Managing investments in a downturn - No politics!

In reply to RX Reven' :

Another bit of guidance I've heard is to invest in strong dividend stocks rather than bonds. Eventually use the dividend proceeds to supplement income rather than gains from stock sales.

In reply to RX Reven' :

Funny thing- we have multiple funds, one is a new IRA that is being more actively managed for the funds.  The best acting fund we have is one that is only using index funds for the large, mid, small caps, bonds, ect.  Better even when you add back in the management funds.

But right now, we are using one of the funds to live on, so reducing the losses is worth not having huge gains.

In reply to AAZCD-Jon (Forum Supporter) :

Index funds are better.  Almost free and outperform active funds over the long run- which is what most of us are in for.

In reply to AAZCD-Jon (Forum Supporter) :

That's something I have done (at least to some extent).  There are also dividend based ETF's out there.  Small note/clarification, you don't actually want to live off the dividends / interest because they are short term gains, you want to sell of long term gains, and if those are less than the dividends / interest, there is no decrease in total value.

I will second a point above about perspective on the loses:  Again, you only loose what you sell, so, even in retirement, if you have (simple math) X in your saving, and you need to use 5% a year to live off off, and the market tanks 25%, if that down turn is only a year, you don't loose 25%, you are loosing %1.25.  Obviously the longer the down turn goes on, the larger the lose gets.

In reply to AAZCD-Jon (Forum Supporter) :

I think dividend funds are OK except many have high management fees and as Aircooled pointed out, they are less tax advantaged.

About 94% of my portfolio is in various S&P 500 Index funds.

As some know, I'm a recently retired statistician...study after study has shown that simply buying and holding index funds is the best approach.

I know that I'm considerably more aggressive than the general guidance recommends...I worked hard and I lived modestly, as a result, I can afford to lose a lot.

I want to stay Wide-Open-Throttle all the way to the cemetery with my portfolio.

At this point I can do nothing to offset the perceived losses.  It is much too late to sell what I have low, and then buy it back high at a later time when things recover.  

I will just wait.  I will have to wait.  There is nothing else I can do.

In reply to Beer Baron 🍺 :

I understand the cost implications. My labor is the largest single cost in producing our beer. But raw materials is a close second.

My point is: I think you were straw-manning the arguments people actually make. Making a "side" look more silly or hypocritical than it actually is.

These tariffs are a big deal. People have very legitimate reasons to oppose them. It is entirely reasonable to doubt that they will be effective at achieving the stated goals. This forum is not the place to malign or mock the people who oppose or support these tariffs.
 

Again, not my intent. I think you may be reading way more into what I wrote than is actually there. I was just stating an observation. I see a lot of the same people who were railing against the stock market highs who declared policy was favoring the market now decrying the losses. I'm not trying to make anyone look silly or hypocritical, they don't appear to need my help.  
 

Tariffs are a big deal. This discussion is not about tariffs in general, it's about how they are affecting the stock market. They are a reality, and anyone that did not see them coming was not paying attention. For the record, I'm pretty strongly against tariffs. They are a tax. Taxes are largely a means to drive behaviors. In this case, a disincentive to buy goods from the impacted countries. They also generate revenue. But I'm also aware of the increasing trade imbalances that we have ignored for decades. Much of our manufacturing, which is key to national defense, has been sent overseas. I'm also concerned that a geopolitical foe controls most of the pharmaceutical manufacturing that we rely on. Often not reported is that other countries have very high tariffs on our goods already. A leader of another country recently decried the tariff increase. Our response? "Then how about we both set them to zero." Keep in mind that Tariffs are not the goal- they are largely a means to influence behaviors and negotiations. Will it work? I don't know. But I do believe that we only have one shot at this, so it needs to be an aggressive one. I don't for see the political will to try this again if this fails, which would have long term consequences on our trade. I'm okay with a bit of short term pain to get long term relief. A valid concern is are we doing this the right way. I don't know the answer. Maybe there is a better way, but no one else has been willing to try, so here we are. I hope it works. I certainly don't want short term pain with no long term relief, which is definitely a possibility. And a perfectly valid argument against the tariffs. I guess we will have to wait and see. 

In reply to STM317 :

Historically, the opposite is true. You want to avoid Sequence of Returns Risk. When you start to draw down your nest egg in retirement, while also experiencing loss due to market downturn, your principal can see losses that cannot be recovered. Everybody should have a plan to mitigate SORR.

 

The following investors retire with the same nest egg, spend the same amount each year, and see the same average rate of return over the 15 year period. The only difference is the timing of their positive or negative returns.
 

Thank you, I had It backwards. This should have been obvious. If you lose 10% early vs. 10% later, you lose more dollars later, but you are also left with more. 

In reply to Boost_Crazy :

Ideally, you'd retire at point zero and the worst case scenario is to retire at point Pi...exactly 50% of people retire at a poorer than average time.

Retirement is a one-time, high impact, discrete event...basically, a statisticians nemesis.

Load up on $hity bonds, take your chances, or have more than the simple math sez' you'll need...we've all got the same three options.  

Lotta smart folks in this thread.

I've heard it said that it's actually beneficial to retire into an ongoing down market. 

This acknowledges that sequence risk is very real, and it is not advocating that you try and time the market. Rather, it's noting that most recessions last less than two years. So retiring a year into a recession:

a) is a brief stress test of your retirement plan

b) provides a significant buying opportunity if you have the liquidity

Thoughts?

Peabody said:

My investments hit a milestone number the day before the latest brilliant announcement, and despite what I'm hearing about the markets, has only lost a few grand from that.  I bet my money guy saw this coming. 

That was optimistic of me. Sunday was my last day of work, Monday morning I was down a hundred grand. 

Well, at least the tariff saved me from spending all that money on a laser welder that I didn't really need.

In reply to Peabody :

That is the absurdity of the managed funds.  They tend to loose just as much as everyone else (plus commission and fees of course).

Well today was nuts. It looks like we got a big chunk of our 401k's back. I put my money where my mouth was and bought a chunk of sale priced Nvidia on Monday, that looks like a good move so far. 

How about a little perspective:

Even at the dip, it was still doing better than during "The Madness" in 2020.

Units were $249 then. They were at $552 in February, then dipped to $465 on Apr 4 and they're back up to $499 already.

I bought a bunch in 2020 too.

Don't panic. It's even written on the front in big, friendly letters.

In reply to Boost_Crazy :

"Well today was nuts". -Planned nuts or I'll eat my hat.

Don't get too excited, there is still a rather large gorilla in the room (China).

I still say though that the market never really took this entirely seriously, I would think it would have dumped a lot worse if they did.

It is a real, short term, example of how difficult it would be to time the market.  And... we still don't know.  If you are timing, do you jump back in, do you sell on the rise thinking its short lived?.... good luck.

RX Reven' said:

Typical guidance is to be 100% stocks until about ten years prior to retirement and then start building a bond position so that you arrive at a 60 stock/40 bond asset allocation upon retirement.

"Don't try this at home kids"

I've always been and continue to be 100% stocks which has given me about an 11.6% increase over what the typical guidance above would have produced.

I've been completely debt free for several years and I've built up a portfolio that's about 50% bigger than the high end of typical guidance range.

Go big or go home; right?

"Don't try this at home kids"

I hope more people consider adopting this strategy. By overshooting your investment goals you're in a position to weather any downturn, which allows you to take on more "risk" and capture higher returns. 

Start young kids, and build a big damn nest egg.

The big mess will be when the china tariffs roll in full bore. Playing chicken with no seatbelts. 

Lots of money in this thread for being "grassroots" :)

In reply to aircooled :

It is a real, short term, example of how difficult it would be to time the market.  And... we still don't know.  If you are timing, do you jump back in, do you sell on the rise thinking its short lived?.... good luck.
 

I'm trying a bit of both. The bulk of my investments are in my 401k that I don't touch and rarely even look at. It's long term, I just keep maxing out my contribution. 
 

I also have some smaller investments that I do for fun. I'm too risk adverse to invest serious money in them, but it's fun to test how good I am at investing, and see if I can beat my 401k return percentage. I've been pretty good at it. I'd be much wealthier if I wasn't so chicken and invested greater amounts, but I probably would have lost a lot of sleep. I guess you could say I  am trying to time the market. I look for stocks that I think are undervalued, or especially suffer from some knee jerk negative news that I don't think will stick for long. I follow stocks that I like then pounce on them when there is a drop, like I did this week with Nvidia. Overall I've been successful, I was at 25% gain per year on my picks until this week. My only loser that I picked was Target. I bought when it dropped due to the controversy, figuring it would blow over. It did and I saw some solid gains, but I didn't sell when I should have. So now I'm holding it until it returns to where it should be. I should have sold it when Nvidia was lower and bought more of that instead, but oh well. Can't win them all, just need to win more than you lose. 
 

Still kicking myself over Twitter. I bought when it was low and Musk offered to buy at a substantially higher price. It's not often that you are told how much a stock is going to be worth. I made a nice gain, but I could have invested a lot more. 

In reply to Steve_Jones :

Lots of money in this thread for being "grassroots" :)
 

I think the two are related. I have money invested because I'm very Grassroots on my fun cars. Instead of an old Miata and Galant VR4, I could have bought much more expensive fun cars. But with the money I invested instead of spent, I can buy pretty much whatever I want later. I probably won't though, because I'm cheap.:)

Edit: I take that back. I can easily see myself buying an expensive fun car in the future, but it would likely be one that is appreciating. 

CrustyRedXpress said:

 

Start young kids, and build a big damn nest egg.

Quoted again because it can't be overstated. Every time I've tried to pick individual stocks or time the market, it turns out I'm terrible at it. The only reasons I've had any success was because I started a Vanguard retirement account at 19. Compounding gains are very real and very powerful

Steve_Jones said:

Lots of money in this thread for being "grassroots" :)

In addition to building a solid retirement account, similar ideas can be used to self fund "repair insurance" schemes.  Instead of giving money to any of those repair service companies, invest it yourself.  Start with something simple, when it's funded to a nominal repair, then step up to the next investment level, once it's similarly funded, then step up into funds.

Basically, just like an HSA account.  Sure, it's not going to be tax free like those are, but it's a whole lot better than giving it to some other company that is doing that exact same thing (as well as shorting pay outs for repairs).

Over time, this can become a solid investment fund.

Steve_Jones said:

Lots of money in this thread for being "grassroots" :)

If one drives through the poor part of town near where I live, there are a surprising number of nice cars. A lot of them are trading in economic security for "bling" or "flexing" on others. Conversely, there are wealthy people who still work on their own cars. The point being that "Grassroots" is a state of mind independent of actual social-economic standing.