Sleeping Well in this crazy market?

[In-control]

Hello:

Being new to the FI I was wondering if anyone else has been loosing a little sleep over the current market downturn? I have saved my sanity with a living expense model that I have been using - Which I wanted to share with you as it has helped me sleep at night and ignore the market noise. Maybe it can help you or you you can share your model.

I essentially have 3 rotating years of living expenses - adjusted for inflation each year. This year I am building the funds that I will need in 2011. I establish a CD ladder - 3yr/2yr 1yr = MM/checking account. In January of 2008 I will open a 3 yr CD after I re-balance - keeping to the 4% rule.

This living expense model has given me freedom - because even if my portfolio has a bad year - I have time to recover and or adjust to the possible lower funds for that year.

Just my 2 cents

 

[REWahoo]

In-control, if you are loosing sleep over short term market movements, you probably need to change your username.

 

[Rich_by_the_Bay]

Being new to the FI I was wondering if anyone else has been loosing a little sleep over the current market downturn?

What's wrong with a great buying opportunity?

 

[Helen]

What's wrong with a great buying opportunity?

It is good for those of us who are still working or have the cash on the side lines to put into the market. I'm wondering how I'm going to feel about a bear market when I am retired though.

 

[REWahoo]

It is good for those of us who are still working or have the cash on the side lines to put into the market. I'm wondering how I'm going to feel about a bear market when I am retired though.

Speaking from the position of retired and living entirely off my portfolio, I don't see it as a traumatic event. If you have an asset allocation you've carefully thought out and have a few years (3 in my case) cash to live off during downturns, why would you need to worry?

I suppose I have the advantage of having been around long enough to see all sorts of market gyrations and know they are all temporary in nature. If we hit a bear market that is worse than any in the past 136 years (FIRECalc's time frame) and my retirement funds evaporate, then I suppose I'll have to take consolation by knowing I'm in good company - and that this time it really was different.

 

[LOL!]

Although the market dropped last week, do you remember what it did the month before? You should be right back where you were in June. If you aren't, then you should be losing sleep because something ain't right.

 

[wildcat]

Just drink three glasses of wine instead of one. That should do it.

 

[MJ]

I only have 25% of my portfolio invested in the market. I would love to invest another 15% to 20%, so I'm hoping for a 15% to 20% correction for about 2 days. I need some panic sellers. Got a lot of cash collecting 5+% dust.

MJ

 

[saluki9]

What's wrong with a great buying opportunity?

Was May 1st, 2000 a good buying opportunity too?

Not to pick on your Rich, but not every drop is a time to buy.

 

[TheFIREman]

I have been FIRE'd for 3 years now and every time one of these "events" pops up, I turn off the news and go for a long walk (or on a vacation). If you have crafted a balanced portfolio of solid investments and have a reasonable SWR, these events are but little irritants that should be ignored.

 

[W2R]

I am doing pretty well. Last night I drifted off to sleep while day-dreaming about the market bouncing back and then some.

If you are seriously having trouble sleeping I would recommend a good workout at your gym. I sleep like a baby and maintain a more peaceful, happy frame of mind when I am working out.

 

[Dawg52]

Just drink three glasses of wine instead of one. That should do it.

I already do that.

I haven't lost any sleep, but I do admit it makes me nervous even though it shouldn't. I have several years worth of cd's laddered, dividends coming in, but who likes to watch your portfolio value drop? It's only on paper, but still a pisser.

 

[Rich_by_the_Bay]

What's wrong with a great buying opportunity?

Was May 1st, 2000 a good buying opportunity too?...Not to pick on your Rich, but not every drop is a time to buy.

Valid point, Saluki.

And not every post is to be taken 100% literally .

Just reassuring the OP ("I was wondering if anyone else has been loosing a little sleep over the current market downturn?") that all may not be lost.

 

[cute fuzzy bunny]

Just work your plan and always keep a little dry powder...

And dont drink extra glasses of wine, its not good for you.

Just make the one glass larger. Nobody ever asks you how big your glass is, just how many of them you're gulping down.

Personally, i'm as excited as a little school girl, outfit and all. I hope we get another 4000 points shaved off the top.

Which would get us almost in range of reversion to the mean...

 

[Nords]

Although the market dropped last week, do you remember what it did the month before?

Sure, at the beginning of July we pulled money out of a couple of overheated stocks. Last week we put them into a couple of undervalued ETFs. Now the pundits are talking about the comeback of large-cap stocks and the values to be found among regional banks. Maybe in a year or two we'll harvest gains from the bank ETF and buy more of the large-cap ETF.

One of our cash-stash CDs matures on Wednesday. We have a choice of putting it in NFCU's 10-month 6% offer or whatever PenFed comes up with at the expiry of their three-year 5% offer. Life is good!

Was May 1st, 2000 a good buying opportunity too?
Not to pick on your Rich, but not every drop is a time to buy.

No, but when the drop goes to stupid levels (below long-term averages, to low P/Es, to high yields) then it's a good deal. Especially when the whole market is only down 4-5% and some sectors are down double that.

"Buying on the dips" is different this time!

 

[CuppaJoe]

Yeah, I got really really nervous as I was overdue to sell. I did some rebalancing on July 15 and think the market was high enough that day. Considering my COST BASIS plus inflation, I sold off some more shares today (July 30). One of my funds goes back 35 years and others have been riding for some years-–I haven’t donated, I mean invested, in most of them in over two or three plus years. I’m letting the equity income funds ride some more as well as a big chuck of a foreign stock fund, and might take some out of an index fund later this week.

Of course your situation may be different, I’m coming out of a very long buy and hold timeframe, soon to be 61. I’m getting my portfolio down to 50/50 and am moving several years of expenses into liquid accounts for the big exit into retirement.

 

[Sam]

I know I will sleep well tonight. The market is up. We need 4 more days like this to make up for last week loss.

So stop arguing, analyzing, and join me in praying.

 

[Alex]

I am not too concerned. I still have 5 years of accumulation before I pull the plug. But as a precaution I keep plenty of 'dry powder' in my account as well (currently 10% cash), should the blood start running on the streets! One thing is for sure, I feel very good about my 60/30/10 allocation when we have down days.

The perfect scenario for me personally would be a 5 year market that goes nowhere (not necessarily a full blown 'bear'), followed by 5 year major bull run.

 

[Moemg]

[quoter...

And dont drink extra glasses of wine, its not good for you.

Just make the one glass larger. Nobody ever asks you how big your glass is, just how many of them you're gulping down.

..[/quote]

So if you are drinking your wine out of a fishbowl it still counts as one glass right?

 

[cute fuzzy bunny]

Yep, but I'd limit myself to a 29 gallon tank. No more.

Actually the last time my doctor asked how many glasses of wine I drank I asked if the glass it came in was the unit of measurement he was looking for...

 

[wildcat]

I already do that.

I haven't lost any sleep, but I do admit it makes me nervous even though it shouldn't. I have several years worth of cd's laddered, dividends coming in, but who likes to watch your portfolio value drop? It's only on paper, but still a pisser.

I knew you were good for the 3 glasses a night rule.

 

[Moemg]

I figured if the market kept dropping I've have to take Ha's advice and go to Newark instead of Costa Rica

 

[CyclingInvestor]

I am 49, retired, 100% individual stocks, and sleeping fine. Market fluctuations mean
nothing to me - I am living on the 3+% dividend flow from my stocks. Earnings are going
up steadily, dividends keep getting raised (KIM by 11% this week). I highly recommend
this approach if you can afford a slightly lower withdrawal rate.

 

[windsurf]

Cycling's Approach

Can you be more specific?

 

[MasterBlaster]

Cycling Investor's approach is that of the Norwegian widow. Own dividend paying stocks and live off of the dividends.

This approach may work well except in severe business downturns where earnings and dividends get severly reduced. Also a diversified portfolio with a SWR would allow for larger distributions and hence a better (in some ways) retirement. The diversified portfolio also would fair better during the severe downturn.

Still, if it works for you go for it.