How I handle a market downturn

[kgtest]

I rolled over an old 401k to my VG account and had it sitting in MM. Glad I did that back at S&P2050. I will disperse it against my AA as soon as tomorrow.

I made the mistake of pushing to bonds in 2008 and it hindered some growth, but at least I was still in the game. This (and every future downturn) I will be sticking to AA.

 

[Mulligan]

It's Popcorn Time. Entertaining to read all the news stories. I placed a small buy order yesterday. Will place another a bit larger in a few weeks if the red numbers continue.

How can you sit there all relaxed when "eternal optimist" Marc Faber just said today S&P is going to drop 20-40% in next 6 months...Sell, sell, sell.


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[Moneygrubber]

Farber is awful!


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[VFK57]

I am sitting tight, it may lead to more losses but selling at panic will mean to accept the loss. Mark Faber and Peter Schiff has always predicted DOOM. When markets are down (it happens every few years in cycles, sometimes the cycles are prolonged) they point out: see I WAS RIGHT.

 

[Christine]

How can you sit there all relaxed when "eternal optimist" Marc Faber just said today S&P is going to drop 20-40% in next 6 months...Sell, sell, sell.

By all means - let Mr Farber sell all he wants!

I'm not that relaxed either - struggling with some big issues - like hot chocolate or tea with my afternoon snack?

 

[Lisa99]

I volunteered to be laid off and that is happening on Monday.

I know that the market isn't doing great but I'm not reading the paper or watching the accounts any more than normal.

Knowing that I was leaving we've been stockpiling cash. We have about 1.5 years in cash so we shouldn't have to sell anything in the near future.

 

[lem1955]

Just retired last week and I would have preferred to see the market tick up instead of down. But I know better than to panic. I have 2.5 years of expenses in cash and CD's. I had planned to buy another CD for 2018 this week, but I'm thinking I'll sit tight for a little while. Maybe CD rates will bounce up a little in a few months! I have another small 403(b) to move to Vanguard at the end of the month. I plan to stick to my AA 60/40 stock/bonds&cash and use that to rebalance. Glad you guys are all here to provide moral support.

 

[doneat54]

About all I do is not check balances on accounts as much. I am now officially in my final year. My job is being excessed 12/31/2016. A bad thing? No, I was planning on retiring 2/1/2017 and now they are going to pay me a healthy severance to retire a month earlier than I planned to. Worst case, I think of this bonus severance as a huge cushion to soften a (potential) fall. Best case, it is some Caribbean travel and maybe a sports car.... and boost to the balances. I agree with most. Like a roller coaster, shut your eyes, hold on time, scream if you want to, but just hang on for the ride....

 

[robnplunder]

I have 1+ year of cash to dip into, and 8 year worth of bond funds I can dip into before I panic sell my stock investments. SS kicks in after the 8th year of stock market downturn. Me, worry? Nah.

 

[hesperus]

I am fortunate in that my portfolio size allows me to keep my allocation above 75% equities, and this still generates more than enough income from S&P dividends (2%) to cover all our expenses, with leftover cashflow that I continue to reinvest. I also still hold almost 8x annual expenses in cash (GE Capital @ 1%) that I have been averaging into the market since 2015. As I average into these pullbacks, I feel comfortable stopping when our cash reserve hit 4x annual expenses. The tipping point for me was when the portfolio got substantial enough to never have to draw down principal, while still being able to reinvest most dividends. So when these pullbacks happen, yeah, I don't like seeing it, but I start to look forward to putting more cash to work and increasing that cash flow.

 

[Llep]

Maybe CD rates will bounce up a little in a few months!

Good luck! It seems like I have been thinking/hoping this exact same thing for a few years now!

 

[Mulligan]

By all means - let Mr Farber sell all he wants!

I'm not that relaxed either - struggling with some big issues - like hot chocolate or tea with my afternoon snack?

Well I have to admit, I am a "market chicken". The year isn't a trading week old, and I am already up. In fact on this crazy day most of my issues are all up. This is definitely the environment for investment grade preferred stocks and people continue to bid them up for safety.
I just don't have the stomach for losses, and I respect all that can. Heck I don't even use my investment money being a pensioner and couldn't handle the losses. I just clip my mostly 6-7% coupons and move on.



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[M Paquette]

Generally, I find that taking a nap is the best way to handle it. Or playing with kittens, if available.

If it happens to be mid-February, I check my asset allocation, and if things are outside of the (very broad) bands I use, I'll move enough around to bring the allocation back inside the bands. I had to do that in 2009 and 2012, I think.

Of course, it's also what I do in a market upturn...

 

[jazz4cash]

Just retired in August and I am still trying to figure out how to manage AA (70% equities), rebalancing and cash flow for retirement. I am also a bucketeer with a lumpy CD ladder that should satisfy my needs for any reasonable length of downturn. I watch and read a lot but just don't react without due diligence. I am sleeping great and enjoying ER.

 

[NW-Bound]

I look at the market everyday, and more than once, whether it's up or down. The only time I don't is when I am traveling and have no internet access. That does not mean that I trade everyday.

Went upstairs to start laying down the laminate floor in a small bedroom. The Dow was down 200 points. Just went back down to have a break for lunch. While eating my nice hot bowl of French onion soup, hit refresh on the laptop screen. Dow is down 440 points. Nice!

And what is this? My put option limit order hit. Son of a gun! I still have plenty of cash to cover put options like this, but perhaps I should slow down. Man! Exciting time again so soon after 2008?

 

[Bir48die]

Don't let it scare you. I too am a recent FIRE. I struggle with money jitters too. It's normal.

I keep reminding myself that having the cash for X number of years of basic expenses will get me through most "correction" and "recession" phases and maybe even a DEPRESSION phase.

That X factor is different for everyone. For some it's a year. For others it's 2-3 years and for yet others it's even more...7 or 8 years in cash not unheard of.

For me I'm about 20 years out from an SS check, and no pension what so ever. Plus hopefully a long many year retirement ... So by comparison I'm on the riskier end of the spectrum.

I like holding on the longer end of basic cash needs.. I hate bonds these days so my bonds are cash ...

But I need equities to offset inflation and best to snap up bargain when the market falls 15-20 percent. History says it pays off most of the time.

Without new money, you can't do that other than reducing cash- so just sit tight.

+1

 

[Sunset]

I just threw $4K into Vanguard Total Stock Market Fund in a 401K Roth as I need to fill it for 2015.

Might not be the lowest point this year, but I'll dribble more in later, and nobody knows it could be the lowest point this year...

 

[Ed_The_Gypsy]

I am 1/4 in cash right now (it was 1/6 14 months ago), cash for at least the next 2 years or so (for other reasons). Just now recharacterizing 3 Roths and don't plan to buy anything for a little while. Reassessing my AA.

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[Ed_The_Gypsy]

I lived through 1987, 2000 and 2008 fully invested and it worked out.

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[Dog]

UGH....in my second year of retirement and DH will retire in May. I started a 72t last February and hate seeing my IRA balance decline as I am wired as an accumulator. I may revisit the funds that are being drawn from and have more drawn from the bond fund during this equity decline.
DH will have a small FERS pension and we will sell our primary home when he retires so we wont have any debts. My 72t distribution and his pension will easily cover our expenses and may even allow funding our rIRAs once the primary home is sold. We won't need to touch his TSP yet.
We also have a CD ladder that can cover several years of expenses.


I just hope this won't be a long bear market!

 

[DrRoy]

My advisor sounded like he had done a lot of talking people down from the ledge yesterday.

Those people sure weren't invested in Oct 1987. They never would have stayed on the ledge long enough to talk down.

Totally turn off CNBC.

 

[Gatordoc50]

Hopefully everyone ran Firecalc prior to this downturn.

 

[shotgunner]

I am worry wart by nature. I went from F/T work to R/E to Semi E/R in 2008 at age 51, and worked PT for the next 7 years for many reasons, insecurity being one of them. The organization I worked for decided it wanted to take two P/T positions and make one F/T position. I did not want to go back to work F/T. I became E/R at age 58 this past August.

It was easy, circumstances made the decision for me. Since then I don't watch the market everyday, I don't listen to the talking heads on CNBC and elsewhere. I have a plan, I am diversified in my investments and my annual spending without work is about 3.2% of my portfolio as it was August.

Oddly enough I am not nervous, I don't like it but what can I do, the decision is made and I have had a great 4+ months of ER. I like it! Now technically I still work a little P/T, not much, I got hired as a guide by a motorcycle tour company. I did one 2 week tour with them in Sept, and hope to do two tours this year. Paid travel. I thoroughly enjoyed my time off in the Fall hunting. I thought I would be bored by now at this time of year living in New England. I thought I would do a little on demand courier driving. I haven't done that, I like E/R.

On NYD I caught up with an old friend I had not seen in awhile. I found out his wife is near death, she is in her early 50's, breast cancer matastisized throughout her body.

As I head towards my 59th birthday in April I realize it's only a few short years and it won't be an early retirement anymore. I intend to enjoy this time. I earned it. The market is going to go down and the market will go up. I believe very much I will be fine and I fully embrace the idea that my time right now while I have my health is too important to spend it worrying about stuff that is completely out of my control.

Age, and the wisdom that came with it combined with the death of loved ones and friends has sent my inner worry wart packing.

 

[Lisa99]

I run Firecalc often and today I ran it with several scenarios to see what our spending would be in several scenarios.

 

[shotgunner]

I run Firecalc often and today I ran it with several scenarios to see what our spending would be in several scenarios.

That's nice, but what if it's different this time?

(sorry I could not resist).