Hyperborea
Thinks s/he gets paid by the post
If my portfolio fell by half, I'd salute the Norwegian widow, reread page 108, on Mr Market in my Ben Graham, check the SEC yield of my portfolio (should take 5- 10 minutes) and get back to ER. I suffer from the illusion, a 50-60% drop in the S&P 500 should be 'a planned possible event' in todays market environment. Bernstein, Bogle, or Ben Graham - take your pick - they understand 'Markets Fluctuate'.
Sure, if the S&P500-like portion of my portfolio fell by 50% I wouldn't be too concerned. But if my total portfolio dropped by 50% I would be worried. That portfolio in retirement will be something like:
- 20% Fixed Income (CDs, short term government bonds, etc)
- 80% Equity - widely diversified perhaps such as:
- 10% Total US market - Wilshire 5000
- 10% Large US Value
- 10% Small US Value
- 20% EAFE
- 10% Emerging Markets
- 5% REITs
- 5% Precious Metals
- 5% Timber
- 5% High Yield Bonds
If I waited just a couple of years to "see what happens" then two bad things happen. First, my skills get older and less able to bring in good remuneration. Second, the continued draw from the portfolio increases the odds of failure. It's quite interesting to play with portfolio failure and see that failures can often be turned into winners with some early corrective action.