Don't sell the stocks in your retirement portfolio because of the drop in the market!

[corn18]

All childish snarking aside on my part, TH is right.

[disneysteve]

That was no correction.

Many folks these days haven’t lived through an extended bear market.

You are confusing two different terms.

A market correction is a drop of 10% or more. There absolutely was a correction a couple of weeks ago.

A bear market is a prolonged drop in the market of 20% or more.

A correction is a short-lived event, as this one was.
A bear market is an extended period of falling prices.

The last bear market was from 10/07 through 3/09, so only 9-10 year ago. So most folks have lived through one. I've certainly been through a few. It's a fundamental part of investing. I've never altered my approach because of one.

[corn18]

The last bear market was from 10/07 through 3/09, so only 9-10 year ago. So most folks have lived through one. I've certainly been through a few. It's a fundamental part of investing. I've never altered my approach because of one.

And yet somehow you managed to save a million dollars.

[bjl584]

Texas, so what do you suggest the average investor do? Diversify? Overweight cash? Short the indexes?

I'm going to suggest that he means to not invest in the stock market at all.

[disneysteve]

And yet somehow you managed to save a million dollars.

Yep. You may recall I posted a thread a while ago showing the year-end value of our portfolio every year since 1992 I think. It showed how things performed over the years including down markets, terrorist attacks, the recession, etc. There were definitely drops but long term the results have been good.

[TexasHusker]

I'm going to suggest that he means to not invest in the stock market at all.

That's correct. But to each his own. I was in the stock market - mutual funds, 401K, options trading, and what not, for about 18 years. I didn't make much money over that time. It just didn't work that well for me personally. I don't begrudge anyone for doing what they think is best.

I do know that looking at historical averages can be VERY deceiving. If the market returns say 12% annual over time, that is an average over decades. But that includes long bull markets of exception returns, AND bear markets of huge losses. If you are retiring in the next 5 or 6 years and believe that just staying the course is the way to go, and you can sustain an imminent bear market, great. But I think folks need to be very cautious at this juncture, and realistic.

[james.hendrickson]

Texas has a very stimulating perspective. Texas, can you please say more about why you don't feel people should be in the market? Do you feel its rigged? A scam? It only benefits the ultra-rich?

[disneysteve]

Many folks these days haven’t lived through an extended bear market. A protracted bear can absolutely destroy your retirement or any other portfolio. While it is true that the stock market rises over the long term, SO DOES PRETTY MUCH EVERYTHING ELSE.

This bull market is years old, and there is without question an extended bear coming at some point. And that worm can turn really fast.

In 1999, everything was milk and honey. Markets were soaring. The nasdaq reached near 7,000. It then took a 75% haircut. It is now 2018 and it STILL hasn’t made it back. That crash washed a lot of folks out of the stock market forever. If you opt to stay invested through the next bear, expect on losing about 41% of your portfolio - that’s the average loss in a bear. You will then need to plan on the next bull market rising 70% just to recoup your losses. That can take a long time.

When the market truly turns south - not a one week dip - you are going to see absolute PANIC.

“What the hell is happening”?
“This isn’t supposed to happen!”
“But I’ve been dollar cost averaging!”
“I thought the markets went up over time??!!”
“Who the hell sold me this crap?”
“But we were planning on retiring in two years!”
“Why doesn’t the government do something?”
“Our life’s savings is gone!”

I heard all of this and more in the early 2000s.

I’ll hear it all again, likely sooner than later: this bull is now 9 years old.

Buckle up. Don’t be stupid.

I think much of what you say here is absolutely true. People get wiped out because they do stupid things. 1999 is a great example. The infamous tech bubble. People were investing every penny they had and more, even borrowing money to buy stock in brand new companies with zero earnings and little more than a flashy Superbowl commercial. Those folks deserved what they got. That's not investing. That's gambling.

If someone lost their life savings, they were doing it wrong.
If someone got wiped out right before retirement, they were doing it wrong.
If someone was making investments they didn't understand, they were doing it wrong.

The stock market is a long term investment. It's for money you won't need to touch for at least 10 years. If you need it to pay tuition in a few months, it shouldn't be in the market. If you need it to cover living expenses next year, it shouldn't be in the market. If you can't sit and wait for a recovery to happen which might take 2 or 3 or 4 years, you shouldn't be in the market.

[disneysteve]

Texas has a very stimulating perspective. Texas, can you please say more about why you don't feel people should be in the market? Do you feel its rigged? A scam? It only benefits the ultra-rich?

We've covered this multiple times. Do you really need to hear the story again?

[james.hendrickson]

We've covered this multiple times. Do you really need to hear the story again?

Yes, I do want to hear it again.

[disneysteve]

I do know that looking at historical averages can be VERY deceiving. If the market returns say 12% annual over time, that is an average over decades. But that includes long bull markets of exception returns, AND bear markets of huge losses. If you are retiring in the next 5 or 6 years and believe that just staying the course is the way to go, and you can sustain an imminent bear market, great. But I think folks need to be very cautious at this juncture, and realistic.

I agree with this 100%. As I said, the stock market is a long term investment. If you will need the money in 5 years, it's not where you should be.

[TexasHusker]

Texas has a very stimulating perspective. Texas, can you please say more about why you don't feel people should be in the market? Do you feel its rigged? A scam? It only benefits the ultra-rich?

Overall the exchanges are not rigged. I feel that there is integrity in the trading systems in the US, as well as the UK, France, Germany, New Zealand, and Australia.

What frightens me about investing in the equities markets is that the price moves in shares are all-too-often driven by emotions rather than earnings. Euphoria is driving the markets now, rather than fundamentals. In a bear market, panic drives the markets. I don't like having my hard-earned cash placed in a situation driven by emotions.

Another thing that frightens me is that I don't have any control over any of the companies I am investing in. I am completely at their mercy in terms of management decisions, personnel decisions, marketing, accounting, auditing, and so on. I don't like investing in things I have no control over.

If I had $10,000, I would much rather open a snow cone stand with it than buy a bunch of shares of GE. And that's no disrespect to GE - but I don't have a seat at the table at GE with my $10,000 investment. The snow cone stand, I have 100% control over. If it fails, it's on me.

The ultra rich are not playing the stock market. They own their own cos.

[rennigade]

This thread is about to go south in 3....2....1....

[james.hendrickson]

Overall the exchanges are not rigged. I feel that there is integrity in the trading systems in the US, as well as the UK, France, Germany, New Zealand, and Australia.

What frightens me about investing in the equities markets is that the price moves in shares are all-too-often driven by emotions rather than earnings. Euphoria is driving the markets now, rather than fundamentals. In a bear market, panic drives the markets. I don't like having my hard-earned cash placed in a situation driven by emotions.

Another thing that frightens me is that I don't have any control over any of the companies I am investing in. I am completely at their mercy in terms of management decisions, personnel decisions, marketing, accounting, auditing, and so on. I don't like investing in things I have no control over.

If I had $10,000, I would much rather open a snow cone stand with it than buy a bunch of shares of GE. And that's no disrespect to GE - but I don't have a seat at the table at GE with my $10,000 investment. The snow cone stand, I have 100% control over. If it fails, it's on me.

The ultra rich are not playing the stock market. They own their own cos.

I can't really disagree with any of this. Thank you Texas.

[bjl584]

Overall the exchanges are not rigged. I feel that there is integrity in the trading systems in the US, as well as the UK, France, Germany, New Zealand, and Australia.

What frightens me about investing in the equities markets is that the price moves in shares are all-too-often driven by emotions rather than earnings. Euphoria is driving the markets now, rather than fundamentals. In a bear market, panic drives the markets. I don't like having my hard-earned cash placed in a situation driven by emotions.

Another thing that frightens me is that I don't have any control over any of the companies I am investing in. I am completely at their mercy in terms of management decisions, personnel decisions, marketing, accounting, auditing, and so on. I don't like investing in things I have no control over.

If I had $10,000, I would much rather open a snow cone stand with it than buy a bunch of shares of GE. And that's no disrespect to GE - but I don't have a seat at the table at GE with my $10,000 investment. The snow cone stand, I have 100% control over. If it fails, it's on me.

The ultra rich are not playing the stock market. They own their own cos.

I listen to several Podcasts from some fairly wealthy people, and they all say pretty much the same thing. Keep your money close to you and keep control over it. They feel that the stock market is too risky because they don't have direct control over their money. Most of their money is in hard assets that they can control, that cash flow, and that they can leverage to buy more assets with.