talking myself into the benefits of a bear market

[runchman]

So I was thinking while walking the dog tonight.....

I'm 43 and looking to retire in, oh, the 10 to 15 yearish time frame. Being that the market has its bull and bear cycles, it occurred to me that it would probably be in my interest to get the next bear cycle out of the way now - so the market could hopefully recover and be on a bull tear for the early years of my retirement.

We all know how an early bear market in retirement can hurt the survival rate, right?

So I'm trying to gear myself up for being happy about a major market correction, should it occur relatively soon. Of course I'd also be happy for a bull market over the next 30 years !

Try as I may though, I have a hard time imagining that I'll be saying "Hey this is great!" if the market drops and stays down for the next 5 years.

Not predicting anything of course, just thinking.

- John

[macdaddy]

I guess it makes sense that you want your highest earning years to correspond to down years in the market... as long as the general economic climate doesn't cause you to lose your job or earn less...

[Linney]

For us in the accumulation stage, a 5-year down market is an opportunity to buy stocks at a significant discount price. You state that you have 10-15 years until retirement. Do you want to build your portfolio by buying equities at full price or would you rather buy them on sale?

Dunno if that logic works for you, but it works for me.

[saluki9]

Quote:

Originally Posted by Linney For us in the accumulation stage, a 5-year down market is an opportunity to buy stocks at a significant discount price. You state that you have 10-15 years until retirement. Do you want to build your portfolio by buying equities at full price or would you rather buy them on sale? Dunno if that logic works for you, but it works for me.

Until you stop to realize that we have had bear markets that lasted 20 years.

[Rich_by_the_Bay]

Talking withdrawal phase, I think that planning for bear and bull markets is basically market timing at the most global level and it doesn't work for me. You may win, you may lose. Not the kind of risk I'm willing to take head on.

My approach to this, right or wrong, is to assume both will occur. If we get just "bull" so much the better. While I'd struggle with Saluki's 20 year bear scenario (who wouldn't?), that speaks to me about planning enough cushion that we'd be OK with an unwelcomed but tolerable lifestyle contraction.

My major defense for the likelier scenarios is to have on hand 10-15 years of cash to wait things out while living my planned-for lifestyle. I'll cut back in phase 2 if I need to, when SS will help (?). Phase 1 is mine.

At least that's the plan I'm working on.

[runchman]

I agree that market timing is a bad idea, and my approach as well is to assume that both will occur. My approach, just like most here, is to stay fully invested and chug, chug, chug along, adding to the portfolio regardless of the market level.

I was just pondering how I would react psychologically to a bear market, not what I would do investment wise.

- John

[unclemick]

pssst Wellesley - and/or other variations of Fama and French, chasing the value premium, Ben Graham's sliding the stock/bond asset mix depending on Mr Market, etc.

Youuuu KNOW the Norwegian widow loves her dividends!!!

Stay balanced ala Bear Bryant - don't push too hard for interest yield and extreme dividends.

I was working during the little 1966 - 1982 flat period - but I hesitate to recreate my mindset from those days - some memories are too painful even though I try to laugh at my mistakes.

heh heh heh heh heh

[soupcxan]

You can wish for your bear market all day long, just stay away from MY market.

[W2R]

Quote:

Originally Posted by runchman So I was thinking while walking the dog tonight..... I'm 43 and looking to retire in, oh, the 10 to 15 yearish time frame. Being that the market has its bull and bear cycles, it occurred to me that it would probably be in my interest to get the next bear cycle out of the way now - so the market could hopefully recover and be on a bull tear for the early years of my retirement. We all know how an early bear market in retirement can hurt the survival rate, right? So I'm trying to gear myself up for being happy about a major market correction, should it occur relatively soon. Of course I'd also be happy for a bull market over the next 30 years ! Try as I may though, I have a hard time imagining that I'll be saying "Hey this is great!" if the market drops and stays down for the next 5 years. Not predicting anything of course, just thinking. - John

Here's what the 2000-2002 bear market felt like for me (projected ER 2010). I watched as those closer to retirement moaned and were depressed and gloomy, and delayed their retirements. That's pretty tough to see.

Personally, I felt a little "at sea" and didn't know what to do. A bear market can be a little unsettling. I didn't have much long term confidence in the stock market. I wondered if it was even smart to contribute to my TSP (401K), or if I should just put my money in the bank. I contributed the maximum allowed anyway, the whole time though I did put 1/3 in a bond fund (the F fund). The company match added to my contributions, so I was coming out about even or at least not losing a huge amount compared with putting it in the bank. I wondered if I could ever retire. I bought a house and paid it off since that was a tangible asset.

Now, I do plan for a bear market just as I retire, since that is something that could always happen. My social security and teensy-tiny pension do not add up to enough to live on, but I will be maintaining enough in CD's to get through the first 10 years. Like Rich_in_Tampa, I will be flying by the seat of my pants toward the end of a 20 year bear market, and will probably lower my expenditures at some point if need be. If there is no bear market during the first 10 years, I should be in good enough shape to get through one with money to spare.