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I’m going to curse myself, question my own intelligence, spend nights sleeping poorly, and firmly consider the wisdom of “stay the course” as no more useful than a chocolate fireguard. Checking my portfolio balance will become a preoccupation to make myself nauseous.
The market is at an all-time high, every metric is stretched, and knowing how I’m going to react come the inevitable correction, I’m still not changing my asset allocation. But I have made preparations—I’ve purchased sick bags.
My reaction to the “big drop” is going to be mirrored by many throughout the world. The gnashing of teeth will become audible, a constant background noise to our emotional pain, but strangely enough, this massive correction will only affect us “sophisticated” investors.
The vast majority will maybe see something on the news, probably just before switching over to the big sporting event. Our front-and-center pain will pass them by. Lack of financial interest will be their savior.
Unknowingly they will practice the art of “tuning out the noise.”I wonder, who really is the “sophisticated” investor? Those of us who protest the inevitable, or those who ignore the volatility—maybe by indifference, but definitely by choosing to get on with life?
Is the checkout clerk who never looks at their 401k balance practicing a more advanced form of investing than those of us obsessively tracking every market move during a downturn? Maybe we should endeavour to embrace some form of “ignorance is bliss”.
Mark:
Excellent question. My response…stay the course.
When you have your retirement income 100% guaranteed (in our case, through social security and annuities), market fluctuations, while irritating, have no direct impact on your day-to-day lifestyle, but they do sometimes interfere with your ability to enjoy life.
Although our income is not affected by market fluctuations, it remains very difficult for me to watch our portfolio decline significantly once you are retired. When that happens, I remind myself of 2020, when a $260K loss in March-May resulted in a recovery by year’s end and resulted in positive results for the year.
There are opportunities, even if the inevitable bear market has us gnashing our teeth:
I am far, far more concerned with my health experiencing a negative correction, i.e., a serious illness or condition, than I am with the market taking a nosedive.
Market goes up, and the market goes down. Rinse and repeat. But when your health takes a serious downturn, it doesn’t always recover.
Amen John. I regularly get my checkups and Iother than being oberweight, I don;t have any crionic illnesses that are not managed (Elevated BP, GERD). I do have a hyatal hernia and a stone (can’t remember, but I think Gall Stone,) but my surgeon recommend NOT to do surgery, as neither is causing any issues.
Like you, I am more focused on my health than my portfolio.
But we must not forget that is why the bucket strategy exists. Having the 3-4 years of expenses set in short term liquidity will be the mouth guard that quiets the teeth gnashing.
Excllenet point…but who acually has that much cash set aside? Some I am sure..but not many. Most couldn’t take the FOMO of having that much cash sitting “idle.”
I love that analogy, Mike
I’ve been retired (by my definition) since October, 2000. That means I’ve lived through three (or is it four?) crashes just since I retired. I neither sold nor bought, and my portfolio is doing fine, thank you. Next month I will move this year’s RMD from my IRA to my brokerage account, and I may take the opportunity to rebalance. Not because the market is up or down, but because my portfolio has strayed from my allocation. Last time I looked I was at 53% stocks instead of 50%. If I’m down to 51% I will do nothing. And I will continue to do nothing until next October.
That doggone Fidelity Full View that RDQ turned me onto, has me looking at my stuff every friggin day. We recently hit a net worth milestone and used it as an excuse for a nice dinner out. The bad news is I know it won’t last, as things are very expensive now. The good news is, after the next correction, when we re-hit our recent milestone, we will have an excuse for another nice dinner out.
Nice, blame the HR guy 😩.
I look for mile stones and then i try to convince myself that after I surpass it as long as the decline does not go below the original target, it’s okay.
Lately i have made it so all dividends and interest are put into the MM rather than reinvested to build up cash. Plus i am heavy into different bond funds. If (when) there is a downturn I will start reinvesting again.
But what do I know? As far as I’m concerned it’s all a big gambling hall- and no free drinks.
“I look for mile stones and then i try to convince myself that after I surpass it as long as the decline does not go below the original target.”
When the market incurs a sharp decline I usually look at the past performance of my portfolio to see at what most recent time it was at the same value. It usually has not dropped more than a couple of years, but has always rebounded to new highs such as the past two weeks. That is even with us financing all of our purchases with our portfolio while awaiting our 70th birthdays to claim Social Security.
Oh, I figure there are a couple of free drinks. One is compounding, and the other is “stay the course” – or as I think of it, benign neglect/productive procrastination. They have served me well.
But it can all be wiped away in a blink of bad news can it not?
Could you clarify what you mean by all wiped away?
As I posted above, I have lived through several major crashes, done absolutely nothing, and am still in pretty good shape. I would be in better shape if I had bought, but much worse shape if I had sold. If you are willing to accept average returns, which is what index investing is all about, you can do just fine over time.
“Is the checkout clerk who never looks at their 401k balance practicing a more advanced form of investing?” I think of it this way. The very long-term benefits for indexes will be upwards. If that clerk owns index funds and believes this, they’ll sleep better through market gyrations and those white-knuckle experiences.
Those with shorter term aspirations will worry. I think many retirees are in that place, if for no other reason than a shorter investing horizon. The young do have the benefit of decades for things to work out.
For anyone my age and circumstance, well, I might have a couple of years.
I suppose I should be worried, but I’m not. I’ve made my portfolio preparations, and I intend to let them play out, no matter what the markets do. I do have a contingency plan, should the unusual occur and my life is extended.
As someone who looks at their portfolio every day-or more – without good reason I share your pain. I dread those red numbers almost as much as red down arrows.
Just think of all your lovely fixed income. Imagine relying solely on a portfolio of volatile assets 😵💫
The lovely fixed income of all is the pension.