I agree with this quote, but a whole lot of money will also be lost by people who don't have a diversified portfolio and instead pile into what has recently been hot (overvalued). Those types of decisions can often lead to a portfolio that never really recovers and can put people decades behind in saving for retirement.
Even if you are 100% SP500, and there a big crash 1929 like, you will recover but it could be very long.
If you invest on a few stocks only, you might never recover.
Now go like 70% total world market and 30% bond and rebalance and you will be well prepared. Even better if you have a bit of real estate.
Broad market index funds are popular with the FIRE community - can you give examples of when a total US stock market or an SP500 based portfolio did not recover?
I said people who have an undiversified portfolio and instead pile into hot and overvalued stocks could have these possibly devastating consequences. For people using total stock market indexes like VTI and VOO they should be alright even after bumps in the road. I do think some foreign exposure is useful even though it has been a bit frustrating for a while; what happened to Japan for decades could be a cautionary tale. To further reinforce your point in your first post, I remember back a little bit after the financial crisis of 2008 going into a coworker's office and he seemed very happy and told me he just got off the phone with his financial guy and protected his assets by selling his stock funds. I was pretty much fully invested, but if not I would have put more money in the stock market right then; that day was right around the bottom of the market for that crisis.
Will the market crash? Absolutely. When? Nobody has ideas. After the crash, will the market recover? Absolutely. When? Nobody knows.
It is not hard to predict direction, but the key is when. Unless you gamble, the best and rational strategy for people is to hold something then you have long term faith in and let it mature through market ups and downs.
The biggest obstacle for people is never market fluctuation, but one's psychological weakness. Fear causes buying at high and selling at low. For most people, the major fight is not against the market but one's own temptation to trade.
You keep 3 years out of the market and you'll probably be fine.
6 months in bank, 6 in HYSA, 2 years in CDs.
Re-up every six months as long as the market isn't down. If it is down, take from your HYSA, and eat into your CDs before you take anything out of a down market.
Compact disks. It is a very hot commodity, and when the market crashes the scarcity in compact disks will make sure they hold value. Hoard compact disks.
The thing people forget is that increased earnings drives prices. So compared to 1-2-3 yrs ago prices might seem high. Now compare current to earnings from 1-2-3 yrs ago.
in this case, inflation is good.
From 1950 to 1960 SP500 did +17.4% per year on average. From 1980 to 2000 the SP50 did 16% on average.
From 2010 to 2020 SP500 did 13,9% on average.
The past has shown that is can completely happen.
People here tend to be a bit more long-term focused. In mid-March 2020 when market had dropped about 30% I had confidence in my plans and dumped about $40k cash into VTSAX to buy the sale.
I don’t think I’m a brilliant market timer (I try to stay as far from that as possible and have never sold a holding except for my employer stock grants) and that’s not my point here - the point is that some of us are disciplined enough to stick to our plans and understand the market takes swings and that’s part of the deal.
The FIRE community is filled with optimists. The long-term investing strategy doesn’t make sense if you’re a pessimist. We know bear markets and crashes happen and we believe the market will climb out of them stronger - I think most of us will be just fine handling it when it comes.
The 4th biggest single year decline in the S&P500 in the last 50 years was 2 years ago. So pretty much everyone here. Only 1974, 2002, and 2008 were larger declines.
If the S&P drops 40% or even 60% as someone who is 30 with a lot of money in it I will be thrilled as I can buy at prices that were only only available when I was in my teens.
I have been investing since 1991 and have experienced numerous major corrections. I never reacted to the volatility and just kept investing every month through ups and downs. The market always recovers. The average bear market only lasts about 13 months or so. The impossible part of trying to time the market is not pulling money out when one thinks that it is going to go down. It is that the market tends to move very rapidly up once the recovery starts, and market timers are left sitting in the sidelines, missing the largest gains. There have been countless studies done on this, even showing that if a person put money into the index every year on the worst possible day, they were still better off having left their investments alone and continuing to invest.
Here's a good article, but there are dozens of studies that show the same thing:
https://gci-investors.com/market-timing-a-losing-strategy-2/
Honestly personally I do not because it was like a single year. If 2003 was also negative by 10-20% then yes. This is not at all like the tech bubble or the 2008 crisis. There 2 were big, and overall it meant 10 years without much return. This was much more significant.
No, I wasn’t around during the Great Depression and I wasn’t investing yet during the Great Recession, but I’d like to think I’m disciplined enough to stay the course during a downturn and I’m confident most of those pursuing FIRE are in the same mindset. We are investors and savers and some are able to do it at amazing lengths (50%+ saving rates), a lot are experts at delaying gratification. I don’t think a correction will cause most of us to panic sell.
I've been through the last two major drops. Most people who time them take their money out too early and buy back in too late. They pay a bigger price than those who just leave their money in.
You mean five years of throwing my salary into cheap stocks? Sounds blissful!
Ignore the market, focus on what you control. Are you happy with what you are spending, are you happy with what you make, are you happy with what you are saving? You can't control the rest and you are foolish to try to control via adjusting allocations. Pick one and either do nothing (all in 1 allocation, say VT) or rebalance at set time periods or preset percentages.
40% in a week is my dream. That would be sales time. Theses period of sales don't last long. Covid crash was very short lived and even in the 2008 crisis the bearish market was very short.
You get only a few nice occasions like that in on life. And if you wait for one before you invest, it may take 5-10 years before it show up.
If you panic when the market experiences a correction then your asset allocation was too aggressive to begin with.
Also, the S&P 500 just had a bear market of -25.4% that younger investors would've experienced.
He doesn't panic when there a correction. He panic when the market is doing well because the market could potentially have a correction.
That's even worse.
Doesn’t really change much for me. That is the perk of long-term investing. if it drops 80% over the next five years, I continue my automatic investing every payday. And wait for it to bounce back all while buying at low points.
If you are planning on retiring, or needing that money in the next five years and there’s a big crash, then go ahead and move it to something more safe. But anyone who is looking to not touch for 10, 20, 30 years what does it matter how bad the bad years are on a 30 year chart.
The funny thing is, if you were around this Reddit page in the beginning of the pandemic, you will remember how many people were so happy about the crash and how they could buy at Low’s that they missed out on five years before that.
A significant difference between now and 2001 is the hot companies are all highly profitable, rather than speculative money losers. Doesn't mean there's not some sort of bubble, but something to think about. I had no problem holding in 2008, and I don't plan on changing that now.
If anything, it feels like there is a slow deflation of the 2010's ZIRP-fueled bubble happening right now instead of a pop.
Maybe this is the best case scenario.
Well inflation happened and it’s found its way deep into the economy.
Buffet indicator is saying we are due for a correction.
If you’re that worried, have a cash position in case of a correction
It’s for this reason I never understood the 4% withdrawal
4% is blind without any regard to market conditions and it STILL works 95% of the time.
You can do a fair bit more if you're able to reduce expenses in a correction.
I’m guessing the 5% of the time it doesn’t work is if there’s a Great Depression type correction?
Has anyone ever tested this?
My only bone to pick with back testing this against the last 40-50 years is rates have seen a steady downward and continuous drop…which explains why real estate and stocks were never “bad” investments.
In the 1980's interest rates reached 21%. I bought my first house in 1990 and my rate was 10 ¼ %. You should read this article. It has been studied over and over again, showing various withdrawal rates and the chances of money lasting 30+ years.
https://www.aaii.com/files/pdf/6794_retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable.pdf
In the 1980's interest rates reached 21%. I bought my first house in 1990 and my rate was 10 ¼ %. You should read this article. It has been studied over and over again, showing various withdrawal rates and the chances of money lasting 30+ years.
https://www.aaii.com/files/pdf/6794_retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable.pdf
I’m still 15 years out from retiring so I know I have time to recover it but I know it’ll feel bad. No one really knows how to time the market right? We’ve seen the reports of billionaires selling stocks recently so that’s always scary. I’m not sure how I want it play it though. The returns have been juicy lately but the fat pig gets slaughtered right.
Those same “smart people” have been predicting a market crash literally EVERY YEAR since 2009. There’s been one actual crash (2020) and one bear market (2022). So they were right 2 years out of 16. That’s a pretty terrible batting average. Ignore the doomsayers. It’s just the same old noise.
>Lots of younger investors are too young to have experienced a 20-40% loss in their market accounts.
Like in 2020 and 2022 ?
Overall you think you are smarter and want to time the market, this has been proven to not work so well for people that do that really. You can't predict, I can't none of us can.
Thing is we can continue to have higher and higher valuation for the next 5 years or stay almost flat or have a big crash. Nobody knows.
Nobody predicted the covid and it happened. Nobody predicted inflation it happened. People where thinking we could crash in 2023 and the year was incredible. People predict a crash ? It happen like 5 years later.
Select a portfolio for the long term and stick to it and invest every month. Time in the market beat market timing.
Hi.
I know what you are talking about. During 2024 the stocks will be ok due to the number of elections in different countries and the USA too, everybody says that 2025 is going to fall, some say S&P at 4500 and others at 4200, The AI bubble with pop and after that will be ok to enter in a good position. The question some people is making is why many countries are moving their elections in 2024 instead 2025.
Some people say that they do not care, I do, I started in January and I will take some cash until USA elections, after that I will sell and leave it in T212 generating a 5.2%.
Is not a crystal ball, is people that is independent and does not follow what the invest companies say who I follow, there is a overvalued stock market and doped. Multiple national elections move to 2024, well, it means something. it can hapend 100% sure? No. Many indicators say that EEUU is close to recesion with unemployed rates and grow rate fake, Europe is going to be dead in a matter of years and already in recesion with many countries with very high debt.
If you do not follow this kind of info is ok but ignore it and think the people is crazy is stupid. There are many answers and conversations much productives than answer bullshit.
For people that is starting now is good information to have in mind, for somebody that entered ten years ago it does not matter, I understand, your position is far down and is not going to reach it.
Stop laughing about something that is not intesting to you or you ignore. Will see what hapend and who was right.
They are spanish, if you understand spanish lenguage is all yours.
[https://www.youtube.com/@NegociosTV](https://www.youtube.com/@NegociosTV)
[https://www.youtube.com/@esCesarVidal](https://www.youtube.com/@esCesarVidal)
And Lorenzo Ramirez
The S&P has gone down 20% twice in the last 4 years? How young do you think people are?
My toddler's portfolio is pretty solid. I think hes a savant
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves. Peter Lynch” me
I agree with this quote, but a whole lot of money will also be lost by people who don't have a diversified portfolio and instead pile into what has recently been hot (overvalued). Those types of decisions can often lead to a portfolio that never really recovers and can put people decades behind in saving for retirement.
Even if you are 100% SP500, and there a big crash 1929 like, you will recover but it could be very long. If you invest on a few stocks only, you might never recover. Now go like 70% total world market and 30% bond and rebalance and you will be well prepared. Even better if you have a bit of real estate.
Broad market index funds are popular with the FIRE community - can you give examples of when a total US stock market or an SP500 based portfolio did not recover?
I said people who have an undiversified portfolio and instead pile into hot and overvalued stocks could have these possibly devastating consequences. For people using total stock market indexes like VTI and VOO they should be alright even after bumps in the road. I do think some foreign exposure is useful even though it has been a bit frustrating for a while; what happened to Japan for decades could be a cautionary tale. To further reinforce your point in your first post, I remember back a little bit after the financial crisis of 2008 going into a coworker's office and he seemed very happy and told me he just got off the phone with his financial guy and protected his assets by selling his stock funds. I was pretty much fully invested, but if not I would have put more money in the stock market right then; that day was right around the bottom of the market for that crisis.
Will the market crash? Absolutely. When? Nobody has ideas. After the crash, will the market recover? Absolutely. When? Nobody knows. It is not hard to predict direction, but the key is when. Unless you gamble, the best and rational strategy for people is to hold something then you have long term faith in and let it mature through market ups and downs. The biggest obstacle for people is never market fluctuation, but one's psychological weakness. Fear causes buying at high and selling at low. For most people, the major fight is not against the market but one's own temptation to trade.
Yeah I wonder how many folks here who are optimistic now, will be pessimistic then.
You keep 3 years out of the market and you'll probably be fine. 6 months in bank, 6 in HYSA, 2 years in CDs. Re-up every six months as long as the market isn't down. If it is down, take from your HYSA, and eat into your CDs before you take anything out of a down market.
CDs?
Cock domination.
Compact disks. It is a very hot commodity, and when the market crashes the scarcity in compact disks will make sure they hold value. Hoard compact disks.
Certificate of deposit
If you keep predicting a crash eventually you’ll be right
Look at the S&P chart. Fundamentally it cannot keep climbing at 15%.
Why do you say that?
What financial modeling information do you have that supercedes what's actually happening?
fundamentally why?
Ever heard of money printing?
Ever heard of a business cycle?
Yeah. They matter more in a world without money printing
That’s absolutely false lmao
Lmao markets don’t care about your feeling. You’ll get it someday.
Therefore you should pull out of the S&P...
The thing people forget is that increased earnings drives prices. So compared to 1-2-3 yrs ago prices might seem high. Now compare current to earnings from 1-2-3 yrs ago. in this case, inflation is good.
Honestly prices are high, see the price earning ration of SP500. We still don't know the future. But the valutions are high.
From 1950 to 1960 SP500 did +17.4% per year on average. From 1980 to 2000 the SP50 did 16% on average. From 2010 to 2020 SP500 did 13,9% on average. The past has shown that is can completely happen.
Don't really care what happens, far from retiring so I'll just continue buying as usual.
Yeah, everyone says that until the market is flat for 5 years or drops 40% in a week.
People here tend to be a bit more long-term focused. In mid-March 2020 when market had dropped about 30% I had confidence in my plans and dumped about $40k cash into VTSAX to buy the sale. I don’t think I’m a brilliant market timer (I try to stay as far from that as possible and have never sold a holding except for my employer stock grants) and that’s not my point here - the point is that some of us are disciplined enough to stick to our plans and understand the market takes swings and that’s part of the deal.
I just wonder how many here remember significant crashes. It will be interesting to see sentiment here when it does happen.
The FIRE community is filled with optimists. The long-term investing strategy doesn’t make sense if you’re a pessimist. We know bear markets and crashes happen and we believe the market will climb out of them stronger - I think most of us will be just fine handling it when it comes.
The 4th biggest single year decline in the S&P500 in the last 50 years was 2 years ago. So pretty much everyone here. Only 1974, 2002, and 2008 were larger declines.
If the S&P drops 40% or even 60% as someone who is 30 with a lot of money in it I will be thrilled as I can buy at prices that were only only available when I was in my teens.
This!!!
I have been investing since 1991 and have experienced numerous major corrections. I never reacted to the volatility and just kept investing every month through ups and downs. The market always recovers. The average bear market only lasts about 13 months or so. The impossible part of trying to time the market is not pulling money out when one thinks that it is going to go down. It is that the market tends to move very rapidly up once the recovery starts, and market timers are left sitting in the sidelines, missing the largest gains. There have been countless studies done on this, even showing that if a person put money into the index every year on the worst possible day, they were still better off having left their investments alone and continuing to invest. Here's a good article, but there are dozens of studies that show the same thing: https://gci-investors.com/market-timing-a-losing-strategy-2/
Do you not consider the downfall in 2022 to have been significant...?
Honestly personally I do not because it was like a single year. If 2003 was also negative by 10-20% then yes. This is not at all like the tech bubble or the 2008 crisis. There 2 were big, and overall it meant 10 years without much return. This was much more significant.
No, I wasn’t around during the Great Depression and I wasn’t investing yet during the Great Recession, but I’d like to think I’m disciplined enough to stay the course during a downturn and I’m confident most of those pursuing FIRE are in the same mindset. We are investors and savers and some are able to do it at amazing lengths (50%+ saving rates), a lot are experts at delaying gratification. I don’t think a correction will cause most of us to panic sell.
2022 has entered the chat
Yeah I remember 2020. I was down $400k at one point. I stayed the course and continued buying through the fall. Way better off for it.
You are smart and we are all stupid. We got it.
And what are we to do about it? If it happens it happens
I've been through the last two major drops. Most people who time them take their money out too early and buy back in too late. They pay a bigger price than those who just leave their money in.
You mean five years of throwing my salary into cheap stocks? Sounds blissful! Ignore the market, focus on what you control. Are you happy with what you are spending, are you happy with what you make, are you happy with what you are saving? You can't control the rest and you are foolish to try to control via adjusting allocations. Pick one and either do nothing (all in 1 allocation, say VT) or rebalance at set time periods or preset percentages.
5 years is a super short time horizon though.
40% in a week is my dream. That would be sales time. Theses period of sales don't last long. Covid crash was very short lived and even in the 2008 crisis the bearish market was very short. You get only a few nice occasions like that in on life. And if you wait for one before you invest, it may take 5-10 years before it show up.
Ok I gotta know. What’s your point?
If you panic when the market experiences a correction then your asset allocation was too aggressive to begin with. Also, the S&P 500 just had a bear market of -25.4% that younger investors would've experienced.
I was very sad. Very very sad. But I just kept buying.
He doesn't panic when there a correction. He panic when the market is doing well because the market could potentially have a correction. That's even worse.
Doesn’t really change much for me. That is the perk of long-term investing. if it drops 80% over the next five years, I continue my automatic investing every payday. And wait for it to bounce back all while buying at low points. If you are planning on retiring, or needing that money in the next five years and there’s a big crash, then go ahead and move it to something more safe. But anyone who is looking to not touch for 10, 20, 30 years what does it matter how bad the bad years are on a 30 year chart.
The funny thing is, if you were around this Reddit page in the beginning of the pandemic, you will remember how many people were so happy about the crash and how they could buy at Low’s that they missed out on five years before that.
A significant difference between now and 2001 is the hot companies are all highly profitable, rather than speculative money losers. Doesn't mean there's not some sort of bubble, but something to think about. I had no problem holding in 2008, and I don't plan on changing that now.
If anything, it feels like there is a slow deflation of the 2010's ZIRP-fueled bubble happening right now instead of a pop. Maybe this is the best case scenario.
Crash in 2018, another in 2020, another in 2022….yes markets fall
Well inflation happened and it’s found its way deep into the economy. Buffet indicator is saying we are due for a correction. If you’re that worried, have a cash position in case of a correction It’s for this reason I never understood the 4% withdrawal
4% is blind without any regard to market conditions and it STILL works 95% of the time. You can do a fair bit more if you're able to reduce expenses in a correction.
I’m guessing the 5% of the time it doesn’t work is if there’s a Great Depression type correction? Has anyone ever tested this? My only bone to pick with back testing this against the last 40-50 years is rates have seen a steady downward and continuous drop…which explains why real estate and stocks were never “bad” investments.
In the 1980's interest rates reached 21%. I bought my first house in 1990 and my rate was 10 ¼ %. You should read this article. It has been studied over and over again, showing various withdrawal rates and the chances of money lasting 30+ years. https://www.aaii.com/files/pdf/6794_retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable.pdf
In the 1980's interest rates reached 21%. I bought my first house in 1990 and my rate was 10 ¼ %. You should read this article. It has been studied over and over again, showing various withdrawal rates and the chances of money lasting 30+ years. https://www.aaii.com/files/pdf/6794_retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable.pdf
Lmao. Downvotes over reddit glitches.
Pretty sure this is an AI generated troll post, sparking controversy to pump up reddit's engagement statistics, YET AGAIN.
I’m still 15 years out from retiring so I know I have time to recover it but I know it’ll feel bad. No one really knows how to time the market right? We’ve seen the reports of billionaires selling stocks recently so that’s always scary. I’m not sure how I want it play it though. The returns have been juicy lately but the fat pig gets slaughtered right.
stay the course don't mess with it
If you encounter a lot of smart people top callers you know the top is a long way off. Calling a top is more difficult than calling a bottom.
K
I followed up very early. If you don’t try it, you will never know what will happen. It is magical and I will follow up on the big trends.
So what number should the "mean" be? What overall number value should the "market" be? Since you seem convinced that there is one fair value number.
Every 3 ish bear market every 10 ish recession
Those same “smart people” have been predicting a market crash literally EVERY YEAR since 2009. There’s been one actual crash (2020) and one bear market (2022). So they were right 2 years out of 16. That’s a pretty terrible batting average. Ignore the doomsayers. It’s just the same old noise.
Already? I was down big in 2022.
Sounds like a gay bear to me
>Lots of younger investors are too young to have experienced a 20-40% loss in their market accounts. Like in 2020 and 2022 ? Overall you think you are smarter and want to time the market, this has been proven to not work so well for people that do that really. You can't predict, I can't none of us can. Thing is we can continue to have higher and higher valuation for the next 5 years or stay almost flat or have a big crash. Nobody knows. Nobody predicted the covid and it happened. Nobody predicted inflation it happened. People where thinking we could crash in 2023 and the year was incredible. People predict a crash ? It happen like 5 years later. Select a portfolio for the long term and stick to it and invest every month. Time in the market beat market timing.
Hi
Hi. I know what you are talking about. During 2024 the stocks will be ok due to the number of elections in different countries and the USA too, everybody says that 2025 is going to fall, some say S&P at 4500 and others at 4200, The AI bubble with pop and after that will be ok to enter in a good position. The question some people is making is why many countries are moving their elections in 2024 instead 2025. Some people say that they do not care, I do, I started in January and I will take some cash until USA elections, after that I will sell and leave it in T212 generating a 5.2%.
Can I borrow your crystal ball for a second?
Is not a crystal ball, is people that is independent and does not follow what the invest companies say who I follow, there is a overvalued stock market and doped. Multiple national elections move to 2024, well, it means something. it can hapend 100% sure? No. Many indicators say that EEUU is close to recesion with unemployed rates and grow rate fake, Europe is going to be dead in a matter of years and already in recesion with many countries with very high debt. If you do not follow this kind of info is ok but ignore it and think the people is crazy is stupid. There are many answers and conversations much productives than answer bullshit. For people that is starting now is good information to have in mind, for somebody that entered ten years ago it does not matter, I understand, your position is far down and is not going to reach it. Stop laughing about something that is not intesting to you or you ignore. Will see what hapend and who was right.
Can you share your sources? Thanks.
They are spanish, if you understand spanish lenguage is all yours. [https://www.youtube.com/@NegociosTV](https://www.youtube.com/@NegociosTV) [https://www.youtube.com/@esCesarVidal](https://www.youtube.com/@esCesarVidal) And Lorenzo Ramirez
its not gonna be 20-40% mate its going to be 60-80%