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Are you preparing for doomsday? aka the next great bear?

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  • #46
    Maybe I'm being a naive young doctor.. I started my retirement savings in 2015 and have been maintaining a 70/30 split ever since. I have been ignorantly happy with my returns and not feel as though I've been "losing out" on greater gains if I had 90+% in equities. If and when the market goes south I will shift this to more of a 80/20 v 90/10 portfolio. The gurus are probably shaking their heads - but I feel that as long as I continue to save aggressively - regardless of my asset allocation - I will be just fine.

    Comment


    • #47




      In the middle of a significant bear market, fear of doom rises.  From a psychological perspective, it is not easy to invest when things simply seem to be falling apart.  The fear of doom is often extreme as the paper value of your investments disintegrates before your very eyes.  For many investors, it is quite difficult to even stay fully invested, much less to be buying.  Hostoric inflows and outflows bear this out.

      That is why you should have a written investment plan.  And why you should consider your risk tolerance carefully.  It is easy to say you have a high risk tolerance when the market has been rising for years.  But not so easy when the market is tanking.

      When investors are running for the exits, a good written investment plan helps you control your emotions and rebalance as appropriate.  I am so thankful to have stayed fully invested through the bear markets of the past.  Easier said than done.

      You youngsters on here should be writing those investment plans now.  In a bad bear market you can lose over 50% of the value of your holdings, and in a bad bear market it can take many years to get back to even from the prior peak.
      Click to expand...


      The essential problem for us young docs is that we just have no idea what this is. We can guess but I don't know how closely correlated that is to being correct.

      If we have a big correction I think I would personally feel better about buying back it at that time than I would about keeping money on the table now, but then again I don't really know that either.

      Comment


      • #48




        Maybe I’m being a naive young doctor.. I started my retirement savings in 2015 and have been maintaining a 70/30 split ever since. I have been ignorantly happy with my returns and not feel as though I’ve been “losing out” on greater gains if I had 90+% in equities. If and when the market goes south I will shift this to more of a 80/20 v 90/10 portfolio. The gurus are probably shaking their heads – but I feel that as long as I continue to save aggressively – regardless of my asset allocation – I will be just fine.
        Click to expand...


        If that is what you are willing to accept, you are okay with your choice to save more, and following your plan is what makes you comfortable, then you are doing exactly what you should be doing. There is no one-size-fits-all IPS and I don't see you as being naive - it sounds as if you have your eyes wide open.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #49










          Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table.
          Click to expand…


          This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
          Click to expand…


          When my brother-in-law tells me that he is buying the 3x long S&P 500 fund ETFs (Ticker: UPRO), that will be the universal sell signal. He rings the bell (over-rings it, actually) at the top. Every. Single. Time.

          (Right now he is building out a surgery center, so I am virtually certain that business model is about to take a nose dive.)
          Click to expand...


          These funds are actually fine used appropriately (and UPRO is up 18.5% this month), and have been rainmakers as the market has been perfect for them, that is, minimal volatility and trend/path going straight up. I use this and the TQQQ to get 100% or more exposure without putting all my cash at risk in the market/equities. I wish I would have just kept it all in there and not mess with it, the less I mess the better I do, just have to get better every day.

          Next recession, I'll probably go nuts into these. Obviously they have to be managed a bit differently than buy/hold and you'd need some kind of stop loss, etc...but they definitely have their place. A low volatility environment (the enemy of leverage), and positive trend are the big keys. The daily rebalance actually helps things go further into your favor on both sides, but should not be held blindly (though I put a smidge of my wifes old IRA into it, quite luckily right after brexit and its up 281%).

          Comment


          • #50













            Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table.
            Click to expand…


            This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
            Click to expand…


            When my brother-in-law tells me that he is buying the 3x long S&P 500 fund ETFs (Ticker: UPRO), that will be the universal sell signal. He rings the bell (over-rings it, actually) at the top. Every. Single. Time.

            (Right now he is building out a surgery center, so I am virtually certain that business model is about to take a nose dive.)
            Click to expand…


            These funds are actually fine used appropriately (and UPRO is up 18.5% this month), and have been rainmakers as the market has been perfect for them, that is, minimal volatility and trend/path going straight up. I use this and the TQQQ to get 100% or more exposure without putting all my cash at risk in the market/equities. I wish I would have just kept it all in there and not mess with it, the less I mess the better I do, just have to get better every day.

            Next recession, I’ll probably go nuts into these. Obviously they have to be managed a bit differently than buy/hold and you’d need some kind of stop loss, etc…but they definitely have their place. A low volatility environment (the enemy of leverage), and positive trend are the big keys. The daily rebalance actually helps things go further into your favor on both sides, but should not be held blindly (though I put a smidge of my wifes old IRA into it, quite luckily right after brexit and its up 281%).
            Click to expand...


            Trust me, when my brother-in-law finds out about them, the stock market will go straight down. He has, what I call, the anti-Midas touch.

            Comment


            • #51
















              Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table.
              Click to expand…


              This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
              Click to expand…


              When my brother-in-law tells me that he is buying the 3x long S&P 500 fund ETFs (Ticker: UPRO), that will be the universal sell signal. He rings the bell (over-rings it, actually) at the top. Every. Single. Time.

              (Right now he is building out a surgery center, so I am virtually certain that business model is about to take a nose dive.)
              Click to expand…


              These funds are actually fine used appropriately (and UPRO is up 18.5% this month), and have been rainmakers as the market has been perfect for them, that is, minimal volatility and trend/path going straight up. I use this and the TQQQ to get 100% or more exposure without putting all my cash at risk in the market/equities. I wish I would have just kept it all in there and not mess with it, the less I mess the better I do, just have to get better every day.

              Next recession, I’ll probably go nuts into these. Obviously they have to be managed a bit differently than buy/hold and you’d need some kind of stop loss, etc…but they definitely have their place. A low volatility environment (the enemy of leverage), and positive trend are the big keys. The daily rebalance actually helps things go further into your favor on both sides, but should not be held blindly (though I put a smidge of my wifes old IRA into it, quite luckily right after brexit and its up 281%).
              Click to expand…


              Trust me, when my brother-in-law finds out about them, the stock market will go straight down. He has, what I call, the anti-Midas touch.
              Click to expand...


              Ha. Everyone should find their contra.

              Comment


              • #52
                I started investing in the 90's, and have been through two bear markets: 2000-02 and 2008-09. The second one was psychologically much harder.

                In 2000 my net worth was positive, but small, and although the percentage drop in stock prices was significant, the dollar value of my losses was small, and was easily overcome by new cash inflows from my practice.

                2008 was different. On paper my net worth went down by over $1MM.  It went down by way more than I could possibly add with new cash inflow. I kept adding new money each month, and things have obviously worked out fine, and nine years into a bull market it's easy to look back and dream about how amazing it was to "buy stocks on sale".

                But it sure didn't feel like that at the time. Think about how many patients you'd have to see to make back $1MM, or how many scans you'd have to report or procedures you'd have to do. You tell yourself, "it's ok, stocks are on sale", and you put another $20k (or whatever your monthly contribution to savings is) into the market. But then you come back next month, and not only has your net worth fallen again, but now last month's $20k isn't worth $20k anymore, and you think back to how hard you worked to earn that $20k, but you put next month's $20k in anyway, thinking, "the market has to hit bottom soon". But it doesn't, and as each month goes by, the idea of "stocks on sale" starts to have a sickening feel to it as your money just seems to evaporate. Meanwhile, your colleague who isn't a saver just spent his/her $20k that month on a luxury vacation, and you feel even more sick.

                The above is not meant to be fear mongering. In the end I did very well investing through 2000-02 and 2008-09. But don't think that a bear market is easy, and make sure that you have an asset mix that is appropriate for your risk tolerance *before* the bear arrives.

                Comment


                • #53







                  In my IPS, there’s Retirement Planning; and there’s investment-speculation-wild catting.

                  The former is a straight plot line of savings, rebalancing, TLH, and adjustment with the continued goal of retirement spending based of goals and risk tolerances.  These funds are set ‘do not raid’  ‘do not sell’ mode that really should be set regardless of a bull/bear market.  Easy to talk in 8 years bull market, but a lot harder to walk that line in year 2-3 of a recession (say 2009-2010) when things were just painful in seeing the balance shrink despite concentrated savings.  Dollar Cost averaging still wins over time—keep saving in same index during that bear.

                  The latter for the next bear market is what I’m interested in folk how they are prepared to take advantage and in what — this is the speculation pot in my mind and separate from the above base +/- 20% savings/investing retirement goal.   Does one move a little cash into a ‘save for future bet’ fund while keeping that exact dollars out of the current bull market (aka timing the market).   Does one secure additional loans or use margin (borrowing) for these speculations?    As pointed out, if an extreme housing decline, HELOCs maybe constrained, but that has largely been eliminated with the closing of poor lending practices — our opportunity bucket remains our HELOC ready to strike on an time sensitive speculation.     With steady earning income flow (beyond above retirement savings) still ready to backfill that investment opportunity

                  That said — we hit the Bull Market Speculation eject button last 4/2017 and emptied the individual stocks gains from the last bear market and made a very nice profit.  Some of that is spec’d for the Tesla splurge, but a bunch went into the retirement pot and will not be touched again until retirement (moved the needle that much earlier!)

                   
                  Click to expand…


                  My method for taking advantage of the next bear market doesn’t involve hoarding cash now or using margin. My equity position of 70% will have declined in my portfolio. My bond position will have increased relative to equities. I will sell bonds and buy equities so my asset allocation is back to plan.
                  Click to expand...


                  That's rebalancing within the bear market IMHO.  Just as one does the reverse in an extended bull run.

                  Comment


                  • #54
                    I agree with you neuro-doc. Continuing to invest in a bear mkt is very hard. I will probably be retired when the one hits hopefully I will remain calm.  I bet you ended up better than the doc going on expense vacations.  I was more upset by 2000 I think because I had individual stocks. 2008 was scary because there seemed to be a question about the entire financial system.  Looking back it seems stupid and everything worked out well as long as you did not panic and go to cash.

                    Comment


                    • #55




                      I agree with you neuro-doc. Continuing to invest in a bear mkt is very hard. I will probably be retired when the one hits hopefully I will remain calm.  I bet you ended up better than the doc going on expense vacations.  I was more upset by 2000 I think because I had individual stocks. 2008 was scary because there seemed to be a question about the entire financial system.  Looking back it seems stupid and everything worked out well as long as you did not panic and go to cash.
                      Click to expand...


                      That's the hard part.  As Neuro-Doc said; you have to set up your IPS and stick to it -- good times and bad times alike.   Plucking down your savings in a bear market may seem depressing, but the dollar cost averaging on this instead of 'timing the market' is easier and probably better on the psyche.   Just have your Advisor hold your hand a little harder

                       

                      Comment


                      • #56
                        How long should you wait when the market is dropping to do it the first time?

                        above asked by  @Phoenixdown99.   As others have stated, this will be determined by your IPS statement.   My "Bear Market Action Plan" mandates ignoring anything less than 10% S&P drawdown........other than rebalancing if triggered. At 20% drawdown, I get to withdraw bonds only ( I'll be in retirement by then.) At 25% drawdown I shift to a more aggressive AA/TD fund.   At 40% drawdown, I will borrow on margin.

                        Perversely, I look forward to a freaking crash.

                        Comment


                        • #57
                          I keep telling myself that I will hold steady.  But I was so close to panic selling (and I did in fact slow-play putting money into the market in 2017, much to my severe pain) as a result of the Trump election that I just don't know.  Guess we'll see.

                          Comment


                          • #58
                            I had a small stock portfolio during residency when the 2008-2009 correction hit (I was lucky enough to have no student loans so I was investing all the extra savings). We all know the mantra: sell high and buy low. So at the beginning, in the fall of 2008, I got all excited and was adding to my positions, just to watch them fall even more. I remember that my broker refused to put a low ball order for BRK.B because he said it will never fall that low. At the end of the month, it was way lower than my initial bid. Then, close to Christmas, I just stopped looking. It was too painful. By March 2009, when the market hit rock bottom, I felt completely bewildered. It was surreal. I was watching people go on with their lives and routines as if completely unaware of the crash. Nobody was talking finances at work. We are doctors, right ? It was hush hush. Not a peep. I kept all the pain, shame and suffering inside, walking around as if in a dream. Then, one day, without warning, the market started to go up, and up, and up...

                            What I found the most amazing about the crash was the speed of the recovery. Had I sold, I would have never been able to time my return right. The fact that many pundits kept talking about a double dip did not help. There was also talk about a sideways market, a lost decade for index investor, etc. Yet, we had one of the greatest bull markets ever. That was a great lesson about trying to time the market and I am glad I had it early on.

                             

                            Comment


                            • #59




                              I had a small stock portfolio during residency when the 2008-2009 correction hit (I was lucky enough to have no student loans so I was investing all the extra savings). We all know the mantra: sell high and buy low. So at the beginning, in the fall of 2008, I got all excited and was adding to my positions, just to watch them fall even more. I remember that my broker refused to put a low ball order for BRK.B because he said it will never fall that low. At the end of the month, it was way lower than my initial bid. Then, close to Christmas, I just stopped looking. It was too painful. By March 2009, when the market hit rock bottom, I felt completely bewildered. It was surreal. I was watching people go on with their lives and routines as if completely unaware of the crash. Nobody was talking finances at work. We are doctors, right ? It was hush hush. Not a peep. I kept all the pain, shame and suffering inside, walking around as if in a dream. Then, one day, without warning, the market started to go up, and up, and up…

                              What I found the most amazing about the crash was the speed of the recovery. Had I sold, I would have never been able to time my return right. The fact that many pundits kept talking about a double dip did not help. There was also talk about a sideways market, a lost decade for index investor, etc. Yet, we had one of the greatest bull markets ever. That was a great lesson about trying to time the market and I am glad I had it early on.

                               
                              Click to expand...


                              Well, they were right about the lost decade. 2000-2017 is one of, if not the worst 17 year returns on record. The worst rolling 15 year period in history ended August 2015. It should be no surprise after such a long stretch of terrible performance (after a stretch of the best ever of course ending 2000) that the market did well after.

                              It still took five years for the market to even break even from 2007 highs, so you could say we've just been going since 2013 really. 2017 Marked the first time all indices finally beat their 2000 inflation adjusted highs.

                              I hope its a while til the next bear, so I can become a more patient investor that will buy and hold, if it comes sooner I definitely wont. However, I wont be waiting til we're 50% down to sell either. I am currently in "ride the melt up" phase, but have trailing stop losses on all my positions. I will have to get my bear market action plan in order. Probably something like buy volatility (of some form), follow historical markers and typical bear market/recession lengths, scale in, and then go in leveraged long, and sell volatility (of some form).

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                              • #60


                                At 20% drawdown, I get to withdraw bonds only ( I’ll be in retirement by then.)
                                Click to expand...


                                Curious - how do you know?
                                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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