About Ready to Give In to....Resignation

[Gone4Good]

YrsToGo, with your comment about the tortoise and the hare....didn't the tortoise win the race by being slow and steady? Yet you commented that "Cash sitting in a bank account may feel very good today, but it has about a zero percent chance of getting me to the finish line 60 years hence." So---maybe in this crazy new economy, we need to rewrite the fable and let the hare win....albeit after many sprains and dislocations and time-outs?

Yup, the analogy is a little backwards with respect to who is "fast" and who is "slow" but the tortoise is where you place your bets for the long hall. If you want the apparent "sure thing" you'd bet on the hare.

The tortoise is behind right now, but I have faith he's gonna cross the finish line whereas the "sure thing" never will.

 

[Khan]

I considered switching almost totally out of equities last year; never got around to it. Was without electricity during the initial crash. Now is just too late to worry about it.

Of course, I do have a small but adequate pension.

 

[FIREd]

A few weeks ago, right after the big drop, I went through a period where I was tempted to throw my hands in the air and give up on the market. It was short lived though. My wife and talked about it and we decided that we had to stick to the plan. We are young dreamers. We figured that if the market went down another 50% from here, it would be painful but, assuming the market never snapped back, it would only postpone our retirement by 1-2 years based on our current savings ability. On the other hand, if this is truly the buying opportunity of a lifetime, it could pay handsomely down the road and we decided that it was worth the risk. So we have been buying equities on market dips and today I even bought my first ever shares of a commodity fund. But we are not going crazy either. We buy small chunks at a time. I guess greed has finally trumped fear in our case!

 

[NW-Bound]

The time to sell was last year or even 4 months ago, not now. I was fortunate to change my allocation to more cash earlier in the year, but that did not keep me from "losing" $500K. I have seen some posters losing double that, hopefully from a larger portfolio than mine.

I have cautiously been buying. It is desperate time like this that scares investors to bail out at the bottom. People in this forum tend to have more bonds, hence were able to sail through the 2001-2003 bear market. I was mostly in equities, hence lost 50%. But I did not abandon the market, and at this point, still have a little more than 2X what I had at the 2003 bottom, by switching away from tech stocks that I had fallen in love with.

This episode reminds all of us to be disciplined in raising our cash as we age, or take early retirement. And we need to remember to rebalance at both the top and bottom of the market.

Again, given the devastation of equities around the world, not just in the US, I see more opportunities than risks. Still, I will never deplete the cash that I have set aside for living expenses for 5 years, or 30% of portfolio, whichever is higher. This cash can stretch even longer if I go into the "extreme frugal mode", the lifestyle that UncleMick said brought tears to his eyes, when remembering it.

 

[unclemick]

Hmmm - the good news is my retirement is on full auto: Target 2015 with auto deduct to Prime MM once a year.

The bad news is my retirement is on full auto: my greed and lust meter is pegging wanting to go 100% stocks.

Trying to visualize the Reneck Riviera say Fort Walton, Destin, etc - Jimmy Buffett's - it's 5 o'clock somewhere to get my mind off investing for later - I'm 65, only been ER'd for 15 yrs - need to keep practicing til I get in 'right.'

So - Mexico and a cruise - or do I skip all winter vacations/buy stock so's I can brag at the doughnut shop this winter?

heh heh heh - other than trying to run up the score male hormone wise - I've heard this vicious rumor you can't take it with you.

 

[Dreamweaver]

Everyone a few years ago was saying "buy real estate, its value never goes down, you can't go wrong". Well, when everyone else was buying, wasn't that the time to sell?

Now everyone is saying "stocks screwed me, cash is king, everything you were taught about the market is wrong and get out while you still can". Well, when everyone else is selling, isn't that the time to buy?

People in general seem to have short memories. They forget there was a real estate recession in the mid 1990s and real estate prices actually fell, and the stock market actually came back after the Great Depression and every single other depression and recession. In hindsight, those were great times to buy. Well here we are, in another recession, so isn't it time to buy?

We can't forget the general trend of the market is upward. Remember back in the late 1990s everyone thought we were entering a "New Economy" and the rules had changed. People said tech businesses didn't need revenues to be profitable. Well clearly the rules of the economy did not change then, and there's no reason for us to believe they have changed now. So shouldn't we expect an upward trend going forward?

So, all of this is to ask... why follow the crowd and do what everyone else is doing? Seems like the best thing to do is to do what what everyone else is not doing.

I can tell you for us, we try to follow this ideology. We just bought our first piece of real estate this year, and we continue to buy stocks. Stocks are cyclical though, and always have been as I understand it, so if comes time where we can't wait out cyclical changes, then we'll invest in a more conservative market, bonds and cash.

 

[Nords]

... but are your ILs really struggling---or just being overly cautious, as older people can become? My parents would go on travel tours where the older people had the money for the all-inclusive trip, but would still sneak food into their purses and pockets for snacks that weren't part of the deal!). And if someone has a high enough net worth and a low enough SWR, wouldn't it be (theoretically, at least) possible to live on the fixed income investments?

Well, they're Depression-era children, so they'll be sneaking food for the rest of their lives.

But, judging from the things they do and do not discuss with their daughter, they are struggling. All self-inflicted, too.

All four of their Ashkenazi parents lived well into their 90s, and were perhaps centenarians. The parents lied about their ages so often during the emigration that they were no longer sure of their ages. Based on FIL's condition at age 74 and MIL at age 71, I think they still have at least 25 years left.

If they had a high-enough net worth then I would hope that the financial stress level would be lower. My BIL, their son, is a CPA and manager of their finances so I hope that when "the money call" comes that there's at least been a discussion and a plan.

 

[newporttony]

As someone confirmed for me earlier - the market when down about 40% has to rise about 70% for a "hold em" investor to "get even". Then you have to go up about another 1.5% to have the basis for your "better" argument. Watch out he does not buy a couple of long term CD's too.

The good news is that, when the market recovers, it does so in a big way. I believe that new bull markets recover 1/3 of the bear losses in the first three months of the rally.

Photo

 

[OAG]

The good news is that, when the market recovers, it does so in a big way. I believe that new bull markets recover 1/3 of the bear losses in the first three months of the rally.

Photo

So when the 1/3 bull runs you can wait for it and then jump back in and get the 2/3 pickup? I think I will wait for the bull to run.
But seriously, your chart on the last line says 5 years to recover. So if the average drop is 30% (this one must be above (below) average) and when the Bull runs the average gain is 150% (i.e., $100 - 30 % = $70 then the 150% comes in so $70 (70 X 150%) becomes $105 AFTER 5 years)). I wonder about that since the Bears are coming more often lately. I probable got it all wrong but that is why I stay away from Wall Street.

I, frankly did not understand much of what Secy Paulson said this morning either but then I shy away from things I do not understand.

 

[REWahoo]

So when the 1/3 bull runs you can wait for it and then jump back in and get the 2/3 pickup? I think I will wait for the bull to run.

OAG, you know you won't be buying any stocks. You won't give up your CD's until they pry them from your cold dead hands...

 

[OAG]

OAG, you know you won't be buying any stocks. You won't give up your CD's until they pry them from your cold dead hands...

True! Hope I keep them for a long time too.

 

[SteveL]

Investing isn't gambling, but they share one thing in common; participants must understand their own tolerance for risk. Going all-in means you can lose it all if you play Texas Hold-um. As a retired person with a 55/45 equity/fixed ratio before the market went south, I have to seriously consider whether to re-balance next year or to what degree. I'm living off the fixed and plan to continue to do so.....

 

[Finance Dave]

I agree with Ha.

Another thing to consider is real costs. You mention making 3-4%, but if inflation is 5%, you are actually losing money each year in real terms. Equities have traditionally been the way of beating inflation, and this is why I think I'll always own at least a small portion of equities.

Dave