"These are the times that try men's souls"

[Midpack]

From another forum, pretty good sources...

So, you say you are a long-term investor. You say that when the markets turn down you will keep a level head and do what you know should be done. You said that you would look at your portfolio allocation and rebalance, or that you would invest more money to bring your allocation back to its target.

Well, are you? Are you rebalancing? Are you adding more money?

Or, are you taking a 'wait and see' attitude? Or maybe thinking about take a little off the table...or just get out altogether.

Guess what? If this market is bothering you to the point that you are not going to maintain your long-term investment plan, then you have no plan!. You have been fooling yourself about your tolerance for risk because it is not as high as you thought it was. And your plan is based on a that false premise. So, it is time for a new plan.

People are brave in a bull market, but it is in a bear market that true feelings come out. So, if you are not going to do what you swore you would during better times, then reduce your risk permanently. Reduce your allocation to stocks, or let the market do if for you, and do not go back to your over allocated level. Keep it at a permanently lower level. At least you will be better prepared for the next bear market.

On the other hand, if it is business as usual, then good for you. You're investing within your tolerance for risk, and you will be justly rewarded, eventually. I don't know when, or how much more we will lose between now and there, but I do know that "this too shall pass."

Rick Ferri

Hi Rick:

Thank you for your wise, experienced and timely advice during this current bear market. It is just what new investors need to hear--and some old-timers too.

This is my 9th or 10th bear market. It took 4 or 5 bear markets before I realized that although each bear market is different, afterwards the the stock market has always gone higher than before.

Your post is a reminder of Mr. Bogle's sage advice:

"Stay the course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."

The underline is mine.

Thank you and best wishes.
Taylor

 

[Dawg52]

What if this time it's different?

 

[Notmuchlonger]

Might have go back to work then

 

[W2R]

Not me. I'll do some serious belt-tightening but I won't go back to work (once I have ER'd).

 

[FIREd]

If this time is different, I am confident that members of this forum will still be far richer than most people out there. If those people can survive the apocalypse, so should we.

 

[Notmuchlonger]

If this time is different, I am confident that members of this forum will still be far richer than most people out there. If those people can survive the apocalypse, so should we.

I hope its not Zombies. I just got done reading World War Z. Scary stuff

 

[Dawg52]

Not me. I'll do some serious belt-tightening but I won't go back to work (once I have ER'd).

Nah, me either. I have 20 years worth of cash/cd's/bonds. Plus SS to kick in 8 years from now if needed. Prefer to wait until 66 for that through. So if stocks go to zero during that time frame, I'll simply slit my wrist and be done with it.

 

[FIREd]

I hope its not Zombies. I just got done reading World War Z. Scary stuff

Yeah, money (or the lack thereof) won't matter there. Though a good shotgun might help!

 

[BunsGettingFirm]

Yes, I just moved a whopping $1000 into equities. LOL. At current rate, I'm many, many moves from being done with rebalancing my portfolio.

 

[Marquette]

I'm twitchy... within 1% of needing to rebalance. I might get to by the end of the week.

 

[CaseInPoint]

From another forum, pretty good sources...
Guess what? If this market is bothering you to the point that you are not going to maintain your long-term investment plan, then you have no plan!.

Well, maybe the plan is not to lose money?

Yes, this might be a good time to buy low, but there's no shame in keeping your money on the sidelines and buying in when things start to improve. Yes, you'll miss some of the initial upside, but you'll buy in later when there's less risk.

Meanwhile, I'd say time to stay in savings and CDs. Maybe treasuries.

I'm twitchy... within 1% of needing to rebalance. I might get to by the end of the week.

Curious - what kind of rebalancing and how do you set the trigger so precisely as to be within 1%?

 

[Marquette]

Curious - what kind of rebalancing and how do you set the trigger so precisely as to be within 1%?

Nothing fancy... typically I rebalance 12-18 months to my AA, but I'll also do it quarterly if things are out of wack by too much. As an example (not my AA), if I were 20% intermediate bonds, 40% US and 40% international, I'd reset if I found myself to be 26%/34%/40%.

 

[DblDoc]

Well, maybe the plan is not to lose money?

Yes, this might be a good time to buy low, but there's no shame in keeping your money on the sidelines and buying in when things start to improve. Yes, you'll miss some of the initial upside, but you'll buy in later when there's less risk.

Meanwhile, I'd say time to stay in savings and CDs. Maybe treasuries.


Curious - what kind of rebalancing and how do you set the trigger so precisely as to be within 1%?

The risk remains the same. Your return will be less .

DD

 

[CompoundInterestFan]

Well, so far I haven't thought much about changing my allocation (about 75% in stocks), but then again, I have well over 20 years before I can retire. So really, I'm not paying too much attention to it. I imagine if I were within five years of retiring, I'd be a lot more concerned. Then again, i would hope that were I five years away, my allocation would be such that I wouldn't have to freak out.

So am I sticking to my plan, or just being blissfully ignorant?

 

[CaseInPoint]

Nothing fancy... typically I rebalance 12-18 months to my AA, but I'll also do it quarterly if things are out of wack by too much. As an example (not my AA), if I were 20% intermediate bonds, 40% US and 40% international, I'd reset if I found myself to be 26%/34%/40%.

OIC.

BTW- Good move adding your info to your sig.

 

[Dawg52]

Well, so far I haven't thought much about changing my allocation (about 75% in stocks), but then again, I have well over 20 years before I can retire. So really, I'm not paying too much attention to it. I imagine if I were within five years of retiring, I'd be a lot more concerned. Then again, i would hope that were I five years away, my allocation would be such that I wouldn't have to freak out.

So am I sticking to my plan, or just being blissfully ignorant?

No. With your time frame, you are good to go. It's some us early retirees that are freaking out.

 

[laurence]

It takes waaay bigger brass cajones to stick to an aggressive plan in the withdrawal phase than the contribution phase. This market is merely a curiosity when you are punk 34 year old with 21 years to retirement and a mere 150k in equities. I think some of you have lost more than my entire portfolio this past year.

 

[Helena]

Not everyone sells his soul to the stock market.

My father never owned a stock/mutual fund in his life,
yet he retired at age 62 with no debt and a nice little
pension and nest egg that lasted him and my mom the
rest of their lives.

I divested myself of all stocks/mutual funds before I retired
from my corporate job at age 55... and I'm not waiting for
a bottom to reinvest... I am out for good.

I'll be watching from the sidelines. Ya'll enjoy the ride.

~

 

[statsman]

Not everyone sells his soul to the stock market.

My father never owned a stock/mutual fund in his life,
yet he retired at age 62 with no debt and a nice little
pension and nest egg that lasted him and my mom the
rest of their lives.

I divested myself of all stocks/mutual funds before I retired
from my corporate job at age 55... and I'm not waiting for
a bottom to reinvest... I am out for good.

I'll be watching from the sidelines. Ya'll enjoy the ride.

~

My wife and I will be joining you tomorrow. Getting close to an early retirement in 6 years. Can't stand to watch these 20%+ equity drops. Worked hard to regain my health a few years back, and am starting to put weight back on stressing about our portfolio. Health before finances.

Have a good-sized nest egg already (not including $900K+ in home equity). Hoping to add to the retirement accounts for the next 6+ years by maxing out our 401(k)s, in bonds and a little in Stable Value funds.

 

[mathjak107]

key word ,nice little pension..... for the rest of us we have to creat our own. unless we can live on social security and have a large enough nest egg to not have to grow it then a certain amount of equities are a must

 

[shotgunner]

Just thinking outloud

"Guess what? If this market is bothering you to the point that you are not going to maintain your long-term investment plan, then you have no plan!"

I believe it was Colin Powell who said "no battleplan survives contact with the enemy"

 

[donheff]

Thanks for the post - it reminded me that I should rebalance - I am probably a little low on equities based on what has been going on. With the constant downward trend I haven't been looking at my spreadsheets lately.

 

[Helena]

key word ,nice little pension..... for the rest of us we have to creat our own. unless we can live on social security and have a large enough nest egg to not have to grow it then a certain amount of equities are a must

When I said, "nice little pension", I meant "little". He was a carpenter,
not a corporate executive with a golden parachute.

The more I observe, the more I understand, it's not what one earns
that is important, it's how one behaves and uses the assets he has
that matters.


~

 

[FUEGO]

I am currently at 100% equities. This is my second bear market even though I am not quite 30 yet. However this is the first bear market where I have a substantial amount of capital in the markets.

I have learned that I am ok with my allocation - I don't have any problems sleeping at night worrying about losing money. On the contrary, I would prefer the next 10 year period to consist of low valuations while I'm accumulating assets.

However, I think I will feel different if I am consuming capital in retirement instead of living off of primarily dividends and interest. For this reason, I will increase my focus a little more on acquiring assets that are likely to pay above-market dividends. Since I have a policy of not buying individual stocks, this leaves me with dividend rich mutual funds and/or ETF's that invest in certain sectors or slices of the market. I already have a value tilt to my portfolio, and I will emphasize this more over time. I just bought a financials ETF to (hopefully) get a nice sized dividend payment long term.

My thoughts are that over the next 10 years there will be a number of sectors that pay nice dividends and they will temporarily "go on sale". Then I will buy to build a portfolio tilted to dividends as well as the current tilt towards small cap and value.

Ideally, I'd like to get up to 3% or so dividend yield which would fund 75%-100% of my eventual withdrawals in FIRE. I plan on a retirement period of 5 to 6 decades (or more if I'm particularly "lucky") - so eating into capital during down markets scares me more than it might scare the typical ER that FIRE's in their 50's. Heck, I might even stay 90% or so in equities during FIRE.

I also plan on doing some sort of variable withdrawal scheme that isn't fully tied to inflation/CPI. Dividends have historically increased long term, so over time my dividend dependent withdrawals should (in theory) rise as well.

To get back to the topic of the thread, I continue to learn a lot about my own investing psychology, particularly during volatile down markets. But so far I have only had urges to buy steeply discounted sectors in limited amounts. Otherwise I continue to DCA. If I can get to the point where my withdrawals are primarily paid by dividends and interest, I would be tempted to stay relatively close to my 100% equities allocation (say, 80-90% equities) during FIRE without worrying too much about fluctuations in the market. I would be willing to cut back on the budget a little during bad market years if it meant much more financial freedom in boom years.

 

[Lusitan]

I haven't touched my existing investments, but I have changed my 401(K) contribution asset allocation in response to this bear market.

I eliminated the 20% that had been going into a bond index fund, and increased the contributions to my int'l stock index fund and total stock market index fund.

I still want to maintain bonds in my overall asset allocation, but with the new money I'm investing right now, I figure I might as well overweight equities for a while as we enter what looks to be a doozy of a bear market.

But I'm just another one of those 30-something punks with years to go before I plan on touching any of my FIRE stash.