Just like 2008

[NW-Bound]

... Many studies have been done on trying to time the market and most people badly miss it. Combine that with the factoid that the bulk of market gains occur in a very small fraction of trading days, so by getting out of the market you will miss those, it becomes a losing proposition.

The bulk of market losses occurred in an even smaller number of trading days.

And the highest daily gains are always less than the highest daily losses.

 

[Running_Man]

Not only that, the S&P is still above the starting level for the year of 2,695.

Ummm no it is not

Oh wait... Yes it is.....

Will revisit in a few minutes..........

Ummmm no it is not.......

Soon I wont be able to reedit...... but I think this will hold for a while

 

[razztazz]

The bulk of market losses occurred in an even smaller number of trading days.

And the highest daily gains are always less than the highest daily losses.

And many of those "biggest gains" days you hear about happened as part of on-going down markets as over-reactions to over-sold conditions

 

[Running_Man]

Combine that with the factoid that the bulk of market gains occur in a very small fraction of trading days, so by getting out of the market you will miss those, it becomes a losing proposition.

This is simply untrue, what is true is in a declining market there will be some very violent updays, which if combined over time add to more or most of the total of the gain over time, but are almost always followed by lower prices.

10 of the 20 largest daily gains in stock market history occurred in 2008 for a total gain of over 60 percent. Yet despite that anyone selling on January 1, 2008 would have missed those 60 percent of gains but still been 37 percent ahead of the investors insuring they harvested the large updays.

 

[Big_Hitter]

Maybe we should do a poll - how much of a market downturn could you take and not be materially impacted?

 

[OldShooter]

... I think it makes some sense to move to safer assets with at least some of your $$ in equities. ...

Absolutely true. Move to safer assets any time the market isn't going to recover for 5-10 years.

​

 

[Lawrencewendall]

Maybe we should do a poll - how much of a market downturn could you take and not be materially impacted?

PC says that even if I took a 50% hit, my probability only drops from 99% to 97% success rate.

 

[joeea]

Yep, that is the issue, in a nutshell. If you don't need the money for 5,10, or more years, then "meh" is probably the right attitude.

Yup, Meh.

Some would say you shouldn't have been in equities in the first place if you fall into the second category

Yup, some would say.

 

[NW-Bound]

Not selling. I am betting on Bogle's forecast of, what was it, 3.6%/year return, averaged over the next 10 years. If he is wrong, well, there's SS to claim before 70.

Maybe we should do a poll - how much of a market downturn could you take and not be materially impacted?

We will need to define that "material impact". Does one's WR going from 1%/yr to 2% count? Or does it have to be WR going as high as 5 or 6%?
Or WR staying low, but no more "dough blowing"?

This forum being full of fastidious people, I can see all kinds of questions raised.

 

[COcheesehead]

Not selling. I am betting on Bogle's forecast of, what was it, 3.6%/year return, averaged over the next 10 years. If he is wrong, well, there's SS to claim before 70.



We will need to define that "material impact". Does one's WR going from 1%/yr to 2% count? Or does it have to be WR going as high as 5 or 6%?
Or WR staying low, but no more "dough blowing"?

This forum being full of fastidious people, I can see all kinds of questions raised.

No one ever questions anything here

 

[MrLoco]

Not sure why this is even an issue? Don't most of us re-balance at least once a year? I used to re-balance between equities and fixed income if my asset allocation bandwidths exceeded 3%. For the past 2 years I have used a 1% bandwidth so this year I re-balanced 4 times and locked in profits mostly in my IRA to avoid tax consequences.


Some may say this borders on market timing but as we enter what is hopefully a long retirement, isn't this a prudent approach?

 

[NW-Bound]

It's nicer to rebalance by selling stocks high.

It does not feel good having to pull cash to buy stock low.

Both are rebalancing, but one makes you feel good, and the other makes you feel lousy.

 

[Maenad]

Eh, I did a quick estimate earlier this year of the S&P dropping 40% during this year, then resuming the average return. Even though I'm 1.5 years away from my desired retirement, it only pushed me back a couple years. Since I'm in my early 40s, it's not a catastrophe, just an annoyance.

I'm strangely relieved at this correction, it's like the relief of the other shoe dropping - not a good thing, but "OK, now the bad thing is happening and I can face it head on rather than worrying about when it's going to hit."

I just hope any bear market isn't accompanied by a serious recession with the associated job loss, but I think they often are.

 

[TwoByFour]

Maybe we should do a poll - how much of a market downturn could you take and not be materially impacted?

It is not just the depth of a decline, it is the longevity of it and what it does afterward. 2008 was a huge drop, but it recovered in a little over four years and the 10 years since have been phenomenal.

I could take another 2008 but I would not want to have a 20% decline that stayed flat for 12 or more years (like Japan).

 

[Big_Hitter]

We will need to define that "material impact". Does one's WR going from 1%/yr to 2% count? Or does it have to be WR going as high as 5 or 6%?
Or WR staying low, but no more "dough blowing"?

I'd say a 25% to 33% change in SWR is material

 

[TwoByFour]

I'd say a 25% to 33% change in SWR is material

How can you have a change in SWR based on the market after you have retired? SWR by definition is calculated once, when you retire, and is based entirely on your assets at that time.

 

[HI Bill]

it looks like I am going to lose almost as much this month as I did 10 year ago!!!...Now, the pct is much less, but in absolute $$$s it is almost the same...

Yes, a 3% swing means a $55K change for me...seeing $100K dissapear from your account value over the course of a week is disconcerting...but I also bought some at lower valuations. Like I told my wife. Every time the market hits a new high, I have faith that regardless of how low it goes, and eventually, the new high will be surpassed. I'm looking forward to being retired and out doing stuff, instead of sitting in my office, watching the market's peturbations.

 

[Big_Hitter]

How can you have a change in SWR based on the market after you have retired? SWR by definition is calculated once, when you retire, and is based entirely on your assets at that time.

my bad I just meant WR

 

[Jerry1]

Not only that, the S&P is still above the starting level for the year of 2,695.

Ummm no it is not

Oh wait... Yes it is.....

Will revisit in a few minutes..........

Ummmm no it is not.......

Soon I wont be able to reedit...... but I think this will hold for a while

Yes, a rough day but still, if it holds as it is today, a flat or slightly negative year is a lot better/different than a 10, 20 or higher percentage loss.

Thankfully, I took the advice of many on this forum and elsewhere and have a very low equity percentage in my AA (about 40%). Not that it isn’t hard to watch the number on my Fidelity statement go down, but that money is for much later in life. My big worry is the tsunami, market drop, MC takes away retiree healthcare, inflation kicks in at a much higher rate . . . I can take on some disappointment, but being my first year of retirement, SOR risk does concern me.

On the flip side, better now than later. I’d rather go back to work now than to realize when I’m 75+ that I don’t have enough and need to work and not be able to at that time.

 

[Big_Hitter]

Thankfully, I took the advice of many on this forum and elsewhere and have a very low equity percentage in my AA (about 40%).

I don't consider 40% to be very low - I'm at 50% at age 54

but yes having a lower equity percentage allows us to withstand material market drops

 

[marko]

The title of this thread is "Just like 2008"

My big take-away from 2008 was the great benefit of sitting tight and riding it out.

If this is indeed just like 2008, can we hope for another decade of extraordinary returns starting sometime in March 2019?

 

[Willers]

This feels nothing like 2008 to me. I have a few friends in the banking industry and remember them actually looking literally scared a few times during that drop.

That said, even though I have a relatively conservative allocation (which helps my psyche), I've still lost enough that I can't exactly say "meh" to 6 figure drops. I know I don't need the cash for years, but it still doesn't feel great...

 

[Free bird]

Slow day. Everyone counting their money.

 

[Retch The Grate]

This is why I am aiming for a 3% withdrawal rate with inflation adjustment afterwards. No historical period where that has failed for any duration. So whatever the market does, I get my desired lifestyle unless things go extraordinarily differently. For now, bring on the buying opportunities hopefully.

 

[NW-Bound]

The title of this thread is "Just like 2008"

My big take-away from 2008 was the great benefit of sitting tight and riding it out.

If this is indeed just like 2008, can we hope for another decade of extraordinary returns starting sometime in March 2019?

Back then, the S&P lost 57% of its value from the peak. Starting from $1, it became 43 cents.

The S&P recently peaked at 2931. It closed today at 2656, not quite 10% down. One dollar became 90 cents.

Yes, you can have 10 years of extraordinary returns once the S&P gets down to 1267. It means the S&P gets down to 1/2 of what it is now.

The current 90 cents has to become 43 cents first. After that, a wonderful 10 years awaits us.