If you're looking at your 401(k) balance, remember

[james.hendrickson]

Posting this for all the lurkers in the forums... Don't forget, long-term investing is a big part of personal finance. If you're young and have time to let your investments grow, market pullbacks are to be expected.

The main thing is to stay focused and not lose perspective. New years is right around the corner, which means you'll have more funds to put to work in your retirement accounts in upcoming months.

[bjl584]

If anyone remembers 2008 - 2009, they saw their account balances cut in half only to come roaring back a year or two later. Stay the course and keep investing for the long term.

[james.hendrickson]

If anyone remembers 2008 - 2009, they saw their account balances cut in half only to come roaring back a year or two later. Stay the course and keep investing for the long term.

I totally remember that - some stocks I loved were available for 10% of their earnings at the bottom, this could be a great buying opportunity for the long term.

[corn18]

My retirement accounts are $54k bigger right now than at the beginning of the year. Yeah! But I put in $59k, so, boo!

A point to remember is if you were 60% stocks 40% bonds in 2008/9, you did not lose 50% of your portfolio. Bonds took off and you only lost 50% of 60% on equities. Might be a good time to evaluate your AA and make sure it matches your risk tolerance.

[greenskeeper]

I've been 100% in on stocks since age 18, highs and lows are pretty standard stuff after investing for 21 years. In about 20 more years I'll start to wean off of stocks.

[disneysteve]

A good exercise is to use an app or website to look at charts of market performance over the past week, month, year, 5 years, and 10 years. The longer out you go, the less noticeable the volatility becomes and the more clear the trend over time becomes.

[corn18]

A good exercise is to use an app or website to look at charts of market performance over the past week, month, year, 5 years, and 10 years. The longer out you go, the less noticeable the volatility becomes and the more clear the trend over time becomes.

[kork13]

Thus far, I haven't really even noticed much of the drop... funny enough, my retirement contributions are basically matching my market losses, so my balances have remained basically constant for the last 2-3 months as the market has started to turn south.

I'm looking forward to the upcoming buying opportunity. I'm continuing our normal retirement contribution purchases, but on the taxable side, I'm stockpiling cash while making smaller recurring stock purchases (25% stocks, 75% cash/MM). I also sold a large portion of my taxable stocks in early October (happily, the day before the first big drop!) to pay off my rental house. Admittedly, those are both partly also driven by a potential PCS (military move) within the next year (building cash for moving/home-buying)... But I'm keeping my options open.

[scfr]

I won't be looking until I do my year-end net worth calculation.
I agree with corn18 that times like these are a good opportunity to evaluate if your risk tolerance really is what you think it is.
October 1987 had a big impact on me. I didn't lose anything because I had not yet started investing, but was less than a year out of college, uncertain about what the future might hold, scared what going through another "Great Depression" would mean for a young single woman out alone in the world. I believe going through that scary time (more in my "what if?" musings than in reality) made me stronger, and even more determined to be self-reliant.

[kork13]

I won't be looking until I do my year-end net worth calculation.
I agree with corn18 that times like these are a good opportunity to evaluate if your risk tolerance really is what you think it is.
October 1987 had a big impact on me. I didn't lose anything because I had not yet started investing, but was less than a year out of college, uncertain about what the future might hold, scared what going through another "Great Depression" would mean for a young single woman out alone in the world. I believe going through that scary time (more in my "what if?" musings than in reality) made me stronger, and even more determined to be self-reliant.

That's a really good point, and probably the same for many folks in my age group. I graduated college months before the 2008 crash, and alot of my friends (at least, the ones who discuss investments occasionally) tend to be at the extremes... most are totally willing to accept & ignore the market churn, and all the rest are simply terrified of it (and thus invest in stocks very little, if at all). The market characteristics when you come of age seems to guide alot of your thinking.

[disneysteve]

I've read an article or two written about how those who were just starting out when the recession hit have stayed away from investing in the stock market and how that has led them to be under-preparing for the future. Folks who have been out of the market since 2008 (or never entered the market to begin with) have missed one of the greatest bull markets in history. Even worse, they've been sitting in cash during a period of rock bottom interest rates earning next to nothing. They can never make up for that lost time.

As a baby boomer, I realize I don't have decades to recover from the next crash so I am being a bit more conservative than I used to be, but I'm still investing in stocks on a regular basis with every paycheck. I've just shifted our portfolio form 80/20 to 70/30 over the past year.

[kork13]

Steve, I think my father is close to your age (60 y/o, looking to retire in the next 3-4 years).... But in early October, he decided to take his entire $700k TSP and moved it into the G-Fund (guaranteed never go down, and earns ~10yr T-Bill returns). I tried to convince him to be (ironically) more conservative with the move (by which I mean, keep at least 40-50% in stocks), and we actually had a good, lengthy discussion about it. But in the end, he really felt like the market was poised for a crash, and still went all-in to the G. He's currently tooting his own horn about the move, but at some point soon, I'll probably want to discuss an "exit" (really a re-entry) strategy with him, to think through when he'll want to move at least somewhat back into stocks. If nothing else, to start buying stocks with his ongoing TSP contributions to at least partially ride the wave down & back up while buying shares "on sale". The problem I foresee is that he'll stay sitting in the G-Fund for way too long, and miss out on the inevitable run back up after the market hits bottom (whatever that "bottom" might turn out to be).

[corn18]

I guess it all depends on what you need for returns. If you've won the game, going all G fund might be fine. If you are looking at a 2% withdrawal rate to maintain your desired retirement income, then all G would be fine. You aren't doing your heirs any favors and you lose any upside.

If your dad is retiring at 64, he may have 30+ years of retirement, so carrying 50% equities would not hurt him if he is willing to ride the volatility. If that's not for him and $700k in G is enough, then maybe he's smarter than all of us.

[disneysteve]

Steve, I think my father is close to your age (60 y/o, looking to retire in the next 3-4 years)

I'm a little younger than him at 54 and I'd like to be able to retire in 7-8 years.

There was just an article in Money magazine highlighting several centenarians (folks 100+). They talked about the importance of preparing for a long retirement. One planner they interviewed said he used to plan based on 30 years but now plans based on 40. I think the advice was that at any age, folks should have 35-55% in stocks because if you need your money to last for 3-4 decades, you're going to need some element of growth in your portfolio. I don't know the percentage my mom has but she is 88 and has a number of individual stocks as well as an S&P 500 fund in her portfolio. Not only is the growth important but she also collects the quarterly dividends to provide some of her income.

[corn18]

Equities are a much better inflation hedge vs. fixed income as well. Real estate can also be an excellent inflation hedge. This chart illustrates that having some equities is actually less risky than all bonds: