NSNP: Market "crash"

BamaNation

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Just thought sometimes we need some perspective.

Here's a chart of the last 50+ years of the S&P500. Despite all the ignoramus talking heads who appear to WANT the market to crash, the last 2 days are barely a blip. In fact, the market has returned to where it was just 3 weeks ago! The point being, invest for the long term and throw a rock through the TV at these idiots telling you the sky is falling. It might go down another 10% but even then, it will still be only down to about mid 2019 levels!

sp500_last50years.jpg
 

BamaNation

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Also, have heard LOTS of emphasis on yesterday and today being two of the largest POINT drops in history. We're down about 2000 points on the Dow30 since Friday close and that's 7%. (For those that don't remember or weren't alive, the Dow30 dropped about 22% IN ONE DAY in October 1987!)

PERCENT is what matters - especially since we're 300% above the lows in 2008/09! The market can drop 20% and we'll be at what we were on Christmas 2018. Perspective matters.
 
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B1GTide

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I am still 5-10 years from retirement so don't look at my balances but twice each year. Not worth the stress because I don't intend to move my money.
 

MDBSnare

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Diversification of non-systematic risk is the only way to manage your investments; through asset allocation. It is the only efficient way to construct an efficient portfolio.
 

BamaNation

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That's why we invest for the long term. Selling out now is foolishness :)

Irrational exuberance or irrational fear. It's still irrational. Plan on ~4% returns over the long haul, take what the market gives you - no more/no less. Save save save. Live below your means.

"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery. " - from David Copperfield
 

dayhiker

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That's why we invest for the long term. Selling out now is foolishness :)

Irrational exuberance or irrational fear. It's still irrational. Plan on ~4% returns over the long haul, take what the market gives you - no more/no less. Save save save. Live below your means.

"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery. " - from David Copperfield
It sure seems like a buying opportunity.
 

BamaNation

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Losses are basically locked in two ways: (1) Selling out low and (2) not continuing to invest (or rebalance back to your target allocation) after a decent drop.

Those who pulled money out 10 -12 years ago and never got back in are now scared because the market was too high and now has dropped ~10% this last week. When, if not now, are they going to get in for the long haul? Probably at another peak. It is an individual decision and when money "disappears" it becomes tough, but having an Investment Policy Statement can help you hold yourself accountable in tough times.

Everyone has to decide their own allocation but if you're not sure, you might consider the following (exact #'s are depending on your risk tolerance):

Total Bond Market Index: Your age minus 10 or 20
Equities: the remainder (in this allocation: 70-100% Total Stock Market Index / 0-30% Total international market index)

If you're getting some kind of 401k match and/or can do a Roth, the benefits are great even (especially) in down markets! If you're speculating by buying individual stocks, you're probably better off going to Tunica or Vegas :) At least then you'll get a free buffet!

Here’s what Boglehead’s.org wiki says about the order in which you should pay off debt and invest (modified slightly by me with some commentary on the interest & return rates): “Here is the most likely order of priority for investments versus paying off loans; it does depend on the rates, so these examples are based on typical rates which may not be accurate at any specific time."
  1. Invest in 401(k) to get maximum employer match (return rate may be over 100% in the first year)
  2. Pay down credit cards (interest rate may be 10-30+%)
  3. Pay down non-deductible auto or student loans, or other medium-rate loans (interest rates typically 5-8%)
  4. Invest in Roth IRA, deductible IRA or decent 401(k) (compare at rate of 5% on Treasury bonds)
  5. Pay down deductible mortgage or student loans (rates are around 4% after tax)
  6. Open and Invest in taxable investment account with index funds … (at Fidelity, Vanguard, Schwab, etc – but definitely NOT anywhere where you’re going to be charged management fees of up to 2% per year!)
  7. Do not pay down/off subsidized loans as long as subsidy lasts (or rates of 0-3%) ”
 

BamaNation

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I have lost almost 6k. Not worried yet, but I am concerned.
I know YOU know this but for the benefit of anyone reading who might not... if you had $1MM - 1.5MM invested in 100% equities it would be down 60K :) (or the same at a 60/40 equity/bond allocation with 2MM-2.5MM invested) But, assuming you had been investing for last 10-20 years, you'd probably be up 200-300% still. That's the beauty of it and, now, anything you invest is 'cheaper' than it was last week when you were buying it!

(Obviously, the above is a bit of oversimplification but makes my point)
 
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Bamaro

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I know YOU know this but for the benefit of anyone reading who might not... if you had $1MM - 1.5MM invested in 100% equities it would be down 60K :) (or the same at a 60/40 equity/bond allocation with 2MM-2.5MM invested) But, assuming you had been investing for last 10-20 years, you'd probably be up 200-300% still. That's the beauty of it and, now, anything you invest is 'cheaper' than it was last week when you were buying it!

(Obviously, the above is a bit of oversimplification but makes my point)
FWIW, the total return in the S&P 500 for 2019 was over 28% depending on how you measure it
 
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BamaNation

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FWIW, the total return in the S&P 500 for 2019 was over 28% depending on how you measure it
Yep - with the 200-300% I was talking about over last 10-20 years (with return dependent on asset allocation). But, to be sure, in our personal financial planning, we assume a 4% annual return (before taxes) on our portfolio over our investing and retirement lives. It's a fairly conservative estimate that makes us save / invest more. This is actually about what Jack Bogle estimated a reasonable expected return to be over the next 10 years.
 
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BamaNation

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DJIA down another 2.2%+ at open. Perspective: We're back where we were on (Oct 10 2019, just 6mo ago.)

The link below is always an interesting thread on bogleheads.org when the market tanks.

NOTE: First post is on 8/8/2011. On that day, the Dow closed down 672 points to 10,809 (-5.85%). As Jack Bogle said on that day, "Don't do something, just stand there!"

Every dollar invested that day, you're up ~150% today. That's about 10.9% / year on average [i~10.9%: (1+i)^8.5]. Using Rule of 72 at that return, you're doubling investment every 6.6 years.

 
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