Did anyone's financial advisor see this coming?

[Teacher Terry]

My sister said both her and my brother sold some a month ago and advised us to do the same at the time. We are all at the age where losing is not good. I followed her advice. She is not a FA.

 

[RetiredAt55.5]

I don't see anywhere that the CDC guy said to reduce exposure to equities. All I see is comments about a more widespread health issue.

Well, the remarks made by the CDC woman did rattle the market that week. See this nasdaq.com article -

https://www.nasdaq.com/articles/dow-tumbles-after-cdc-warns-coronavirus-will-hit-the-u.s.-2020-02-25

From this article -

"The CDC just warned that the coronavirus will spread to the U.S. The Centers for Disease Control and Prevention’s Dr. Nancy Messonnier went so far as to tell reporters that Americans should prepare for a major disrupting to occur because of the disease.

The CDC just warned that the coronavirus will spread to the U.S.—and markets aren’t happy. The Dow has dropped 900 points, while the S&P 500 is off more than 3%. Maybe it is time to stop comparing coronavirus to other health outbreaks, and compare it to other disasters instead.

The CDC just warned that the coronavirus will spread to the U.S.—and the stock market is not happy."


Also from the article -
"The Dow, which had been trying to limit its losses, took another leg down and closed off 879.44 points, or 3.2%, to 27,081.36, while the S&P 500 fell 3% to 3128.44.

The Centers for Disease Control and Prevention’s Dr. Nancy Messonnier went so far as to tell reporters that Americans should prepare for a major disruption to occur because of the disease. At this point it is becoming clear that coronavirus shouldn’t be compared with SARS, MERS or bird flu, which never really had an impact on the U.S. but other disasters instead."

Also -
"According to Joseph Kalish, chief global macro strategist at Ned Davis Research, the best analogues might be 9/11 and the Japanese tsunami in 2011. While previous health scares were “relatively contained,” these two disasters caused economic activity to slow, disrupted supply chains, and caused some people to stay inside."

Again, this is Monday morning quarterbacking by me, but the warning alarms were starting to sound. Some people were trying to downplay these warnings since it DID start to rattle the markets.

 

[Ready]

If I sold my equities every time some financial expert published an article on the internet claiming the markets are doomed I would have never been able to buy any equities. Those articles have been appearing daily since the beginning of time. Right alongside the articles claiming the Dow will hit 50,000. And everything in between.

At some point someone who predicts doom and gloom is going to be correct. That doesn’t make them a genius. It just makes them lucky.

 

[unclemick]

Hmmm - do computers have crystal balls? Went full auto 2006 with my 'real' retirement portfolio.

So those trusty Vanguard computers re balanced their little hearts out during the 2008/2009 and current kerfuffle. Still the dips were/are a mental challenge to 'stay the course' which remains to be seen.

heh heh heh - RMD and nixed travel plans have freed up some mad money. Let's hope we keep within compass and don't get carried away.

So does a computer count as an investment advisor as in set and forget?

 

[RetiredAt55.5]

If I sold my equities every time some financial expert published an article on the internet claiming the markets are doomed I would have never been able to buy any equities. Those articles have been appearing daily since the beginning of time. Right alongside the articles claiming the Dow will hit 50,000. And everything in between.

At some point someone who predicts doom and gloom is going to be correct. That doesn’t make them a genius. It just makes them lucky.

Perhaps you're right. I'm just trying to reconstruct this train wreck in my own mind and what I could've done differently.

Again, it gets back to my original question of whether anyone's FA did anything about this, since this is their full time job to analyze this stuff.

If an FA is paid by assets under management, they're going to be taking a big haircut in this too (if the market doesn't rebound quickly). So they have a lot of skin in the game.

 

[RetiredAt55.5]

Hmmm - do computers have crystal balls? Went full auto 2006 with my 'real' retirement portfolio.

So those trusty Vanguard computers re balanced their little hearts out during the 2008/2009 and current kerfuffle. Still the dips were/are a mental challenge to 'stay the course' which remains to be seen.

heh heh heh - RMD and nixed travel plans have freed up some mad money. Let's hope we keep within compass and don't get carried away.

So does a computer count as an investment advisor as in set and forget?

Nope, Vanguard's computers have no artificial intelligence to predict market movements. It's all predicated on current NAV's, current shares, and your target asset allocation. However, I think Vanguard's advisory services only rebalance a couple of times a year, so you could still get out of wack depending on when your accounts were last automatically rebalanced. They do have some guardrails built in (e.g., perhaps 5% drift if the adjustment would be too big).

I guess they could do off-cycle rebalancing, but I'm not aware that they do that. Even if they did, it could quickly get out of balance again with another sudden swing.

This is why automated rebalancing is tricky. It does eliminate the hunches and gut feelings from the equation.

 

[luckydude]

I manage my own finances, and am not a market timer.

However, I keep kicking myself for not seeing/anticipating how this virus would impact the markets once it hit the U.S., and doing some defensive measures.

Did anyone's financial advisor give early warning before the market went crazy?

I know it's little comfort, but if they didn't see it coming either, my backside won't be as sore!

Consider this. If you FA was prescient enough to tell you at the end of Feb that in 3 weeks' time, the market would take a 30%+ dive, Fed would cut the rate to 0, half of the US population would be locked down, all shops, dine-in restaurants, hotels/motels, malls, theme parks and schools would be closed, unemployment claims would shoot through the roof with millions being laid off/furloughed, and told you to sell everything, would you have believed him/her and followed his/her advice? You probably would have laughed in his/her face. I know I would have.

We're in unchartered territory. Nobody could have seen this coming (in terms of the dramatic measures taken by the government to shut everything down and bring the market/economy to this point), so there's no point in kicking yourself

Lucky Dude

 

[RetiredAt55.5]

Consider this. If you FA was prescient enough to tell you at the end of Feb that in 3 weeks' time, the market would take a 30%+ dive, Fed would cut the rate to 0, half of the US population would be locked down, all shops, dine-in restaurants, hotels/motels, malls, theme parks and schools would be closed, unemployment claims would shoot through the roof with millions being laid off/furloughed, and told you to sell everything, would you have believed him/her and followed his/her advice? You probably would have laughed in his/her face. I know I would have.

We're in unchartered territory. Nobody could have seen this coming (in terms of the dramatic measures taken by the government to shut everything down and bring the market/economy to this point), so there's no point in kicking yourself

Lucky Dude

Well said, thanks Lucky Dude!

 

[harley]

All you who are regretting not having sold equities a month ago are missing something. As long as you are in the market you will get what the market is doing. Before the 2008 meltdown I removed about 25% of our net worth from the market for a completely unrelated-to-the-economy reason. But it worked out brilliantly, and after the crash I was slapping myself on the back for my lucky/genius move.

However, I could never bring myself to buy back in, especially as the market would gyrate wildly. I did get back in eventually, but in the long run I did no better, and maybe worse, than the ones who just rode it out.

IMO it's more important to have a decent bucket of fixed income money available for use during bad times than it is to be able to get out of the market before a crash. I know some don't agree with keeping a significant fixed income allocation, but in a case like this one or 2009 or whatever, as long as you aren't forced to sell equities to live on during the bad times you haven't really lost anything but numbers on a spreadsheet. And unless it really is different this time, I'll be OK. I like 3 years of living expenses in fixed income, and I'm willing to take the loss of growth for the safety of being able to outlast the bad times. I was willing to work a little longer to build that up, and that makes me sleep much better at night with my current equities allocation.

Plus, the asteroid missed us today, so it probably isn't really the end times.

 

[REWahoo]

^ What harley said.

 

[dixonge]

IMO it's more important to have a decent bucket of fixed income money available for use during bad times than it is to be able to get out of the market before a crash. I know some don't agree with keeping a significant fixed income allocation, but in a case like this one or 2009 or whatever, as long as you aren't forced to sell equities to live on during the bad times you haven't really lost anything but numbers on a spreadsheet. And unless it really is different this time, I'll be OK.

Like most of us, I regret not getting out earlier. But our income is all pension/SS so we haven't had to sell anything. For awhile I was worried I wouldn't be able to put more cash in before the market came back up. I've stopped worrying about that particular problem...

 

[audreyh1]

I suspected it was coming when China started shutting down. I wasn't confident enough to dump all stocks but I did go to a more typical AA and I'm glad I did. I still expect stocks to drop by >50% before this turns around, but I've certainly been wrong before and I hope I am this time. Fortunately, I shouldn't need any of my stock investments any time soon, if ever.

I think a bunch of us expected a hit and were amazed to see the equity markets keep going up in Jan and Feb.

I had been increasingly nervous about the stock market valuations since early 2017. I was already at my most conservative AA of 50/50 and in early Jan rebalanced to target. Still with 50% exposure to stocks I’m taking a pretty good beating now.

Have no idea how long the recovery will be. Folks expecting a quick market turnaround like in 2009-2010 - I fear they will be disappointed.

Due to travel constraints, we are spending very little this year.

 

[audreyh1]

IMO it's more important to have a decent bucket of fixed income money available for use during bad times than it is to be able to get out of the market before a crash. I know some don't agree with keeping a significant fixed income allocation, but in a case like this one or 2009 or whatever, as long as you aren't forced to sell equities to live on during the bad times you haven't really lost anything but numbers on a spreadsheet. And unless it really is different this time, I'll be OK. I like 3 years of living expenses in fixed income, and I'm willing to take the loss of growth for the safety of being able to outlast the bad times. I was willing to work a little longer to build that up, and that makes me sleep much better at night with my current equities allocation.

Plus, the asteroid missed us today, so it probably isn't really the end times.

Absolutely. I’ve had half of investable assets in fixed income for several years now. I like the symmetry - even odds.

It’s hard to even think about rebalancing during scary times unless you have a good chunk in fixed income, because you need to cover both potentially several years of expenses and rebalancing.

 

[Dtail]

Absolutely. I’ve had half of investable assets in fixed income for several years now. I like the symmetry - even odds.

It’s hard to even think about rebalancing during scary times unless you have a good chunk in fixed income, because you need to cover both potentially several years of expenses and rebalancing.

Based on your past posts on Cape 10 reference AA investing, are you still considering increasing your equity exposure now?

 

[Franklin]

I use an FA for half my investable assets. It is with ML and they charge 1%. The only good news is that their 1% just got cheaper as my assets have declined. I am watching to see what if anything
they do.

 

[audreyh1]

Based on your past posts on Cape 10 reference AA investing, are you still considering increasing your equity exposure now?

Yes, I probably will eventually and I think I have plenty of time to do it and gradually too. The CAPE10 measure is somewhat delayed - it’s not very real time. Last time (2008-2009) CAPE10 was down for many months, and I think it could be true again.

Honestly, I’m too busy right now managing tax loss harvesting/cleaning up legacy funds to deal with more. And I don’t like to make big moves when everyone is still screaming fire.

 

[atmsmshr]

My Fidelity FA told me two years ago I had enough to retire and could scale back my risk. So I did. I went in capital preservation mode. 30/70 at the time. Maybe a couple years too early, but her advice is now greatly appreciated.

Like many, I am my own FA. However, this forum has provided so many references to read over the years running up to retirement that my eyes were opened to Sequence of Returns Risk. As a result, I started retirement journey at 40/60 last year with a 7 month cash reserve. (Not including cash balance pension not yet annuitized)

Did not see the virus impact in advance with any financial clarity, but having an AA matching my risk tolerance has protected our retirement to a large degree. Just another blind squirrel finding an acorn before the black swan picked it up.

Looks like I will have to readjust my signature line at the end of the month/quarter. At some point we will have to decide if we should keep with a rising equity glidepath or cash in the pension and flip to 60/40 allocation in the second half of this year.

 

[bobandsherry]

All you who are regretting not having sold equities a month ago are missing something. As long as you are in the market you will get what the market is doing. Before the 2008 meltdown I removed about 25% of our net worth from the market for a completely unrelated-to-the-economy reason. But it worked out brilliantly, and after the crash I was slapping myself on the back for my lucky/genius move.



However, I could never bring myself to buy back in, especially as the market would gyrate wildly. I did get back in eventually, but in the long run I did no better, and maybe worse, than the ones who just rode it out.



IMO it's more important to have a decent bucket of fixed income money available for use during bad times than it is to be able to get out of the market before a crash. I know some don't agree with keeping a significant fixed income allocation, but in a case like this one or 2009 or whatever, as long as you aren't forced to sell equities to live on during the bad times you haven't really lost anything but numbers on a spreadsheet. And unless it really is different this time, I'll be OK. I like 3 years of living expenses in fixed income, and I'm willing to take the loss of growth for the safety of being able to outlast the bad times. I was willing to work a little longer to build that up, and that makes me sleep much better at night with my current equities allocation.



Plus, the asteroid missed us today, so it probably isn't really the end times.

So, with the that type of approach it would seem that an AA of 100/0 with just a slight cash/fixed income cushion to cover the downturn period is appropriate strategy?

 

[OldShooter]

Like most of us, I regret not getting out earlier. ...

I'll exclude myself from that group. I have long ago accepted the fact that no one knows the future, especially including me. So DW and I just ride the wave. We're in a trough right now and will probably be there for a while. Such is life in general and investing life in particular. YMMV, of course.

 

[dingo]

Believe it or not my advisor reached out to me in early February to move to a cash position. I had been using an advisor to handle some small amounts that my wife had from some previous employers. I retired on Jan 2 and was in the process of moving my 401K to an IRA with them but had yet to move it.

Even though their company was not managing the funds yet they knew the transfer was coming in a few weeks . He called me on my cell one day and advised me to take a safe position and referenced the SARS outbreak from years earlier and effect on markets. I was reluctant and waited because my balance was growing at a pretty good rate. I finally made the move on on February 12 to cash. It was the only time ever that I was ahead of something like this. He said later that a lot of his clients did not take his advise.

I came close to leaving this firm a couple of months ago because of an investment strategy that I did not like going in . They have regained my trust for now.

 

[harley]

So, with the that type of approach it would seem that an AA of 100/0 with just a slight cash/fixed income cushion to cover the downturn period is appropriate strategy?

I guess, if that's what you're comfortable with. For me, I try to stay at 60/35/5, with some slippage between the bonds and the cash. 5% of my portfolio in cash will carry me for three years, and probably more if I really hunker down and limit spending.

 

[OldShooter]

So, with the that type of approach it would seem that an AA of 100/0 with just a slight cash/fixed income cushion to cover the downturn period is appropriate strategy?

Roughly speaking, we think it is. We were 75/25 prior to the current excitement and we judged the 25 to be adequate money to ride for at least 5 years. We are now launched on that voyage and we'll see how long it lasts. Maybe some would not consider 5 years of reserve to be "slight" though.

 

[Spock]

anybody reading zerohedge got out in January (if they weren't already out from the steady stream of impending doom there). The issues in China were highlighted there starting Jan 2.
There is a picture of the front page of USAToday from Jan 27 with the headline
"Kobe Bryant, daughter among 9 killed in crash".
The article just to the left of Kobe's picture is: "Rush is on to develop vaccine for coronavirus".

 

[dixonge]

anybody reading zerohedge got out in January (if they weren't already out from the steady stream of impending doom there).

I got out of that cesspool a long time ago. ZH is generally permabear in its approach. The founder is an ex-broker, ex- because he isn't allowed to trade any more. A rather sordid profile here:

https://en.wikipedia.org/wiki/Daniel_Ivandjiiski

 

[bobandsherry]

Roughly speaking, we think it is. We were 75/25 prior to the current excitement and we judged the 25 to be adequate money to ride for at least 5 years. We are now launched on that voyage and we'll see how long it lasts. Maybe some would not consider 5 years of reserve to be "slight" though.

Guess depends on how big your portfolio is and how much you spend. The original person I quoted was 3 years, for me that would be more like 85/15. Five years would be 80/20. Might need to revisit those ratios now based on all the fun we had. [emoji20]