even the next day.

Today's $25k+ loss in the market? Pssshhhh... It goes up and it goes down.

That's the thing. The loss of a much smaller amount of money in "real life" hurts more than a bigger reduction in the relatively abstract portfolio balance.

Well, look at it this way. If you mailed in a check to buy $50,000 of stock and then it dropped 50% right after your purchase, would you call it a paper loss if your friend also mailed in $50,000 for the same stock but was delayed because not enough postage on the envelope? I mean, hey, you still have the same shares...but your friend has twice as many now.

It would make me cranky (and I think we've all been there--stocks go on sale shortly after a big purchase). And there's no doubt I'll always own 50% fewer shares than if my letter had been later, which stings But, for whatever reason, it doesn't feel like I "lost" the difference in share value, at least not in the same way as if I'd actually burned the currency.

Between the "abstractness" of account balances and their incessant ups and downs, it's just hard to fixate on a particular point in time and feel that I "lost" money.

 

[RockyMtn]

Markets go up, markets go down. If you have the right AA and you have your needed income streams covered there is nothing to worry about. If you have cash to invest...wait for it...wait for it, then DCA in. Days like today and yesterday I don't even look at losses. Just would bum me out. All I know is I won $55 on the golf course this week so I am feeling good!

 

[NW-Bound]

It all depends on your expectation. Yes, you still have the same number of shares, but for a retiree, the conversion ratio of share/loaf of bread is suddenly cut back.

Some will say "Yes, but I live on only dividends". Those people will do fine. The ones hurting are people who expected 8% portfolio growth in order to make their retirement goal, or counted on that return for living expenses.

Will the market come back? Sure, but it may take a while. It may just linger for a while, meaning several years, bouncing up/down. If one does not expect much, he will be less disappointed.

 

[clifp]

It's absolutely true that paper losses don't feel as bad (nor paper gains as good).

In 2008, I was playing a lot of poker and generally doing quite well at the same time the market was crashing. My rule of thumb was that a real dollar lose or gain was roughly equal to 25x paper gain. So losing or winning $400 (fairly common) made feel about the same as $10K down day in the market and $1,000 lose or gain in poker (fairly rare.), about the same as $25k day. I distinctly remember having an awful $40K loss in my portfolio and winning $2,500 a terrific day playing poker, and going to bed feeling happy.

 

[Katsmeow]

But, of course, your net worth had really changed. If you'd sold out before the dip, you'd have had lots more money. Now it's gone. And yet, your right. It's not like losing a tangible thing.

Every Friday in YNAB I record my new portfolio balances. I do it weekly. And, then YNAB has on the page my net worth at any given time. So, yes, today when I recorded I have to admit that I did wince a bit when I saw the reduction in net worth. I know that it wasn't that huge in terms of a percentage basis, but I do remember thinking to myself something about losing a car....

 

[Totoro]

I am doing a month consulting gig right now, the money (25k) from that assignment is just enough to offset my 'losses'.

In the beginning of the year it was the inverse: went on a month long trip abroad, came back a lot wealthier.

Maybe I should take more long trips ...

 

[grasshopper]

Quicken says, Ms.G will still have a quarter of a million at age 95. Me I will be pushing up roses,

 

[JoeWras]

This is a good discussion, and an important one to have.

We have a lot of newbies here, or people who are at least new to paying attention. Sharing our experiences can help. It is nice to exude your confidence, but have a heart, people! For the INTJs, try to find a little "P".

For the INTJs this is nothing. Intellectually, it is part of the normal way of things, and probably a good chance to buy. For those with a little more "S" and "P" in them, this could be a bit scary.

I'm one of those ISTJs. Intellectually, this is not freaking me out. But I do feel something. And I'm sensing some panic out there, which I have to fend off from my own feelings.

So, yeah, I "know how you feel", but no worries. Don't let it get to you. This may be a blip, or perhaps a multi year thing. We're in this for the distance, right? Don't panic. Most of us have seen similar or worse in '87, '90, '97, '02 and the dreaded '08+. We survived. I was brand new to investing in '87 and one of my good INTJ friends told me to not panic and hold on. I thank him to this day. It was a lesson well learned.

By the way, last year I had a thread about the opposite. I.E. feeling too much confidence on those good days. The old, "I just made 15k today, so I think I'll buy that stupid item." This is something I also have to resist. It works both ways, you know.

 

[frayne]

It's only on paper.

 

[REWahoo]

I think we're somewhere between 5 and 6...

 

[MichaelB]

I think we're somewhere between 5 and 6...

Always the optimist

 

[sengsational]

If I'm not selling and don't 'need' to sell, what do I care if the collective of buyers is not "doing it's job"? The price is like a thermometer measuring the heat of the (irrational) buyers.

As long as you stay away from the step 11 / step 19 pitfall, live long enough to get through the cycle, and don't absolutely "need to sell" between about 7 and 17, you're golden.

 

[JoeWras]

If I'm not selling and don't 'need' to sell, what do I care if the collective of buyers is not "doing it's job"? The price is like a thermometer measuring the heat of the (irrational) buyers.

As long as you stay away from the step 11 / step 19 pitfall, live long enough to get through the cycle, and don't absolutely "need to sell" between about 7 and 17, you're golden.

Agree, and the chart is alarming accurate. I saw all of this from one of my coworkers in the '08-09 mess. He literally sold it all on the absolute bottom and put it into CDs and has not returned since. Man, what a loss he took. Haven't seen him in a while, but I can imagine that yesterday he was saying "Told you so!"

 

[samclem]

By the way, last year I had a thread about the opposite. I.E. feeling too much confidence on those good days. The old, "I just made 15k today, so I think I'll buy that stupid item." This is something I also have to resist. It works both ways, you know.

Good point. If one has a predisposition toward it, the daily/weekly ups and downs can prompt some poor decisions and be tough emotionally. Since the daily portfolio balances are loaded with noise undecipherable from "signal", I can't see much value in actively tracking them, and I think doing so can discourage some people ("I just lost all the money I scrimped and saved over the last 6 months! I definitely should have used the money to take that snowboarding trip instead. No more of this for me!"). I don't encourage new investors to check their dollar balances frequently, because both the ups and the downs are false "uppers" and "downers."

 

[jollystomper]

For the week I lost the equivalent of a little more than a years planned withdrawal from my accounts. If things stay the same and I live to 114, I'm still okay, but if I live to 115, I'm in trouble.

 

[Dawg52]

Still, I bet for a newbie who just retired in the past month and isn't living off a pension, must find a sudden drop unnerving. When you are working it isn't as big as a deal, or if it isn't your first rodeo in retirement it is not as troubling. But to get that first punch in the mouth has to sting a bit I would think.

It did. Retired 3/31/07 and we all know what happened soon there after. But a few bottles of cheap bourbon(couldn't afford the good stuff) eased the pain.

 

[HFWR]

Down about $25k-ish from my own all-time high. Can't say I enjoy it, but I'd rather the market take a breather every now and again, to recalibrate expectations. The market overshoots, and undershoots, but I still "own" the same assets. Not enough movement yet to trigger a rebalance, so...

 

[mpeirce]

Watching the "bloodbath" is always a bit unnerving for most folks. The thing to remember right now is the following:

1. No U.S. recession is looming.
2. The economy is growing slightly and steadily.
3. Unemployment is about as low as it can get.
4. Inflation is low.
5. Housing is pretty strong.
6. Commodities are in the toilet (low gas prices, cheap feedstock for plants)
7. No one is starving in the U.S.
8. Interest rates are at historic lows (cheap mortgages, loans, etc).
9. The restaurants are full and a one hour wait is common.
10. Discount Tire is selling tires like crazy.

11. I did see a guy selling Apples at the side of the road today


.. but it was at a farmers market.

 

[tcaron20]

My Stable Value 401k fund is looking pretty good right now. Basically I have done better with it vs. my other 401k options.

I realize it is a temporary parking of the money but I think we still have further to fall and will end the year down.

There just is not a lot of good news out there and the Fed will act in an irrational way. History tells us so.


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[tcaron20]

Hi aja8888,

Just my take on your list:

What is scary is that the Fed thinks that everything on your list is true.

A few points:

A second recession is still possible.
A rate boost could trigger it without signs of inflation.
China is imploding mainly because there are no reporting or accounting standards.
Corporate returns are not impressive.
Housing activity is based on low rates. When Rates move up, market will dry up.

Just another point of view.....


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[samclem]

I realize it is a temporary parking of the money but I think we still have further to fall and will end the year down.

There just is not a lot of good news out there and the Fed will act in an irrational way. History tells us so.

Are you buying any options? A relatively small investment in "puts" could pay off big if you are right.

 

[Senator]

What is scary is that the Fed thinks that everything on your list is true.

Everything on the list is true. Unfortunately, so is the fear of deflation. And another recession.

Ray Dalio Fed tightening is like 1937 - Business Insider
"The Fed raised rates eight years after the 1929 financial crisis, following accommodative monetary policy to boost the economy, and it still ended up being too soon. The Dow lost half of its value between 1937 and 1938."

I lost plenty in the latest crash. And in 2000 and in 2008. I decided to move more towards rental property, something I could control. And I have more income diversification.

Inflation is dead. The only reason you see higher prices is increased demand. There is plenty of un-utilized capacity. Companies are making less, and charging more. Look at earnings reports, top-line revenue growth is always the issue, not profits. Lowest oil prices in 7 years, yet prices at the pump are high. Kill the chickens, raise egg prices. Prevent housing from being built, and you raise rents.

The only reason why the Fed wants to raise rates is the member banks are crying for it. The banks will make a killing on the increased rates on HELOCs and ARMs. Most of the banks loans are insured, so they have very little risk. If banks get in a bind, none of the larger banks will fail, as the fed can bail them out.

If the fed raises rates, it will absolutely kill the economy and make last weeks rout look like a great week. I lost a year+ worth of expenses, easily. Likely two years. Yet, I am still in. I am also paying off rental mortgages again (5.375%), in addition to investing my monthly allocation.

 

[scrabbler1]

I monitor my taxable account holdings far more closely than my Rollover tIRA. This includes recording their balances monthly in the taxable but only quarterly in my IRA, a holdover from the quarterly account statements I got for my 401k which became the Rollover tIRA after I ERed. I therefore record combined balances every quarter, too.


It took only 12 months (from mid-2013 to mid-2014) to crash through the $1.2M mark and $1.3M mark. With the market's recent losses (including losing $16k Friday), I am just under $1.3M again. No big deal.


It is time to do some mild rebalancing in my tIRA, though, as its AA has gone outside my range of acceptable bounds. Again, no big deal.

 

[tcaron20]

No options for me. I have learned from experience not to bet for or against the market. I was retired at 60 but went back to work when I was asked to join a local firm as a business development officer. Been in community banking for 40 years.

History tells us that the Fed will act irrationally. When rates move up, they never move up slowly. This come out like a cannon shot. Will this be the case? I do not know. Any rate move upward will stifle the market especially in an election cycle with no clear leader identified yet.

I cannot wait to get reinvested but being close to retirement, I have become a lot more conservative in my thinking.

As has been written everywhere, the Fed is out of arrows. They have never unwound a balance sheet
like they have now, full of mtg backed securities. As rates rise the value of their investments will drop like a rock. Another disaster waiting to happen.

Man I wish I was having happier thoughts!


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[nash031]

I think we're somewhere between 5 and 6...

I agree, and I think 12 and 13 probably happen around SP 1900... so no big deal...