What is your action vs Market Fall?

[Chuckanut]

Has anybody thought about how to handle a situation where instead of a correction and then a nice recovery, we just had a relatively flat market for a decade or so?

[W2R]

Quote:

Originally Posted by Chuckanut Has anybody thought about handle a situation where instead of a correction and then a nice recovery, we just had a relatively flat market for a decade or so?

How could you not? Add rampant inflation and you're living in my belt-and-suspenders overly cautious world.

I think one important way to prepare for such a situation, is to arrange your spending so that the bare bones expenses are very small and most of your money is spent on discretionary stuff. If a cut back is necessary, discretionary spending is easier to eliminate. Try to think of what you would do if you couldn't withdraw at all from your investments. Could you survive without going back to work? With SS and my mini-pension and more cash in my portfolio than most might have, I think I could, although my lifestyle would sure be different.

[Maenad]

Quote:

Originally Posted by Chuckanut Has anybody thought about handle a situation where instead of a correction and then a nice recovery, we just had a relatively flat market for a decade or so?

I'll have to dig it up, but one of the more popular financial bloggers wrote a post about someone retiring in the late 1960s, right before years of a flat market and high inflation. They discussed numerous ways to deal with it, but the two biggest were (as W2R mentioned) cut spending substantially, or move to a much LCOL country.

[albireo13]

Trying to time the market is a fools errand.

[audreyh1]

Quote:

Originally Posted by Chuckanut Has anybody thought about how to handle a situation where instead of a correction and then a nice recovery, we just had a relatively flat market for a decade or so?

Well sure, although I kind of saw the 2000 decade that way even though it was volatile, it ended near where it started - or lower depending on your allocation.

You are just drawing down for a long time, portfolio gradually shrinking.

[audreyh1]

Quote:

Originally Posted by gayl I overreacted. Should have stuck with business class instead of adding 25% to investments but I'm just 5'8" and did grab an aisle seat on Economy Plus. Hey, I just retired 1 year ago (hence anniversary trip) so still learning.

I certainly understand being so recently retired. Heck it took us a decade before we were willing to splurge on business class even when the market was rallying. Chronic underspending finally helped us loosen the purse strings.

One thing we specifically do each year is withdraw the full year’s income from the retirement investments. That way we don’t feel the immediate need to pull back spending. We might need to in a year, but at least we can spend the current year money without paying attention to market volatility.

[Lsbcal]

The market is only about 1.8% above it's 200 day moving average. This seems to be a popular traders get-out-of-Dodge point. Would not be surprised to see it happen tomorrow or maybe a bloody Monday?

When I looked at the 1962 and 1987 crashes, they lasted about 3 months. No way to determine if history will repeat. Both those were much larger declines, -20% and -30% respectively. They stand out to me because like now, there were no signs of an economic slowdown (unemployment not increasing, yield curve not flat or inverted, etc.).

So maybe in a few months there will be a good point to buy back some equity? Call it rebalancing if it makes you feel better.

[pj.mask]

I converted 0.5% of my net worth from cash into index funds today. If we crash I’m going to put all but the bare minimum e fund in as it has grown a bit large these days. I still believe if we make it through the year I’ll convert to some bonds (away from 100% stocks to maybe 80-90%)

If we crash (40% loss) I could/would buy stock with about 9% of current net worth in cash like assets

[NW-Bound]

Quote:

Originally Posted by Chuckanut Has anybody thought about how to handle a situation where instead of a correction and then a nice recovery, we just had a relatively flat market for a decade or so?

WR is at 2.5% right now. I might draw SS early, and that's it.

[braumeister]

Quote:

Originally Posted by Chuckanut Has anybody thought about how to handle a situation where instead of a correction and then a nice recovery, we just had a relatively flat market for a decade or so?

Well, looking back over a lifetime, it used to be kind of flat. This is the S&P 500 since 1950:

Screen Shot 2018-02-08 at 3.57.57 PM.jpg

[AginMS]

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Originally Posted by VFK57 Of course there are two actions to take: 1. Sell as soon as you see the Fall begins, wait until the Market stabilizes and buy in again. 2. Seat tight, do not sell or buy, having enough cash to wait until the storm is over.

Or option 3, for those of us not FIREd, continue to invest each month into the market and take advantage of dollar-cost-averaging.

Personally I’m happy to see the market finally pull back.

[USGrant1962]

Quote:

Originally Posted by braumeister Well, looking back over a lifetime, it used to be kind of flat. This is the S&P 500 since 1950: Attachment 27776

Not really. You need to use a log chart to make any sense of historical market performance. There was a nice rise from '50 to the mid-sixties, then a lost decade-and-a-half (actually worse than it looks because of inflation), then the Reagan market all the way to 2000ish, followed by another lost decade, and now the teens bull.

[Lsbcal]

Quote:

Originally Posted by NW-Bound WR is at 2.5% right now. I might draw SS early, and that's it.

I did that back in 2010. Your current WR looks great assuming you are spending to your heart's content now.

[Lsbcal]

Quote:

Originally Posted by USGrant1962 Not really. You need to use a log chart to make any sense of historical market performance. There was a nice rise from '50 to the mid-sixties, then a lost decade-and-a-half (actually worse than it looks because of inflation), then the Reagan market all the way to 2000ish, followed by another lost decade, and now the teens bull.

But that chart still leaves out dividends. Maybe chart something like Vanguard's VFINX (sp500 + dividends - ER) although it doesn't go back as far.

[SJ1_]

Quote:

Originally Posted by VFK57 Of course there are two actions to take: 1. Sell as soon as you see the Fall begins, wait until the Market stabilizes and buy in again. 2. Seat tight, do not sell or buy, having enough cash to wait until the storm is over. Personally I prefer to seat tight, especially on Dividend paying stocks as it is part of income. However there is possibility to make much larger amount if selling when they are still in plus and repurchasing when stocks went to the bottom or so.

#2 BUT we have a small percentage of our money in stocks