If you lost half what action would you take

[street]

Not wanting to go off topic in the "2021 Investment Performance thread" but lets say we lost half in a down market.

How would you change doing business in your life and financial life? Could you stay the course or have to live differently for the long haul?

My action would be to stay the course and I always took that in to consideration if that scenario happened. The reason I believe I could is I have at this time 34X my expenses in cd's etc.. I'm not saying it is bullet proof but it was plan of attack so time will tell if it ever does get that bad.

 

[OldShooter]

Ever single market drop in history has been followed by recovery to higher levels. We would just ride it out. That's what the Fixed Income tranche aka bucket is for.

 

[stepford]

I guess I'd rebalance... eventually.

 

[Car-Guy]

Ever single market drop in history has been followed by recovery to higher levels.

Well,,,, so far....

For me, a market down turn isn't going to hurt me much at all, at least directly. Negative interest rates probably would.

 

[Dash man]

I’d probably do some tax loss harvesting and put the money back into the market in different stocks. Maybe do more Roth conversions so our future tax bill would be reduced. We have enough cash to last a few years until the market came back. We could start social security if we needed to.

 

[Fermion]

I would just sit tight and look to the skies for more helicopter money. It is more reliable than rain on a vacation.

 

[jollystomper]

I’d probably do some tax loss harvesting and put the money back into the market in different stocks. Maybe do more Roth conversions so our future tax bill would be reduced. We have enough cash to last a few years until the market came back. We could start social security if we needed to.

+1

This pretty much sums up what I have done (except for the Roth stuff) in previous downturns. No need to change our lifestyle as we have taken that sort of drop into account. And has been pointed out, it eventually rebounds.

 

[SecondCor521]

Roth convert, rebalance in traditional IRA, TLH in taxable if it got low enough. But that's not a change; that's a contingent action already in the plan.

I might end up Roth converting too soon. Trying to work on that by being a bit more patient, although I did accidentally get it just about right last spring.

 

[Jerry1]

I would definitely tighten up the spending. Basically, I’d go to plan B on the spending side. Pretty much just the essentials. As for the market and my investments, I blew it with the COVID downturn. I got out and missed the ride back up. Part of that was a learning experience of my risk tolerance. But, that also means, my portfolio is a lot less exposed to the market now. So, 50% of 25% that I have in the market would not hurt too bad. I might even consider bumping up my equity allocation and try to redeem myself, but I’m sure I wouldn’t get very aggressive.

Since, based on my low equity percentage, I wouldn’t have lost too much, I’d bring spending back up as soon as I was comfortable that there was no continuing crisis.

So, I wouldn’t just ride it out. I’d make some adjustments.

 

[LRDave]

Maybe take SS earlier than 70(?). Just spitballin' - maybe wouldn't do anything.

I am more worried about the state of the world/my country/my region that would precipitate such a large drop. We can muddle along at very low burn rate if necessary, but that low burn rate could be jeopardized by an unstable world.

 

[Fermion]

Maybe take SS earlier than 70(?). Just spitballin' - maybe wouldn't do anything.

I am more worried about the state of the world/my country/my region that would precipitate such a large drop. We can muddle along at very low burn rate if necessary, but that low burn rate could be jeopardized by an unstable world.

Very important consideration. LOTS of things get broken if we get a 50% drop in the market...many local/state bankruptcies. This is probably why they never will let it happen.

 

[disneysteve]

We are about 66% stock right now, so a 50% drop in the market could mean a 33% drop in our portfolio. That would equate to roughly 580K.


We'd definitely stay the course but that might delay retirement a bit depending on how long the recovery took. As LRDave said, it could also mean taking SS earlier than planned but since I'm not retired yet, it's impossible to know.


And yes, I'd probably pour more new money into the market to take full advantage of the recovery.

 

[CDRE]

Put my dry powder in the market and reduce some discretionary expenses. Returning to employment is not gonna happen.

 

[rodi]

Rebalance on the way down... and rebalance again on the way up.

With the recent market gains, my portfolio is much bigger than I expected at this point of my retirement... so while I might tighten my belt a bit if my portfolio dropped by half... I would not be destitute.

 

[wmc1000]

Stay the course as we can meet expenses without withdrawals.

 

[audreyh1]

Did lose like 39% from Oct 2007 to Mar 2009.

I had already rebalanced on the way down. Caught quite a few falling knives.

I just waited, and it gradually recovered. Rebalanced some on the way up again.

We had plenty of short term funds, so we kept going about our traveling in the motorhome during the whole thing.

 

[travelover]

Hurry up and sell before the stock price goes back up.

 

[Lsbcal]

I would probably already be partially or fully out of the market. But these plans depend on the nature of the decline.

Most declines in my lifetime that were not sudden (like 1987 or 2020) were somewhat gradual and reacting properly could save your sanity in that case. I have no desire to relive the 2008-2009 like decline. And yes, I do have a full plan that takes into account buying back in ... but it's a secret.

 

[Dawg52]

With my conservative AA a 50% equity drop wouldn't be any fun but it wouldn't hurt too bad. I would rebalance on the way down as I did in 2008 and hope for a steady recovery.

 

[Bamaman]

I live back in the woods, you see
My woman and the kids, and the dogs, and me
I got a shotgun, a rifle, and a 4-wheel drive
And a country boy can survive
Country folks can survive

I can plow a field all day long
I can catch catfish from dusk 'til dawn
We make our own whiskey and our own smoke, too
Ain't too many things these old boys can't do
We grow good old tomatoes and homemade wine
And a country boy can survive
Country folks can survive

Hank Williams Jr.

 

[Vincenzo Corleone]

For my wife and me, that would be an effective drop of around 35% given our asset allocation. We have around 10 years of expenses in cash and non-taxable short-term fixed income. The chances of the market heading back up are greater. I like to think I'd rebalance and stay the course.

 

[W2R]

A 3% WR based on half my portfolio would still be enough for me to live my current lifestyle. Hopefully I'd stay calm, hang tight, and ride it out.

That said, if I had any huge BTD purchases in mind I'd probably put them off for a while. If half was lost, then who knows, maybe another half is on its way out the door.

 

[RobbieB]

Live on bonds till the market goes up again.

 

[Katsmeow]

It sounds like you really don't mean the money is "lost" but simply that the market has gone down so what you could then sell for is less. I don't think I would do much. I wouldn't try to realize the loss by selling. I would probably take any necessary withdrawals out of the bond side (as I assume that side would not have gone down as much). I would watch spending to try to put off withdrawals particularly if the bond side was also down.

 

[street]

Maybe take SS earlier than 70(?). Just spitballin' - maybe wouldn't do anything.

I am more worried about the state of the world/my country/my region that would precipitate such a large drop. We can muddle along at very low burn rate if necessary, but that low burn rate could be jeopardized by an unstable world.

Yes, that would be my worst concern, what the rest of the world would do, and the effect of a 50% drop would do.