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Old 11-22-2008, 10:50 AM   #41
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Bestwifeever..... Consider having an AA you can stick with through the ups and downs. Selling low to "protect" yourself will indeed preserve your remaining capital but it also manifests the decision to permanently accept that new, lower life style based on a smaller retirement portfolio.

What are your thoughts for Monday? "forego potential run-ups to preerve the bulk of your capital" or make a purposeful decision to hang on a little longer and wait and see?

I echo ERD50's sentiment. It's easy to look back over the past couple of years and see what you should have done. It's more challenging to say what you'll do Monday. BTW, what will you do Monday?
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Old 11-22-2008, 10:56 AM   #42
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From Moemg: I would like to think that next time and their will always be a next time I'll cut my losses at 20% and park a huge chunk until the market starts to recover .
This is what I was responding to re determining your comfort level in advance for "cutting your losses." I don't see it as an asset allocation issue (we have an incredibly conservative AA, by the way). Maybe other people don't believe in cutting your losses--that's fine.

Personally on Monday I won't do anything other than get ready for Thanksgiving--what will you do? Reallocate?
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Old 11-22-2008, 11:06 AM   #43
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Erd, argue at will (and I know you enjoy that ), but I'm not talking about getting out when the market is down 20 percent and predicting which way it will go. I'm talking about getting out when your nest egg drops 20 percent (if that's one's comfort number) and putting what's left into CDs,
Not sure why you see it as arguing, I'm just trying to understand what it is you are proposing. Once I understand it, if it sounds good, I may want to follow your lead.

From what you just said, why would you wait for a 20% drop to go into CDs? - that means you lost 20%. If you want to be in CDs (or whatever), just do it. And, it also begs the question, 20% from where? It sounds like you are saying, once you retire, if your NW drops 20%, go to safety, is that it?

Honestly, I don't understand what your plan is.

-ERD50
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Old 11-22-2008, 11:08 AM   #44
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....
Personally on Monday I won't do anything other than get ready for Thanksgiving--what will you do? Reallocate?
You're reading my mind. I'm defrosting the refrigerator as we speak, how retro is that? Let the holidays begin!
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Old 11-22-2008, 11:27 AM   #45
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Erd, argue at will (and I know you enjoy that ), but I'm not talking about getting out when the market is down 20 percent and predicting which way it will go. I'm talking about getting out when your nest egg drops 20 percent (if that's one's comfort number) and putting what's left into CDs, at the most basic level, or other holdings where you at least won't lose principal. No one can predict the markets but we can protect what we have and decide where that is.
That was the basis for me moving to 40% cash/CD in Aug 2007. I realized I was FI with that amount in cash. DW and I would have a modest but decent retirement on just that amount. That is all 100% FDIC insured or in a federal money market. I don't like the market's 50% tank but I am only seeing my luxuries in retirement being threatened and not my ability to retire.

note - I am now about 55% in cash and I am not going to rebalance out of cash into equities. The dollar amount in cash/CDs is a minimum number. It's only a question of rebalancing out of equities into cash when they recover to over 60% of my portfolio. I will move the equity portion around between large cap, small cap and foreign.
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Old 11-22-2008, 11:27 AM   #46
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This is what I was responding to re determining your comfort level in advance for "cutting your losses." I don't see it as an asset allocation issue (we have an incredibly conservative AA, by the way). Maybe other people don't believe in cutting your losses--that's fine.

Personally on Monday I won't do anything other than get ready for Thanksgiving--what will you do? Reallocate?
Awwww.... just giving you a hard time cuz most of us are hypothesizing about what we should have done and few of us know what we'll do on the next trading day. If you do believe in cutting your losses, have you taken any action so far this downturn? If not, when will you? What's your trigger?

All I've done so far is to make a conscious decision to not rebalance yet. So, my AA has shifted from 62/38 to 44/56 over the past year or so. That makes me more conservatively postioned, but I haven't actually sold equities and bought fixed.

The decision grating on me is when to rebalance and to what level. History is history....... Monday is real.....
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Old 11-22-2008, 12:59 PM   #47
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Not sure why you see it as arguing, I'm just trying to understand what it is you are proposing. Once I understand it, if it sounds good, I may want to follow your lead.

From what you just said, why would you wait for a 20% drop to go into CDs? - that means you lost 20%. If you want to be in CDs (or whatever), just do it. And, it also begs the question, 20% from where? It sounds like you are saying, once you retire, if your NW drops 20%, go to safety, is that it?

Honestly, I don't understand what your plan is.

-ERD50
You posted while I was posting my my post above your post.

Plan, schman--just made a comment re figuring out when one might want to consider cutting one's losses in advance. Sorry.

Standing by the comment re arguing....
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Old 11-22-2008, 01:08 PM   #48
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Awwww.... just giving you a hard time cuz most of us are hypothesizing about what we should have done and few of us know what we'll do on the next trading day. If you do believe in cutting your losses, have you taken any action so far this downturn? If not, when will you? What's your trigger?

All I've done so far is to make a conscious decision to not rebalance yet. So, my AA has shifted from 62/38 to 44/56 over the past year or so. That makes me more conservatively postioned, but I haven't actually sold equities and bought fixed.

The decision grating on me is when to rebalance and to what level. History is history....... Monday is real.....
Or as I like to say, History is history and Monday is mystery. Or something like that .

I do believe in cutting one's losses--we did it several years ago regarding company stock when everyone else was just waiting for it come back up (it never did, of course)--but have not had to consider it in this downturn since we're at 10/90 since early summer (the 10 is all within Wellesley and Wellington--we are financial fraidy cats in our late 50s) so we are not down a material amount. I think we have about a 30% cushion over our barebones budget right now that figures in the worst case financial scenario for us.

I'm thinking we'll reconsider in two years, but for us personally I just don't see any point in moving anything soon.

(I know no one will ever invest in the BWE Investment Newsletter!)
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Old 11-22-2008, 01:14 PM   #49
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(I know no one will ever invest in the BWE Investment Newsletter!)
Nope. Not until you can explain your criteria for recognizing when to pull the trigger on cutting one's losses.
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Old 11-22-2008, 01:27 PM   #50
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Right now I'm concentrating on cutting celery and apples....
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Old 11-22-2008, 02:40 PM   #51
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Originally Posted by ERD50
Not sure why you see it as arguing, I'm just trying to understand what it is you are proposing. Once I understand it, if it sounds good, I may want to follow your lead.
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Plan, schman--just made a comment re figuring out when one might want to consider cutting one's losses in advance. Sorry.

Standing by the comment re arguing....
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I think planning in advance when you might want to cut your losses is as important as planning your asset allocation.
OK, now I'm *really* confused. You used the word "planning" in your comment, so I thought this had something to do with your.... plan.

I still don't see where I'm arguing (other than I'm now arguing about whether I'm arguing ).

OK, I see REWahoo just asked the same question I was going to get to. Without that, there is really no discussion, or anything to learn from. So just like stop losses, I'm trying to understand how/if this idea of "cutting your losses" can help.

thanks - ERD50
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Old 11-22-2008, 03:13 PM   #52
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I've read through a lot of the angst above and see myself in a lot of those posts. What I've done recently:

1) Came up with a plan that's right for me going forward. That included reviewing FIRECalc simulations and how markets behaived in past nasty downturns (1930's and 1966-82). Mostly I just made several minor moves to tax loss harvest and get the cash flow picture right.
2) Took my wife out to lunch at a fast food restaurant on Thursday to celibrate Wedneday's new low for the market and our portfolio. She doesn't really like seeing me morose about stocks. She appreciated the humor and asked if we could do it again after the Thursday's awful close. I told her that was going a little too far .
3) Kept up my exercise program and have thrown in some extra work around the house to give me something I could do instead of kicking myself over something I have no control over.
4) Pet the dog when I need some extra comfort. He's also getting extra walks.
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Old 11-22-2008, 04:11 PM   #53
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Good Plan

I'm concentrating on the holidays and ignoring the market till Jan.2 .
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Old 11-22-2008, 04:54 PM   #54
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Yeah, those target funds haven't gone down one bit
Whoopeee - I've beaten what my Vanguard calculator says is the worst historical case for my portfolio -31.93 % vs - 29.1% in 1931.

Eh ah hmmm - soo maybe I don't win anything. Perhaps I should go easy on looking till after 12/31.

I see to remember a -16.5% one quarter back in the 02/3 time period.

heh heh heh - At least when I was a kid and had to go to the dentist - I got a lolipop.
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Old 11-22-2008, 04:58 PM   #55
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heh heh heh - At least when I was a kid and had to go to the dentist - I got a lolipop.
Now you get to go to a proctologist.
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Old 11-22-2008, 05:00 PM   #56
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...heh heh heh - At least when I was a kid and had to go to the dentist - I got a lolipop.
Mick, I'm sure you can still afford one in each of your favorite flavors.
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Reversion to the mean
Old 11-22-2008, 05:03 PM   #57
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Reversion to the mean

"Reversion to the mean, also called regression to the mean, is the statistical phenomenon stating that the greater the deviation of a random variate from its mean, the greater the probability that the next measured variate will deviate less far. In other words, an extreme event is likely to be followed by a less extreme event."

I sure hope so!
Of course, it depends what you mean by "mean".
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