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

[audreyh1]

Wow, The flipped decade, the flat decade...makes me wonder what the curve looks like 2000 through today.

Given the introduction of program trading and more access to world markets, or the timing of other developments, I wonder if there's a reason why these curves change as they have done.

It all has to do with the relative performance of asset classes. In a decade like 2000, when S&P500 performed poorly yet bonds had a great rally, you,ll see an inverted curve. In a decade when S&P500 and bonds perform about the same you'll get a flat curve.

Ultimately, the really long time period curves show the long-term trends. A decade is too short.

 

[hnzw_rui]

Ultimately, the really long time period curves show the long-term trends. A decade is too short.

True. Heck, even 30 years is too short. Alas, lifespan and all so what can you do but hope you don't encounter any situation worse than previous worst case scenarios.

There are tons of discussions on this very point. Some people do, others choose not to invest aggressively. It comes down to personal preference. Neither answer is wrong.

My COLA pension covers about 140% of my monthly budget, so I continue to invest. Assuming you have a sound pension, you have plenty of latitude.

I truly should be more aggressive, due to the fact I don't need the money and just turned 51. But I get too bothered (hot under the collar not worried) by market losses on money I don't even need, so its best not to fight that and just continue what I am doing.

Mulligan, just like in 2008, people found they had personal thresholds above which they couldn't handle the volatility, i.e. sleep at night. Ultimately an investor has to adopt a style that is compatible with his/her psychology. It doesn't matter if a given approach is considered "optimal" or has better long-term returns - if it goes against one's psychology, it ain't gonna work.

Thank you both for the input. Knowing my risk tolerance, I'll probably go with buckets of cash, bonds/TIPS ladder and stocks based on annual expenditures instead of following a specific percentage AA and rebalancing. As long as I have sufficient funds in the cash/bonds bucket for a spending floor in case of emergencies, I think I can weather the stock market rollercoaster ride. Besides, I can always skip going on expensive vacations and curtail other recreational spending in years when the stock markets tank.

 

[FIREd]

For me it only feels like a loss when the value of the investment is less than I paid for it.

With DW's stock options, we did "lose" hundreds of thousands of dollars in a single day on more than one occasion. But I don't see stock options as real money until they are exercised, so I did not feel like we actually lost anything.

 

[NW-Bound]

A decade is indeed too short to know. But how many decades do we have left? Are we all going to live till 100 or 110?

Hey FIREd, where have you been? Camping? How was it?

 

[Mulligan]

NW, you will be shocked....on another market panic day, I went in very aggressive and bought 200 shares of EDE... A small electrical utility. Getting more aggressive...It was actually a common stock! I was afraid this big purchase would move the entire market.


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[NW-Bound]

You buying a common stock? I am shocked. And I am afraid tomorrow the market will crash harder.

Darn, another day of losing more than $25K for me. Still have to wait for MFs to report, but I can tell roughly the damage.

 

[Mulligan]

You buying a common stock? I am shocked. And I am afraid tomorrow the market will crash harder.

Darn, another day of losing more than $25K for me. Still have to wait for MFs to report, but I can tell roughly the damage.

And I bought 200 shares of a common stock medical reit MPW. Unfortunately I bought it yesterday. Oh well, the 7% plus yield will be there. I actually would have bought more today, but no more Roth room to buy those stocks that aren't 15% qualified.
And if it does go south further maybe I will buy more of something. It dont do me much good to sell because all it does it just burn a hole in my pocket. I don't like losing money, but I don't like it just sitting either.. A nice contradiction that makes no sense...


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[Nemo2]

Any chance of amending the title of this thread? Right about now it's starting to look a little penny-ante.

 

[FIREd]

Hey FIREd, where have you been? Camping? How was it?

Yes, camping and traveling, trying to escape the heat. We came back too soon as it is still quite hot here, so we'll be back on the road soon... Trying to pick a location with poor internet connectivity to get away from the market's doom and gloom .


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[REWahoo]

Any chance of amending the title of this thread? Right about now it's starting to look a little penny-ante.

Suggested title?

Maybe "I lost my@ss today --- and it definitely feels like it!" ?

 

[Nemo2]

Suggested title?

I was thinking of something along the lines of "AAAAAAAARGHHH".

 

[NW-Bound]

Yes, camping and traveling, trying to escape the heat. We came back too soon as it is still quite hot here, so we'll be back on the road soon...

You've got to keep us updated, with some posts and photos.

 

[samclem]

It all has to do with the relative performance of asset classes. In a decade like 2000, when S&P500 performed poorly yet bonds had a great rally, you,ll see an inverted curve. In a decade when S&P500 and bonds perform about the same you'll get a flat curve.

Ultimately, the really long time period curves show the long-term trends. A decade is too short.

But it's interesting to me that that last 30% of equities (i.e. from 70% stock to 100% stock) always increased volatility a lot. Only rarely (in this sample, the 1950s) did this increment improve annual total returns by more than 2%. OTOH, the first dollop of equities (from 0% stocks to 20% stocks) always reduced volatility (sometimes dramatically) and usually improved annual total returns by about 2%. There's just a lot of "bang-for-the-buck" in those first "chunks" of stock. This isn't news, of course, but I'm always surprised to hear of "very conservative" investors who have gone to 100% bonds, when history shows that from a short-term perspective (volatility) and a more important long-term perspective (returns needed to stay ahead of inflation) historically they would be better off with 20% or so in stocks even if very risk averse.

 

[Mulligan]

Any chance of amending the title of this thread? Right about now it's starting to look a little penny-ante.

Nah, I just need to shut up since I am the one with the penny-ante talk. With the stuff I own (plus not having millions helps also) there is no way they would go down that much to lose 25k.


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[daylatedollarshort]

This isn't news, of course, but I'm always surprised to hear of "very conservative" investors who have gone to 100% bonds, when history shows that from a short-term perspective (volatility) and a more important long-term perspective (returns needed to stay ahead of inflation) historically they would be better off with 20% or so in stocks even if very risk averse.

I think the inflation concerns are addressed with either inflation adjusted income or fixed expenses matched to fixed income in a matching strategies type approach for retirement income:

Matching strategy - Bogleheads

 

[redduck]

... because all it (money) does it just burn a hole in my pocket. I don't like losing money, but I don't like it just sitting either..
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Putting your money under your @ss can generate enough heat to leave you with burns?

 

[Mulligan]

Putting your money under your @ss can generate enough heat to leave you with burns?

I assume you are not familiar with that "figure of speech" terminology?


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[redduck]

I assume you are not familiar with that "figure of speech" terminology?


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Ah, yes. The old "figure-of-speech" gambit.

 

[redduck]

But back to the OP's original question:

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

I imagine for many of those who lost $25K today, it might have felt like they lost that amount. And, tomorrow, if another $25K is lost, I imagine it may feel like they lost more than that--especially if they are in the distribution stage. Maybe some of those with first-hand knowledge will chime in (or not).

 

[W2R]

But back to the OP's original question:

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

I imagine for many of those who lost $25K today, it might have felt like they lost that amount. And, tomorrow, if another $25K is lost, I imagine it may feel like they lost more than that--especially if they are in the distribution stage. Maybe some of those with first-hand knowledge will chime in (or not).

I lost (although only a little over half that much), and I am in the distribution stage.

It doesn't feel like I lost anything at all. Since I just sold my old house and haven't finished re-investing the money, I am temporarily sitting on quite a bit of cash. That Cash Stash (like the rhyme? ) and other income streams from various sources would allow me sit tight for years instead of selling low, if I have to.

 

[scrabbler1]

But back to the OP's original question:

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

I imagine for many of those who lost $25K today, it might have felt like they lost that amount. And, tomorrow, if another $25K is lost, I imagine it may feel like they lost more than that--especially if they are in the distribution stage. Maybe some of those with first-hand knowledge will chime in (or not).

I "lost" $16k today but it had no effect on the monthly bond fund distributions I receive to cover my expenses. The number of cents per share in the August distribution was almost identical to the July distribution, so the total dollar amount was also nearly the same. For me, that cents per share in my main bond fund is the number most important. And I pay close attention to the fractional amount, too, because I won just over 52,000 shares. Even an extra one-tenth of a penny translates to $52 more coming to me.

I also get a stock fund distribution every 3 months or so to supplement the monthly bond fund distributions. The next one of those will occur in early October. But once again, the daily fluctuations in the price of a share are far less important to me than the number of cents per share in the upcoming distribution.

 

[NW-Bound]

Yep, another day when it would be nice to "lose" only $25K. Darn!

I have never misplaced $25K, have it dropped off my car, or totaled a $25K car with no insurance, so I do not know what really losing $25K feels like. But I think the OP is right, that losing the money in the market does not hurt as much. It's because I am still giving up the gain, not my principal. Not yet.

Anyway, all the MFs and wife's 401k result are in. Stock down -2.78%, and MFs down -2.27% vs. S&P at -2.96%. Total portfolio down -1.65% vs. Wellington at -1.80%. Perhaps I should be happy I beat these benchmarks.

And Mulligan keeps taunting us with his preferred stocks.

 

[ejman]

Let's see, down 1.48% today. Interesting how psychology (mine anyway) works. If I'm down considerably less than the S&P on a downer of a day such as today (as I should be with a 50/50 nominal) I feel I'm doing alright and dodged a bullet. Now when the market goes up and again I get my usual 1/2 of the days action I just shrug and feel OK because I tell myself I'm exchanging volatility for a conservative stance of hanging on to my retirement nut... Funny the games we play.

 

[NW-Bound]

I am greedy. In a bear market, I want to drop less than the S&P. In a bull market, I want to match it, even if I am not fully invested.

 

[ejman]

Yes, I too would like the key to the Lake Wobegon approach, where all investors are above average...