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Market Correction
Old 08-12-2015, 11:29 PM   #1
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Market Correction

Looking at the global financial situations with Greece, Puerto Rico and now China, if you had a greater than 50% confidence that a 50-75% downward correction was coming to the US equity market where or to what would you move the taxable portion of your portfolio(cash, change in mutual funds or stocks ??).

It goes without saying (as a disclaimer) that you can't predict the market.
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Old 08-13-2015, 12:34 AM   #2
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I think having been thru "The Great Recession" provided me the experience and wisdom of what to do in such a dire scenario, and that would be to do absolutely nothing.

No panic. No selling. No changes. Go to WCB (Worst Case Budget) and simply stay the course and wait for recovery.
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Old 08-13-2015, 05:03 AM   #3
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.. . if you had a greater than 50% confidence that a 50-75% downward tcorrection was coming to the US equity market...
I would hope my DW and children would get me back on my meds before I did something stupid.
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Old 08-13-2015, 06:00 AM   #4
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Originally Posted by Looking4Ward View Post
I think having been thru "The Great Recession" provided me the experience and wisdom of what to do in such a dire scenario, and that would be to do absolutely nothing.



No panic. No selling. No changes. Go to WCB (Worst Case Budget) and simply stay the course and wait for recovery.

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Old 08-13-2015, 06:08 AM   #5
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Originally Posted by ferco View Post
Looking at the global financial situations with Greece, Puerto Rico and now China, if you had a greater than 50% confidence that a 50-75% downward correction was coming to the US equity market where or to what would you move the taxable portion of your portfolio(cash, change in mutual funds or stocks ??).

It goes without saying (as a disclaimer) that you can't predict the market.
With a > 50% confidence level. I would do nothing. That would just be a guess on my part.

If my confidence level got to 95%, say, I would start worrying about my ability to believe in my confidence level.

I am safe, in any event. We have no equity investments in taxable accounts.
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Old 08-13-2015, 06:26 AM   #6
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My confidence of any particular move would never reach 50%. He'll, a nuke could go off in NYC and I wouldn't be that confident of a 50-75% fall. Strick to your AA.
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Old 08-13-2015, 06:38 AM   #7
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I believe there has only been a 50-75% downside move (not a "correction") twice in history. There's no way you will ever have >50% confidence that the next one is coming. I would guess it will be another 25+ yrs before that happens.
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Old 08-13-2015, 06:38 AM   #8
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I think this hypothetical question is just too difficult to answer. If I knew the market was going to correct I guess I'd just everything to cash in all accounts and then reinvest it at the bottom. With less than a 100% chance I would continue to rebalance whether the market went up or down... but even then I would make the changes in my tax-sheltered accounts first to avoid cap gains on trades.
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Old 08-13-2015, 06:44 AM   #9
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Since most of my money in taxable accounts are in individual stocks, I'd look at the basic fundamentals of each business and consider using tax loss harvesting to offset some taxable gains I may want to take. I wouldn't sell based on the market as a whole since each company is different. I keep enough cash to live a few years if needed in a prolonged market downturn, and may consider buying stocks that I believe are oversold and show good value.
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Old 08-13-2015, 06:52 AM   #10
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Looking at the global financial situations with Greece, Puerto Rico and now China, if you had a greater than 50% confidence that a 50-75% downward correction was coming to the US equity market where or to what would you move the taxable portion of your portfolio(cash, change in mutual funds or stocks ??).
I wouldn't do anything at all to prepare for the presumably imminent crash. If such a crash DID happen, I'd check to see if I should rebalance (according to my written rules for when I can rebalance). If not, then I would continue to do nothing.

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It goes without saying (as a disclaimer) that you can't predict the market.
I agree completely. You really can't!
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Old 08-13-2015, 07:17 AM   #11
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I think having been thru "The Great Recession" provided me the experience and wisdom of what to do in such a dire scenario, and that would be to do absolutely nothing.

No panic. No selling. No changes. Go to WCB (Worst Case Budget) and simply stay the course and wait for recovery.
+2

What goes down will go up again.
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Old 08-13-2015, 08:39 AM   #12
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I'm almost certain that a correction of >50% is coming. I just don't know when. Could be tomorrow, could be decades from now.
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Old 08-13-2015, 09:17 AM   #13
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I'd sit still at first, and hopefully work up the courage to DCA my remaining 50% cash/bond portion into stocks.

Meanwhile go to Nepal and sing hymns to myself on a low-cost budget for a few years
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Old 08-13-2015, 09:17 AM   #14
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The "great recession" has really tempered my reaction to downturns. I just ignore it and keep plugging along. I've got a couple years cash so all's well.
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Old 08-13-2015, 09:26 AM   #15
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If I could get to 80% confidence and also knew the time frame, I would load up on cheap out of the money puts on a big index like SPY

Then I would buy Branson's island.
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Old 08-13-2015, 09:35 AM   #16
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My husband starts his RMDs in 2016. I would see if Fidelity will withdraw from his 457 stable value fund and let the equity investments ride the wave. I also have cash building up with no place to go right now. I would put it to work (after tax) if we get a good correction.
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Old 08-13-2015, 10:04 AM   #17
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If I knew the market was going down 50% I'd sell everything and hold cash... then buy at the exact bottom. Good luck.

If the odds are just 50% then I wouldn't change anything in current portfolio. I would just collect all new money in cash.
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Old 08-13-2015, 10:09 AM   #18
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I'm almost certain that a correction of >50% is coming. I just don't know when. Could be tomorrow, could be decades from now.
And I am almost certain that 33% bear markets are nothing unusual while 50% plus will not happen very frequently.

Don't hold your breath for 50% Bear market in a near future
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Old 08-13-2015, 10:21 AM   #19
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+2

What goes down will go up again.
I think the two key points have been shared:

1) Stay the course

2) EVERYONE SHOULD HAVE A WORST CASE BUDGET THAT OF COURSE INCLUDED FLEXIBLE SPENDING.
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Old 08-13-2015, 10:34 AM   #20
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The Great Recession has made me considerably more sanguine over corrections and such. If we survived (more accurately: profited from) that debacle, we can survive just about anything.

In another thread this week I wondered aloud if the flat market performance since April has been a sort of slow-motion correction...allowing equities to slowly cool down to a "true" price vs the mean instead of a drastic drop. Time will tell.

Our neighbor (smartest girl in the room...just ask her) proudly smugly announced on Feb 15, 2009 that she had just "sold everything"...a few weeks later....ouch! She's been grousing since that she never got back into the market.
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