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Ask HN: How to deal with markets down turn? Feeling down

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Re: Ask HN: How to deal with markets down turn? Feeling down

#111

Post by pzs »

richliss wrote: post #104
throw0101c wrote: post #28

Earlier quoted context omitted.

The problem is getting out before things drop, and getting back in when the drop is "over": * https://awealthofcommonsense.com/2018/10/the-psychology-of-s... By sitting in cash you're also losing money through inflation: * https://ofdollarsanddata.com/the-cost-of-waiting/ At the end of the day you should always be invested, and if you're worried about market undulations then you should own some bonds. And besides red…

If you cut early and miss the top 5% of profits then buy back in at 5% above the bottom when it rebounds you'll do pretty well.

That sounds great in theory, but you can't implement it in practice. It's often easy in hindsight to identify where are those suboptimal 5%-away-from-perfect-timing points where you should have done a rebalancing, but we have no idea how close we are to the next peak/trough.

Re: Ask HN: How to deal with markets down turn? Feeling down

#112

Post by baron816 »

bluGill wrote: post #62

Fidelity did a survey of thier customers whose 401k did the best over the years. The most popular response (about 1/3) was 'I don't have a 401k at fidelity'. They had forgotten about it and left it alone to grow through good and bad. If you know how your investments are doing you know too much

Dead people’s portfolios also tend to perform really well.

Re: Ask HN: How to deal with markets down turn? Feeling down

#113

Post by somenameforme »

tjs8rj wrote: post #79
sicp-enjoyer wrote: post #78

Earlier quoted context omitted.

There is always a reason to think it's different this time.

Investments doing so well these last 40 years is the unusual part. Vast majority of the gains in the stock market over its history happened from 1977-2007.

I'd also add to this point: https://wtfhappenedin1971.com/

The implied causation : https://en.wikipedia.org/wiki/Bretton_Woods_system

Bretton Woods was a defacto global* monetary system with other currencies tied to the dollar, and the dollar convertible to gold at a fixed rate. Nixon ended it in 1971, at which point the government was unconstrained by any external forces when determining economic policy. The debt to GDP ratio in 1971 was about 35% and declining. Today it's 122%. Even before COVID it was 105% and rising.

If this is not sustainable, then there will be a generation which will simultaneously be the last to benefit and first to suffer for this.

Re: Ask HN: How to deal with markets down turn? Feeling down

#114

Post by O__________O »

throw0101c wrote: post #95
bluGill wrote: post #62

Fidelity did a survey of thier customers whose 401k did the best over the years. The most popular response (about 1/3) was 'I don't have a 401k at fidelity'. They had forgotten about it and left it alone to grow through good and bad. If you know how your investments are doing you know too much

> Fidelity did a survey [citation needed] This is an urban legend from what I recall. (But not touching your investments is generally a good idea.)

Citation:

https://www.businessinsider.com/forgetful-investors-performe...

Re: Ask HN: How to deal with markets down turn? Feeling down

#115

Post by ekelsen »

cloudking wrote: post #63

Be aware that: 1) we're likely in a declining/sideways market for at least another year until inflation subsides, possibly longer 2) the Fed has most of the control over the inflation/deflation levers (on demand side) 3) markets will most likely recover over the long term, historically speaking The Fed is purposefully reducing their asset holdings and increasing interest rates to slow down demand, which in theory sho…

"markets will most likely recover over the long term, historically speaking"

tell that to the Nikkei index. At this point you'll have been waiting 40 years for the recovery.

https://www.macrotrends.net/2593/nikkei-225-index-historical...

Re: Ask HN: How to deal with markets down turn? Feeling down

#116

Post by kqr »

jeremyt wrote: post #81
thehappypm wrote: post #37

Earlier quoted context omitted.

What was your motivation to invest in such a way that 95% loss was even possible?

To make money, why else? Look folks, this wasn't my retirement money, it was money I didn't particularly need and had no idea what to do with. It always worked for me before. My investing history is a long string of huge successes beginning in 2014. I've always invested in companies I believed in and that had solid fundamentals. It appears the market doesn't give a shit about company fundamentals right now. Most smal…

> To make money

Strategies that result in 95 % drawdowns are not in the "making you money" bucket.

Since growth is compounding[1], the most important property of a money-making strategy is to keep drawdowns at at optimal level. This optimal level is a thrill ride on its own, but 95 % is plain overbetting and will never make you money in the long run.

----

[1]: If you draw down from 100 to 10, it takes as long to go back to 100 as it would have taken to go to 800 had you only drawn to 80.

Re: Ask HN: How to deal with markets down turn? Feeling down

#118

Post by kqr »

ekelsen wrote: post #115
cloudking wrote: post #63

Be aware that: 1) we're likely in a declining/sideways market for at least another year until inflation subsides, possibly longer 2) the Fed has most of the control over the inflation/deflation levers (on demand side) 3) markets will most likely recover over the long term, historically speaking The Fed is purposefully reducing their asset holdings and increasing interest rates to slow down demand, which in theory sho…

"markets will most likely recover over the long term, historically speaking" tell that to the Nikkei index. At this point you'll have been waiting 40 years for the recovery. https://www.macrotrends.net/2593/nikkei-225-index-historical...

A different take on the same thing: the best models we have of the risk-free returns of equity markets are unbiased random walks, or martingales. Whatever value the index is at now is the best guess at what value it will be in the future, at least when absolute polynomial loss is the error function.

Re: Ask HN: How to deal with markets down turn? Feeling down

#119

Post by marcrosoft »

Know that relative to previous events it is possible for a much larger drop. Be mentally prepared. Stick to your plan. If buy and hold is your plan you should already know that it routinely has 30% drops for months or years at a time. If you have all your money in one company stock then your plan could use some diversification.

Re: Ask HN: How to deal with markets down turn? Feeling down

#120

Post by writeinpencils »

pseudoramble wrote: post #10

My perspective is a bit different since I don't have stock options, just plain retirement and such. So, take this with that in mind. I would recommend giving yourself a break from following it. My reasons for not looking are these: Values of assets change a ton day-to-day, and a year or two from now who knows what it will look like! I also don't have any control over prices. I could shuffle assets around, but again I…

This is something covered very well by Taleb in "Fooled By Randomness." Simply by exposing yourself to random fluctuations on a shorter cadence, you are experiencing stress reactions that would never occur if you checked it on a less frequent cadence. Anyone who has played fantasy football will be familiar with this. If you check your players' scores every five minutes, it is infinitely more stressful than just checking them once on Monday morning.
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