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What We've Learned from 150 Years of Stock Market Crashes

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Re: What We've Learned from 150 Years of Stock Market Crashes

#31

Post by torlok »

ebiester wrote: post #19
throw0101c wrote: post #5

A popular post that is often given to folks who are freaking out about drops in their portfolio: * https://awealthofcommonsense.com/2014/02/worlds-worst-market... And for those who want to sit on the sidelines, that's usually not a good idea: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co... The main folks that do have to worry about their portfolio are those who are about to retire, and those that ha…

There are a fair number of us not worried about the drop in our portfolio as much as we are worried that the current decisions will decrease the world's willingness to invest in American companies and markets permanently. What if your hypothesis is that the fundamentals have changed?

Buy a world index that's not over-weighted on the US or spread your money around region indices. Keep dollar-cost averaging. Stop believing you'll get more than 3-4% yearly returns above inflation. My only real strategy change as a European was to move my money to European ETF providers away from Vanguard and BlackRock because at this point you never know what the US government is going to cook up next, and to weigh more on Europe and Emerging Markets.

Re: What We've Learned from 150 Years of Stock Market Crashes

#32

Post by charlie0 »

MilnerRoute wrote: post #20
uptownfunk wrote: post #7

People say not to time it but if you took your profits December ish you’re probably much happier than if you had lost everything since then and reset to 6-12m ago unless you’re playing the short. There is a premium on mental health and market volatility.

Since December the S&P 500 is down... 4.10%. It's a small loss, but I don't know if people who cashed out in December are really that much happier. Especially since for the last 12 months the S&P 500 is still up nearly 10%.

Even at 6 months it's still in tbe green at ~2%. DCA and buy the dip.

Re: What We've Learned from 150 Years of Stock Market Crashes

#33

Post by wintermutestwin »

mplanchard wrote: post #23
wintermutestwin wrote: post #17

Earlier quoted context omitted.

>Target day funds exist for a reason. Yes - to make a lot of money on the expense ratio. I guess if you really didn't want to learn a damn thing about modern portfolio construction a taget date fund is your best bet. However, it is incredibly easy to buy 4-6 ETFs that give you the same thing at a lower cost. Yes, you have to do a little work to re-balance these funds, but that is also an advantage to this approach as…

Vanguard target retirement funds have expense rations of 0.08%

They are cheaper than most for sure, but still more than buying individual ETFs.

Here are 4 common funds that are used in risk parity portfolios:

VTI = .03% VXUS = .06% VGLT = .03% GLDM = .1%

(edit) I am not arguing that that investing in TDFs is inferior solely due to expense ratio cost - the biggest issue is that they lock you in to a specific allocation and re-balancing strategy that might not align with your specific situation.

Re: What We've Learned from 150 Years of Stock Market Crashes

#35

Post by [deleted] »

xvilka wrote: post #10
losvedir wrote: post #6

Hm, interesting article but I wish they had included global data as well. For example, stock market crashes in Japan and other countries. As I understand it, Japan still hasn't quite recovered from its crash more than 30 years ago.

Mostly because of the restrictive Plaza accord[1] and tariffs[2]. [1] https://en.m.wikipedia.org/wiki/Plaza_Accord [2] https://edition.cnn.com/2019/05/24/business/us-china-trade-w...

[deleted]

Re: What We've Learned from 150 Years of Stock Market Crashes

#36

Post by throw0101c »

tylerflick wrote: post #14
throw0101c wrote: post #5

A popular post that is often given to folks who are freaking out about drops in their portfolio: * https://awealthofcommonsense.com/2014/02/worlds-worst-market... And for those who want to sit on the sidelines, that's usually not a good idea: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co... The main folks that do have to worry about their portfolio are those who are about to retire, and those that ha…

People about to retire shouldn’t be that exposed anyway. Target day funds exist for a reason.

> People about to retire shouldn’t be that exposed anyway. Target day funds exist for a reason.

Most research about safe withdrawal rates finds having 50-75% equities is necessary for retirement periods of thirty years:

* https://en.wikipedia.org/wiki/William_Bengen

* https://en.wikipedia.org/wiki/Trinity_study

* https://en.wikipedia.org/wiki/Retirement_spend-down

Of course you could have less, but then your initial withdrawal rates becomes quite low, and so you need a much large portfolio to begin with: this would mean much more saving and much less spending (i.e., enjoyment of life) during your working life.

Re: What We've Learned from 150 Years of Stock Market Crashes

#38

Post by nine_zeros »

ram_rar wrote: post #24

While dollar cost averaging and index investing are solid strategies, this article overlooks an important consideration: the Realistic Rate of Return (RoR) needed for retirement planning. Yes, US markets historically recover (lately that notion seems to be challenged more often than not), but timing matters significantly. What happens if someone's retirement coincides with a market crash? Younger investors have time…

> Age-appropriate risk management becomes increasingly important as your investment horizon shortens.

As you appear closer to retirement, make sure you invest in Bonds or other fixed income. It won't beat inflation but it will prevent you from draw-downs exactly when the market is down.

Re: What We've Learned from 150 Years of Stock Market Crashes

#39

Post by dachris »

wiredfool wrote: post #25
ebiester wrote: post #19

Earlier quoted context omitted.

There are a fair number of us not worried about the drop in our portfolio as much as we are worried that the current decisions will decrease the world's willingness to invest in American companies and markets permanently. What if your hypothesis is that the fundamentals have changed?

So far, this is a minor stock correction coupled with unprecedented political uncertainty. In my lifetime, there have been multiple -10+% single day drops, one -22%, and a bunch of -10% months. In that time though, no one has questioned the full faith and credit of the US government. However now -- The Supreme Court had to take a case to rule that the government had to pay contracts that had already been delivered on…

Yes, the market reaction so far has been very tame, considering that the stock market is supposed to be forward-looking, and there's another 4 (or at least 2) years of the same behavior, policies and politics we've had for just 7 weeks.

Extrapolate that 30 times out in the future, even leaving out feedback loops and nonlinear systems.

Re: What We've Learned from 150 Years of Stock Market Crashes

#40

Post by mplanchard »

wintermutestwin wrote: post #33
mplanchard wrote: post #23

Earlier quoted context omitted.

Vanguard target retirement funds have expense rations of 0.08%

They are cheaper than most for sure, but still more than buying individual ETFs. Here are 4 common funds that are used in risk parity portfolios: VTI = .03% VXUS = .06% VGLT = .03% GLDM = .1% (edit) I am not arguing that that investing in TDFs is inferior solely due to expense ratio cost - the biggest issue is that they lock you in to a specific allocation and re-balancing strategy that might not align with your spec…

Yeah you can definitely optimize better, but depending on your allocation you're still going to be fairly close to that 0.08% ratio on the average.

For most people, it probably makes more sense to recommend something like a vanguard target fund, so that they don't have to think too much about it or remember to rebalance as they near retirement (or actively choose not to rebalance b/c the market is currently good and then get walloped by a crash).

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