How to Protect Savings from stock market crash
How to Protect Savings from stock market crash
Hi
How should I do the protect form potential stock market crash.
I have about below in retirement portfolio across ira and 401 K.
VTI 10k
FxAiX 10K
VTV 3K
VOE 3K
VEA 7K
VWO 4.5k
MuB 2k
BNDX 1K
TRPrice Target date fund 2045 50K
Vanguard Target date Fund 2045 40k
≠==========
I have below for 9 year investment (child education)
Microsoft 5K
Home Depot 2K
Other Chinese and korean technology stock 5k
VTI 1.5k
VTV 1k
SCHB 3k
SCHB 2k
VWO 1.5 k
vTEB 1K
VIG 1k
VEA 1K
BNDX 1K
MUB 1k
==================
How should I do the protect form potential stock market crash.
I have about below in retirement portfolio across ira and 401 K.
VTI 10k
FxAiX 10K
VTV 3K
VOE 3K
VEA 7K
VWO 4.5k
MuB 2k
BNDX 1K
TRPrice Target date fund 2045 50K
Vanguard Target date Fund 2045 40k
≠==========
I have below for 9 year investment (child education)
Microsoft 5K
Home Depot 2K
Other Chinese and korean technology stock 5k
VTI 1.5k
VTV 1k
SCHB 3k
SCHB 2k
VWO 1.5 k
vTEB 1K
VIG 1k
VEA 1K
BNDX 1K
MUB 1k
==================
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Re: How to Protect Savings from stock market crash
You cannot protect from a stock market crash by investing in stocks.
High quality bonds, savings, CDs, money market will all give you a low risk, low return investment.
High quality bonds, savings, CDs, money market will all give you a low risk, low return investment.
- anon_investor
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Re: How to Protect Savings from stock market crash
+1. Personally I would use not just high quality bonds, but US treasury bonds.Triple digit golfer wrote: ↑Sun Jun 13, 2021 9:03 am You cannot protect from a stock market crash by investing in stocks.
High quality bonds, savings, CDs, money market will all give you a low risk, low return investment.
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Re: How to Protect Savings from stock market crash
If your portfolio mirrors the market, your portfolio will rise when the market rises and crash when the market crashes. You can't change that. You can dampen the impact of a crash (which will also dampen the benefit of a rise) by adding bonds to your portfolio. The higher the percentage of bonds, the greater the dampening effect.
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Re: How to Protect Savings from stock market crash
Sell your stocks and put it in a CD. That is the only protection from a stock market crash. If you want the returns of stocks, you must take the risk. You can diversify the risk of individual companies and industries away by investing in broad market indices, but you cannot diversify away systemic risk.
Re: How to Protect Savings from stock market crash
In the current market environment, what bonds are the most optimum to hold in a portfolio? Thanks.
Re: How to Protect Savings from stock market crash
As one can gather from the replies there are two options:
1. You can't protect stocks from market crashes so don't invest in stocks. But this can be tailored in degree. That is why people discuss having the right asset allocation between stocks and bonds. This would be the approach of the rational engineer.
2. Don't protect your stocks from market crashes but rather live with it. The benefits of gaining wealth by investing in stocks come with the price that the results are wild and uncertain even while trending upward on the whole. To participate in this you have to be willing to endure and to live with uncertainty. This amounts to a zen experience.
1. You can't protect stocks from market crashes so don't invest in stocks. But this can be tailored in degree. That is why people discuss having the right asset allocation between stocks and bonds. This would be the approach of the rational engineer.
2. Don't protect your stocks from market crashes but rather live with it. The benefits of gaining wealth by investing in stocks come with the price that the results are wild and uncertain even while trending upward on the whole. To participate in this you have to be willing to endure and to live with uncertainty. This amounts to a zen experience.
Re: How to Protect Savings from stock market crash
Consider when you need the money. Retirement is 20 years away, so that money can be left in stocks as it will recover before 2045 - also the target date funds will adjust to be less risky over time.
You will need the education funds in 9 years so might be wise to start to transition that fund to less volatile investments.
You might make another post for general advice on your planning using this format - viewtopic.php?f=1&t=6212
You will need the education funds in 9 years so might be wise to start to transition that fund to less volatile investments.
You might make another post for general advice on your planning using this format - viewtopic.php?f=1&t=6212
My other vehicle is an index fund.
Re: How to Protect Savings from stock market crash
What harm would it be for OP to liquidate and park his money in say a MMF temporarily to preserve value following a (likely) impending crash. Following the crash, they can then reinvest those funds back as he/she chooses when they feel it has dipped enough.
Any thoughts?? (i know, can't predict when the market will crash so this is timing the market)
Any thoughts?? (i know, can't predict when the market will crash so this is timing the market)
- anon_investor
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- arcticpineapplecorp.
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Re: How to Protect Savings from stock market crash
1. first define what you mean by "crash".
is it 20%? 30%? 40%? 50%? What exactly?
Important to know because if you think a crash is when the market falls 20% that's very different from what others might consider a "crash".
2. realize you can make 4 types of errors by trying to market time:
a. you sell too soon (ex: Greenspan uttered "irrational exuberance" in Dec 1996. If you got out, you'd have missed a doubling of your money (100% return) in the next 3 years (1997-1999)
b. you sell too late waiting to get out at the top, but the market falls and then you panic sell (lose money).
c. you buy too early (ex: market falls in 2008 and you buy back in after stocks fell 38% but it would have been better to buy in March 2009 after prices fell 50%).
d. you buy too late waiting for the market to fall further and the market rises (ex: Jim Cramer told viewers not to buy in March 2009 because he believed the market would fall 80% like Great Depression, rather than the 50% it actually did. He said it would be a dead cat bounce. Those who listened to him waited for the market to keep falling, but it rebounded 60% between the bottom in March 2009-Dec 2009.
Lesson: don't listen to Jim Cramer. Or anyone else who thinks themselves an investment guru.
3. A crash happened last year (32% between mid Feb and mid March) but so what. If you had bought in Jan and held through Dec 2020, you'd have made 20% on your US money (11% on international) even after losing 32% of your money Feb-March.
source: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
lesson here: buy and hold works. If only more people would either believe and/or follow the evidence.
4. Peter Lynch once said “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” source: https://www.etf.com/sections/index-inve ... nopaging=1
lesson: it's better to face the corrections than try to sideswipe them (see link above to Swedroe Article which explains why).
5. If you're out of the market on some of the best days, that can absolutely decimate your returns:
lesson: you can't get the return of the market if you're not in the market to get that return.
6. The market has increased since 1926 by 10.1% per year. This included the crashes. Read that again. You don't have to sidestep down markets to get good returns. Buy and hold works. Do I need to say it again?
7. Markets decline (not crash, though it depends on your definition) every year. But as we saw in 2020 just because there are intrayear losses, doesn't mean we don't recover and then get the growth we seek.
8. Determine your asset allocation. That is based on your need, ability and willingness to take risk. Don't take more risk than you need, have the ability or the willingness to take Read more here:
https://www.cbsnews.com/news/asset-allo ... -you-take/
https://www.cbsnews.com/news/asset-allo ... tolerance/
https://www.cbsnews.com/news/asset-allo ... -you-need/
https://www.cbsnews.com/news/asset-allo ... ing-goals/
9. Determine the amount you're willing to lose and design the portfolio around the allocation that gets you that maximum loss:
10. But be honest with yourself and convert the percentage losses into dollars. Paul Merriman talked about a client he used to work with who after much questioning determined he thought he'd be ok losing 20% of his portfolio. Then when Paul said, "So you have a million dollars to invest, you'd be ok with losing $200,000?" the client said "My God No!! That's far too much!" (see the problem?)
that's my top 10. peace out.
is it 20%? 30%? 40%? 50%? What exactly?
Important to know because if you think a crash is when the market falls 20% that's very different from what others might consider a "crash".
2. realize you can make 4 types of errors by trying to market time:
a. you sell too soon (ex: Greenspan uttered "irrational exuberance" in Dec 1996. If you got out, you'd have missed a doubling of your money (100% return) in the next 3 years (1997-1999)
b. you sell too late waiting to get out at the top, but the market falls and then you panic sell (lose money).
c. you buy too early (ex: market falls in 2008 and you buy back in after stocks fell 38% but it would have been better to buy in March 2009 after prices fell 50%).
d. you buy too late waiting for the market to fall further and the market rises (ex: Jim Cramer told viewers not to buy in March 2009 because he believed the market would fall 80% like Great Depression, rather than the 50% it actually did. He said it would be a dead cat bounce. Those who listened to him waited for the market to keep falling, but it rebounded 60% between the bottom in March 2009-Dec 2009.
Lesson: don't listen to Jim Cramer. Or anyone else who thinks themselves an investment guru.
3. A crash happened last year (32% between mid Feb and mid March) but so what. If you had bought in Jan and held through Dec 2020, you'd have made 20% on your US money (11% on international) even after losing 32% of your money Feb-March.
source: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
lesson here: buy and hold works. If only more people would either believe and/or follow the evidence.
4. Peter Lynch once said “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” source: https://www.etf.com/sections/index-inve ... nopaging=1
lesson: it's better to face the corrections than try to sideswipe them (see link above to Swedroe Article which explains why).
5. If you're out of the market on some of the best days, that can absolutely decimate your returns:
lesson: you can't get the return of the market if you're not in the market to get that return.
6. The market has increased since 1926 by 10.1% per year. This included the crashes. Read that again. You don't have to sidestep down markets to get good returns. Buy and hold works. Do I need to say it again?
7. Markets decline (not crash, though it depends on your definition) every year. But as we saw in 2020 just because there are intrayear losses, doesn't mean we don't recover and then get the growth we seek.
8. Determine your asset allocation. That is based on your need, ability and willingness to take risk. Don't take more risk than you need, have the ability or the willingness to take Read more here:
https://www.cbsnews.com/news/asset-allo ... -you-take/
https://www.cbsnews.com/news/asset-allo ... tolerance/
https://www.cbsnews.com/news/asset-allo ... -you-need/
https://www.cbsnews.com/news/asset-allo ... ing-goals/
9. Determine the amount you're willing to lose and design the portfolio around the allocation that gets you that maximum loss:
10. But be honest with yourself and convert the percentage losses into dollars. Paul Merriman talked about a client he used to work with who after much questioning determined he thought he'd be ok losing 20% of his portfolio. Then when Paul said, "So you have a million dollars to invest, you'd be ok with losing $200,000?" the client said "My God No!! That's far too much!" (see the problem?)
that's my top 10. peace out.
Last edited by arcticpineapplecorp. on Sun Jun 13, 2021 8:25 pm, edited 1 time in total.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
Re: How to Protect Savings from stock market crash
That JP Morgan chart is ludicrous. They should have shown "Missed the best 10 days and the 10 worst days", etc. for a meaningful example.
Re: How to Protect Savings from stock market crash
asdfgghk wrote: ↑Sun Jun 13, 2021 4:54 pm What harm would it be for OP to liquidate and park his money in say a MMF temporarily to preserve value following a (likely) impending crash. Following the crash, they can then reinvest those funds back as he/she chooses when they feel it has dipped enough.
Any thoughts?? (i know, can't predict when the market will crash so this is timing the market)
You have no idea how much growth OP will miss out on by doing this. They could end up loosing to inflation without any other gains with this method, depending on how the market performs.
- arcticpineapplecorp.
- Posts: 15081
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Re: How to Protect Savings from stock market crash
guess 9 out of 10 then ain't half bad.
well the worst days are often around the best days (see below) so if you stay the course you usually recover but the point is if you're bouncing in and out of the market you could be in the market for the worst days and out of the market for the best days
since you can't know in advance, you're risking not being in when the gains happen.
Last edited by arcticpineapplecorp. on Sun Jun 13, 2021 8:31 pm, edited 1 time in total.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
Re: How to Protect Savings from stock market crash
You can buy put contracts to lock in your price assuming all of these positions have some multiple of 100. But for this protection, it's going to cost you money. There is no free lunch.
Re: How to Protect Savings from stock market crash
Sure, but my point is that JPM tells that, over 20 years, if we miss the best 10 days our return is cut in half. What if we miss the best 10 days and the worst 10 days ? Since judging by eye it looks that the worst days have larger losses than the best days have gains, I suspect one might even be ahead !arcticpineapplecorp. wrote: ↑Sun Jun 13, 2021 8:29 pmguess 9 out of 10 then ain't half bad.
well the worst days are often around the best days (see below) so if you stay the course you usually recover but the point is if you're bouncing in and out of the market you could be in the market for the worst days and out of the market for the best days
since you can't know in advance, you're risking not being in when the gains happen.
Re: How to Protect Savings from stock market crash
The only way to protect your investments in stocks is to time the market. While it is true that hardly anyone can time the market routinely, it does not follow that it is never possible to time the market. We know that the crash of 2008 was predictable, because astute economists identified the housing bubble and we know that when a national housing bubble blows up a recession will follow. On average a recession causes the market to drop by about 28%. So, it was possible to identify the inevitable denouement at that time and get out in time. I know, because I did myself. I was reading a variety of American and British economists who clearly identified the housing bubble. So, I sold my apartment and all my stock funds in 2005.
But 2008 was a special case. Housing markets are not a random walk, so they can be predicted especially when they diverge from historical norms. We have to accept that we cannot expect to time markets correctly, but we can still keep an eye out for exceptional occasions when we can time the market.
I didn't foresee the drop in the market from Covid in March/April 2020, but then neither did I foresee that the Fed Chairman would extend the Fed's mandate to protecting the stock market with the result that we all now know.
But 2008 was a special case. Housing markets are not a random walk, so they can be predicted especially when they diverge from historical norms. We have to accept that we cannot expect to time markets correctly, but we can still keep an eye out for exceptional occasions when we can time the market.
I didn't foresee the drop in the market from Covid in March/April 2020, but then neither did I foresee that the Fed Chairman would extend the Fed's mandate to protecting the stock market with the result that we all now know.
- arcticpineapplecorp.
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Re: How to Protect Savings from stock market crash
you're certainly welcome to try and let us know how that worked out.Thesaints wrote: ↑Sun Jun 13, 2021 9:23 pmSure, but my point is that JPM tells that, over 20 years, if we miss the best 10 days our return is cut in half. What if we miss the best 10 days and the worst 10 days ? Since judging by eye it looks that the worst days have larger losses than the best days have gains, I suspect one might even be ahead !arcticpineapplecorp. wrote: ↑Sun Jun 13, 2021 8:29 pmguess 9 out of 10 then ain't half bad.
well the worst days are often around the best days (see below) so if you stay the course you usually recover but the point is if you're bouncing in and out of the market you could be in the market for the worst days and out of the market for the best days
since you can't know in advance, you're risking not being in when the gains happen.
be sure to show the receipts, though.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
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Re: How to Protect Savings from stock market crash
By selling stocks, but then how will you protect your savings from inflation?
My posts are for entertainment purposes only.
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Re: How to Protect Savings from stock market crash
What if the impending crash does not happen for a while? In the meantime, the money is parked in say a MMF as you suggested while the market continues to rise. By the time the market drops, even if OP times the dip successfully, OP would still have lost all the gain between now and then.asdfgghk wrote: ↑Sun Jun 13, 2021 4:54 pm What harm would it be for OP to liquidate and park his money in say a MMF temporarily to preserve value following a (likely) impending crash. Following the crash, they can then reinvest those funds back as he/she chooses when they feel it has dipped enough.
Any thoughts?? (i know, can't predict when the market will crash so this is timing the market)
So, the potential “harm” is opportunity cost. Unless OP would only get back in the market after the market drops to the point that equals to the lost gain that OP would have gotten, but that moment might never come as the market might never drop to that point and then recover and continue to rise. In that case, OP would still be sitting on the sideline with the money in the MMF.
Re: How to Protect Savings from stock market crash
Not just a problem knowing when the market will crash, but also when it has stopped crashing. Easy in hindsight, not so easy in real time!asdfgghk wrote: ↑Sun Jun 13, 2021 4:54 pm What harm would it be for OP to liquidate and park his money in say a MMF temporarily to preserve value following a (likely) impending crash. Following the crash, they can then reinvest those funds back as he/she chooses when they feel it has dipped enough.
Any thoughts?? (i know, can't predict when the market will crash so this is timing the market)
Re: How to Protect Savings from stock market crash
Unrelated to your question, but why do you have so many investments in each account?
Diversification is important. But having so many small investments means that none is really having much of an impact on your return. You get complicated without improving your results.
(Most posters aren’t going to know what funds that the ticket symbols you listed represent.)
Diversification is important. But having so many small investments means that none is really having much of an impact on your return. You get complicated without improving your results.
(Most posters aren’t going to know what funds that the ticket symbols you listed represent.)
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: How to Protect Savings from stock market crash
Here is one way to sommewhat protect against a crash:
Buy puts on all stocks and ETF positions, take a little profit out of every position and invest in puts once every 3 months. They act like insurance.
Most people insure 20k items, but not $1M portfolios!
Rinse and repeat every 3 months.
Buy puts on all stocks and ETF positions, take a little profit out of every position and invest in puts once every 3 months. They act like insurance.
Most people insure 20k items, but not $1M portfolios!
Rinse and repeat every 3 months.