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Why Bear Markets Hurt So Much
Old 10-23-2008, 01:08 PM   #1
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Why Bear Markets Hurt So Much

Bear Markets are not just the opposite of a bull market. They are like a tornado that clean away a community - unfortunately that community is a large part of you.

It shakes your confidence about most things
It can wipe away your plans for the future
It reduces your options
It wipes away years of earnings from hard work
It points out the fallacy of security
It humbles all the financial experts

A bear market takes out all the excesses.

We were surprised by the severity of this bear market as we will be of the next one.

These two quotes about sums it up:
"The stock market teaches us to loose."
"I am the greatest threat to my financial security."

People will get out of the market at the bottom and not invest in it again - they will loose.

I'm still surprised that I'm still rather relaxed about the loss in my investments.

I admit I will become even more conservative in my investments in the future.

I will:
1. Have 4 - 5 years of expenses in cash equivalents - this was always planned
2. Use ETFs (instead of Mutual Funds) with trailing stop losses set
3. Reduce the type of investments held
4. Watch the charts closer for a change in the trends

I will not implement 2 & 3 for several years.

So, how has this bear market affected you personally and your investment plans?
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Old 10-23-2008, 01:13 PM   #2
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When we ate out at Subway yesterday, we just drank water.

Sounds like a joke, but this represents how it has affected us personally. "Lost" $250,000 in investments, so we'll save $1.49 by not getting a drink.

I'm moving my tightwad tendencies from low gear to medium gear.
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Old 10-23-2008, 01:13 PM   #3
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Let's just say I now understand why the Depression generation spent the rest of their lives distrusting banks, distrusting the stock market and disdaining discretionary spending.
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Old 10-23-2008, 01:37 PM   #4
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I really think capitualtion is close. I've reached the point of resignation that I will lose thousands of dollars in the market most days now, there's nothing I can do about it since I believe in my asset allocation of 70-30 {whoops, only 61-39 now! } so no changes will do any good because the rebound will leave you in the dust and I just don't really care to follow all the BS any more.
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Old 10-23-2008, 01:45 PM   #5
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When we ate out at Subway yesterday, we just drank water.
....
I've done that many times recently but for a different reason. Whenever I don't want coffee or iced tea, I see nothing on the menu I want, most of it has high fructose. And, yes, I should start opening that thread called, "Wednesday Weigh In."
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Old 10-23-2008, 01:58 PM   #6
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For me it is the first bear market where I have a significant amount of money on the line, so it is not easy to see so much money just disappear. But, the worse part is the loss of optimism about the future, whether my own or other people's. It is just so depressing. Second to that is my dwindling confidence in the financial and political systems.

Investment-wise, I think that it is a bit early for me to make permanent changes to my investment philosophy. Right now I already emphasize income-producing assets and this is unlikely to change in any significant way. I may cut back a bit on my planned stock allocation in the future (I am waiting to see how stable stock dividends are going to be throughout this crisis).
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Old 10-23-2008, 04:08 PM   #7
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Originally Posted by TromboneAl View Post
When we ate out at Subway yesterday, we just drank water.

Sounds like a joke, but this represents how it has affected us personally. "Lost" $250,000 in investments, so we'll save $1.49 by not getting a drink.

I'm moving my tightwad tendencies from low gear to medium gear.
I used the coupon at Subway today. The buy one 6 incher and get another 6 incher free. It reminded me of a joke. So I got a laugh and a free 6 incher! But I had to buy a tasty soda pop. So really I didnt get a 6 incher for free since I would not have bought the soda pop. Damn I got tricked!
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Old 10-24-2008, 07:41 AM   #8
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So, how has this bear market affected you personally and your investment plans?

i have reviewed my 55/45 AA (circa 2007) and am sticking with it. i am sickened by the unrealized losses i am seeing in my stock mutual funds, especially the international ones, but my glass is still half full. i am lucky to have a longer time horizon to "normal" retirement age so i can be patient for a recovery (if? when?).

higher dividends on my TE bonds will shorten my time horizon to reach a pre-set target principal amount. i increased my monthly DCA to capitalize on that temporary increase in yield and capture some additional shares in "buy lower" mode. the drop in NAV is not pleasant to behold, but this too shall pass. not timing, just utilizing an opportunity. 30 day dividends plus my DCA are working in my favor here.

wish i could do some "bargain shopping" but that is not in the plan right now. my stock mutual fund stakes are left untouched.
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Old 10-24-2008, 07:45 AM   #9
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I'm moving my tightwad tendencies from low gear to medium gear.
This may be the most outrageous understatement I've seen on this forum in months (Soapbox excluded).
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Old 10-24-2008, 08:14 AM   #10
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We have been in "stay the course" mode through all of this. We're both still working and contributing to a portfolio of about 60/40 AA. We plan to stay strapped in to this roller coaster even though others are jumping out and we're covered with puke

We've come to realize that our retirement is likely to come later than we'd hoped. Our expectations of standard of living in retirement are decreasing each week. No fear of being on the Alpo diet, but also no illusions of extensive travel to exotic destinations. Semi-ER is also a possibility.
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Old 10-24-2008, 08:22 AM   #11
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Originally Posted by dex View Post
Bear Markets are not just the opposite of a bull market. They are like a tornado...

I admit I will become even more conservative in my investments in the future.

I will:
1. Have 4 - 5 years of expenses in cash equivalents - this was always planned
2. Use ETFs (instead of Mutual Funds) with trailing stop losses set
3. Reduce the type of investments held
4. Watch the charts closer for a change in the trends
Good decription of a bear market Dex but I am curious about your plans. I have implemented 1 and 3 based on information I got here. I started on the "more conservative" approach which is why #1 is in effect. But I don't understand what #2 is and #4 sounds like market timing. Can you expand on those two?
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Old 10-24-2008, 08:25 AM   #12
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I'm 37. I just have to have faith in past market history. It's always come back in the past... err, right? :confused:

Basically we are just holding onto more cash while still relentlessly putting away 15% in the 401k's. Money that would have gone to home improvements is now staying in a money market for a rainy day and paying off the car quickly.
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Old 10-24-2008, 10:06 AM   #13
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Good decription of a bear market Dex but I am curious about your plans. I have implemented 1 and 3 based on information I got here. I started on the "more conservative" approach which is why #1 is in effect. But I don't understand what #2 is and #4 sounds like market timing. Can you expand on those two?
Yes, it might look like market timing but, I consider it capital preservation.
Using ETFs with trailing stops is an enforced discipline. (You can not use trailing stops with mutual funds. To save on transaction fees; you can average into mutual funds and then when you get to a particular amount sell/convert them to ETFs). It is difficult to explain how to establish a trailing stop Investor Business Daily's guideline is a loss of 8%.

Watching the charts is about keeping the market in focus and reminding you to pay attention and capital preservation. I have three things that have cost me greatly in my life:
Not selling loosers
Not taking profits - rebalancing
Selling at a low
Watching the charts should help me to avoid these things - then again; an old dog ...

None of these things are short term trading techniques; they are intended to follow the long term trend.

The way things look I will not be implimenting them for several years.

One thing I will be doing - starting in January is allocating the interest from my Hight Yeild bond fund to the stock funds - this should help them recover faster.
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Old 10-24-2008, 10:23 AM   #14
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The Norwegian widow is going shopping - looks like this 'gloom and doom thing' has legs so she may become more popular than Sarah Palin. Maybe some coaching on proper interview techniques, how to pick a ghost writer writer for her new book -MPT Sucks, Dividends Rule! - title hasn't been picked. Modeling instuction how to pose by the mailbox getting her dividend checks. etc. etc.

On a more serious note - with portfolio way down - I need to reread and take to heart appendix 4 of Ben Graham's Intelligent Investor - The New Speculation in Common Stocks.

" The middle way." And not get too greedy chasing yield, a strong temptation today. Well covered div plus div growth.

Like that springtime rain in the PacNW - it may seem like rain forever until that 3 days in August when it's summer. ( a little Seattle joke).

heh heh heh - like Bear Bryant's linebacker - stay agile, mobile and hostile..

ooh oh - Pssst Wellesley! almost forgot. 5% SEC yield or more?
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Old 10-24-2008, 10:43 AM   #15
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They feel so sudden and once committed to the fall you see it coming and can't do a darn thing to stop it?



OK, just an excuse to use the picture again. We've been pretty placid about this, mostly because we have so little in the market - not that it hasn't affected us - would like to be selling our rentals and living a life of (more) leisure but no one is buying and the prices are going lower and lower and comparable properties are all over the place. For us it's more a matter of being stuck in landlord mode with more desperate tenants having more trouble making their rent payments...
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Old 10-24-2008, 11:07 AM   #16
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So, how has this bear market affected you personally and your investment plans?
Personally - - - The first part of my life was wretched, miserable, and unlucky. Eventually I decided to take the bull by the horns and ruthlessly make my own luck ("Spare no prisoners!" ), and things turned around quite nicely. I am warily watching, and wondering what happens next for me to deal with.

My investment plans - - - I am not one of our investment wizards, and I really worked hard on making my investment plan the best one I could come up with. I am not insightful enough to see how to improve it yet, though I keep thinking and re-assessing. I see no reason not to leave the equity portion and Wellesley alone, except for rebalancing. At some point I should probably move some of my cash from MM into CD's. I have suspended the idea of moving much cash into bond funds until I learn more about them, since one of my bond funds has lost quite a bit more than I thought possible.
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Old 10-24-2008, 11:26 AM   #17
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I have suspended the idea of moving much cash into bond funds until I learn more about them, since one of my bond funds has lost quite a bit more than I thought possible.
Just a thought - now not the time to go into US Treasuries - price at a high - USA first into a recession; first out so it will raise interest rates them.

You might look at Corp. Bond funds - they have gotten hit hard and paying a good yield over Gov't bond. I don't follow them too much so do your research.
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Old 10-24-2008, 12:04 PM   #18
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For me, this bear market has affected me in a way I never thought possible, that is it has effected by television viewing preferences. I find that I can no longer stand watching television shows that are all about violence and misery and gloom. I am serious, I can no longer watch Criminal Minds, because I find it makes me feel so down. It feels as if there is so much negativity in the media on a day to day basis, that when I watch TV I want things to be much more light hearted than in days gone by.
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Old 10-24-2008, 12:48 PM   #19
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I will:
1. Have 4 - 5 years of expenses in cash equivalents - this was always planned
2. Use ETFs (instead of Mutual Funds) with trailing stop losses set
3. Reduce the type of investments held
4. Watch the charts closer for a change in the trends

I will not implement 2 & 3 for several years.

So, how has this bear market affected you personally and your investment plans?
When(if) the market comes back and I recoup most of my losses, I will:

1. Have 100% CD's.

Of course by time I recoup my losses, I will be right in line with the old rule of thumb, age = fixed income. A 100% cd allocation will be just about right.

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Old 10-24-2008, 01:09 PM   #20
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I'm moving my tightwad tendencies from low gear to medium gear.


I would hate to know what high gear would be !
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