peskypesky wrote: ↑Fri May 20, 2022 3:51 pm
HomerJ wrote: ↑Fri May 20, 2022 3:28 pm
peskypesky wrote: ↑Fri May 20, 2022 3:18 pm
It's funny that one person is criticizing me for being too pessimistic about the market's prospects, and someone else is criticizing me for being too optimistic.
They probably should argue with each other, since I'm in the middle.
What was funny was you saying "Dark days are coming for years" AND "I wish I could borrow money to buy stocks" in the same post.
That worked in 2008 because you were still getting a paycheck. (
and the market recovered quickly, so even if you were retired it could have worked).
If dark days continue for years, when your cash runs out, you will have to sell equities to eat.
You can't just wait 5-10 years for the market to bounce back if you are spending down your portfolio, AND paying interest on some margin loans (assuming they don't get called).
The market took 5 years to recover in 2008. To me that's not so quick. But we can have different opinions on whether that's quick.
I have no margin loans.
And I absolutely CAN wait 5-10 years for the market to bounce back. What other choice would I have? Wouldn't we all be waiting for the market to bounce back?
Look, you may not realize this, but if you are SELLING stocks each year to buy food, you can run out of money if it takes too long to recover.
Because the 3% or 4% that you are pulling from your 100% equities each year never gets a chance to bounce back.
If you retire with $1 million, 100% in stocks, and the market crashes 50%, so you only have $500,000 now... AND you are pulling $40,000 a year from that $500,000 (4% withdrawals from the original $1 million), after five years you will have pulled $200,000 out, and be down to $300,000.
If the market finally bounces back to it's original heights, you're only going to have $600,000 when it gets back to even. The $200,000 you spend over those 5 years is gone, and never bounces back. You technically blew through $400,000 in 5 years because you were selling stocks at 50% down.
This is why one should have a good chunk in fixed-income at retirement, so you can spend that in a crash and leave your stocks alone and wait for them to recover.
If you were 60/40, the $600,000 in stocks would drop to $300,000, you wouldn't touch it, instead spending $200,000 out of the fixed-income.
After five years the $300,000 would bounce back fully to $600,000, and you'd still have $200,000 in fixed-income, so you'd be at $800,000 after the recovery instead of at $600,000.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59