Lessons from this crash

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
ROIGuy
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Re: Lessons from this crash

Post by ROIGuy »

I bet all the annuity salespeople are stuffing their wallets with commissions right now from all the scared people who are signing up.
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max12377
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Re: Lessons from this crash

Post by max12377 »

Marseille07 wrote: Thu May 12, 2022 1:38 pm
stocknoob4111 wrote: Thu May 12, 2022 1:27 pm that markets and sentiment can change on a dime and irrational exuberance and speculative excesses always meets a day of reckoning and it's important not to ignore it but to incorporate it into your planning especially closer to retirement...
It's a tough situation because even if you downshifted from 100/0 to 60/40 before you retire, the 60/40 is doing poorly this year. Basically we're in a situation where Boglehead portfolios do poorly across the board, ranging from 0/100 to 100/0.
+1
nigel_ht
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Re: Lessons from this crash

Post by nigel_ht »

mikep wrote: Thu May 12, 2022 12:13 pm Stocks and bonds market fluctuate.

Keep rebalancing according to your AA.
Haven’t had to this go around…
alfaspider
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Re: Lessons from this crash

Post by alfaspider »

Seems rather premature to draw "lessons" from an ongoing event.
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HomerJ
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Re: Lessons from this crash

Post by HomerJ »

sailaway wrote: Thu May 12, 2022 1:16 pm I have learned that many people didn't learn much from the previous crashes.
Well, to be fair, the world keeps creating new people.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
LittleMaggieMae
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Re: Lessons from this crash

Post by LittleMaggieMae »

So far, the lessons from 2007/2008 seem to be holding up:
1.) have a long term plan (goals and how to achieve the goals)
2.) work the plan
3.) keep your eyes on the goal.
4.) review the plan a couple times per year (not daily, weekly, monthly) in case changes need to be made.

I'm close to retirement - but I liked the idea of having 2 years worth of expenses in "cash" so that has been part of the plan for the last 3 - 4 years (along with maxing out tax advantaged accounts). I'm not happy that the balances in my tax advantaged accounts have dropped but it's not catastrophic. I more or less have 2 years worth of expenses in "cash". I will just keep working the plan.
I've got 2 or more years before I need to access the $$ in the tax advantaged accounts. Hopefully the global factors effecting my investments will settle down in those 2 years. At this point I don't see a need to change the timing or the plan.

Ask me again in 6 months. :)
secondopinion
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Re: Lessons from this crash

Post by secondopinion »

HomerJ wrote: Thu May 12, 2022 12:54 pm I will admit I was surprised by how much Total Bond Fund went down.

I mean, I'm not one of those people who think bond funds never go down, and I'm not worried at all. Higher dividends are good, and Total Bond will recover over time. In the long run, higher interest rates will be helpful for me.

But I was surprised that it went down this far, this fast...

Guess the lesson I learned is to be diversified on the fixed-income side...

Which, by pure luck, I was...

I have slowly been moving money into IBonds over the past decade... and our 401ks didn't have Total Bond, so we were using stable-value funds and short-term treasury funds, AND I had recently accumulated 4 years of cash\CDs to help my wife sleep at night.

So I've done okay during this period on the fixed-income side.
When 2020 had a massive yield drop, I sold to place essentially all my fixed income allocation to place most of it into a 3% add-on CD (maturing four year later at the time) and iBonds. This havoc to bonds, although I did not expect it, was in the realm of possibility; I am not regretting my decision at all.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Parkinglotracer
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Re: Lessons from this crash

Post by Parkinglotracer »

HomerJ wrote: Thu May 12, 2022 1:48 pm
sailaway wrote: Thu May 12, 2022 1:16 pm I have learned that many people didn't learn much from the previous crashes.
Well, to be fair, the world keeps creating new people.
True dat.
alluringreality
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Re: Lessons from this crash

Post by alluringreality »

jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?
Honestly recent events that seem most interesting fall into the area of Unacceptable Topics, which are not open for discussion. The main issue about exiting when risk shows up is generally choosing when to re-enter, so I'll just keep buying. I'm not sure how this all plays out, and it's always possible that my main area of interest may not be tested before all time highs show up again. I generally do like the idea of buying at prices lower than 20% off, so I guess make a plan and buckle up, who knows I might get my wish from time to time.
Last edited by alluringreality on Thu May 12, 2022 2:06 pm, edited 2 times in total.
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ge1
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Re: Lessons from this crash

Post by ge1 »

Not really a lesson but good to see that valuations still matter and ultimately, even if it takes a VERY long time, valuation come down to earth, which is and will be very painful for a lot of investors.

And then there was the obvious stuff, like owning a total bond fund with a 6 or 7 year duration and a yield in the low 1% is probably not a good idea.

Still ways to go though in this one I would think, so let's see what else shakes out.
Normchad
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Re: Lessons from this crash

Post by Normchad »

max12377 wrote: Thu May 12, 2022 1:46 pm
Marseille07 wrote: Thu May 12, 2022 1:38 pm
stocknoob4111 wrote: Thu May 12, 2022 1:27 pm that markets and sentiment can change on a dime and irrational exuberance and speculative excesses always meets a day of reckoning and it's important not to ignore it but to incorporate it into your planning especially closer to retirement...
It's a tough situation because even if you downshifted from 100/0 to 60/40 before you retire, the 60/40 is doing poorly this year. Basically we're in a situation where Boglehead portfolios do poorly across the board, ranging from 0/100 to 100/0.
+1
It’s not doing poorly though. This is expected behavior.

You need to expect this (and worse) to happen from time to time. It happen in 1987. It happen in 2000. It happened in 2008. It happened briefly in 2020. It’s happening now.

If your plan is an ever increasing portfolio, it is a bad plan. You will be disappointed. And you might panic at the worst time.
Fallible
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Re: Lessons from this crash

Post by Fallible »

jay22 wrote: Thu May 12, 2022 12:02 pm What are the lessons that BHs have learned from this crash?

Not that it is over or everything will be rosy going forward!
Ask me when it's over. Every crash is different and I've learned from every one I've been through since the first in October '87 - but not until they had ended. From crashes that have ended, the overall lessons were pretty much the same: understand risk in general and my own tolerance for it.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Tom_T
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Re: Lessons from this crash

Post by Tom_T »

I've found that it really helps to truly think about exactly what one might be worried about, and what would happen if it does.

For example, if I said "I'm worried that the market will go down 50%", what does that really mean for me? What would happen if my stocks were 50 percent lower at the end of the year? Was I counting on some stock money for an expense next year? Do I have to cut my expenses? Can I just wait it out? Do I have to work another year before retiring?

The answers might not be easy, but it pays to think about what one would do if stocks really did fall that much. It's not likely but it's possible. Perhaps this is just another way of saying "be prepared for the unlikely."
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TierArtz
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Re: Lessons from this crash

Post by TierArtz »

Comparing unrealized (paper) losses to estimated yearly unfunded retirement expenses is eye-opening! Presently, this down-turn leaves me with 16X less than before. It's a good thing I did not retire when I hit 25X. Assuming the world regains some peace and sanity (stopping at that), the down-turn could be a silver-lining for late-stage accumulators.
Tanelorn
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Re: Lessons from this crash

Post by Tanelorn »

TheoLeo wrote: Thu May 12, 2022 12:20 pm QT = bear market
QE = bull market
Pretty much, or like they say “don’t fight the Fed”. When they’re going to raise rates and shrink their balance sheet, look out below. If you don’t want to sell, at least consider keeping your fixed income duration short and maybe hedge your equities until things calm down a bit. I know this is beyond most people, but selling to cash is a fine way to wait out market volatility without the fancy stuff.

Inflation and national debt levels may make it harder for things to recover the way we have in the past. Hopefully not, but maybe this time is different and not in a good way.
fsrph
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Re: Lessons from this crash

Post by fsrph »

MYGA's can be a superior alternatives to bonds when the Fed is raising rates.

Francis
"Success is getting what you want. Happiness is wanting what you get." | Dale Carnegie
Marseille07
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Re: Lessons from this crash

Post by Marseille07 »

Normchad wrote: Thu May 12, 2022 1:58 pm It’s not doing poorly though. This is expected behavior.

You need to expect this (and worse) to happen from time to time. It happen in 1987. It happen in 2000. It happened in 2008. It happened briefly in 2020. It’s happening now.

If your plan is an ever increasing portfolio, it is a bad plan. You will be disappointed. And you might panic at the worst time.
I don't agree. While I'm not impacted, lots of people didn't expect equities crashing -19% and bonds crashing -10% at the same time. One of the basic premises of a Boglehead portfolio is inverse correlation of stocks and bonds.

I'm fully aware correlation can break down at times, what I'm saying is that people didn't expect that to happen in 2022.

To go even further, if correlation can't be relied upon then one should question if they should be holding bonds at all.
Last edited by Marseille07 on Thu May 12, 2022 2:10 pm, edited 1 time in total.
Dottie57
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Re: Lessons from this crash

Post by Dottie57 »

I have learned that I really hate losing value, down about 13% from the one day high.
dcabler
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Re: Lessons from this crash

Post by dcabler »

Nothing I didn't already know

- Stocks and bonds don't have to move in opposite directions.
- People get panicky when the market corrects
- Lots of people don't understand bonds and even more don't understand bond funds. Especially true for TIPs
- People make decisions based on the short term, often ones that turn out to be poor choices in the end
- When in doubt, TLH
- I'm still retiring this year. :D

and so it goes...

Cheers.
atdharris
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Re: Lessons from this crash

Post by atdharris »

I am not sure what others are thinking, but this is not a normal market pullback. VTI is down 20% and the Nasdaq is down ~30%. This is the worst start to the year for the market in a century.

I am hopeful things will turn around once inflation is brought under control, but this is not a normal run of the mill market pullback.
Normchad
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Re: Lessons from this crash

Post by Normchad »

Marseille07 wrote: Thu May 12, 2022 2:07 pm
Normchad wrote: Thu May 12, 2022 1:58 pm It’s not doing poorly though. This is expected behavior.

You need to expect this (and worse) to happen from time to time. It happen in 1987. It happen in 2000. It happened in 2008. It happened briefly in 2020. It’s happening now.

If your plan is an ever increasing portfolio, it is a bad plan. You will be disappointed. And you might panic at the worst time.
I don't agree. While I'm not impacted, lots of people didn't expect equities crashing -19% and bonds crashing -10% at the same time. One of the basic premises of a Boglehead portfolio is inverse correlation of stocks and bonds.

I'm fully aware correlation can break down at times, what I'm saying is that people didn't expect that to happen in 2022.

To go even further, if correlation can't be relied upon then one should question if they should be holding bonds at all.
If people weren’t expecting interest rates to rise, and to allow for inflation, and know that those things would also impact equities, then I don’t know what to say. Maybe a lot of people throwing money around and just not understanding what they’re doing.

At this point, it’s not a crash. A lot of people seem to be down overall about 15%. That is absolutely expected. Again, if folks are panicking over that, then they’re probably doomed when the off-cited 50% haircut comes.
Fallible
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Re: Lessons from this crash

Post by Fallible »

I've also wondered whether it's too soon to call this downturn an actual CRASH, so looked it up in the usually reliable Investopedia, which says:
A stock market crash is a rapid and often unanticipated drop in stock prices. A stock market crash can be a side effect of a major catastrophic event, economic crisis, or the collapse of a long-term speculative bubble.
https://www.investopedia.com/terms/s/st ... -crash.asp
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Dusn
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Re: Lessons from this crash

Post by Dusn »

Watching people rioting and burning down government buildings in Sri Lanka yesterday due to the crazy high inflation was a concerning reminder of how bad inflation can get.

But people have been saying that we’re overdue for a correction for many many years now. I’m seeing VTSAX being down -6.71% over the past year. I personally don’t feel all that concerned in the US. Maybe I should be more worried.. I don’t know.
Last edited by Dusn on Thu May 12, 2022 2:53 pm, edited 1 time in total.
mrc
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Re: Lessons from this crash

Post by mrc »

This is our first year to take an RMD, which I cannot complete until after mid-year. My takeaway from the reductions in both the equity and bond markets, and it's a rather small thing, is to transfer the year's RMD from our total stock/bond index funds to a money market fund first thing in the new year. Then no matter how the market moves, I don't have to even think about what it means to the portfolio.
By the time you know enough to choose a good financial adviser, you don't need one. | bogleheads.org is my advisor: The ER is 0.0% and the advice always solid.
atdharris
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Re: Lessons from this crash

Post by atdharris »

Dusn wrote: Thu May 12, 2022 2:23 pm
atdharris wrote: Thu May 12, 2022 2:13 pm I am not sure what others are thinking, but this is not a normal market pullback. VTI is down 20% and the Nasdaq is down ~30%. This is the worst start to the year for the market in a century.

I am hopeful things will turn around once inflation is brought under control, but this is not a normal run of the mill market pullback.
People have been saying that we’re overdue for a correction for many many years now. I’m seeing VTSAX being down -6.71% over the past year. Should we be really concerned about that?
I am looking at it from ATHs to where we are now, not from 1 year ago until today. My point remains that a 20-30% pullback is not a normal pullback.

However, I am not concerned or panicked. Things will work themselves out. I will keep buying with each paycheck. Life will go on.
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WoodSpinner
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Re: Lessons from this crash

Post by WoodSpinner »

Marseille07 wrote: Thu May 12, 2022 2:07 pm
Normchad wrote: Thu May 12, 2022 1:58 pm It’s not doing poorly though. This is expected behavior.

You need to expect this (and worse) to happen from time to time. It happen in 1987. It happen in 2000. It happened in 2008. It happened briefly in 2020. It’s happening now.

If your plan is an ever increasing portfolio, it is a bad plan. You will be disappointed. And you might panic at the worst time.
I don't agree. While I'm not impacted, lots of people didn't expect equities crashing -19% and bonds crashing -10% at the same time. One of the basic premises of a Boglehead portfolio is inverse correlation of stocks and bonds.

I'm fully aware correlation can break down at times, what I'm saying is that people didn't expect that to happen in 2022.

To go even further, if correlation can't be relied upon then one should question if they should be holding bonds at all.
Umm, I have been following lots of Bond Threads for years on this forum and have never seen the assertion (without a correction) that bonds are inversely correlated with stocks.

I don’t think the overall correlation changed by much and it certainly should not have been a surprise.

WoodSpinner
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hoops777
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Re: Lessons from this crash

Post by hoops777 »

WoodSpinner wrote: Thu May 12, 2022 2:31 pm
Marseille07 wrote: Thu May 12, 2022 2:07 pm
Normchad wrote: Thu May 12, 2022 1:58 pm It’s not doing poorly though. This is expected behavior.

You need to expect this (and worse) to happen from time to time. It happen in 1987. It happen in 2000. It happened in 2008. It happened briefly in 2020. It’s happening now.

If your plan is an ever increasing portfolio, it is a bad plan. You will be disappointed. And you might panic at the worst time.
I don't agree. While I'm not impacted, lots of people didn't expect equities crashing -19% and bonds crashing -10% at the same time. One of the basic premises of a Boglehead portfolio is inverse correlation of stocks and bonds.

I'm fully aware correlation can break down at times, what I'm saying is that people didn't expect that to happen in 2022.

To go even further, if correlation can't be relied upon then one should question if they should be holding bonds at all.
Umm, I have been following lots of Bond Threads for years on this forum and have never seen the assertion (without a correction) that bonds are inversely correlated with stocks.

I don’t think the overall correlation changed by much and it certainly should not have been a surprise.

WoodSpinner
The general thought is that bonds do protect you when stocks crash.It is not a certainty, but it is expected.
Last edited by hoops777 on Thu May 12, 2022 2:36 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.
WildBill
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Re: Lessons from this crash

Post by WildBill »

Howdy

Seen this movie before.

However, this time the plot has a new twist - open with stocks and bonds both at very high valuations, inflation quiescent, interest rates low.

Cut in Act 2 to inflation up, interest rates rising, stocks reacting negatively, understandably.

Act 3 - beats me.

Hang in there, wait for the sequel.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid
Ron
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Re: Lessons from this crash

Post by Ron »

mrc wrote: Thu May 12, 2022 2:25 pm This is our first year to take an RMD, which I cannot complete until after mid-year. My takeaway from the reductions in both the equity and bond markets, and it's a rather small thing, is to transfer the year's RMD from our total stock/bond index funds to a money market fund first thing in the new year. Then no matter how the market moves, I don't have to even think about what it means to the portfolio.
We've been following that course on our RMD's for the last five years we've had to take them. I know the recommendation by many on this forum is to keep the money in the market until the end of the year, but I've had times over the last 40 years of investing that the market didn't rise (or break even) about a third of the time on an annual basis.

I/we will continue to take our respective RMD's on the first business day of the year (funded primarily by Oct-Dec distributions which are held in cash) and use it to pay taxes on all our known income for the year including the RMD's, and put the remainder into savings. At this time (mid-70's) we're fortunate that we don't have to make every dollar work in the market - that's the job of the bulk of our retirement investments which we don't touch (outside of the required RMD).

- Ron
Ed 2
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Re: Lessons from this crash

Post by Ed 2 »

Lesson #1 stay the course
Lesson #2 stay the course if you ignored lesson #1
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hoops777
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Re: Lessons from this crash

Post by hoops777 »

WildBill wrote: Thu May 12, 2022 2:35 pm Howdy

Seen this movie before.

However, this time the plot has a new twist - open with stocks and bonds both at very high valuations, inflation quiescent, interest rates low.

Cut in Act 2 to inflation up, interest rates rising, stocks reacting negatively, understandably.

Act 3 - beats me.

Hang in there, wait for the sequel.

W B
This time it’s different is usually met with scorn, but this time it’s different. :D
K.I.S.S........so easy to say so difficult to do.
Tom_T
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Re: Lessons from this crash

Post by Tom_T »

I've been around this forum a long time, and I don't recall a lot of conversation about how TBM could fall 10 percent so be prepared. There are, however, a number of posts now saying "well, you should have expected it." Taylor himself would frequently post that TBM has only has one small losing year, or something along those lines.
NYstrip
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Re: Lessons from this crash

Post by NYstrip »

Once the Fed acknowledged what most of us already knew, that inflation was not transitory, was the time one should have set down their glass of punch and made a beeline for the exit. Because the party was coming to an end.
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vv19
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Re: Lessons from this crash

Post by vv19 »

NYstrip wrote: Thu May 12, 2022 2:48 pm Once the Fed acknowledged what most of us already knew, that inflation was not transitory, was the time one should have set down their glass of punch and made a beeline for the exit. Because the party was coming to an end.
100%, it was pretty clear the pullback was coming based on Fed's action/comments.

Should have acted upon it rather than ignoring it. :oops:
er999
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Re: Lessons from this crash

Post by er999 »

My lessons:
1. I bonds are a great deal for the small investor and should buy the max each year if you can afford it, potentially instead of any other bond holdings.if things change in the future you can always redeem after 1 year so not locked k .
2. If you don’t want to see a drop if your fixed income value, buy short term bonds or bank cds. Not appropriate for all
Bond holdings but when I’m close to retirement and want safe money to spend in the next couple years I’d consider t bills < 1 year duration or cds/cash.
KineticSync
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Re: Lessons from this crash

Post by KineticSync »

I've learned that having a stable value fund in the 401k provides a nice alternative for FI funds if it looks like interest rates may be increasing.
Marseille07
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Re: Lessons from this crash

Post by Marseille07 »

jay22 wrote: Thu May 12, 2022 2:51 pm 100%, it was pretty clear the pullback was coming based on Fed's action/comments.

Should have acted upon it rather than ignoring it. :oops:
Why? Whatever happened to "stay the course"? It's rough if you're a retiree, but if you're accumulating then this is when you keep buying.
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vv19
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Re: Lessons from this crash

Post by vv19 »

Marseille07 wrote: Thu May 12, 2022 2:54 pm
jay22 wrote: Thu May 12, 2022 2:51 pm 100%, it was pretty clear the pullback was coming based on Fed's action/comments.

Should have acted upon it rather than ignoring it. :oops:
Why? Whatever happened to "stay the course"? It's rough if you're a retiree, but if you're accumulating then this is when you keep buying.
I am continuing buying - my monthly contributions have never stopped. Should have locked in the profits last year, though.

Hindsight is 20/20
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Cheez-It Guy
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Re: Lessons from this crash

Post by Cheez-It Guy »

This is not a crash.
GAAP
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Re: Lessons from this crash

Post by GAAP »

HomerJ wrote: Thu May 12, 2022 1:48 pm
sailaway wrote: Thu May 12, 2022 1:16 pm I have learned that many people didn't learn much from the previous crashes.
Well, to be fair, the world keeps creating new people.
Boy, doesn't that say something about our ability to educate younger generations...

Those who don't learn from history -- etc.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
Apathizer
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Re: Lessons from this crash

Post by Apathizer »

It reinforced my prior inclinations. Hold about a year of expenses in cash, about 2-5 years in bonds, and 5+ years in stocks.

Had I known what would've happened early this year I'd have sold everything and held cash until about now, but of course clairvoyance isn't real.
Last edited by Apathizer on Thu May 12, 2022 3:13 pm, edited 1 time in total.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
countmein
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Re: Lessons from this crash

Post by countmein »

Don't take term risk without getting paid to do so.
Apathizer
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Re: Lessons from this crash

Post by Apathizer »

GAAP wrote: Thu May 12, 2022 3:01 pm
HomerJ wrote: Thu May 12, 2022 1:48 pm
sailaway wrote: Thu May 12, 2022 1:16 pm I have learned that many people didn't learn much from the previous crashes.
Well, to be fair, the world keeps creating new people.
Boy, doesn't that say something about our ability to educate younger generations...

Those who don't learn from history -- etc.
What's interesting is where. Most projected pop growth is in developing regions like Africa, while pop is decreasing in many developed areas, esp Europe.

This might eventually bode well for emerging market returns, but who knows?
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
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vv19
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Re: Lessons from this crash

Post by vv19 »

For people saying, this is not a crash or a bear market, that's just semantics.

VTI down 20%+ in 4 months is not a normal market pullback.
Apathizer
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Re: Lessons from this crash

Post by Apathizer »

jay22 wrote: Thu May 12, 2022 3:12 pm For people saying, this is not a crash or a bear market, that's just semantics.

VTI down 20%+ in 4 months is not a normal market pullback.
Good point. Since we can't predict them, we only label them crashes after the fact. Again, who knows how long present trends will persist?
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GAAP
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Re: Lessons from this crash

Post by GAAP »

atdharris wrote: Thu May 12, 2022 2:13 pm I am not sure what others are thinking, but this is not a normal market pullback. VTI is down 20% and the Nasdaq is down ~30%. This is the worst start to the year for the market in a century.

I am hopeful things will turn around once inflation is brought under control, but this is not a normal run of the mill market pullback.
I'm not sure how you define "normal", but PV shows the following:

Code: Select all

Drawdowns for US Stock Market (worst 10)
Rank	Start		End		Length			Recovery By	Recovery Time		Underwater Period	Drawdown

							
1	Nov 2007	Feb 2009	1 year 4 months		Mar 2012	3 years 1 month		4 years 5 months	-50.89%
2	Jan 1973	Sep 1974	1 year 9 months		Dec 1976	2 years 3 months	4 years			-45.86%
3	Sep 2000	Sep 2002	2 years 1 month		Apr 2006	3 years 7 months	5 years 8 months	-44.11%
4	Sep 1987	Nov 1987	3 months		May 1989	1 year 6 months		1 year 9 months		-29.34%
5	Jan 2020	Mar 2020	3 months		Jul 2020	4 months		7 months		-20.89%
6	Dec 1980	Jul 1982	1 year 8 months		Oct 1982	3 months		1 year 11 months	-17.85%
7	Jul 1998	Aug 1998	2 months		Nov 1998	3 months		5 months		-17.57%
8	Jun 1990	Oct 1990	5 months		Feb 1991	4 months		9 months		-16.20%
9	Oct 2018	Dec 2018	3 months		Apr 2019	4 months		7 months		-14.28%
10	Jan 2022	Apr 2022	4 months				-14.01%
1973 was effectively the same as this year, down 12.27% on April 30 and 14.29% on May 31. The really bad stuff didn't happen until the third quarter of 1974. I don't really care if it's the worst start for a year, I care about just how bad it gets no matter when it starts.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
abc132
Posts: 2435
Joined: Thu Oct 18, 2018 1:11 am

Re: Lessons from this crash

Post by abc132 »

Lessons:

1) Portfolio performance is a function of the investments chosen
2) The Boglehead philosophy is to take what the market gives while minimizing fees
3) Trying to avoid/time #1 or #2 is expected to reduce success over a lifetime of investing

I moved from 95%+ stocks into fixed income and also diversified those stock holdings in mid-2018. My portfolio since them has been roughly
44% US Stocks
15% International Stocks
12% Emerging Market
4% REIT
25% Fixed Income (I Bond, EE bond, CD's, Individual Treasuries, Bond Funds)

From mid 2018-present that meant solid returns (15% CAGR with additions) but not as good as going 100% US stocks. I expect to pay for diversification by losing some performance relative to the winner - in exchange for improved worst-case outcomes. As to the present, my stock allocation and fixed income without interest rate risk both make inflation a non-issue with regards to my portfolio. Inflation hurts by reducing all performance, but there is no special action that is needed for the above portfolio. Stocks should recover some of those increased prices over time, and future bonds will have better rates.

So far everything seems as advertised.
Last edited by abc132 on Thu May 12, 2022 3:23 pm, edited 1 time in total.
Aaand...it'sgone
Posts: 130
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Re: Lessons from this crash

Post by Aaand...it'sgone »

I think I'm learning that I should have been adding more i-bonds to my portfolio, and also that I need a larger EF. I've been keeping very little cash in my EF, and between the market and some surprises (needing new appliances and some plumbing issues), I think my EF should be 2-3 times larger.
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Kenkat
Posts: 9549
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: Lessons from this crash

Post by Kenkat »

Just some random thoughts:
  • I’ve been investing in bonds since the late 80s and this is by far the worst I’ve ever seen in terms of speed and amount of drop in value
  • it’s unclear to me whether the market levels out from here and moves back up or drops further. This does not feel like a crisis to me, more of a reset based on new interest rates and inflation. There’s a lot of jobs out there and a lot of money still being spent. Times don’t feel hard, at least not yet
  • I’m very glad I swapped out a big chunk of Total Bond for my 3% stable value fund in my 401(k)
  • I feel that my slant to value funds has softened the drop and feel relatively good about those funds helping me in the immediate future vs, being a drag as they were for a good while there
  • that commodity fund i have held on for many years is finally filling a role; it’s a small role but it sure is nice having something up double digits when everything else is down
  • I feel much better with future investments in bonds paying 3% going forward than 1.5%, inflation worries not withstanding
  • I am retiring this summer, so losing 2x expenses in portfolio value is worrying but also makes me glad I built some buffer into the plan
  • I am going to be cautious with an upcoming lump sum pension distribution. Was going to be anyway, but this is a good reminder to build a solid bridge to social security
So as a p.s. - not really making any changes to my overall plan, just staying the course until all the money is gone :wink:
Last edited by Kenkat on Thu May 12, 2022 3:48 pm, edited 1 time in total.
carminered2019
Posts: 1939
Joined: Fri Jun 21, 2019 7:06 pm

Re: Lessons from this crash

Post by carminered2019 »

jay22 wrote: Thu May 12, 2022 3:12 pm For people saying, this is not a crash or a bear market, that's just semantics.

VTI down 20%+ in 4 months is not a normal market pullback.
How did you react March 2020 ?
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