20% stock market plunge

[kumquat]

Quote:

Originally Posted by megacorp-firee Was with you until the 'gun to head' part ... my philosphy is make the other guy pay 1st.... can we join you on DW 300 acre's? I can help with the chores ... and we don't eat much ...

No problem (I think), can you brew good dark beer?

[megacorp-firee]

Quote:

Originally Posted by kumquat No problem (I think), can you brew good dark beer?

if it gets to that point .. I'll learn... bock ok?

[audreyh1]

I'd do what I did in Oct of 2002 - I'd rebalance my portfolio, which would mean buying more equities at depressed prices and letting go of some bonds and cash. This move was very handsomely repaid with the 2003 recovery.

I also managed to "trade up" in mutual fund quality during 2002 - selling some funds that I wasn't that happy with to purchase better quality funds with lower expense ratios. The depressed values of the funds (in some cases sold at a loss), helped minimize the tax impact of exchanging to the better funds.

I tend to keep 1 to 3 years of cash in a separate "short term" account that I use for day-to-day living expenses. With this kind of buffer, a bad market year doesn't cause me to immediately tighten the belt. If the short term cash account drops under 1 year's worth of funds and the markets were still down, I might start to cut back on discretionary expenses.

Audrey

[loosechickens]

Well, we keep about two years of normal expenses in a high interest cash account, so like the previous poster, we probably wouldn't even conserve until one year had gone by.

Also, we don't spend anywhere near the dividends and interest that our brokerage account earns, so unless interest and dividends fell to less than 50% of their former level, we would hardly notice.

We don't anticipate invasion of principal in our lifetime unless both of us would be confined to nursing homes for long periods, and we don't do a lot of trading of stocks anyway, so the chances are that we would just maintain our asset balance, pick up bargains as available, and continue to rest easy. We tend to look at stock market downturns as opportunities, rather than a calamity.

It helps that we, by nature, live pretty frugally and have few consumer desires. If there's a lot of money, as there has been in the last few years, we notice that we just don't tend to spend it, and the reverse would be true as well.

Let's just put it this way....we don't expend any worries over the market. We are well diversified, live way below our means.....why should we worry? If it all fell apart, we'd sure be in better shape than most.

LooseChickens

[W2R]

Quote:

Originally Posted by Bikerdude With some of the concern I saw on this board when the market corrected less than 5% in February, I would say this will be a great place for entertainment come a 20% decline.

Oh, believe me, we'd provide you with all the entertainment you can imagine and more! I get seriously nervous during these declines, and really appreciate all the hand-holding that steadier forum contributers provided back in February.

[2B]

Quote:

Originally Posted by Want2retire Oh, believe me, we'd provide you with all the entertainment you can imagine and more! I get seriously nervous during these declines, and really appreciate all the hand-holding that steadier forum contributers provided back in February.

February was small potatoes (in honour of Dan Quayle). At the final yearly low I was just barely negative for the year. Wait until you've watched the last 3 years of gains melt away.

I started investing around 1966. I got baptized real fast. I lost almost 50% of my investments by 1974.

[unclemick]

Quote:

Originally Posted by 2B I started investing around 1966. I got baptized real fast. I lost almost 50% of my investments by 1974.

Me too - about the same amount. Also took some 'legend in my own mind' money off the table in 1968 rented a penthouse, bought a 68 Datsun 2000 roadster and frittered some $ ratting around Seattle. Lucky I was working in those days.

Very educational. Bogle/Vanguard and Psst Wellesley came later in the 70's.

heh heh heh 8)

[2B]

I started investing in high school with a friend who had a custodial account his father let him do what he wanted with. We went in half and half until I turned 18 in 1969 and started my own brokerage account within the week. I poured all of my income into it and bought high flying trash with it that mostly tanked. I learned a lot but not enough. I didn't discover indexing until the late 90's.

I paid $50 of my own money to go to the UW for 4 years -- I had to pay the application fee. I had scholarships and grants to cover everything. I had great jobs both at school and over the summer which never impacted my scholarships. I graduated with over $6000 which was a minor fortune for a college kid in 1973.

[gnorris51]

I don't think I would do anything - I am 55 / my husband is 57 - both retired - fully invested in a very diversified stock portfolio which has returned about 16% per year for the last several building a nice nest egg about 1/3 investment and 2/3 retirement. I have no bonds, about 30K in my cash account and get $4500 monthly in a pension (after paying my part of health insurance and federal taxes) . I figure I don't need to buy the safe stuff because my pension is worth well over a million so Its like having a million in bonds - is this faulty reasoning or am I on the right track? I also have no mortgage on my home and no debt.

Thoughts? Thanks.

[old woman]

So far I never sell anything but I still work. When I lose money I think that is another year I need to work. I don't think I will panic after retirement I don't plan to be desperate. I will have a home with low expenses so I can basically live on SS and my roommate income. I probably won't have a mortgage and I will have a newer vehicle so not need another until I have been retired 10 years. I will probably be between 60-63 when I retire since I am already 59 so SS isn't that long to wait to collect. Other than medical insurance I think I could live on 10K per year without a house payment and would get 14K SS and 8K roommate income so investment income won't be crititical. I have over 400K invested so that will be my home repair, new vehicle and other expense fund as well as my medical fund. If I wait 3 years to retire it could be up another 100K or more. As long as my annual cost of living is kept very low doing things like heating with a woodstove and catching fish and gardening maybe raising some chickens or rabbits to keep food bills low I can stand a pretty long down turn and if I get a 10% return on 500K for 4-5 years my portfolio could double before I am 70.
As a back up plan my roommate will have SS and 3 pensions, I could raise his rent. My mom is 80 and getting to poor health so I could inherit something in the next 10-15 years.

[mickeyd]

20% drop would make me start rounding up as much cash as I could so as to invest more in the equity market, probably the Vanguard total stock market index fund.

[Alan]

Quote:

Originally Posted by gnorris51 I don't think I would do anything - I am 55 / my husband is 57 - both retired - fully invested in a very diversified stock portfolio which has returned about 16% per year for the last several building a nice nest egg about 1/3 investment and 2/3 retirement. I have no bonds, about 30K in my cash account and get $4500 monthly in a pension (after paying my part of health insurance and federal taxes) . I figure I don't need to buy the safe stuff because my pension is worth well over a million so Its like having a million in bonds - is this faulty reasoning or am I on the right track? I also have no mortgage on my home and no debt. Thoughts? Thanks.

I agree with you, assuming that your pensions provide all the essentials you need. If you are not relying on your investments for much income, then it's not your money you are playing with - it is your heirs'

[Spanky]

$4500 net (after tax and health insurance) per month is good enough for me, DW and 2 kids. With that kind of pension, a nearly 100% equity portfolio is fine.