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I know the markets go up and down. I know anyone living from investments knows that as well. I know many people say they plan for it with various strategies.
However, we seem to be living in an environment like never before. Chaos and uncertainty is the norm on a daily basis here and around the world. The stock markets are reflecting it all.
I’ve seen my investments drop and it concerns me even though they are not providing living income.
Are you concerned? Am I overstating the situation?
Jonathan, how about more words of wisdom? Anything unique about the current state of the markets?
Watching the morning news I was struck by this opportunity to stay focused and keep emotions in check. Some of us have already done the exercise of considering the impact of a 20 or 30% equity decline and are aware of any emotional impact, as well as financial impact. “Anticipate the best but prepare for the worst.” I also read this morning that “quality divided-paying companies rarely cut or suspend their payouts in times like this.”
I’ve never been here before, as in this exact place, but it seems there are similarities. This post and comments gave me something to think about. I am reminded of my past and I either experienced all of these things or lived with them:
Stock market crashes,
Housing crash,
Bear Markets,
Lost decade in stocks,
Recessions,
War concerns and the military draft,
Fear of Nuclear War,
Fear of mass extinction because of asteroid impact,
The war on drugs,
Crime and criminal activities,
Violence and personal threats,
Financial hardships, being in debt and penniless at age 48,
Business failure,
Gasoline price peaks including rationing,
Stagflation,
Inflation,
High interest rates on loans including a mortgage above 20%,
Food shortages,
High food prices,
Polio, Measles, Mumps, Chicken Pox, H1N1, Swine Flu, SARS, Covid, etc.
Severe personal injury; life threatening with permanent loss (twice),
Stage IV Cancer, inoperable with 15% survival rate (at best),
Unhappy citizens,
Angry employees,
Cut-throat competition and ungrateful clients,
Civic unrest, Occupy Wall Street, etc.
Political unrest,
Campus riots,
Other riots accompanied by the destruction of nearby sections of communities,
Two hurricanes and rebuilt after one, near misses by tornadoes, other severe storms and weather events on land and on water,
An earthquake or two,
Talk of the imminent demise of Social Security,
Talk of the crash of the dollar,
Fear of job loss,
Mass layoffs and firings,
Loss of parents, siblings, etc.
Marital divorce,
Etc.
I’ve concluded that I have survivor’s bias. Be aware that my list of good and incredible things is even longer!
I had planned on retiring in 2000, but two 50% stock market drawdowns (2000-2002 & 2007-2009) interrupted my plan. On paper my stock investments soared in the late 90s due to tech investments and then after the bubble popped the s&p 500 market went sideways for more than a decade. The market didn’t fully recover(from 2000) until 2013. Due to the AI phenomena, the past few years S&P 500 returns feel eerily similar to the late 1990s due the FAANG concentration. Given the debt we’re carrying as a country, the geopolitical environment, the Fed’s artificial low interest rate environment the past 15yrs causing a mispricing in assets, etc – I think the latter half of the 2020s certainly would lend itself to being more cautious of “high growth assets” and sets us up for a lower returns.
All this to say for anyone in retirement, or about to retire, that derives their income from the equity/fixed income markets – asset diversification, income/expense mgt, “time segmentation or buckets” etc is even more important IMHO. I did eventually retire in 2009 but learned that the ideas & concepts that Johnathan has written about are invaluable and best put into practice early. I put many of these concepts into place after 2009 by educating myself, reading and taking a couple of classes. And more importantly, luck was also on my side given that I had the financial income level to set aside the necessary assets.
But I say this with great appreciation for anyone reading the HumbleDollar content, thank you Johnathan for creating a forum and an educational platform whereby people who want to be informed, educated and can share their life and economic journeys. Life’s experiences hold the most valuable lessons.
“However, we seem to be living in an environment like never before.”
Has there ever been a time when that was not the reality?