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"How do you handle the steep downturns in the market"
Old 01-20-2008, 01:23 AM   #1
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"How do you handle the steep downturns in the market"

The market's down 8% in January alone. How do the fixed income/retired folks not fret?
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Old 01-20-2008, 01:36 AM   #2
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I am 49, retired, and 100% in equities. I live on the dividends generated by
my portfolio, all top quality stocks with solid management (IMO) and long
histories of increasing earnings and dividends. Because of this the market
prices are irrelevant to me except as trading opportunities when my stocks
are over-valued and other stocks I track are under-valued (IMO).

A sharp drop in business conditions might concern me if large enough, but
I could live on half my current income, and I feel the odds of GE / JNJ / PG /
GGP / KIM / VNO / WRE etc cutting their dividend by half on average to
be pretty slim.
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Old 01-20-2008, 04:36 AM   #3
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I handle them by diversification. I maintain a balance between Equity and Fixed.
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Old 01-20-2008, 04:38 AM   #4
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As entertainment; I have 0 in the Stock Market.

AZAuthor: January and it has 8 more trading days left. Any bets on where it will end up on COB 1/31?
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Old 01-20-2008, 08:10 AM   #5
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I ignore it (well, ok, I don't worry about it).

A mm and cd ladder (4-5 years), an income portfolio consisting of preferreds, muni's, and royalty trusts, and a megacorp pension make up my living expense money. My equity portfolio is there to refresh my mm and cd ladder. If the portfolio doesn't start growing in 2 years, then I will throttle back a bit, so I can make the mm and cd ladder last a bit longer. If after 5 or 6 years (? could happen, I guess, but not likely) I would have to start to eat into some of the equity if I don't cut back to a level where my income portfolio and pension can cover the expenses (we can do this, but I wouldn't like it ).

What, me worry?
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Sleeping well, regardless of short term moves...
Old 01-20-2008, 08:36 AM   #6
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Sleeping well, regardless of short term moves...

Currently have 4 years of gross income in MM funds.

10 years away from SS (at age 70), but always have the option to take it in less than two years, if need be.

Could reduce expenses (a lot of fluff), but don't expect to "panic" till the middle of next decade ...

- Ron
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Old 01-20-2008, 08:43 AM   #7
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Rude and crude - 60/40 ballpark handgrenade wise, da 'policy' portfolio, Firecalc, ORP, 4% - soldier on.

Actually 5% variable of 12/31 previous balance and party on - cause I'm not getting any younger - sort of a Vanguard and take off of some of Gummy's work.

After forty plus years - started investing in 1966, Mr Markets wiggles become amusing - the early years were more grippy and 2000 - 2002 got my attention - not to the point of changing my asset allocation or anything.

Now a Depression era 80% drop in stocks would test my 'Sunshine Patriotism'. I would be calling Valley Forge to verify those Vanguard computers were rebalancing my Target Retirement and possibly rereading a little Tom Paine to buck up my resolve to stay the course.

heh heh heh - Remember the Norwegian widow - she always knows the current yield of her holdings in case of hard times. Dividends and interest are almost as good as real money. This is only my 15th year of ER - still practicing.
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Old 01-20-2008, 09:00 AM   #8
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I am 75% in equities but have 5 years worth of cash in a MM account. The only change I have made was to sell Washington Mutual shares at $19 (they are now down to $13) after the dividend was cut. I put that $ into a closed end fund (JPG) that was at a nearly 15% discount to NAV and pays a substantial dividend. No other changes contemplated.

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Old 01-20-2008, 05:29 PM   #9
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a 60/40 mix with 7 years worth of money in mm,cd's, bank
another 7 in bonds and unlisted reits
rest in equities although i admit it, this time i was a dirty lil market timer and in october started lightning up to about 30/70.....

now im trying to value average in and hope i do before things turn.

so many investors are waiting for that golden entry point. most of us are just uncomfortable out of the market as when were in
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Old 01-20-2008, 06:59 PM   #10
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Quote:
Originally Posted by azauthor View Post
The market's down 8% in January alone. How do the fixed income/retired folks not fret?
I think you can avoid too much fretting by imagining the worst and preparing for it. So FIRECalc should give you results you can live with for the periods (1) beginning with 1929, (2) beginning with 1968, and (3) the 1973-74 recession. You have to be honest with yourself and do a reasonable stress test.

Our portfolio was up about 8% last year and is so far down ~4.1% this year. The S&P is down about 9.8% so far in 2008. Our portfolio is targetted at 55/45. Just sold our TIPS.
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Old 01-20-2008, 08:28 PM   #11
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The market's down 8% in January alone. How do the fixed income/retired folks not fret?
Less than 14% of my monetary assets are in US and European stock mutual funds. The other 86% are in CDs, stable value funds, US Savings Bonds, money market, etc.

My wife is younger and has a low paying, but fairly secure job which helps cover her medical benefits.
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Old 01-20-2008, 09:26 PM   #12
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As said by someone else, stakes in a number of great dividend payers which also are great dividend growers.
As I am bringing in some extra money, I also look at this, as many others have already stated in one way or another, as a sale on stocks. Buy when everyone else is panick selling
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Old 01-20-2008, 09:55 PM   #13
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Scenes From Lynchburg
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Old 01-20-2008, 09:59 PM   #14
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That one showed up at 86 proof...x 4.
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Old 01-20-2008, 10:21 PM   #15
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I think you can avoid too much fretting by imagining the worst and preparing for it. So FIRECalc should give you results you can live with for the periods (1) beginning with 1929, (2) beginning with 1968, and (3) the 1973-74 recession. You have to be honest with yourself and do a reasonable stress test.

Our portfolio was up about 8% last year and is so far down ~4.1% this year. The S&P is down about 9.8% so far in 2008. Our portfolio is targetted at 55/45. Just sold our TIPS.
? just curious, why did you sell your TIPS. Are you rebalancing AA and putting the TIPS funds into equities?
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Old 01-20-2008, 10:27 PM   #16
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Scenes From Lynchburg

hmmm, quality control problems? why does the last bottle look bigger and fuller :confused:
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Old 01-20-2008, 11:39 PM   #17
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If times get really tough, you can order a barrel, that's about 240 bottles worth.

Single Barrel - Buy the Barrel Orderform
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Old 01-20-2008, 11:55 PM   #18
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hmmm, quality control problems? why does the last bottle look bigger and fuller :confused:
Same volume as all the others but maybe for a different market. US 1 liter bottles and EU 1 liter bottles possibly.
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Old 01-21-2008, 12:37 AM   #19
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Old 01-21-2008, 12:46 AM   #20
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Hmmmm. One bottle is bigger and has more visual volume and you are worried? That is fine Tennessee Sippin whiskey...you may have a Bonus bottle there. One that was got stretch a bit in the molding process and got filled to a higher level due to a filler being on the high side.

Much like the topic of this thread.....don't sweat it.....just enjoy what you have.

As for how I survive a toilet bowl flush market like we have now (swirling around and down the drain so to speak)...well..I am about 60% in equities. 20% in various bonds and bond funds and the rest in MM or cash.

Most of my pre-tax IRA stuff (former 401k) is spread all over the place in various CDs, funds, stocks, and some bond funds. My post tax portfolio is mostly in equities. I have 3-4 years in MM funds or cash accounts. With good money management this might take me 5-6 years and then I can start taking money out of one of my IRAs if necessary. We will also be in a smaller less costly house by then so our living expenses should be down by 30-40% by then too which should stretch the MM cash even more. If the market tanks and stays that way for 5+ years I can still get by but would have to cut back to avoid selling off equities in a down market and losing out on the long term returns.

While I would say I am not worried....I am expectantly hopeful the media will find something else to whine about and let the market manage itself instead of driving everyone into a frenzy out of misguided fears of another Great Depression this year.

The market floats up. The market floats down. World events affect the market both ways but over the long haul the market will correct either direction to offset the "hysteria" caused by short term moves either up or down. Fearful people sell short because they "think" their stocks will fall lower than their comfort level. When a lot of fearful people sell short the market feels it and the media makes up a cover story to explain it....which causes more fear and more short sales.

If the "talking heads" would put a sock in it for a while the market will stabilize and float up or down based on real value rather than hysteria. Just my opinion.
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