Why do folk complain so much when the Stock Market goes down a "Little"?

[Rianne]

The difference in this discussion is staying put with what you have in stock funds, which is what we're doing. Last big purchase, DOW at 15,000. So we're sticking to it. Selling not an option.

Bond funds are a different story.

 

[MrLoco]

If it went down say 25%, 30% or even 50%, people who were in it, would still be 50% better off than they were in 2009/10. It has had a good run, lots of folk have made money. One cannot win all of the time, even though one would like to. The media reacts to a 500 point loss as if it was the end of the world. It is only 2%. That is a drop in the proverbial bucket. Even with this volatility the traders are still making money intra day.

Just trying to understand and am not sure what all the fuss is about.

Well you sort of answered your own question.



What does CNBC focus on at 4 pm when the market closes?
Sara Eisen or Kelly Evans scream :STOCKS SINK YET AGAIN! A 650 POINT DROP IN THE DOW!!!!
They focus on the number.....not the %.
They get your attention this way.



To be fair the market does tend to drop faster on the way down than on the way up. You rarely see gains in the DOW of more than 250-300 points in one day. But lately, 500+ point drops seem to be the norm.


Plus it is does put a little damper on the holidays when all the gains for the year are wiped out in just 6 weeks.


Plus people I think would just like to know so they can better plan and prepare. Where is the bottom? How much more will the market drop? When will the bleeding stop? You get the picture.

 

[steelyman]

One positive (mental) aspect of drops in my brokerage account (all individual stocks) is that the yield rises as the stock price falls, similar to bonds. The annual dividends in the stocks I own are pretty stable, no GEs in there. I don’t trade frequently and rarely sell.

 

[ls99]

THe market went up, it went down. I do not know when.

 

[RobLJ]

It's basically due to loss-aversion. I'm sure someone above said that.

I'm looking at doing 1/2 of my usual late Jan rebalancing this week, to (perhaps) take advantage of the drop. To be sure, if the rational market continues coughing up blood, perhaps will do this week only 1/3 or 1/4 of the rebalance, rather than 1.2.

 

[clifp]

DOW hit its lowest point in March 2009. Took approx. 5 yrs. to recover to previous high in June 2007. We're staying put but rethinking bond funds to CD's.

I'm not market timing, I'm just rebalancing to more conservative AA, and ya the CDs are actually looking interesting.

 

[audreyh1]

The S&P500 50dma crossed under the 200dma a few days ago (so called death cross), and the index is still dropping. A year’s worth of gains has been wiped out and the usual cheery December has been painful instead with significantly increased volatility. Situations like this tend to snowball. I understand why many folks are unhappy and fearful.

Of course I always felt the action since late 2016 was way over the top considering various headwinds, so it seemed somewhat inevitable to me.....

Not that I do anything but rebalance and tax loss harvest when the opportunity arises (by exchange within asset class).

 

[ER Eddie]

Just irrational human nature, I reckon.

This line of thinking probably made sense to our caveman ancestors and was a crucial survival instinct: we caught 3 fewer gophers than last week. Doom! We must move camp to a new valley immediately!

And then get eaten by a sabertooth tiger along the way... I'm staying put in my cave!

Doesn't it also depend on where one is at in their investing life? A market drop to myself is welcomed. I can buy cheaper.
Where as a newly retired person could get a little bothered by a market decline.

Yeah, I'm on the cusp of retirement, and I'd rather not retire into a down market. But it's not a big deal. Easy come, easy go...

 

[jjflyman]

The problem with this is not everyone has been in the "market" since 2008. Anyone who invested money in the last 15+ months is very likely behind, maybe even significantly behind. The main thing that drove the market in the last few years have been the so called FAANG stocks, and they are now crashing.
That's why people are complaining.

 

[VanWinkle]

Just irrational human nature, I reckon.

This line of thinking probably made sense to our caveman ancestors and was a crucial survival instinct: we caught 3 fewer gophers than last week. Doom! We must move camp to a new valley immediately!

My ancestors ate gophers?? I always though mine were chasing down small dinos and eating them.

 

[VanWinkle]

The issue is when will it come back. I keep entering lower and lower "portfolio start amount" in firecalc.

This reminds me of going shopping and a great 30% off sale. I walk out feeling good, until I go back a week later and the same clothes are now 50% off.

If you are currently taking big losses in your portfolio, you may need to rethink your allocation and adjust to something you can tolerate. I am 50/50 stocks and bonds and am down less than 3% on the year. That is tolerable for me.

 

[Dawg52]

Why do folk complain so much when the Stock Market goes down a "Little"?

Some people enjoy talking about how much their portfolio goes up when the stock market does well. Why do people do that?

 

[Dtail]

If you are currently taking big losses in your portfolio, you may need to rethink your allocation and adjust to something you can tolerate. I am 50/50 stocks and bonds and am down less than 3% on the year. That is tolerable for me.

55/45 for me but down 4.25% due to joining the Nasdaq party midyear and having 20% International.

 

[ShokWaveRider]

Cheer up, it was up yesterday and looks like a relatively up open today. Me-Thinks it will just go sideways for a year or so, at least till November 2020. But what do I know?

 

[Brdofpray]

Cheer up, it was up yesterday and looks like a relatively up open today. Me-Thinks it will just go sideways for a year or so, at least till November 2020. But what do I know?

I don’t know! However, have you stayed at a Holiday Inn lately?

 

[Which Roger]

Since I am still in the accumulation phase, I like to think of market drops as a "sale".

It really depends where one is in the accumulation phase. If you're young and most of your investing years and contributions are ahead of you, I agree. However, somebody who is a year from retirement is also in the accumulations phase, but any benefits of a "sale" will be dwarfed by the losses from what's already been invested.



It would be interesting to see some analysis showing where the break-even point lies.

 

[Which Roger]

What does CNBC focus on at 4 pm when the market closes?
Sara Eisen or Kelly Evans scream :STOCKS SINK YET AGAIN! A 650 POINT DROP IN THE DOW!!!!
They focus on the number.....not the %.
They get your attention this way.

And they're getting the attention of a subset of investors. A long-term/boglehead/buy-and-hold-and-rebalance type shrugs when seeing this news, although it's unlikely that he/she is even tuning in.

 

[imoldernu]

I don't belong on this thread, but...

Out of curiosity did a comparison of one of my ibonds bought in 2001, to government inflation rate.

Inflation.. $10,000 to $14,400

Bond.......$10,000 to $26,400
................................................................................................
Apropos of nothing, but a wider view of long term investment for the later years.

Yes... the base ibond rate was better, but the bonds were bought when the prime rates were in the 7% range at that time. The Ibond base rate was 4.2%)

See the historical rate chart here.

https://www.gobankingrates.com/banking/interest-rates/see-interest-rates-last-100-years/

What appealed to us during those early years was the idea that at the very least, we would track inflation, and we could look at this "investment" as a fixed amount, a base for checking on our safety plan. Not a place for large amounts of money, but for several years, the IBond limits were $30K/year per person.

I think that if we were doing this today, we'd put our $20000 limit into Ibonds, each year... as a hedge. Current IBond composite rate is 2.83%.

I guess this makes me an ultra conservative investor.

You might want to know what the average market investor has received over the longer term. An interesting article.

https://www.creditdonkey.com/average-stock-market-return.html

What is the average investor's return on mutual funds?
The average investor greatly underperforms the stock market. Over the last 30 years, the average investor saw a return of 3.66%, whereas the S&P 500 had an average return of 6.73%

 

[mountainsoft]

It really depends where one is in the accumulation phase. If you're young and most of your investing years and contributions are ahead of you, I agree. However, somebody who is a year from retirement is also in the accumulations phase, but any benefits of a "sale" will be dwarfed by the losses from what's already been invested.

True, but I would assume anyone nearing retirement would already have a decent nest egg built up. A 10-20% drop may be scary, but it shouldn't derail a good retirement plan.

Unless you're cashing out all of your investments when the market drops, it's just numbers. They may drop 30% today but regain 35% over the next couple of years. The only real "loss" are the funds you sell to live on while the market is down. If you can set aside some money outside the market to live on while the market is down, you may not need to take a loss at all. Then replenish that buffer when the market comes back up.

Now ask me the same question in five years if the market drops just before we're ready to pull the plug.

 

[marko]

What does CNBC focus on at 4 pm when the market closes?
Sara Eisen or Kelly Evans scream :STOCKS SINK YET AGAIN! A 650 POINT DROP IN THE DOW!!!!
They focus on the number.....not the %.
They get your attention this way.

.

Kelly Evans doesn't have to scream to get my attention. Jus' sayin'

 

[sengsational]

My ancestors ate gophers?? I always though mine were chasing down small dinos and eating them.

You know that humans and dinos never shared the land. Humans are portrayed as hunters, true to a degree, but also scavengers... smashing bones (leftovers) etc. Which ties back to scarcity wiring.



Irrational humans, beyond being "too sensitive" to losses have another foible that helps in this condition. It's second level thinking, so might not come as quickly, but we tend to compare our lot with those around us. Our food might be half as good as last year but we feel great because it's better than anyone in the camp.


With investments, and more appropriate, the economy, if things go to hell in a hand basket, I'm going to show a lower figure on paper, and maybe give myself fewer luxuries, but because I'm a planner, I figure I'll be less impacted than those around me (not including this community, of course, because you're all above average).

 

[OldShooter]

... somebody who is a year from retirement is also in the accumulations phase, but any benefits of a "sale" will be dwarfed by the losses from what's already been invested. ...

This is an example of the sunk cost fallacy. Whatever happened in the past has no effect and can have no effect on decisions going forward. Every day, every decision, should be a clean sheet of paper without history. More: https://en.wikipedia.org/wiki/Sunk_cost and also in any introductory economics textbook.

 

[Free bird]

The wheel that sqeaks get the grease. Complaining has been proven to be effective.

 

[Dtail]

This is an example of the sunk cost fallacy. Whatever happened in the past has no effect and can have no effect on decisions going forward. Every day, every decision, should be a clean sheet of paper without history. More: https://en.wikipedia.org/wiki/Sunk_cost and also in any introductory economics textbook.

+1
Sometimes also use this reasoning when the DGF and I are in an "involved" discussion.

 

[OldShooter]

+1
Sometimes also use this reasoning when the DGF and I are in an "involved" discussion.

Oh, I think we all are victims of this fallacy from time to time. Nothing to be ashamed of.

True Story: I am on the investment committee for a nonprofit and the investment guy for the firm running the money has been reluctant to sell some donated Class A mutual funds because a big front-end load fee aka sunk cost was paid for them. The funds are dogs. After 6 months of waffling with us waiting for him to grasp the obvious, we finally just directed him to sell. He is a former CPA and has these initials on his bio: CFA, CFP, CPWA. I think he is really not too bright but has real talent for passing multiple choice tests.