Lost $53K in the market downturn

[TexasHusker]

And sold everything an hour ago. While I understand that panic selling is not at all a "financial strategy", given my life situation (in my middle age, renting, have a severely disabled child to likely have to provide for a life time etc) this seemed like the only thing to do to stop the bleeding.

I just about had enough, so I bailed. I needed to calm down and rethink this. My spouse is beyond pissed but I had to pull the trigger.

Maybe I will jump back in after March 2019, but I am so done for now.

Your fears are well-founded, and since you sold out on the 21st, you definitely did better than if you had sold out on the 24th or even today. Everyone is all smiles today because of the "relief" rally, but this will be short-lived - the overall market has been overbought for years now. Everyone has different opinions, but I see the stock market as nothing more than a glorified carnival game, and if you play long enough, you come out ahead. For me personally, that's not really investing - it's just kind of hanging on to a bunch of companies I know nothing about, and have no control over, assuming "all boats rise" at some point. And perhaps they do. But I became disillusioned with all of that about 10 years ago, cashed out, invested in other stuff, and never looked back. The only reason I know what equities are doing right now is because it's been in the headlines for the last few days.

Good luck to you, and don't be embarrassed that you cashed out.

[~bs]

To me, it's "to each their own" and "we all make our own beds, and lie in them".

If you pursue a stocks only strategy, there's risk to that. Cash only, there's risk to that. Business only, there's risk to that. A mix of all of those strategies, there's risk to that. Everyone needs to decide for themselves what level and type of risk is acceptable to them.

What works for me, which is a mix of business, mutual fund investment, and real estate isn't going to be a good fit for the next guy. I was up very early the day after xmas closing a purchase that will end up netting me $2000 profit for a few hours "work", and afterwards I worked my 8-5 job. And that evening, I worked on my quickbooks file for the business. (and all the while, my investment account is going down in value, hopefully temporarily lol) I could very well have wasted my time in the morning and made nothing and lost a lot of sleep, but that's the way it goes. Is my financial and work strategy for everyone? most definitely not.

[Captain Save]

To me, it's "to each their own" and "we all make our own beds, and lie in them".

If you pursue a stocks only strategy, there's risk to that. Cash only, there's risk to that. Business only, there's risk to that. A mix of all of those strategies, there's risk to that. Everyone needs to decide for themselves what level and type of risk is acceptable to them.

What works for me, which is a mix of business, mutual fund investment, and real estate isn't going to be a good fit for the next guy. I was up very early the day after xmas closing a purchase that will end up netting me $2000 profit for a few hours "work", and afterwards I worked my 8-5 job. And that evening, I worked on my quickbooks file for the business. (and all the while, my investment account is going down in value, hopefully temporarily lol) I could very well have wasted my time in the morning and made nothing and lost a lot of sleep, but that's the way it goes. Is my financial and work strategy for everyone? most definitely not.

This is a breath of fresh air from the typical "boglehead" response ... the world does not revolve around stocks and bonds .. matter of fact the most successful people did not make it because of stocks and bonds.. .. you can have a great retirement without a "retirement account" ...

It does help to know how stocks and bonds work .. so you can use it to your advantage.. but that goes with everything ..real estate business etc.. the same applies

so if you're not a person comfortable with stocks and bonds, you can at the very least minimize your exposure and focus on something that suits you best.


.. and to me the lowest hanging fruit out there is .. a home service based business .. you can be terrible and still be profitable, learn on the job and have a much higher return on your investment.

[~bs]

home based business can be very low risk if you want it to be, with the main investment is your personal free time. All the overhead cost is essentially already paid for, you arent paying salaries, so your only expenses are directly related to the business. I was up early again this morning, and should make $400-500 from those 2 hours.

Business in general can make money much faster than passive investment. Stocks average maybe 10% a year? the reason why individual businesses can skyrocket much more than the 10% is because businesses can make money at a much higher rate. Example say you have $10,000 at the beginning of the year, and can utilize your funds and turn your inventory and generate a 10% return every 2 weeks. You're always fully invested in your business, with the profits used towards generating a return as well (perhaps an unrealistic expectation). At the end of the year, your $10,000 is now over $100,000. With business, you can achieve compounded returns that would take decades to do when invested in the overall stock market.

[disneysteve]

While I didn't do any panic selling, I did use the bounce back rally the past couple of days as a kick in the behind to do a little housekeeping in our portfolio. There were a couple of holdings that I've been thinking about unloading due to lagging performance over time. I got completely out of one position today and sold off about 70% of another. Right now I'm keeping the proceeds in cash until I decide where to reallocate it. I've been gradually trying to simplify our holdings as retirement approaches so I'll probably end up adding the money to existing holdings rather than anything new.

[Jluke]

I had $700 “cash” in my Roth account since I was forced to transfer to E Trade in November.

Today I bought more of the Vanguard Wellesley fund I have been holding. At least I think the purchase went through.

Otherwise I am in the process of moving my 2019 contribution into the investment account so I can contribute that in January. This will happen in my Vanguard specific account and I have decided to buy the Balanced Index Fund (VBIAX) since it is 60:40 stock/bonds.

i may move the existing Roth IRA from E Trade to Vanguard later.

[JBinKC]

I have been pretty much paying attention to risk and have been defensively positioned ranging between 60-70% cash since 2017 and been doing just enough selective swing trades and short selling that has kept me in the green both years so far. I have no complaints because in the first few years of the last market cycle returns exceeded the entire return in the index from the 2008 credit crisis so I have no qualms of not beating markets dominated by algorithms.

I am not going to argue with his decision because the effect of the Federal Reserve shrinking their balance sheet is causing a liquidity crisis resulting in deflation of the market and it is finally hitting home. Breadth of the market has been pretty bad for quite some time and you had to be lucky being parked in secular growth, special situations and/or a trading system with the right algorithms to outperform indexes.

Other periods of Fed balance sheet reductions were immediately after the Y2K fears not panning out and in 2010 when they shrunk the balance sheet after QE1 that eventually resulted in the May flash crash of that year. I am not saying the market will go straight down there likely will be some reversion to the mean but you are now fighting the Fed if you are going long and will have to figure out timing an exit until the Fed is technically in your favor again.

What complicates matters is the big risk in 2019 is getting inflation from the tariffs yet the Fed will be forced to raise rates and shrink the balance sheet faster to counter it that will be a totally ugly scenario for the market. Another concern looking at the historical past we are certainly due for a reset of a credit cycle given (Bretton Woods) was the last one and take note most resets are preceded by major war.

[LivingAlmostLarge]

Scallywag why did you sell in a panic? What was your asset allocation? Why don't you give us details? What is your asset allocation going forward? Why are you jumping in March 2019? What made you pick that date?

I will not say stupid but I am curious why you are making these decisions? What is the rational? You also wrote about buying a house with 10% down.

I think that looking at the bigger picture will help people listen to what you are doing and give rational advice.

[james.hendrickson]

Exactly, no judgement. We all could improve our finances.

[Scallywag]

Scallywag why did you sell in a panic? What was your asset allocation? Why don't you give us details? What is your asset allocation going forward? Why are you jumping in March 2019? What made you pick that date?

I will not say stupid but I am curious why you are making these decisions? What is the rational? You also wrote about buying a house with 10% down.

I think that looking at the bigger picture will help people listen to what you are doing and give rational advice.

100% of our assets were in stocks - individual and mutual funds. We were / are aggressive investors -- we have 20 years to retirement and a child with a disability. In a nutshell, we're trying to build up a sizable inheritance for him to live off of for the rest of his life. I sold in a panic because I was afraid, there was no logic or reason there.

I picked March 2019 because I want to give myself enough time to calm down and research what we should be doing, going forward, and thought that we would need at least 3 months to come up with a suitable, long term plan of action and a better thought out asset allocation.

As for 10% down, that's the plan as we need a house and can't rent forever

[LivingAlmostLarge]

100% of our assets were in stocks - individual and mutual funds. We were / are aggressive investors -- we have 20 years to retirement and a child with a disability. In a nutshell, we're trying to build up a sizable inheritance for him to live off of for the rest of his life. I sold in a panic because I was afraid, there was no logic or reason there.

I picked March 2019 because I want to give myself enough time to calm down and research what we should be doing, going forward, and thought that we would need at least 3 months to come up with a suitable, long term plan of action and a better thought out asset allocation.

As for 10% down, that's the plan as we need a house and can't rent forever

First off, I'll go with low hanging fruit. How much is rent? How much is the house you want to buy? And why can't you rent forever? There are many cases where it makes more sense to be a perpetual renter and you might be in a situation where it makes sense. It depends on how much you make, where you live, and cost of living where you are. So if you give us some numbers we could make some suggestions. I say this because I'm not against buying with 10% down. Perhaps using a 80-10-10 loan depending on how expensive the house is, how much rent, and if it makes financial sense. I am a VERY aggressive investor and risk taker and DH and I have bought with 10% down. We've also had a HELOC 1st mortgage. No savings, etc. So I know how to live life on the edge. But everything we did, we weighed each financial pro and con and decided for the risk. So NO JUDGEMENT but I will give an honest financial opinion if it makes sense. Maybe it does, maybe it doesn't. Right now I am carrying a car loan that I am weighing whether or not we should pay off. We owe $17k on it and 3 more years. I think based on our current cash flow it makes sense for us to carry it 1 more year and then consider paying it off end of 2019. This will give me wiggle room in 2019 to bulk up savings, buy an investment property, or pay off debt. Depends on market for us.

Second, I'm sorry but you have to admit you aren't aggressive investors if you sold in a panic in December. You didn't have the stomach or risk tolerance to be in stocks 100% there is nothing wrong with this but you need to decide how much risk you can honestly take. I'm 90% invested in stocks and we have a 10-20 year time frame including 100% of my DK college funds in VTI. They are 6 and 8 for reference. I don't plan on changing it till around age 14 or 15 (potentially older). I did not sell a penny of anything and just funded our Roth IRA this week to buy more stocks. I'm sticking to my asset allocation. In fact i'm toying with investing in some dividend stocks and doing Dogs of the DOW as test.

I think you need to discuss with your husband how much upside you want in relation to downside. I would guess you are a 60/40 investor. You want upside but you are extremely hesitant to lose anything. You need to build your total portfolio like that. Personally I'm very aggressive. How aggressive? I plan on cutting our cash in the next year or two down to 3 months cash on hand EF. Then investing every penny rest. Why? Because I think we'll be able to float pretty much anything and only a job loss would do us in. Plus I'm okay taking the risk that in a job loss we'd start tapping our taxable accounts. It would be something like this for us. EF, I-bonds, taxable accounts retirement.

Even before we were financially secure we'd always best investing our money and taking risk. When we were young we had no EF and everything to HELOC on house and if we needed money we'd write a check from line of credit to cover it. We also used 0% CC to swing paying DH's MBA tuition bills and kept rolling them to pay our student loans off at 0%. We also borrowed $25k on subsidized student loans for me and for him to live in graduate school. We took a huge risk for borrowing and determining we'd pay it off in 6 months after graduate school. We also borrowed for a couple of cars for cash flow purposes because the interest rates were below 2% and DH quit his job. So I get risk and aggressive investing. During all this we maxed out our 401k and Roth IRA. So we were basically borrowing to invest. This is not for the faint of heart nor for people who panic sell. This should only be done by people willing to take the risk and borrow to invest. We could have paid cash for tuition and not saved for retirement. But we made a conscious decision not too and risk investing during 2007-2008. Trust me I was sick as we lost big time. We were 100% invested in stocks no bonds or cash. But I kept borrowing and plowing money into DH's 401k and our Roth IRA. Then in 2010 he finished his MBA and we had a kiddo. We kept our investments intact and focused on debt paydown on 0% CC until 2015. We also took our 2 car loans in 2010 and 2012 and made regular payments no acceleration. So this two prong approach of long term investing and risk of 0% CC and borrowing money for cash flow we played a very risky game. Right before DH quit we paid off both cars, all student loans, and all CC.

Now I don't bother with 0% CC. I got a car loan I guess because the rate was good and I don't feel we have enough cash to allocate to our risk. But at the same time I'm getting older and I like simplifying my finances and not worrying about paying bills. So I am starting to just pay things in cash.

Spend this time to figure out what you really can accept for returns and realize that if you want 8% you will end up with some risk. High return = higher risk. I'm turning 40 this year. My philosophy will likely stay aggressive until we are about 1-2 years from retirement. Then we'll scale back because I've really thought about it and decided if everything started going south about 2-3 years before we retired DH would work longer. He's okay with that since he isn't keen on retiring when I want him too. So when he says he's done or 1 year out I'll start planning.

[Scallywag]

I have a child with special needs that will likely never be able to work or earn a living so we have to provide for him, which inciudes ensuring that he always has a roof over his head even after were gone. In our case renting additionally makes no sense because I am sick of neighbor complaints about my son's behaviors almost every day. This home buying decision isn't 100% about finances but about what would be best for our family and for our son. This rent vs buy situation is different because of my kid. I don't know what you mean by "low hanging fruit" ?

I still think of myself as "aggressive" but not to the point that I would take on debt to fund investments. For me, being debt free and stopping the bleeding when necessary are the way to go. I think my asset allocation should be closer to 80 - 20 and not 100% because I want the upside more than I fear the downside (despite one massive stop loss)

[james.hendrickson]

Scallywag, since your child is special needs, are you thinking about income investing then? That would help generate funds for his care.

[Scallywag]

What's income investing ? Dividend investing ?

[james.hendrickson]

What's income investing ? Dividend investing ?

Sure, or you could buy bonds for the coupon payments.

Some stocks pay monthly dividends, or you could set up your portfolio so that you'd get a payment every month. Its totally workable, my wife is a stay at home mom and pays for our groceries from her monthly dividend payments.