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FYI: IF THIS IS THE START of a bear market, share prices have a lot further to fall: The S&P 500 is down just 9.4% from its all-time high—and yet one of the most important lessons may have already been learned. Regards, Ted https://humbledollar.com/2018/10/ignore-the-signs/
Example A: If your portfolio fell by 25% in one year, you would actually need to gain more than 33% in the following year to “break-even” again.
Example B: How many years in succession can your portfolio experience a 25% decline?
Think 4? Actually, in hypothetical terms, it could fall by 25% per-year every year - forever.
Are you feeling lucky?
Yep - The dollar sum losses sting a bit more. I don’t know how old you are, but if not yet taking distributions you’re fine just dealing with the percentages. After one actually begins pulling money out, losses in dollars seem to assume a greater importance. Guess it has to do with a diminishing time horizon.
I came to the conclusion early in investing that it’s the percentages that really matter - not dollar amounts. When it comes to putting together a sound allocation model and investment approach, it seemed to me that whether one was managing $50,000 or $1,000,000 it really didn’t make a lot of difference. The thought process is pretty much the same. (But it’s cheaper to manage a million because fees are generally lower.)
My thinking behind the % comments I made earlier was along the lines that, while I have often chased markets down in the past - with some success - and including during the ‘07-‘09 rout, I won’t be chasing this one. My gut tells me there’s a ways to go yet. I’ve never before witnessed the kind of complacancy among investors as this time around. At 72 I don’t have a realistically long enough time horizon to tough it out and keep buying should prices continue falling.
Not doing anything drastic. Just sitting back and watching. At the end of December it will be time to do a quarterly rebalance. Perhaps equities will be on sale at that time.