5% off the high - are we done yet ?

[Katsmeow]

I was expecting a pull back. Seeing it happen proves to me (once again) that I am not ready to ER. I could probably pull it off financially, but if I can't sleep at night its not worth it.

I thought you had run your numbers based upon as much as even a 20% drop? If so, then why would a 5% drop make you unable to sleep?

I don't like the drop, but it doesn't panic me and I don't really expect a 20% drop right now.

I'm not really planning on changing anything. Our overall net worth is still higher today than it was at the start of the year even though we have taken some portfolio withdrawals this year. Also, right before the May high I sold some of our after tax portfolio to pay for a car which turned out to be good timing (not that I was expecting it to be good timing...it just worked out that way).

I also thought it was kind of absurd for the market to react so strongly to Bernanke's statements which I also didn't find alarming.

 

[pb4uski]

Yes, this market is so horrible!

Look at the 3m, 6m or 1y charts and you'll feel better.

VTI Technical Analysis | Vanguard Total Stock Market ETF Stock - Yahoo! Finance

Time to get a bit of perspective folks!

 

[pb4uski]

.....I also thought it was kind of absurd for the market to react so strongly to Bernanke's statements which I also didn't find alarming.

+1, but that is what the market does.

 

[F4mandolin]

But....if you are in a large store and 6 people suddenly start sprinting for the door in a panic......you have a tendency to want to follow them just in case they know something you don't..... It doesn't have to make sense.....but some people (350+ Dow points worth of them) will start running. I have enough cash to get me through the next 3-5 years.

 

[brewer12345]

I will start getting interested in the general market after a 10% drop from the highs or specific stocks if they hit what I consider to be attractive entry points. Until then, snooze fest.

Tomorrow is so-called "quadruple witching" so I expect a lot of meaningless volatility.

 

[Bestwifeever]

....Also, right before the May high I sold some of our after tax portfolio to pay for a car which turned out to be good timing (not that I was expecting it to be good timing...it just worked out that way).

I also thought it was kind of absurd for the marke....

[thread jacking on]: is this what you ended up doing after the discussion here: http://www.early-retirement.org/forums/f27/should-i-sell-my-car-66704.html?

What did you end up finding?

[/thread jacking off]

We're hanging on and making no changes. We kept a chunk of cash for at least three years so will shut our eyes to the market swing as much as we can.

 

[F4mandolin]

Hmmmm...I could make a dirty comment about part of that last post....

 

[Animorph]

I don't think buying a little more of something on sale is market timing. Closing out a positon entirely on a well reasoned AA due to a drop is.

Historically I have always bought on dips. Didn't care really if it was the bottom or not. I was a devoted advocate of DCA. I would just put a little more in the envelope if the trend was down. Served me very well.

What is hard mentally now that I am close to pulling the trigger on ER (2014 hopefully) is sitting on the sidelines preserving enough cash for multiple years of living expenses. I want to jump on this and am bitting my tongue! I am finding preservation mode vs accumulation mode is a very strange change....

I try to keep the cash for spending, up to however many years you target. However, if the market goes down more than 20%, that is the time to consider reinvesting some of that cash. Do the math. Even adding 10% of your AA back into the portfolio and picking up an extra 5% with it before you need to spend it, it'll only grow to 10.5% of your portfolio. An extra 0.5% for what is really quite a bit of risk. Make that 2% and it's a little better. But still, a lot of work and worry for just to make up what the market lost just today.

 

[RAE]

I raised some cash the last two weeks selling some winners and lightening up on some bond etf's in case Uncle Ben dropped the hammer. I'm going to sit on the cash for a while to see where things shake out then will probably start nibbling at a few things on my "want to own" list. I think we could fall another 4-5% before things settle down.

You want to buy when everyone else is selling! Question is when.

I did the same. I expected a market pullback after the Fed announcement, as things have gotten way out of hand with this QE stuff. Of course Ben was going to say that QE must be tapered off at some point, and it was not hard to guess that the market was going to react negatively to that. My tendency at this point is to stay away (mostly) until the Fall, and then start buying back in a little bit at a time. Sure, it's market timing, but I've done well over the first 5-6 months of the year, so I'm content to park mostly in cash for a while and wait this out.

 

[obgyn65]

Thanks for your kind encouragement. I am typing this post from 36,000 feet in the air. A first for me. Connecting via wifi. I love technology !

Good job. One nice feature about Wellesley is it rebalances automatically, so as equities fall, more are purchased at a lower price. This is an excellent conservative fund and over long periods should do a superior job of maintaining purchasing power compared with typical fixed income options.

 

[Katsmeow]

[thread jacking on]: is this what you ended up doing after the discussion here: http://www.early-retirement.org/forums/f27/should-i-sell-my-car-66704.html?

What did you end up finding?

[/thread jacking off]

No... we had had a loan that we took out when we didn't have after tax money available and didn't want to take out tax deferred money because we were in a higher tax bracket than we would this year. This year, however, we had some after tax money investments available and sold in May shortly before the height of the market (yay!). We still own the car in the above thread and I'm keeping an eye out for vehicles on sale since I only want to sell it if I find something really ideal.

Anyway...back to the regularly scheduling programming...

 

[Gatordoc50]

The yield on the S and P 500 is only at 2 %. It has a long way to fall to reach its mean of 4.5. Rising rates should correct both stock and bond prices which have been artificially propped. Wouldn't it be nice if portfolio values remained the same and yields returned to norm? lol

 

[Live And Learn]

I thought you had run your numbers based upon as much as even a 20% drop? If so, then why would a 5% drop make you unable to sleep?.

I was using a 10% drop; 20% left me potentially broke at 79 which is much too young. I was unable to sleep when the market wasn't even dropping yet. Just not emotionally ready. I will probably keep working. Worst thing that happens is that I "wasted" a couple of good years to be able to spend more money on travel later on.

 

[packrat44]

I will start getting interested in the general market after a 10% drop from the highs or specific stocks if they hit what I consider to be attractive entry points. Until then, snooze fest.

Tomorrow is so-called "quadruple witching" so I expect a lot of meaningless volatility.

+1. Actually, I am hoping for more of a drop. Looking for good buying opportunities.

 

[winger]

It's just noise, right?

 

[Katsmeow]

I was using a 10% drop; 20% left me potentially broke at 79 which is much too young. I was unable to sleep when the market wasn't even dropping yet. Just not emotionally ready. I will probably keep working. Worst thing that happens is that I "wasted" a couple of good years to be able to spend more money on travel later on.

Well, maybe let it drop 10% and then run your numbers at that point and then retire if you show success then. I've often thought the best time to retire is just when there has already been a drop....

 

[Lakewood90712]

..............................................I also thought it was kind of absurd for the market to react so strongly to Bernanke's statements which I also didn't find alarming.

I have a diferent view. I really can't remember anytime in the last 20 years when "The Market" didn't react absurdly to statements by the Fed.

 

[imoldernu]

Am out of my bailiwick when it comes to investing, but thought this article on the safety of the market (that ETF's are supposed to enhance), might be worth a read.

"ETF Losses Today Were Far Beyond What The Most Sophisticated Risk Models Could Have Predicted" | Zero Hedge
It deals with the situation that can occur when the amount of cash redemptions at a trading desk exceeds the allocated at risk capital. It can essentially halt trading, and cause the very steep market drops.

Most of these problems occur because of the high frequency trading where automatic trades take place in milliseconds and ahead of the human reaction time.

This morning there were announcemnts from exchanges that purport to fend off the "crash" effect, but the pundits question these changes.

A harum scarum article but something to keep in mind as it describes what actually happened yesterday.

 

[enjoyinglife102]

It appears we are not done yet with people thinking they can time the markets, paying too much attention to short term activity and committing to their strategy only as long as things are good. Best of luck with all that; the overwhelming evidence is that you're going to underperform.