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Correction and Rebound
Old 11-25-2014, 11:55 AM   #1
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Correction and Rebound

I'm sure glad I didn't panic and start selling during that last small correction we had. My portfolio was down about 100k at the trough.

My portfolio is now up over 140k from that low point. Because of coincidental timing, I was able to rebalance and pick up some more IVV before things headed back up.

If anyone did start selling off when we were getting down in 5-10% correction territory, it probably says something important about their risk tolerance that they should be listening to. Or maybe they had trades on margin that they had protect, which is a different issue.

Anyone here feel the correction spooked them and they are now reconsidering their equity AA?
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Old 11-25-2014, 12:07 PM   #2
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That small blimp was not a stress test of what one should be able to tolerate.

Now 2008 that is another story....
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Old 11-25-2014, 12:21 PM   #3
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That small blimp was not a stress test of what one should be able to tolerate.

Now 2008 that is another story....
Yep, totally agree. I guess my point was, better to "learn" from this last correction that ended a few weeks ago so that when the big one does hit in the future, one is not only then learning that they were way too overweighted in equities for their risk tolerance.
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Old 11-25-2014, 12:26 PM   #4
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Eh? Correction? Rebound? Did we just have one of those?

Sorry. Must have missed it. I was playing with the cats.
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Old 11-25-2014, 12:40 PM   #5
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There was no correction/rebound for a long term investor, as most here are - so nothing worthy of "panic." How does the period you reference look to you on the chart below, not even noteworthy. Anyone who panicked in the recent blip would have panicked many times over the past 5 years...
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Old 11-25-2014, 12:50 PM   #6
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I definitely agree that any investor who got spooked by the small recent correction should seriously reconsider his or her asset allocation. What happened this time is nothing compared to what will happen the next time we see a real bear market. It's better to be proactive and take J.P. Morgan's famous advice to sell down to the sleeping point.
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Old 11-25-2014, 01:04 PM   #7
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Anyone here feel the correction spooked them and they are now reconsidering their equity AA?
That last little dip? I rebalanced and sold some bonds and bought some stocks, and the total as of yesterday's close was at an all time high.

It makes me want to say that word that starts with "wh" but I don't want to crash the market.
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Old 11-25-2014, 01:16 PM   #8
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I honestly didn't know a correction had occurred. The market has been up and down all year. I rebalance in January regardless of what the market has done.

My favorite word used by MM is "unexpected". Isn't it all unexpected?
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Old 11-25-2014, 01:31 PM   #9
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I had some cash I put into some stocks during the dip, and agree if anyone got spooked from that slump they shouldn't be in the market.


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Old 11-25-2014, 01:39 PM   #10
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I didn't consider that to be a correction, so much as an example of extreme volatility. I began withdrawals from my portfolio after the 2008/2009 mischief, so am still waiting for the first serious correction or downturn while in the withdrawal phase. I wouldn't say that I am looking forward to it, but am quite keen to see how I fare. That brief dip we just experienced barely phased me, so I think I may well have what it takes to stay the course during some serious underwear-soiling times.

But I hope that doesn't happen just yet
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Old 11-25-2014, 01:41 PM   #11
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That last little dip? I rebalanced and sold some bonds and bought some stocks, and the total as of yesterday's close was at an all time high.

It makes me want to say that word that starts with "wh" but I don't want to crash the market.
I did the same. I had been contemplating my AA for a few months. This gave me the push to do it and move some out of bonds. I still keep 5 years expenses in short term bonds and cash, but that's what helps me sleep at night. I don't include the cash portion in my portfolio when running my numbers.
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Old 11-25-2014, 02:08 PM   #12
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Anyone here feel the correction spooked them and they are now reconsidering their equity AA?
Nope, I had a little extra cash on hand so I bought some more down around 1850. I'm still actually a little low on my equity allocation, so I'll adjust my recurring investments accordingly after the new year.
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Old 11-25-2014, 02:16 PM   #13
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Well when we hit new highs I took some off the table on those stocks that I'm not happy with to get cash, when we drew back around 8% I put that cash to work for me. However, if we had drawn back more than 12%; at that point I would have put my protection strategy into place... anything more than 12% for me is a concern and not something that is a "blip". Its easy to move money to the sidelines in the IRA as I don't pay taxes or fees, thus I start there..and leverage out completely before we hit 20%. I used it in the 2001 and 2006 crashes and lost very little money. i'm not going to watch all my money crash, but anything less than 10 is a buying opportunity.
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Old 11-25-2014, 02:29 PM   #14
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Well when we hit new highs I took some off the table on those stocks that I'm not happy with to get cash, when we drew back around 8% I put that cash to work for me. However, if we had drawn back more than 12%; at that point I would have put my protection strategy into place... anything more than 12% for me is a concern and not something that is a "blip". Its easy to move money to the sidelines in the IRA as I don't pay taxes or fees, thus I start there..and leverage out completely before we hit 20%. I used it in the 2001 and 2006 crashes and lost very little money. i'm not going to watch all my money crash, but anything less than 10 is a buying opportunity.
Interesting. How do you know when to get back in ?
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Old 11-25-2014, 02:29 PM   #15
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The minor correction (if you can call it a correction) served as another "rich getting richer" event. I am sure a lot ER.org folk's net worth is hitting their all time high. Now, go spend some and stimulate the economy some more, please.
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Old 11-25-2014, 02:47 PM   #16
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For me the bump signified a further divergence of US and non-US stock.

Vanguard VT vs. Vanguard VTI (as an example) separated by a further 5% after the 'event'.

Probably a function of the strengthening dollar, nevertheless gives me food for thought going forward. Wil non-US and US mean revert, or not?

Guess only Draghi knows ..
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Old 11-25-2014, 03:47 PM   #17
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After 40 years the latest "correction" didn't even make the list. The quick rebound from '08 & early '09 also gave people , in my humble opinion, a false sense that the market will always come back. What I fear right now is a 1937 type drop just when it looks like we've put the mess behind us.

However, in my mind I don't see a better option than to hang in there with my desired AA. Didn't sell in '87, '90, '02 or '08 so hopefully I've got the nerve to hang in there once I'm retired.
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Old 11-25-2014, 03:55 PM   #18
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After 40 years the latest "correction" didn't even make the list. The quick rebound from '08 & early '09 also gave people , in my humble opinion, a false sense that the market will always come back. What I fear right now is a 1937 type drop just when it looks like we've put the mess behind us.
After 1937 market did come back as well...it just took a bit more time.
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Old 11-25-2014, 03:58 PM   #19
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After 1937 market did come back as well...it just took a bit more time.
And a hell of a war, but I'll stop at that.
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Old 11-25-2014, 04:32 PM   #20
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The terms seem inexact at times, but these definitions seem to be the most common I've seen:

% off the most recent top
00 to 10% - Pullback
10 to 20% - Correction
20% and more - Bear market

I also suppose it matters what index you look at...
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