The Market is Crashing - What's Your Plan?

[3.0L]

Originally Posted by rad doc

Yeah, that is all true. But you have to have cash to buy when market is down so that means somewhere less than 100% equity. How much is the question assuming greater than 10 yrs till retirement. I don't really believe in market timing much but going all in when market is so overvalued is tough!

I had a defined amount automatically taken right off the top of my monthly paycheck, market position be damned. I didn't just jump in with a huge purchase. It was simply monthly installments into a TSA. I plugged away at this faithfully for 20 years, so I'm sure this would be characterized as a long-term plan. Nothing tricky or fancy.

Yeah, things really took a dump in 2008, but I stayed the course. I guess that took some guts. I didn't sell or move money around. I was never one to sit around and stress over the stock market. I groaned slightly when my quarterly reports arrived when the market was down, but smiled later when the market was up. The ups have always exceeded the downs. I never flinched. I'm retired now and my investments are still growing over the long term.

[rad doc]

Originally Posted by 3.0L

I had a defined amount automatically taken right off the top of my monthly paycheck, market position be damned. I didn't just jump in with a huge purchase. It was simply monthly installments into a TSA. I plugged away at this faithfully for 20 years, so I'm sure this would be characterized as a long-term plan. Nothing tricky or fancy.

Yeah, things really took a dump in 2008, but I stayed the course. I guess that took some guts. I didn't sell or move money around. I was never one to sit around and stress over the stock market. I groaned slightly when my quarterly reports arrived when the market was down, but smiled later when the market was up. The ups have always exceeded the downs. I never flinched. I'm retired now and my investments are still growing over the long term.

Congrats on retirement. Your plan is a great one for many and what I did for years. But when someone is fortunate enough to acquire a new lump sum, things get a little tricky especially now.

[3.0L]

Originally Posted by rad doc

Congrats on retirement. Your plan is a great one for many and what I did for years. But when someone is fortunate enough to acquire a new lump sum, things get a little tricky especially now.

Okay, I understand now.

Yes, do be cautious with your lump. I know someone in our family who inherited a handsome wad and promptly invested virtually the whole deal in real estate, 4 years before the real estate market crashed and burned. They lost the entire wad.

Lesson: diversify. Maybe even stuff it in a coffee can and bury it until the market comes down a bit.

I have no experience predicting the market, but considering our current administration, I have this strange feeling the market might fall a bit in the not-too-distant future. Heh!

[funbobbyrob]

There are products for accredited investors via any major bank wealth manager that have capital preservation (0% return as max downside) and participation for market upside. Some have caps and others may not that still offer liquidity. Also there are ‘rich man’s Roth’ products via IUL insurance products with similar mechanics with other tax benefits on the accumulation. These products rely on options not just equities to limit downside risk while still getting upside.

[BayMoWe335]

I will buy more. People have been calling the crash since the. S&P hit 1200.

Bears always lose.

Long long long.

[qba335i]

Originally Posted by funbobbyrob

There are products for accredited investors via any major bank wealth manager that have capital preservation (0% return as max downside) and participation for market upside. Some have caps and others may not that still offer liquidity. Also there are ‘rich man’s Roth’ products via IUL insurance products with similar mechanics with other tax benefits on the accumulation. These products rely on options not just equities to limit downside risk while still getting upside.

All investment products carry risks and no one will guarantee the rate of return. They are ways to hedge your portfolio or add some insurance policy on top of that, but this is not a standard practice and it is pretty costly to maintain. There are many risks and market risk is just one of them...

[qba335i]

Originally Posted by DETRoadster

I just sat down and looked over my entire portfolio. Im currently at roughly:

10% Cash
10% Annuity
20% Bonds
60% Equities

I feel like that's a pretty reasonable mix given my age and appetite for risk. but that 60% equity really eats at me. on the one hand I want to axe that annuity and ratchet up the equities which have been making me almost as much money than my job the last year. On the otherhand I just cant help bu feel the party is going to come to a terrible screeching halt in the not too distant future. I get option paralysis and end up just holding, which in the end may be the best thing anyway!

1) annuity - usually they are not good investment products. Long term investor are usually better of having a long only stock/bond portfolio.
2) equities - how do you invest? Domestic, international developed or emerging? What about market cap? What about sectors? Value or growth? Individual or fund/etf?
3) bonds? Taxable or not? Duration? Maturity? Individual issues or funds? Credit rating?

Do you have any RE exposure, commodities?

There are a lot of things to consider when designing a portfolio.

[rad doc]

Originally Posted by qba335i

All investment products carry risks and no one will guarantee the rate of return. They are ways to hedge your portfolio or add some insurance policy on top of that, but this is not a standard practice and it is pretty costly to maintain. There are many risks and market risk is just one of them...

If it sounds too good...

[ipilcher]

For those investing in bonds, how are you doing so - mutual funds, ETFs, or individual bonds? If the last, how are you buying them?

[other_evolved]

Originally Posted by ipilcher

For those investing in bonds, how are you doing so - mutual funds, ETFs, or individual bonds? If the last, how are you buying them?

For the majority of investors, funds/ETF's are the way to go. If you're trying to buy individual bonds here and there through a brokerage account, you're likely getting hammered on pricing. One could get much broader exposure at a pretty cheap price and have the benefit of next day liquidity.

[DETRoadster]

Originally Posted by qba335i

1) annuity - usually they are not good investment products. Long term investor are usually better of having a long only stock/bond portfolio.
2) equities - how do you invest? Domestic, international developed or emerging? What about market cap? What about sectors? Value or growth? Individual or fund/etf?
3) bonds? Taxable or not? Duration? Maturity? Individual issues or funds? Credit rating?

Do you have any RE exposure, commodities?

There are a lot of things to consider when designing a portfolio.

1) Annuity - I tend to agree with you. I got talked into the one I have by my last adviser who sold it as a good way to balance out risk. It's done OK, not great. It's gained 30% in value in 6ish years. I have not owned it during a big downturn, which is where it was really supposed to shine. I may jut keep it and see how it does when the market turns.

2) Equities - I have a few mutual funds through my 401K that are focused on healthcare, real estate, and emerging markets. The bulk of my equities are actively managed by my portfolio management company. About 75 individual companies, focused almost exclusively on the US. There's a pretty eclectic bunch from tech to pharma, financials, and aerospace. What I really like about what they offer is that I know exactly what my money is invested in and I can steer them away from companies I'm not a fan of.

3) Bonds - The bulk of mine are in the American Century Government Bond fund (CPTNX) though my 401K. My portfolio managers also have me in a mix of taxable and non taxable bond funds and ETFs, the bulk of which is through Vanguard.

I have zero commodities

Real Estate is my house which has more than doubled in value in the last 6 years (Thanks Seattle!). I'm on a 30 year loan and was considering making extra payments to pay it off in 15, but with the markets and interest rates where they are, it seemed wiser to take any extra cash and invest as opposed to to paying down a 4% interest rate loan.

I agree, there's a ton to consider when designing a portfolio, which is why I leave a lot of it up to Baird. However, at the end of the day they are still in it to turn a profit and shielding me from possible losses with a market crash is not really in their financial best interest. They want all the money I will channel to them as quickly as possible.

All that being said, the big nugget of feedback I'm gathering from all you investment gurus is to stay the course. I may feel like an old fart at 43 but I've got plenty of time to ride out a downturn and buy like crazy as the market is tanking. It'll be a much different convo 15 years from now when I'm just a couple years from retirement.

Also, I need to start searching for forms of regular income generation. Many of my equities are in companies that pay regular dividends, so that's good. But a juicy rental property would augment my portfolio nicely.

Thanks for all the great tips, guys! This has been super helpful!

[Joekerr]

I've been waiting for a correction, and have now given up. Might as well go in and ride any downturn out - we're not yet 40, so we should have time to ride it out.

[Joekerr]

Though the portfolio manager I'm using did make some sense to me when he said he focuses almost only on stocks that pay a regular dividend (and blue chip), because he mentioned when they fail to pay a dividend, they know there is something wrong / tough times with that company to come.

[qba335i]

Originally Posted by ipilcher

For those investing in bonds, how are you doing so - mutual funds, ETFs, or individual bonds? If the last, how are you buying them?

It all depends... for bigger accounts I would recommend individual bonds especially when we ladder the portfolio, for smaller I would do funds (not a fan of ETF in this asset class)

With raising interest rates you want to stay short maturity and have a manager that actively manages the yield curve. Also being invested in cash/money market is not a bad idea. I have MM paying over 1% and this will go up with dec rate hike.

[qba335i]

Originally Posted by Joekerr

I've been waiting for a correction, and have now given up. Might as well go in and ride any downturn out - we're not yet 40, so we should have time to ride it out.

Fear of missing out... it takes a lot of self discipline and control to be bearish on the market.

[Flying Ace]

Originally Posted by DETRoadster

I just sat down and looked over my entire portfolio. Im currently at roughly:

10% Cash
10% Annuity
20% Bonds
60% Equities

I feel like that's a pretty reasonable mix given my age and appetite for risk. but that 60% equity really eats at me. on the one hand I want to axe that annuity and ratchet up the equities which have been making me almost as much money than my job the last year. On the otherhand I just cant help bu feel the party is going to come to a terrible screeching halt in the not too distant future. I get option paralysis and end up just holding, which in the end may be the best thing anyway!

that's a good mix based on your age. I'm also assuming you're going to try to retire at 60? You still have close to 20 years left.

Question on your shitty annuities. Are there penalties for withdrawing it early? What's the payout/yield on it? Is it currently paying or it'll pay later?

[DETRoadster]

Originally Posted by Flying Ace

that's a good mix based on your age. I'm also assuming you're going to try to retire at 60? You still have close to 20 years left.

Question on your shitty annuities. Are there penalties for withdrawing it early? What's the payout/yield on it? Is it currently paying or it'll pay later?

Cool, thanks for the sanity check on the mix. Yeah, I'd like to retire at 60.

Forgot to mention, I actually have a pension too! Through my first employer back in the day. it's not a ton of money and I try to forget about it as opposed to planning on depending on it, but it'll pay out nearly $1k/month from retirement till I'm dead. Not a bad little revenue stream.

I have no answers to the annuity questions. That's how little I know about it. I need to just call them ans say my broker is no longer in the picture so tell me all you can about what I bought in to. All I know is that it was a lump-sum deposit I made back in 2011 after I rolled my old 401K out from under my previous employer and needed a tax deferred place to stash it.

[Flying Ace]

Originally Posted by DETRoadster

Cool, thanks for the sanity check on the mix. Yeah, I'd like to retire at 60.

Forgot to mention, I actually have a pension too! Through my first employer back in the day. it's not a ton of money and I try to forget about it as opposed to planning on depending on it, but it'll pay out nearly $1k/month from retirement till I'm dead. Not a bad little revenue stream.

I have no answers to the annuity questions. That's how little I know about it. I need to just call them ans say my broker is no longer in the picture so tell me all you can about what I bought in to. All I know is that it was a lump-sum deposit I made back in 2011 after I rolled my old 401K out from under my previous employer and needed a tax deferred place to stash it.

anytime you can get a guaranteed cash flow, it's a good thing. I too have a tiny pension from when I used to work in federal government (in my case it's literally back by the full faith and credit of USA). I estimate my payout is $675 per month. It's not much, but combine this with social security, and 401k and IRA distributions plus brokerage investments, it's just one more source of income, but guaranteed.

[Never_Enough]

According to my brother, since I will not buy Bitcoin, I should essentially remove all my money from the market & put it under my mattress. I will miss "minimal gains", but save myself from a huge correction...

[DETRoadster]

Originally Posted by Never_Enough

According to my brother, since I will not buy Bitcoin, I should essentially remove all my money from the market & put it under my mattress. I will miss "minimal gains", but save myself from a huge correction...

When did he make this suggestion?

A lot of people predicted a financial apocalypse when Trump took office in January. Had I pulled out of the marked in January and stuffed my money under a mattress, I'd be down a six-figure sum. Hardly "minimal" gains.

Personally, I would not listen to your brother for financial advice. But that's just me.

[bimmer456]

Originally Posted by someguywithanm3

I moved my 401k money into bonds during the very first stages of the last crash. I did okay., so I'll do that again.

As far as the IRA, I'll move a lot to gold.

It's down today but I'm still up from where I was last month. I'd wait a little longer before selling my shares and buying gold. This is probably related to North Korea and Matt Lauer so it's not a long term thing.

[Never_Enough]

Originally Posted by DETRoadster

When did he make this suggestion?

A lot of people predicted a financial apocalypse when Trump took office in January. Had I pulled out of the marked in January and stuffed my money under a mattress, I'd be down a six-figure sum. Hardly "minimal" gains.

Personally, I would not listen to your brother for financial advice. But that's just me.

He said this to me this morning.