Why do folk complain so much when the Stock Market goes down a "Little"?

[Which Roger]

Quote:

Originally Posted by mountainsoft Since I am still in the accumulation phase, I like to think of market drops as a "sale".

It really depends where one is in the accumulation phase. If you're young and most of your investing years and contributions are ahead of you, I agree. However, somebody who is a year from retirement is also in the accumulations phase, but any benefits of a "sale" will be dwarfed by the losses from what's already been invested.



It would be interesting to see some analysis showing where the break-even point lies.

[Which Roger]

Quote:

Originally Posted by MrLoco What does CNBC focus on at 4 pm when the market closes? Sara Eisen or Kelly Evans scream :STOCKS SINK YET AGAIN! A 650 POINT DROP IN THE DOW!!!! They focus on the number.....not the %. They get your attention this way.

And they're getting the attention of a subset of investors. A long-term/boglehead/buy-and-hold-and-rebalance type shrugs when seeing this news, although it's unlikely that he/she is even tuning in.

[imoldernu]

I don't belong on this thread, but...

Out of curiosity did a comparison of one of my ibonds bought in 2001, to government inflation rate.

Inflation.. $10,000 to $14,400

Bond.......$10,000 to $26,400
.................................................. ..............................................
Apropos of nothing, but a wider view of long term investment for the later years.

Yes... the base ibond rate was better, but the bonds were bought when the prime rates were in the 7% range at that time. The Ibond base rate was 4.2%)

See the historical rate chart here.

https://www.gobankingrates.com/banki...ast-100-years/

What appealed to us during those early years was the idea that at the very least, we would track inflation, and we could look at this "investment" as a fixed amount, a base for checking on our safety plan. Not a place for large amounts of money, but for several years, the IBond limits were $30K/year per person.

I think that if we were doing this today, we'd put our $20000 limit into Ibonds, each year... as a hedge. Current IBond composite rate is 2.83%.

I guess this makes me an ultra conservative investor.

You might want to know what the average market investor has received over the longer term. An interesting article.

https://www.creditdonkey.com/average...et-return.html

Quote:

What is the average investor's return on mutual funds? The average investor greatly underperforms the stock market. Over the last 30 years, the average investor saw a return of 3.66%, whereas the S&P 500 had an average return of 6.73%

[mountainsoft]

Quote:

Originally Posted by Which Roger It really depends where one is in the accumulation phase. If you're young and most of your investing years and contributions are ahead of you, I agree. However, somebody who is a year from retirement is also in the accumulations phase, but any benefits of a "sale" will be dwarfed by the losses from what's already been invested.

True, but I would assume anyone nearing retirement would already have a decent nest egg built up. A 10-20% drop may be scary, but it shouldn't derail a good retirement plan.

Unless you're cashing out all of your investments when the market drops, it's just numbers. They may drop 30% today but regain 35% over the next couple of years. The only real "loss" are the funds you sell to live on while the market is down. If you can set aside some money outside the market to live on while the market is down, you may not need to take a loss at all. Then replenish that buffer when the market comes back up.

Now ask me the same question in five years if the market drops just before we're ready to pull the plug.

[marko]

Quote:

Originally Posted by MrLoco What does CNBC focus on at 4 pm when the market closes? Sara Eisen or Kelly Evans scream :STOCKS SINK YET AGAIN! A 650 POINT DROP IN THE DOW!!!! They focus on the number.....not the %. They get your attention this way. .

Kelly Evans doesn't have to scream to get my attention. Jus' sayin'

[sengsational]

Quote:

Originally Posted by VanWinkle My ancestors ate gophers?? I always though mine were chasing down small dinos and eating them.

You know that humans and dinos never shared the land. Humans are portrayed as hunters, true to a degree, but also scavengers... smashing bones (leftovers) etc. Which ties back to scarcity wiring.



Irrational humans, beyond being "too sensitive" to losses have another foible that helps in this condition. It's second level thinking, so might not come as quickly, but we tend to compare our lot with those around us. Our food might be half as good as last year but we feel great because it's better than anyone in the camp.


With investments, and more appropriate, the economy, if things go to hell in a hand basket, I'm going to show a lower figure on paper, and maybe give myself fewer luxuries, but because I'm a planner, I figure I'll be less impacted than those around me (not including this community, of course, because you're all above average).

[OldShooter]

Quote:

Originally Posted by Which Roger ... somebody who is a year from retirement is also in the accumulations phase, but any benefits of a "sale" will be dwarfed by the losses from what's already been invested. ...

This is an example of the sunk cost fallacy. Whatever happened in the past has no effect and can have no effect on decisions going forward. Every day, every decision, should be a clean sheet of paper without history. More: https://en.wikipedia.org/wiki/Sunk_cost and also in any introductory economics textbook.

[Free bird]

The wheel that sqeaks get the grease. Complaining has been proven to be effective.

[Dtail]

Quote:

Originally Posted by OldShooter This is an example of the sunk cost fallacy. Whatever happened in the past has no effect and can have no effect on decisions going forward. Every day, every decision, should be a clean sheet of paper without history. More: https://en.wikipedia.org/wiki/Sunk_cost and also in any introductory economics textbook.

+1
Sometimes also use this reasoning when the DGF and I are in an "involved" discussion.

[OldShooter]

Quote:

Originally Posted by Dtail +1 Sometimes also use this reasoning when the DGF and I are in an "involved" discussion.

Oh, I think we all are victims of this fallacy from time to time. Nothing to be ashamed of.

True Story: I am on the investment committee for a nonprofit and the investment guy for the firm running the money has been reluctant to sell some donated Class A mutual funds because a big front-end load fee aka sunk cost was paid for them. The funds are dogs. After 6 months of waffling with us waiting for him to grasp the obvious, we finally just directed him to sell. He is a former CPA and has these initials on his bio: CFA, CFP, CPWA. I think he is really not too bright but has real talent for passing multiple choice tests.

[Spock]

Quote:

Originally Posted by OldShooter Oh, I think we all are victims of this fallacy from time to time. Nothing to be ashamed of. True Story: I am on the investment committee for a nonprofit and the investment guy for the firm running the money has been reluctant to sell some donated Class A mutual funds because a big front-end load fee aka sunk cost was paid for them. The funds are dogs. After 6 months of waffling with us waiting for him to grasp the obvious, we finally just directed him to sell. He is a former CPA and has these initials on his bio: CFA, CFP, CPWA. I think he is really not too bright but has real talent for passing multiple choice tests.

I was treasurer on BoD of a local charity.
One of the board members had a resume of Branch Manager at 2 of the big name brokerages plus starting up his own firm and several "Outstanding Advisor of the year" awards... He believed that since we were a "non-profit", we could not end the year with more money than we started with....

[jazz4cash]

Quote:

Originally Posted by Free bird The wheel that sqeaks get the grease. Complaining has been proven to be effective.

The wheel that squeaks gets greased first but the others get greased too!

[steveark]

The market isn't down 2%. We are in a full fledged bear market that has some of us down several hundred thousand dollars since earlier this year. That is big news, period! I won't sell a share myself and I'm not the least worried. If I didn't have a big cushion I would not have retired early. But acting like this is a speed bump is not rational either. This is a historically bad plunge that could continue, or not. It is not scary to old hands, but for younger investors who haven't seen it before it's monumental.

[street]

because we can have more then most and have it to good. We have nothing else to complain about but the market. LOL

[HadEnuff]

There is a tendency, basic human nature I suppose, to look at the highest point as the "value" of an investment. Hence any deviation downward from that point is a "loss".

Case in point: I have friends who own a very nice property in Cape Coral, Fl. At the height of the bubble in 2007, similar properties were selling for almost 500K. Hence, their property was "worth" 500K, never mind that 500K represented approximately a 200K run-up over a period of 3 years. "It's worth 500K".... One year later their neighbors were trying to unload that same property, and weren't getting any buyers at $250K...but in my friends' minds, their property was still "worth" 500K...
Same with the stock markets. Once the S&P hits a certain high, that becomes the benchmark. No matter how irrational that valuation may have been.

[JoeWras]

Quote:

Originally Posted by steveark The market isn't down 2%. We are in a full fledged bear market that has some of us down several hundred thousand dollars since earlier this year. That is big news, period! I won't sell a share myself and I'm not the least worried. If I didn't have a big cushion I would not have retired early. But acting like this is a speed bump is not rational either. This is a historically bad plunge that could continue, or not. It is not scary to old hands, but for younger investors who haven't seen it before it's monumental.

True. The best thing that happened to me was 1987. I started my big investments just 1 year before that drop. Gave me some scar tissue.

It was also big news last year, when, in the last half of the year, nothing could stop the dow/s&p/faang from going up every day. There was some talk here, but not enough screaming (by Kelly or whomever) about the irrational gains. A lot of young investors have come on line in the last few years and that was seeming to be normal to them. They may be finding the recent drops to be somewhat surprising.

[JustCurious]

Quote:

Originally Posted by Brdofpray I don’t know! However, have you stayed at a Holiday Inn lately?

I think you mean Holiday Inn Express.

[audreyh1]

Well, you can’t say the market is down just a little now.

[Jeb-NY]

Not panicking here. Down a bit over the peak but still about 50% above where I was when I retired 13 years ago and I lived off it exclusively till this year when I started drawing SS at 70. Through great financial insite (dumb luck) I decided rebalance to my AA early and over several months, close to this years peak because I was getting to far off from my 50:50 allocation. So now I'm about 46:54 with the drop and have to decide when to start rebalancing again. Currently I have more than 4 years of living funds in MM and CD ladders which seem access with the buying opportunity.

[Bunker]

Don't feel so bad. My portfolio, one major holding in particular, bought at its all time high, then it's continued to fall ever since (2014), down 25% before all this, about $80-$100,000. Sold some at the bottom (a month ago), financial advisor put proceeds into other like things, and then this big correction right afterward. I just turned 50. Haven't worked in 6 years. I feel like I'm in pretty bad shape.