elusive 5% drop

[OldShooter]

... Mathematically this is wrong. I should just reallocate now. ...

Well, I don't think that's totally true. The statistics say that the odds are strongly in favor of immediately putting lump sums into the market vs DCA or other slower means.

But we are samples of one, and it's not possible for us to be 80% lucky. We either are or we are not. one/zero. This, combined with our genetics' making us very risk averse, might be a strong argument for DCA. If we jump in at the wrong time, IMO we will remember it longer than we will remember getting lucky from immediately investing a lump sum. So I can argue either side and have. Nonprofits don't really have emotions, so lump sum in the logical tactic for them. Real people, however, may be happier and emotionally safer with a DCA strategy.

 

[Andre1969]

Yes. The behavioral finance studies have shown that on average retail investors who watch too closely have inferior returns compared to those who do not.

It has to do with humans' risk aversion bias. The "downs" make a bigger impression on us than the "ups," leading to excessive selling.

Oh, I learned awhile back that it's okay to look, but don't touch! For the most part I keep track of my portfolio more often than most people should, because numbers and stuff like that fascinates me.

And with keeping so much detail, sometimes it can be cathartic. Like if it feels like the market just took a major dump, but then I can look back and see where I was, at some point in time, and realize it's not nearly as bad as it looks.

For instance, right now I'm about where I was on April 30. But, in the interim, I had pulled out about $70,000 for a garage I'm having built. So when you take that into account, I'm actually ahead of April 30. Oh, and as of yesterday's close, I'm now up around 12.32% for the year. So about 2.97% off that peak I had a couple weeks ago.

 

[Koolau]

The one exception to my rule of NOT watching my assets is my old Megacorp stock. It has been on a tear of late and that got me interested in watching it - and back-of-the-envelope calculating how much I was making with it. SO, of course, it took a big hit of late and even though still higher than my wildest imagination "back in the day" it's making me wonder things like "Is it time to sell?" "How much should I sell?" "Will it come back? It always has." "Maybe I should have gotten out at the top?" "How would I know that was the top?" On and on.

So, I've decided to stop looking until my next statement comes in the mail. I should follow my own rules!

 

[SecondCor521]

Well, I don't think that's totally true. The statistics say that the odds are strongly in favor of immediately putting lump sums into the market vs DCA or other slower means.

You may have misunderstood.

I am (sort of) DCA'ing, but I'm saying that mathematically I should just lump sum.

We're in violent agreement, as they say.

 

[NW-Bound]

On Monday, the S&P went down 1.7%. My stocks went down much more.

Then, in just 3 trading days, the S&P has recovered to where it was last week, and my stash also came back to where it was.

I just thought of this song with French lyrics sung by Julio Iglesias, though it has nothing to do with the market: "Un Jour Tu Ris, Un Jour Tu Pleures" (One Day You Laugh, One Day You Cry).

 

[audreyh1]

Yeah, I just ignore these one week wonders. The sudden volatility is usually due to some big traders getting caught in a bad trade and being forced to cover margin or something similar. Then a few days things settle down and the rest forget it even happened.

Not that it can’t eventually cause larger ripples and even preview big market issues, but many times it’s a one-off.

 

[NW-Bound]

Well, that song I mentioned has a more somber line of lyrics.

"Un jour tu vis, un jour tu meurs" -- One day you live, one day you die.

 

[ejman]

Well, that song I mentioned has a more somber line of lyrics.

"Un jour tu vis, un jour tu meurs" -- One day you live, one day you die.

Nah, many days you live, one day you die.

 

[Koolau]

On Monday, the S&P went down 1.7%. My stocks went down much more.

Then, in just 3 trading days, the S&P has recovered to where it was last week, and my stash also came back to where it was.

I just thought of this song with French lyrics sung by Julio Iglesias, though it has nothing to do with the market: "Un Jour Tu Ris, Un Jour Tu Pleures" (One Day You Laugh, One Day You Cry).

With all the stuff going on (3.5 T bills in the wings, Covid, Afghanistan, Haitian migration, inflation, etc., etc.) it's a wonder we don't have MORE volatility - more 5% drops. YMMV

 

[NW-Bound]

With all the stuff going on (3.5 T bills in the wings, Covid, Afghanistan, Haitian migration, inflation, etc., etc.) it's a wonder we don't have MORE volatility - more 5% drops. YMMV

They may be coming. You never know.

 

[OldShooter]

They may be coming. You never know.

Sure. We know. What we don't know is whether the next one will be only 5%.


What we do know, if history is to be trusted, is that future drops will be followed by recoveries.

 

[Koolau]

Sure. We know. What we don't know is whether the next one will be only 5%.


What we do know, if history is to be trusted, is that future drops will be followed by recoveries.

I've learned not to worry too much about drops - not even bear markets. You are right. The markets always seem to recover eventually. But inflation frightens me the most. Stagflation is something I lived through and felt as if survival depended upon being empl*yed and NOT retired. YMMV

 

[Markola]

I've learned not to worry too much about drops - not even bear markets. You are right. The markets always seem to recover eventually. But inflation frightens me the most. Stagflation is something I lived through and felt as if survival depended upon being empl*yed and NOT retired. YMMV

I figure, the best one can do is buy a slice of the world’s economy and hope that something zigs if something else zags.

 

[NW-Bound]

If it gets really bad, after a long period of stagflation, perhaps my 1% WR will become 4%.

But that's not even the worst case.

The worst case is I die early before I get to witness all that drama.

 

[OldShooter]

... But inflation frightens me the most. ...

Agreed. That is why we have about 5 years' spending in TIPS and have held a large quantity since 2006.

 

[Koolau]

Agreed. That is why we have about 5 years' spending in TIPS and have held a large quantity since 2006.

Yeah, back in those days, I believe Tips paid decent interest. Too bad I didn't know back then or have the foresight. I guess I believed them when they said inflations was no longer an issue. Yeah, right!

 

[ducky911]

Well a 5% drop is here. I went to put this small amount of side money to work but first had to check my balances. Hmm had not check since last November...way out of balance.

Put 100% into bonds. Still way out of balance.

Choices :

1. sell equities in my taxable account...ugh pay taxes..no way

2. Turn my heavy bond tax deferred account to 100% bonds.

3. embrace my new goal of 70/30 from 60/40

I'm still bullish. Think I will ride it out.

 

[chassis]

Who has gone to 100% cash given the 5% pullback currently in play?

 

[HawkeyeNFO]

I put $12k into the kids' 529 plans over the past 10 days. So I saved a little money there, but the overall portfolio is down around 6 figures from August.

I'm 96% equities with the rest in cash, but the military retirement pay mitigates a lot of risk.

 

[flyingaway]

Well a 5% drop is here. I went to put this small amount of side money to work but first had to check my balances. Hmm had not check since last November...way out of balance.

Put 100% into bonds. Still way out of balance.

Choices :

1. sell equities in my taxable account...ugh pay taxes..no way

2. Turn my heavy bond tax deferred account to 100% bonds.

3. embrace my new goal of 70/30 from 60/40

I'm still bullish. Think I will ride it out.

When the 5% drop finally arrives, you may hesitate and wonder if the 10% drop is coming.

 

[Dtail]

Who has gone to 100% cash given the 5% pullback currently in play?

I can't imagine anyone on this site has pulled that trigger just due to a 5% drop.

 

[Koolau]

Well a 5% drop is here. I went to put this small amount of side money to work but first had to check my balances. Hmm had not check since last November...way out of balance.

Put 100% into bonds. Still way out of balance.

Choices :

1. sell equities in my taxable account...ugh pay taxes..no way

2. Turn my heavy bond tax deferred account to 100% bonds.

3. embrace my new goal of 70/30 from 60/40

I'm still bullish. Think I will ride it out.

1. One of the few advantages of having "too much" in my 401(k) is I never have to worry about "selling" to rebalance and paying taxes (not then, anyway.)

In reality, so far, I've not rebalanced as my AA is something like 35% equities.

 

[Dash man]

We’re down 2.8% from recent highs. Nothing to lose sleep over.

 

[calmloki]

Feel fortunate to have had a 60 buy order in for VTI. It dropped 5% below the last year's high sometime this morning, boom: instant purchase. Now to put in an order for 10% below for a greater sum of money. Very neat, as it means we buy at the lowest point as time goes on and we don't miss any dips into our buy range.

 

[OldShooter]

Feel fortunate to have had a 60 buy order in for VTI. It dropped 5% below the last year's high sometime this morning, boom: instant purchase. Now to put in an order for 10% below for a greater sum of money. Very neat, as it means we buy at the lowest point as time goes on and we don't miss any dips into our buy range.

But that implies you have cash that you're holding out of the market. What would have happened if you had simply committed that cash to VTI from the beginning and you rode the market rise from the commit date? It seems like you might be better off.