A time to EVALUATE your jitters

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Dottie57
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Re: A time to EVALUATE your jitters

Post by Dottie57 »

LeeAtlantica2020 wrote: Fri Jan 28, 2022 10:05 pm
Dottie57 wrote: Fri Jan 28, 2022 3:04 pm
princetontiger wrote: Fri Jan 28, 2022 1:45 pm There's been three monetary regimes since 1914.

1914 - 1971
1971 - 2008
2008 - present

We're in a quasi-MMT phase. Markets will only head higher. In both real and nominals terms.
Hope you are right. What isMMT?
Modern Money or Monetary Theory, which doesn't tell us much about how the stock market performs at all, since the market always goes up over time regardless of what monetary "regime" is in place. But it's got some curious twists on conventional macro theory. For instance:

1 government bonds are useless because the government can simply print money to meet its debt or spending obligations
2) interest rates should be at zero, as you want people to consume in order to maintain economic growth
3) inflation is not caused by excessive money in the circulation, or excessive demand caused from said zero-point interest rates, but rather monopolistic producers who jack up prices by controlling markets
4) the broadest goal should always be full employment, with the government bearing the responsibility of giving everyone a job with satisfactory wages if private employers cannot keep up
5) if too much inflation hits, then don't raise interest rates -- just raise taxes.

It's interesting also because its own adherents can't seem to figure out when it works and when it doesn't. Jerome Powell blasted MMT during his 2018 confirmation at the Fed, then put into place a lot of policies that seemed to come from it, but now is backtracking and arguing that the Fed needs to adopt a more traditional anti-inflationary stance by hiking interest rates, as he prefers that to raising taxes.

It's of interest to academicians and economists but frankly, not very useful to retail investors like most of us who believe that the secular trend in stock markets always points up. They pointed up in the "pre"-MMT era and they will point up in the "post"-MMT era.
Yjank you for your explanation. Very interesting. I remember inflation and the 1980’s skyrocketing interest rates. My home mortgage rate in 1987 was 10%.
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NearlyRetired
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Re: A time to EVALUATE your jitters

Post by NearlyRetired »

Dottie57 wrote: Sat Jan 29, 2022 9:40 am
LeeAtlantica2020 wrote: Fri Jan 28, 2022 10:05 pm
Dottie57 wrote: Fri Jan 28, 2022 3:04 pm
princetontiger wrote: Fri Jan 28, 2022 1:45 pm There's been three monetary regimes since 1914.

1914 - 1971
1971 - 2008
2008 - present

We're in a quasi-MMT phase. Markets will only head higher. In both real and nominals terms.
Hope you are right. What isMMT?
Modern Money or Monetary Theory, which doesn't tell us much about how the stock market performs at all, since the market always goes up over time regardless of what monetary "regime" is in place. But it's got some curious twists on conventional macro theory. For instance:

1 government bonds are useless because the government can simply print money to meet its debt or spending obligations
2) interest rates should be at zero, as you want people to consume in order to maintain economic growth
3) inflation is not caused by excessive money in the circulation, or excessive demand caused from said zero-point interest rates, but rather monopolistic producers who jack up prices by controlling markets
4) the broadest goal should always be full employment, with the government bearing the responsibility of giving everyone a job with satisfactory wages if private employers cannot keep up
5) if too much inflation hits, then don't raise interest rates -- just raise taxes.

It's interesting also because its own adherents can't seem to figure out when it works and when it doesn't. Jerome Powell blasted MMT during his 2018 confirmation at the Fed, then put into place a lot of policies that seemed to come from it, but now is backtracking and arguing that the Fed needs to adopt a more traditional anti-inflationary stance by hiking interest rates, as he prefers that to raising taxes.

It's of interest to academicians and economists but frankly, not very useful to retail investors like most of us who believe that the secular trend in stock markets always points up. They pointed up in the "pre"-MMT era and they will point up in the "post"-MMT era.
Yjank you for your explanation. Very interesting. I remember inflation and the 1980’s skyrocketing interest rates. My home mortgage rate in 1987 was 10%.
I remember thinking I had done well securing a mortgage at 12.5% - It's unreal how low rates are these days (and that includes inflation)
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calmaniac
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Re: A time to EVALUATE your jitters

Post by calmaniac »

vtsnowdin wrote: Fri Jan 07, 2022 10:08 am On the other hand as a person in the withdrawal stage of life I see nothing wrong with taking my balance each month and dividing by 120 and taking that amount for current expenses. Like the frog jumping half the distance to the finish line with each jump I will never get to zero and if I have picked good funds and or stocks the balance may grow, increasing the result of dividing by 120. I look at the 1/120th being akin to what a money manager would skim off me in fees and hidden costs.
Off topic for this thread, but just want to point out that taking out 1/120th every month equals a 10% annual withdrawal rate. That is not sustainable over many 20 year periods. Happy to discuss in a new thread if vtsnowdin wishes.

Now, back to your regularly scheduled Jitters....
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vtsnowdin
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Re: A time to EVALUATE your jitters

Post by vtsnowdin »

calmaniac wrote: Sat Jan 29, 2022 11:08 am
vtsnowdin wrote: Fri Jan 07, 2022 10:08 am On the other hand as a person in the withdrawal stage of life I see nothing wrong with taking my balance each month and dividing by 120 and taking that amount for current expenses. Like the frog jumping half the distance to the finish line with each jump I will never get to zero and if I have picked good funds and or stocks the balance may grow, increasing the result of dividing by 120. I look at the 1/120th being akin to what a money manager would skim off me in fees and hidden costs.
Off topic for this thread, but just want to point out that taking out 1/120th every month equals a 10% annual withdrawal rate. That is not sustainable over many 20 year periods. Happy to discuss in a new thread if vtsnowdin wishes.

Now, back to your regularly scheduled Jitters....
Certainly I will start a thread called Vtsnowdin's 120 rule.
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Re: A time to EVALUATE your jitters

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settlement12
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Re: A time to EVALUATE your jitters

Post by settlement12 »

Jittery time but I'm not too worried. Does anyone hear buy on margin during corrections or is that silly? I mean with very sensible stocks (BRK etc)
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Re: A time to EVALUATE your jitters

Post by chairmanofthebored »

settlement12 wrote: Tue Feb 22, 2022 11:37 am Jittery time but I'm not too worried. Does anyone hear buy on margin during corrections or is that silly? I mean with very sensible stocks (BRK etc)
Can you afford to pay back if your pick goes to 0? Would it hurt? I don’t think buying on margin is very bogley and never have and don’t plan to. Have been moving cash into the market though.
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Re: A time to EVALUATE your jitters

Post by Jaymover »

Great original thread. I will make a note of my current jitters for when the market recovers
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Re: A time to EVALUATE your jitters

Post by ddbtoth »

I’ve had to calm myself too, and read posts like this, to realize it is a time game. I’ve been DCA’ing VTSAX and it has gotten ugly last couple of weeks,(I’ve been investing all of 2-3 months, so I know what I’m doing) but now bounced back to by average buy in price, and I briefly though “sell 80% of it, lose no money, and buy back in when it craters at 20k Dow”, but didn’t. Even though I’m 15 months out from retirement, I have good pensions and cash enough t9 ride out the bear.
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Re: A time to EVALUATE your jitters

Post by JnyVuko »

Any other BogleHeads concerned because you don't feel jittery? I'm not.

I don't like to see my portfolio go down in value, but I'm almost concerned that I'm not freaking out. Maybe because I'm 62 and I've been through this a couple of times and/or my asset allocation is just right. I guess time will tell, but even if I was jittery I ask myself,"What would I do?" I know moving things around during such times locks in your losses.

Curious about others.
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AnnetteLouisan
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Re: A time to EVALUATE your jitters

Post by AnnetteLouisan »

JnyVuko wrote: Mon Mar 21, 2022 11:04 am Any other BogleHeads concerned because you don't feel jittery? I'm not.

I don't like to see my portfolio go down in value, but I'm almost concerned that I'm not freaking out. Maybe because I'm 62 and I've been through this a couple of times and/or my asset allocation is just right. I guess time will tell, but even if I was jittery I ask myself,"What would I do?" I know moving things around during such times locks in your losses.

Curious about others.
Yes- I can’t tell if my incredible sangfroid in recent VTI and FSKAX buying was due to my becoming more mature, knowledgeable and confident over time, armed with my IPS and a detailed understanding of how those purchases fit into my investing goals.

Or evidence of greater risk tolerance due to the excitement of discovering a fun new hobby and eagerness to get in too near ATHs because I am a bit behind and failed to invest enough the past 13 years. Granted, I didn’t buy enough recently, so that limited downside could explain it. But I’m also not TOO upset by my 401k declines.

In fact this is only the second time I was invested during a pullback besides March 2020, and I stayed the (too conservative) course then and benefited from staying in.
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Re: A time to EVALUATE your jitters

Post by Jungle »

In my 20s I burned about 70k buying and selling various luxury and/or sports cars. An expensive lesson but it helps to keep any (temporary) market losses in perspective. I don't mean that I owned a 70K car, I mean that I destroyed $70,000 total in vehicle depreciation lol

That, and knowing what I technically own (A chunk of the top 6000 or so companies in the world, the chance of which dropping to 0 is basically 0) gives me confidence to stay the course and be patient
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Kookaburra
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Re: A time to EVALUATE your jitters

Post by Kookaburra »

Why is EVALUATE in all caps in the thread title? Doesn’t that imply that word is being yelled?
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Re: A time to EVALUATE your jitters

Post by CZjc1330 »

Excuse me -- but that's a lot of blah, blah, blah!

This is not the time for Jitters.

It's a GREAT buying opportunity.
Wall Street, Total Market, is on Sale!

Buy VTI till it hurts.
Then buy some more. You'll be grateful and glad in 5 to 10 years.
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AnnetteLouisan
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Re: A time to EVALUATE your jitters

Post by AnnetteLouisan »

CZjc1330 wrote: Tue Mar 22, 2022 10:17 pm Excuse me -- but that's a lot of blah, blah, blah!

This is not the time for Jitters.

It's a GREAT buying opportunity.
Wall Street, Total Market, is on Sale!

Buy VTI till it hurts.
Then buy some more. You'll be grateful and glad in 5 to 10 years.
I’m grateful and glad already and it’s only been a few weeks. :D
HappyPappy
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Re: A time to EVALUATE your jitters

Post by HappyPappy »

Kookaburra wrote: Tue Mar 22, 2022 9:58 pm Why is EVALUATE in all caps in the thread title? Doesn’t that imply that word is being yelled?
Yes, you are correct. I assume it's mean to be a reminder that: WE GOTTA KEEP OUR COMPOSURE!!!

If you don't need your money for a while, downturns are awesome. I'll take as many downturns early in my investment career as I can get, so that the inevitable (knock on wood) upswing earns me enough to protect against the inevitable (ouch) downswings that will occur when I do need the money.
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9-5 Suited
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Re: A time to EVALUATE your jitters

Post by 9-5 Suited »

CZjc1330 wrote: Tue Mar 22, 2022 10:17 pm Excuse me -- but that's a lot of blah, blah, blah!

This is not the time for Jitters.

It's a GREAT buying opportunity.
Wall Street, Total Market, is on Sale!

Buy VTI till it hurts.
Then buy some more. You'll be grateful and glad in 5 to 10 years.
I’m a buy, hold, and rebalance investor and buy regardless of where the market is (up or down) but I fail to see how the present moment is a “great buying opportunity”. The CAPE10 is at like 37 even after the minor Q1 losses, making this possibly one of the lowest expected return periods in recent memory. I’m not changing my strategy in any way, but saying stocks are on sale now can only be a function of recency bias because they were a little higher a few months ago.
DesertMan
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Re: A time to EVALUATE your jitters

Post by DesertMan »

There’s a feeling like we are now looking at a worse version of 2011. The OP is a reminder that one must be prepared to stay the course.

With that said, now is the time to top off your emergency fund. Run your budget and make sure you have 6 months to a year of family expenses in cash, CDs, I Bonds, or VERY short term bonds, preferably TIPS (as rates are about to soar). Check your insurance deductibles (health, car, homeowners, etc.) and make sure you have those in cash as well. If you don’t, then sell enough of your investments until you do.

If you’ve started a family or otherwise experienced a large increase in expenses—or haven’t corrected your budget for inflation—prepare for a rude awakening. You may find that you will have to convert some of your tax advantaged accounts to cash. Don’t withdraw them unless and until you have a real emergency. But accept the resulting “cash drag”—do not take risks by investing your emergency fund. Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.

After filling up your emergency fund and reassessing your risk tolerance, take a deep breath and stay the course. Don’t look at your investments. If you feel that you have to, reassess your E-fund and asset allocation. Then leave it alone and sleep well.
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Re: A time to EVALUATE your jitters

Post by livesoft »

DesertMan wrote: Fri Apr 22, 2022 4:38 pm... and stay the course. Don’t look at your investments. ....
I'm glad I looked at my investments recently because I discovered I was overweighted in equities and stayed the course: I rebalanced.
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Re: A time to EVALUATE your jitters

Post by Normchad »

livesoft wrote: Fri Apr 22, 2022 4:45 pm
DesertMan wrote: Fri Apr 22, 2022 4:38 pm... and stay the course. Don’t look at your investments. ....
I'm glad I looked at my investments recently because I discovered I was overweighted in equities and stayed the course: I rebalanced.
I looked at mine as well and some tasty TLH today…..
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Re: A time to EVALUATE your jitters

Post by riverant »

DesertMan wrote: Fri Apr 22, 2022 4:38 pm There’s a feeling like we are now looking at a worse version of 2011. The OP is a reminder that one must be prepared to stay the course.

With that said, now is the time to top off your emergency fund. Run your budget and make sure you have 6 months to a year of family expenses in cash, CDs, I Bonds, or VERY short term bonds, preferably TIPS (as rates are about to soar). Check your insurance deductibles (health, car, homeowners, etc.) and make sure you have those in cash as well. If you don’t, then sell enough of your investments until you do.

If you’ve started a family or otherwise experienced a large increase in expenses—or haven’t corrected your budget for inflation—prepare for a rude awakening. You may find that you will have to convert some of your tax advantaged accounts to cash. Don’t withdraw them unless and until you have a real emergency. But accept the resulting “cash drag”—do not take risks by investing your emergency fund. Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.

After filling up your emergency fund and reassessing your risk tolerance, take a deep breath and stay the course. Don’t look at your investments. If you feel that you have to, reassess your E-fund and asset allocation. Then leave it alone and sleep well.
Respectfully, but why? Markets are down but people generally can adjust significantly and/or substitute rather than just see their expenses rise by CPI. There's no sign that the job market will suffer, so it's unlikely that unemployment will materially rise. Given all that, why sell equities/bonds (at a -10% loss) and convert to extra cash in a period of high inflation? That doesn't seem to be anywhere near "staying the course" no matter how it's rationalized.
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Re: A time to EVALUATE your jitters

Post by DesertMan »

TJat wrote: Fri Apr 22, 2022 5:02 pm
DesertMan wrote: Fri Apr 22, 2022 4:38 pm There’s a feeling like we are now looking at a worse version of 2011. The OP is a reminder that one must be prepared to stay the course.

With that said, now is the time to top off your emergency fund. Run your budget and make sure you have 6 months to a year of family expenses in cash, CDs, I Bonds, or VERY short term bonds, preferably TIPS (as rates are about to soar). Check your insurance deductibles (health, car, homeowners, etc.) and make sure you have those in cash as well. If you don’t, then sell enough of your investments until you do.

If you’ve started a family or otherwise experienced a large increase in expenses—or haven’t corrected your budget for inflation—prepare for a rude awakening. You may find that you will have to convert some of your tax advantaged accounts to cash. Don’t withdraw them unless and until you have a real emergency. But accept the resulting “cash drag”—do not take risks by investing your emergency fund. Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.

After filling up your emergency fund and reassessing your risk tolerance, take a deep breath and stay the course. Don’t look at your investments. If you feel that you have to, reassess your E-fund and asset allocation. Then leave it alone and sleep well.
Respectfully, but why? Markets are down but people generally can adjust significantly and/or substitute rather than just see their expenses rise by CPI. There's no sign that the job market will suffer, so it's unlikely that unemployment will materially rise. Given all that, why sell equities/bonds (at a -10% loss) and convert to extra cash in a period of high inflation? That doesn't seem to be anywhere near "staying the course" no matter how it's rationalized.
If you don’t have a sufficient emergency fund, you should not be investing until you do. It’s having a sufficient EF that gives you the ability to stay the course. If you have to raid your investments whenever a rainy day happens, you’re not staying the course.

I have learned this lesson the hard way: if you try to invest without having a sufficient EF, you will have to both (1) reduce your allocation to equities and so sacrifice returns over the long run; and (2) pull from investments to handle emergencies, which has the same effect, AND you incur unnecessary taxes (and early withdrawal penalties and loss of tax advantaged space in the case of IRAs). Furthermore you lock in losses that you could have recovered from had you stayed the course. That’s bad.

My point is, don’t fall into the trap of being allergic to cash drag. Have a sufficient EF so you can keep an optimal long term allocation regardless of market conditions. (bonus: I Bonds are paying a lot right now so it’s a great time to use that for a second tier E fund.)
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Re: A time to EVALUATE your jitters

Post by MissH1967 »

DesertMan wrote: Fri Apr 22, 2022 6:36 pm
TJat wrote: Fri Apr 22, 2022 5:02 pm
DesertMan wrote: Fri Apr 22, 2022 4:38 pm There’s a feeling like we are now looking at a worse version of 2011. The OP is a reminder that one must be prepared to stay the course.

With that said, now is the time to top off your emergency fund. Run your budget and make sure you have 6 months to a year of family expenses in cash, CDs, I Bonds, or VERY short term bonds, preferably TIPS (as rates are about to soar). Check your insurance deductibles (health, car, homeowners, etc.) and make sure you have those in cash as well. If you don’t, then sell enough of your investments until you do.

If you’ve started a family or otherwise experienced a large increase in expenses—or haven’t corrected your budget for inflation—prepare for a rude awakening. You may find that you will have to convert some of your tax advantaged accounts to cash. Don’t withdraw them unless and until you have a real emergency. But accept the resulting “cash drag”—do not take risks by investing your emergency fund. Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.

After filling up your emergency fund and reassessing your risk tolerance, take a deep breath and stay the course. Don’t look at your investments. If you feel that you have to, reassess your E-fund and asset allocation. Then leave it alone and sleep well.
Respectfully, but why? Markets are down but people generally can adjust significantly and/or substitute rather than just see their expenses rise by CPI. There's no sign that the job market will suffer, so it's unlikely that unemployment will materially rise. Given all that, why sell equities/bonds (at a -10% loss) and convert to extra cash in a period of high inflation? That doesn't seem to be anywhere near "staying the course" no matter how it's rationalized.
If you don’t have a sufficient emergency fund, you should not be investing until you do. It’s having a sufficient EF that gives you the ability to stay the course. If you have to raid your investments whenever a rainy day happens, you’re not staying the course.

I have learned this lesson the hard way: if you try to invest without having a sufficient EF, you will have to both (1) reduce your allocation to equities and so sacrifice returns over the long run; and (2) pull from investments to handle emergencies, which has the same effect, AND you incur unnecessary taxes (and early withdrawal penalties and loss of tax advantaged space in the case of IRAs). Furthermore you lock in losses that you could have recovered from had you stayed the course. That’s bad.

My point is, don’t fall into the trap of being allergic to cash drag. Have a sufficient EF so you can keep an optimal long term allocation regardless of market conditions. (bonus: I Bonds are paying a lot right now so it’s a great time to use that for a second tier E fund.)
I agree with TJat. The things I highlighted in red seem quite contradictory. Or it's very late/early and I'm overly tired.
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Re: A time to EVALUATE your jitters

Post by lucha »

DesertMan wrote: Fri Apr 22, 2022 4:38 pm Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.
I'm confused about this... save in taxable accounts so you can TLH? What do you mean by re-invest your IRA, 401k etc... ?
DesertMan
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Re: A time to EVALUATE your jitters

Post by DesertMan »

lucha wrote: Wed Apr 27, 2022 12:25 pm
DesertMan wrote: Fri Apr 22, 2022 4:38 pm Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.
I'm confused about this... save in taxable accounts so you can TLH? What do you mean by re-invest your IRA, 401k etc... ?

That is written to folks like myself who eschewed or underestimated the need for an EF and now are forced to hold the EF in a tax advantaged account. That’s possible but it’s not a good use of such accounts. The idea is to build up your EF in taxable so you can free your deferred/Roth to hold productive assets and not cash drag.

Per the wiki ( https://www.bogleheads.org/wiki/Emergency_fund):
It is generally best to establish a modest emergency fund while getting any employer match to an employer retirement plan (e.g. 401(k) or 403b) and paying down high-interest-rate debt (such as credit card debt) before investing for longer range goals such as retirement, college expenses or a home down payment.
IOW, unless you’re getting an employer match, EF comes before investing. That’s all I’m saying.
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Charles Joseph
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Re: A time to EVALUATE your jitters

Post by Charles Joseph »

Kookaburra wrote: Tue Mar 22, 2022 9:58 pm Why is EVALUATE in all caps in the thread title? Doesn’t that imply that word is being yelled?
Perhaps an attempt by the thread's author to grab attention. Kind of like CLICKBAIT a la 2011.

EDIT: while the word "clickbait" wasn't added to the Oxford English Dictionary until 2016, the phrase (as two words) was actually first used in 2006.
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Re: A time to EVALUATE your jitters

Post by HootingSloth »

Samuel Glover wrote: Fri Apr 29, 2022 4:34 pm
Kookaburra wrote: Tue Mar 22, 2022 9:58 pm Why is EVALUATE in all caps in the thread title? Doesn’t that imply that word is being yelled?
Perhaps an attempt by the thread's author to grab attention. Kind of like CLICKBAIT a la 2011.

EDIT: while the word "clickbait" wasn't added to the Oxford English Dictionary until 2016, the phrase (as two words) was actually first used in 2006.
It seems from the context of the original post that it was intended for emphasis. The author was trying to emphasize that it was time to evaluate your jitters, but not necessarily to act on them. The forum does not support italics, bolding, or underlining in thread post titles, so this was the only option.
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Re: A time to EVALUATE your jitters

Post by Carol88888 »

settlement12 wrote: Tue Feb 22, 2022 11:37 am Jittery time but I'm not too worried. Does anyone hear buy on margin during corrections or is that silly? I mean with very sensible stocks (BRK etc)
Not a good idea. BRK itself has had 4 times when it dropped 50%. In a bear market they take ALL stocks out to woodshed to be shot. Just at different times. First the speculative stuff, but in the end they come for the Generals.

And have you looked at the margin rates at Schwab? About 9% I think.
Count of Notre Dame
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Re: A time to EVALUATE your jitters

Post by Count of Notre Dame »

DesertMan wrote: Fri Apr 22, 2022 6:36 pm
TJat wrote: Fri Apr 22, 2022 5:02 pm
DesertMan wrote: Fri Apr 22, 2022 4:38 pm There’s a feeling like we are now looking at a worse version of 2011. The OP is a reminder that one must be prepared to stay the course.

With that said, now is the time to top off your emergency fund. Run your budget and make sure you have 6 months to a year of family expenses in cash, CDs, I Bonds, or VERY short term bonds, preferably TIPS (as rates are about to soar). Check your insurance deductibles (health, car, homeowners, etc.) and make sure you have those in cash as well. If you don’t, then sell enough of your investments until you do.

If you’ve started a family or otherwise experienced a large increase in expenses—or haven’t corrected your budget for inflation—prepare for a rude awakening. You may find that you will have to convert some of your tax advantaged accounts to cash. Don’t withdraw them unless and until you have a real emergency. But accept the resulting “cash drag”—do not take risks by investing your emergency fund. Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.

After filling up your emergency fund and reassessing your risk tolerance, take a deep breath and stay the course. Don’t look at your investments. If you feel that you have to, reassess your E-fund and asset allocation. Then leave it alone and sleep well.
Respectfully, but why? Markets are down but people generally can adjust significantly and/or substitute rather than just see their expenses rise by CPI. There's no sign that the job market will suffer, so it's unlikely that unemployment will materially rise. Given all that, why sell equities/bonds (at a -10% loss) and convert to extra cash in a period of high inflation? That doesn't seem to be anywhere near "staying the course" no matter how it's rationalized.
If you don’t have a sufficient emergency fund, you should not be investing until you do. It’s having a sufficient EF that gives you the ability to stay the course. If you have to raid your investments whenever a rainy day happens, you’re not staying the course.

I have learned this lesson the hard way: if you try to invest without having a sufficient EF, you will have to both (1) reduce your allocation to equities and so sacrifice returns over the long run; and (2) pull from investments to handle emergencies, which has the same effect, AND you incur unnecessary taxes (and early withdrawal penalties and loss of tax advantaged space in the case of IRAs). Furthermore you lock in losses that you could have recovered from had you stayed the course. That’s bad.

My point is, don’t fall into the trap of being allergic to cash drag. Have a sufficient EF so you can keep an optimal long term allocation regardless of market conditions. (bonus: I Bonds are paying a lot right now so it’s a great time to use that for a second tier E fund.)
I don't believe in an emergency fund in cash, but I sure do believe in liquidity. I have multiple lines of credit, unmaxed out credit cards and an enormous HELOC available should the need arise - or I just get greedy seeing market lows and want to invest.
lauberge49
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Re: A time to EVALUATE your jitters

Post by lauberge49 »

Great insights, and yes I am one of those nervous ones. I am retired and can survive on minimal withdrawals, hopefully just my RMD’s and SS. I actually switched my allocation from 40/60 to 60/40 a short time ago as the future is still in corporations and corporate profits. Big picture is that I am still up 6-7% from 2013 when I moved to VG and started indexing. In 2009 when the market was at 6500 I went 100% stocks. That time may come again, but my allocation for this year will continue at 60/40, and then take a look next year. Worse case scenario is that my daughter will inherit slightly less than I planned. In reality, if I look at real estate as a part of the overall picture (home, land) allocation to stocks is much less…………..worried, yes, but have learned indexing and patience on this board……………
VWCE
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Re: A time to EVALUATE your jitters

Post by VWCE »

DesertMan wrote: Fri Apr 22, 2022 6:36 pm
TJat wrote: Fri Apr 22, 2022 5:02 pm
DesertMan wrote: Fri Apr 22, 2022 4:38 pm There’s a feeling like we are now looking at a worse version of 2011. The OP is a reminder that one must be prepared to stay the course.

With that said, now is the time to top off your emergency fund. Run your budget and make sure you have 6 months to a year of family expenses in cash, CDs, I Bonds, or VERY short term bonds, preferably TIPS (as rates are about to soar). Check your insurance deductibles (health, car, homeowners, etc.) and make sure you have those in cash as well. If you don’t, then sell enough of your investments until you do.

If you’ve started a family or otherwise experienced a large increase in expenses—or haven’t corrected your budget for inflation—prepare for a rude awakening. You may find that you will have to convert some of your tax advantaged accounts to cash. Don’t withdraw them unless and until you have a real emergency. But accept the resulting “cash drag”—do not take risks by investing your emergency fund. Now stop contributing to retirement and start saving in taxable accounts or (hint!) I Bonds so that you can re-invest your IRA, 401k, etc.

After filling up your emergency fund and reassessing your risk tolerance, take a deep breath and stay the course. Don’t look at your investments. If you feel that you have to, reassess your E-fund and asset allocation. Then leave it alone and sleep well.
Respectfully, but why? Markets are down but people generally can adjust significantly and/or substitute rather than just see their expenses rise by CPI. There's no sign that the job market will suffer, so it's unlikely that unemployment will materially rise. Given all that, why sell equities/bonds (at a -10% loss) and convert to extra cash in a period of high inflation? That doesn't seem to be anywhere near "staying the course" no matter how it's rationalized.
If you don’t have a sufficient emergency fund, you should not be investing until you do. It’s having a sufficient EF that gives you the ability to stay the course. If you have to raid your investments whenever a rainy day happens, you’re not staying the course.

I have learned this lesson the hard way: if you try to invest without having a sufficient EF, you will have to both (1) reduce your allocation to equities and so sacrifice returns over the long run; and (2) pull from investments to handle emergencies, which has the same effect, AND you incur unnecessary taxes (and early withdrawal penalties and loss of tax advantaged space in the case of IRAs). Furthermore you lock in losses that you could have recovered from had you stayed the course. That’s bad.

My point is, don’t fall into the trap of being allergic to cash drag. Have a sufficient EF so you can keep an optimal long term allocation regardless of market conditions. (bonus: I Bonds are paying a lot right now so it’s a great time to use that for a second tier E fund.)
I wonder, howmuch % of your networth do you generally keep in cash at all times?
hotelcalifornia
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Re: A time to EVALUATE your jitters

Post by hotelcalifornia »

It seems the market will continue to slide given the high inflation rates but I have to remind myself that trying to time the market is a fool's errand... buckling up for this one.
Stephen_Crane
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Re: A time to EVALUATE your jitters

Post by Stephen_Crane »

I'm welcoming these dips. Perfect time to slurp up for future gains.
sent from my user friendly home computer.
stocknoob4111
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Re: A time to EVALUATE your jitters

Post by stocknoob4111 »

Stephen_Crane wrote: Wed May 11, 2022 8:39 pm I'm welcoming these dips. Perfect time to slurp up for future gains.
if your time horizon is 15+ years then sure yeah... if not good luck as this may be a repeat of 2000-2013 zero returns
dboeger1
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Re: A time to EVALUATE your jitters

Post by dboeger1 »

stocknoob4111 wrote: Mon May 16, 2022 11:01 pm
Stephen_Crane wrote: Wed May 11, 2022 8:39 pm I'm welcoming these dips. Perfect time to slurp up for future gains.
if your time horizon is 15+ years then sure yeah... if not good luck as this may be a repeat of 2000-2013 zero returns
Keep in mind that buying consistently with dividends reinvested throughout such time periods does a lot to smooth out returns and net worth progression. A single household's net worth chart generally should not look much at all like a typical return chart for the investments they're holding. I'm not saying you're ignoring that, but I think it's common for people to look at historical price charts and be unduly put off investing by very specific time frames that suggest poor results. The short-lived 2020 pandemic crash was a perfect example of this because it happened so fast. People who sold into the drop got obliterated. People who made even just 1 purchase during the drop soon found themselves with noticeable gains, even when the market had just returned to its previous high.
atlguy
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Re: A time to EVALUATE your jitters

Post by atlguy »

"Your job is to confront the reality of that uncertainty, that you do not know what will happen, and can only make the roughest guesses as to the likelihood of all these scenarios."

We do know what is happening with interest rates because the Fed told us. They are going up until inflation trends toward 2%.
That is quite a big piece of information.
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William Million
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Re: A time to EVALUATE your jitters

Post by William Million »

stocknoob4111 wrote: Mon May 16, 2022 11:01 pm
Stephen_Crane wrote: Wed May 11, 2022 8:39 pm I'm welcoming these dips. Perfect time to slurp up for future gains.
if your time horizon is 15+ years then sure yeah... if not good luck as this may be a repeat of 2000-2013 zero returns
Problem is, picking a hypothetical high point to buy and low point to sell is unrealistic. Most investors did not put all their investable funds in in 2000 and cash out in 2013. They bought at many low points and enjoyed dividends along the way. A balanced portfolio might have also enjoyed a run up in bonds.
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Beensabu
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Re: A time to EVALUATE your jitters

Post by Beensabu »

atlguy wrote: Sun May 22, 2022 1:39 pm "Your job is to confront the reality of that uncertainty, that you do not know what will happen, and can only make the roughest guesses as to the likelihood of all these scenarios."

We do know what is happening with interest rates because the Fed told us. They are going up until inflation trends toward 2%.
That is quite a big piece of information.
Well yes, until they have to stop doing that or reverse course because "other stuff". Which they've also told us.

Information changes. There is no certainty.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
atlguy
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Re: A time to EVALUATE your jitters

Post by atlguy »

Beensabu wrote: Sun May 22, 2022 8:09 pm
atlguy wrote: Sun May 22, 2022 1:39 pm "Your job is to confront the reality of that uncertainty, that you do not know what will happen, and can only make the roughest guesses as to the likelihood of all these scenarios."

We do know what is happening with interest rates because the Fed told us. They are going up until inflation trends toward 2%.
That is quite a big piece of information.
Well yes, until they have to stop doing that or reverse course because "other stuff". Which they've also told us.

Information changes. There is no certainty.
You can of course apply that "logic" to any situation where you wish to argue there is no point in doing anything. The sun will rise tomorrow. Until it doesn't.
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Beensabu
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Re: A time to EVALUATE your jitters

Post by Beensabu »

atlguy wrote: Sun May 22, 2022 10:30 pm
Beensabu wrote: Sun May 22, 2022 8:09 pm Information changes. There is no certainty.
You can of course apply that "logic" to any situation where you wish to argue there is no point in doing anything. The sun will rise tomorrow. Until it doesn't.
You can also choose to ignore variability of uncertainty.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
kop604
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Re:

Post by kop604 »

Morgthorak wrote: Sun Aug 07, 2011 10:27 am
Dieharder wrote: The most important thing is to understand and admit that we are powerless to change the course of events that already happened, reducing stocks at this point is sure disaster.
This.

It's best to let the market roll on while you do something else. Let your dividends and capital gains buy you more shares on a much cheaper basis. Go about your business and let all the drama flow by without you getting caught up in it.

Life is good, so we all ought to enjoy it while we can. The market will continue to do its thing and we should do ours. :)
What capital gains?
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1hotjava
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Re: Re:

Post by 1hotjava »

kop604 wrote: Tue May 24, 2022 5:35 pm What capital gains?
They must have meant "capital gains distributions" if the funds they are thinking about have those.
- Paul | Kansas City | "Dont look for the needle in the haystack, just buy the haystack" -Bogle
AlohaBill
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Re: A time to EVALUATE your jitters

Post by AlohaBill »

It’s jittery season again. Have a gander.
john0608
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Re: A time to EVALUATE your jitters

Post by john0608 »

let me check my jitters......no jitters but lots o' frustration & anger

i am seeing odd comments in this thread like -
- i have no cash in my ER but i have lots of credit lines (sounds like a sound strategy (not))
- employment wont be impacted by a potential multi year recession (wrong, companies are already freezing headcount, laying off)

i am 65 and fairly recently retired with no pension, not planning on SS till age 70, my AA was 60/40 but as the stocks tank the ratio changes.
i have 5 to 7 years living expenses in cash, cd's, i-bonds, t-bills and i would advise anyone to do the same with their fixed assets if possible (its very conservative but when the bear hits you don't sweat it)
so i can wait this debacle out, my fall back will be to collect SS earlier, hopefully things are back on track within 2 to 3 years if not sooner.
lots of my growth funds down 25 to 45%, i don't have the guts to purchase more at least not till i see some rays of sunshine somewhere.

Right now i am laddering t-bills, goal is to have monthly ladders then extend them to 2 to 3 years as rates get near 5% (could be 6 or 7% by year end)

bottom line - my very conservative strategy gives me zero jitters but is not a cure for frustration, anger, and grumpiness.
Calico
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Re: A time to EVALUATE your jitters

Post by Calico »

I am a bit bummed out, but I am not sure if that's the same as jittery. I am bummed that I just invested a large lump sum of money from the sale of my house two weeks ago. I saw it a few days ago and I was up nearly $10K, but I don't plan to look at it again or a very long time. I don't need the money for several years, 10 or more, so me not looking at it is the best. I have 60% in a total stock market fund, 20% in an index bond fund, 2% in an I-bond now, and the rest as cash. I plan to get another I-bond in January.

I am happy that I recently re-balanced my retirement accounts to 65/35 which is more conservative than where I usually am (I've been 70/30 for years and just decided to change it with this latest re-balance).
I am a mere Boglehead apprentice... even after all these years.
kdfi
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Re: A time to EVALUATE your jitters

Post by kdfi »

Calico wrote: Thu Jun 16, 2022 5:38 pm I am a bit bummed out, but I am unsure if that's the same as jittery. I am bummed that I just invested a large lump sum of money
I'm in a situation where I'm trying to avoid being bummed out, and therefore I'm a bit hesitant about what the best course of action should be.

I want to kick-start my investment portfolio with a good amount of savings and then start adding regular contributions every month (DCA). I know I shouldn't be timing the market and that no one can predict what is going to happen next. Also, I'm looking to invest for at least 35 - 45 years so I know whatever I do now is not going to have a major impact on the longer-term outcomes of my investment, but well, I'd hate to see my portfolio lose 10 - 20% soon after I start investing.

As soon as I finished Jim Collin's book (The Simple Path to Wealth) a couple of weeks ago, I decided to start investing right away. But, knowing that the ECB and the Fed are both planning to increase interest rates by the end of this month, I'm starting to think maybe it'd be wise to wait a couple of days (or weeks?) into August before I pull the trigger.

Would love to hear some opinions on the matter to help me make up my mind (... or confuse me even further :happy)
random_walker_77
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Re: A time to EVALUATE your jitters

Post by random_walker_77 »

kdfi wrote: Sun Jul 17, 2022 9:00 am
Calico wrote: Thu Jun 16, 2022 5:38 pm I am a bit bummed out, but I am unsure if that's the same as jittery. I am bummed that I just invested a large lump sum of money
I'm in a situation where I'm trying to avoid being bummed out, and therefore I'm a bit hesitant about what the best course of action should be.

I want to kick-start my investment portfolio with a good amount of savings and then start adding regular contributions every month (DCA). I know I shouldn't be timing the market and that no one can predict what is going to happen next. Also, I'm looking to invest for at least 35 - 45 years so I know whatever I do now is not going to have a major impact on the longer-term outcomes of my investment, but well, I'd hate to see my portfolio lose 10 - 20% soon after I start investing.

As soon as I finished Jim Collin's book (The Simple Path to Wealth) a couple of weeks ago, I decided to start investing right away. But, knowing that the ECB and the Fed are both planning to increase interest rates by the end of this month, I'm starting to think maybe it'd be wise to wait a couple of days (or weeks?) into August before I pull the trigger.

Would love to hear some opinions on the matter to help me make up my mind (... or confuse me even further :happy)
If you have a suitable emergency fund, then I'd start to DCA now in any case. Regarding timing on the lump sum, my guess is worthless.

If in doubt, you could DCA that over the next x months as a psychological crutch. You might take heart in the story of Bob, the world's worst market timer: https://awealthofcommonsense.com/2014/0 ... ket-timer/
Note that Bob ends up doing well only because he never sells. That's why it's critical to have a solid emergency fund, so that if everything goes wrong, you aren't forced to sell at the worst possible time.

Also note, the worst times to buy are when you're confident because everything looks good. The best times to buy are when you, and everyone around you, are scared and convinced that it's a foolishly bad time to buy. Best to just automate it, and take your emotions out of the picture.
Parkinglotracer
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Re: A time to EVALUATE your jitters

Post by Parkinglotracer »

I have had jitters since I tried to kiss what’s her name in 7th grade. Got that off my chest.
GP813
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Re: A time to EVALUATE your jitters

Post by GP813 »

Would have been a great day to post in the soaring thread!
Bluedoor
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Re: A time to EVALUATE your jitters

Post by Bluedoor »

random_walker_77 wrote: Sun Jul 17, 2022 5:51 pm

Also note, the worst times to buy are when you're confident because everything looks good. The best times to buy are when you, and everyone around you, are scared and convinced that it's a foolishly bad time to buy. Best to just automate it, and take your emotions out of the picture.
Well-said. I will buy some mutual funds today.
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