Assessing the Carnage

[Looking4Ward]

I'm invested pretty conservatively, so for me at this point in time it's not too bad at all even when I compare with my all time high back on 11/8/2021.

However if this keeps up for very long then I reserve the right to whine a bit.

I'm down 18% from what my all-time high was last mid-December, but I'm still 10% higher than I was when I started living off my investments eight years ago.

Hard to swallow a several hundred thousand dollar drop over the last six months especially since I was counting on the accumulations to become the cash I was going to use to buy a house later this year.

Oh well - it will recover, and the cycle(s) will continue.

 

[luckydude]

Joe ^^^^^ I don't understand how you can call Tesla a safe stock when it's P/E is around 100 and competition is staring it in the face.

As I recall, there was a fellow board member who had a huge position in TSLA worth more than USD $20 million when TSLA was at its all-time high (I recall that he shared a screen shot of his position). Hopefully he was able to cash out some of the chips before the market started going south.

 

[aja8888]

As I recall, there was a fellow board member who had a huge position in TSLA worth more than USD $20 million when TSLA was at its all-time high (I recall that he shared a screen shot of his position). Hopefully he was able to cash out some of the chips before the market started going south.

Hopefully, he bought in during the early years when it was around $200.

 

[joesxm3]

aja8888,

I have been thinking about what you said about TSLA and I may recharacterize it into my risky 10%. That would free up some cash to buy more VTI in the "safe" 30%.

I suppose in the end it is just semantics, since I am not going to reduce my TSLA exposure, but it would crowd out some even more stupid gambles in the risky section.

 

[aja8888]

aja8888,

I have been thinking about what you said about TSLA and I may recharacterize it into my risky 10%. That would free up some cash to buy more VTI in the "safe" 30%.

I suppose in the end it is just semantics, since I am not going to reduce my TSLA exposure, but it would crowd out some even more stupid gambles in the risky section.

Sounds like a plan!

 

[tominboise]

I am down 16% from my all time high in November and down 2.2% from when I retired, which was Oct of 2020. So I am worried but trying to sit still and do nothing. I am currently at 60/35/5 stocks/bonds/cash....

 

[audreyh1]

March 2020 - that was carnage!

 

[latexman]

^^^^^
Compared to that, this is a slow slide down.

 

[Chuckanut]

^^^^^
Compared to that, this is a slow slide down.

Which I find much scarier.

 

[NW-Bound]

In March 2020, I was too busy following the news to see if people were going to drop like flies around me. I worried about the disruption of the food supplies, and was scared reading about elderly Italians dying in their home and nobody came to pick up the bodies. And then, there was a story about a Spanish nursing home where caregivers fled, abandoning the occupants to fend for themselves. There were stories like that all around the world.

Stock market? Pfft, who cares?

It's similar to movies where you see zombies running around chasing people. Do survivors in these movies stop running to check the price of their stocks?

 

[W2R]

In March 2020, I was too busy following the news to see if people were going to drop like flies around me. I worried about the disruption of the food supplies, and was scared reading about elderly Italians dying in their home and nobody came to pick up the bodies. And then, there was a story about a Spanish nursing home where caregivers fled, abandoning the occupants to fend for themselves. There were stories like that all around the world.

Stock market? Pfft, who cares?

It's similar to movies where you see zombies running around chasing people. Do survivors in these movies stop running to check the price of their stocks?

Thank you! That was exactly how I felt in March of 2020 and that must be why I don't even remember the stock market dropping.

All I remember were those scary stories about nursing homes, and people dropping dead on the street or being welded into their apartments by the authorities. We were under lockdown at that time. Stores were closed, and normally busy streets near us were empty which seemed pretty spooky. Almost like living in another world.

 

[luckydude]

Hopefully, he bought in during the early years when it was around $200.

He probably did. Unfortunately that's not how most investors think about their investments.

They always tend to focus on how much they've "lost" vs the all-time-high, instead of how much they've made vs. their actual cost basis.

Case in point: witness all the posters here lamenting how much they've lost since the market hit a peak earlier this year. I'll wager most of them are still (way) ahead vs. their actual cost basis.

 

[ImThinkin2019]

If I could go back to talk to my 21 year old fresh out of school self, put every extra dollar in S&P 500 index and ignore it all, don't get creative, ignore your coworker's theories, talking heads and on. I'd be a lot better off today and not wasted a lot of time.

I might tell someone 5 years from retirement to ease off a bit and put some in CD's and treasuries, but I digress.

My wife and I just had a similar conversation. "Just imagine if we had just bought S&P 500 index funds. We would have been better off."

 

[ShokWaveRider]

What Carnage?

in ~2010 the DOW was ~10k it is triple that now. S&P was ~1200 and NASDAQ was ~2300.

How soon folks forget, carnage would be another 30 to 50% drop. It ain't gonna happen. Enjoy the roller coaster.

 

[joesxm3]

The positions I have held forever are still in profit as has been pointed out. However, my recent knife catching portfolio is truly below my basis.

I think the source of my angst with the carnage is that with my cash heavy portfolio I had modeled the case of equities dropping 50% giving only a 15% drop in total portfolio, but with my recent increase in equity allocation as the market would is dropping I am near that already.

Looks like I avoided the big run up over the past two years only to join in the losses.

Not complaining or freaking out, but just observing the situation and learning.

 

[NW-Bound]

How soon folks forget, carnage would be another 30 to 50% drop. It ain't gonna happen...

Money back guarantee?

 

[razztazz]

What Carnage?

in ~2010 the DOW was ~10k it is triple that now. S&P was ~1200 and NASDAQ was ~2300.

How soon folks forget, carnage would be another 30 to 50% drop. It ain't gonna happen. Enjoy the roller coaster.

I'll admit it's not exactly "carnage" but it's precisley because people DO NOT forget that these views are invoked. Yes. I remember 2010. Too long ago to be relevant. People start reaching far and wide for all sorts of things

 

[SALTedOut]

From my total on the day I FIRED in August 2016, down 2%.

Yikes! Dow for that period is up 76% and NASDAQ 121%. I'll continue to take my total stock market index investing any day and every day.

 

[joesxm3]

Yikes! Dow for that period is up 76% and NASDAQ 121%. I'll continue to take my total stock market index investing any day and every day.

Your comment got me wondering so I tried to crunch the numbers.

I took VTI and BND and computed the price in August 2016 and today and added in the dividends (roughly), then computed the percentage gain of each during that period with dividends.

I came up with roughly 44% for VTI and 4.2% for BND.

I took my starting number and divided it 60% and 40% then multiplied the 60% number by 1.44 and the 40% number by 1.042.

I compared that number to my current total plus my $70K per year spending during that period.

Based on that I seem to show that a 60/40 split of VTI/BND resulted in a current total that is 12% higher than what I have now. And the total I have now includes the impact of my recent potentially stupid risky moves.

I think if I were to remove the recent losses I probably would be underperforming by 6% or so over that period.

I admit that if I were a better investor and had not had such a low equity position I would have a bigger pile of money, but, assuming I am not making a math error, the difference is not as large as I would have expected.

[edit]

I don't want to publicly post my personal financial numbers, but here are the numbers I used for VTI and BND in case someone wants to correct me.

VTI

8/2016 $150.62
today $201

rough estimate average dividend $0.70 / quarter or $16.00 dividends

today with dividends $217

144.07% 8/2016 to now

BND

8/2016 $84.25
today $76.03

dividends assume %0.17/month or $11.73 total

today with dividends $87.76

4.16%

 

[SecondCor521]

^ Yes, but...

With 60 VTI / 40 BND, you'd have less work to do (investigating stocks).

You'd probably have a lower tax bill.

You might have less stress (agonizing over and second guessing purchase and sell decisions).

You might have also had a smoother ride (less volatility), but on this I'm less certain.

 

[joesxm3]

That's the way it was up to April 2021 with my "set it and forget it" plan. At most I would move 1% if I got itchy to do something.

 

[Freedom56]

Your comment got me wondering so I tried to crunch the numbers.

I took VTI and BND and computed the price in August 2016 and today and added in the dividends (roughly), then computed the percentage gain of each during that period with dividends.

I came up with roughly 44% for VTI and 4.2% for BND.

I took my starting number and divided it 60% and 40% then multiplied the 60% number by 1.44 and the 40% number by 1.042.

I compared that number to my current total plus my $70K per year spending during that period.

Based on that I seem to show that a 60/40 split of VTI/BND resulted in a current total that is 12% higher than what I have now. And the total I have now includes the impact of my recent potentially stupid risky moves.

I think if I were to remove the recent losses I probably would be underperforming by 6% or so over that period.

I admit that if I were a better investor and had not had such a low equity position I would have a bigger pile of money, but, assuming I am not making a math error, the difference is not as large as I would have expected.

[edit]

I don't want to publicly post my personal financial numbers, but here are the numbers I used for VTI and BND in case someone wants to correct me.

VTI

8/2016 $150.62
today $201

rough estimate average dividend $0.70 / quarter or $16.00 dividends

today with dividends $217

144.07% 8/2016 to now

BND

8/2016 $84.25
today $76.03

dividends assume %0.17/month or $11.73 total

today with dividends $87.76

4.16%

The distributions from BND have been averaging about .14 per month over the past two years. Consider that if you had invested in CDs yielding 2% (and they were available at better yields) compounded annually, your net gain would have been 12.6% and you would have more capital to invest today. The yield on BND is still too low relative to treasuries with the same maturity so the thrashing is far from over. Bond funds are a bad idea. They don't protect your capital and returns are poor due to the fact that they buy high and sell low passing the losses to investors. The only winner is the fund manager who collects a fee based on the assets under management.

 

[SecondCor521]

That's the way it was up to April 2021 with my "set it and forget it" plan. At most I would move 1% if I got itchy to do something.

So why did you switch to a more complex, active plan? (Sincere question.)

 

[ls99]

If I did not sell, and have no need to in the foreseeable future, does it matter that the market is down? My stuff has been on set and forget for the at least ten years. Did pull some profits late last year to buy a car for cash, and consider having gotten the car for free, otherwise letting it ride. At this rate my nieces will be filthy rich when I kisck the bucket.

 

[SecondCor521]

If I did not sell, and have no need to in the foreseeable future, does it matter that the market is down? My stuff has been on set and forget for the at least ten years. Did pull some profits late last year to buy a car for cash, and consider having gotten the car for free, otherwise letting it ride. At this rate my nieces will be filthy rich when I kisck the bucket.

Probably mostly not.

The only reasons I can think of that it might matter would be if any of the following creates something actionable:

1. The increase in your WR% (assuming constant spending and decreasing assets) might exceed some threshold.

2. Decreasing asset values may affect your income tax situation and you may elect to realize some additional income this year or in the next few years.

3. Your estate value relative to the exclusion amount may have crossed some threshold.

4. Your Social Security claiming strategy could be affected if you're not already on SS.

But if you like being on auto-pilot and things haven't changed that much for you, or you don't feel like or need to optimize every last nickel, then again...probably mostly not.

(I don't think I need to, but I think I still like to try to optimize every last nickel. Old habits die hard.)