Down Six Figures in Six Days

I was feeling a little smug last week, have to admit that. My net worth and my investment portfolio were closing in fast on new all time highs! My spouse and I were heading out on a two day drive to Breckenridge CO for some skiing and there were no worries to be found. Now back in the condo after a day of glorious powder I checked the market and to be mild it dropped like a boat anchor today. Added to last week’s losses my investments are $110,000 lower than they were one week ago. Fortunately as a slightly early retired couple our portfolio is less than half equities so the loss could have been much higher. My brother, also slightly early retired looks like a genius because he texted me last Tuesday that he was going to cash with a big part of his portfolio and he got the trades made right before things started to go mideval on my net worth.

Most of you have experienced something similar as investors these last few days. You may be early on in your journey to FI and if so rejoice! You lost little and will get some discounted prices. Or you may be already at FI and already early retired and this market bobble might be a particularly hard sting to your peace of mind. That is precisely where I am and I watched myself react to see if I really believed all the things I’ve said to others about investing. And…I passed. I actually got a wry smile on my face when I checked the indices for a couple of reasons. First because I’m not losing anything if I don’t sell. And second because my portfolio is diversified, doesn’t have exaggerated cap weighting and can handle a blip, or a correction or even a historic bear market. And I have to say I was pretty happy I didn’t have any exposure to crypto currency just now.

So is this a speedbump, a genuine correction starting or is the fabled bear coming out of hibernation to visit? Nobody knows, it is fair to say that as of Monday afternoon on the 5th of February, 2018 Wall Street looks to have another down day tomorrow. If the futures markets are correct, there is already blood in Tuesday’s streets. But profits are strong, the tax package will make them even stronger so there is every chance this is just a speed bump in another good year or two of equity growth. However price to equity ratios are quite high and the bond interest rates appear to be creeping toward business borrowing depressing levels so that’s a downside. Of the many indicators out there of future prosperity you can find one you like if you look hard enough.

The real question to ask yourself that you can actually answer is how did you react to the market suddenly acting like it has always acted, outside of the last few years? Were you OK with the way it felt, did it make you feel good about your investment strategies and your FI or FIRE plans? Or were you distraught and kicking yourself because you weren’t my brother and weren’t able to time the market with precision? This little slice of history is a perfect time to evaluate your risk tolerance. If you can’t avoid a knee jerk reaction to unexpected market moves then perhaps you need to reevaluate your plan. Personally when I made my own investment decisions I found days like today caused me angst, pain and fear. Now that I have three managers handling parts of my portfolio and I’m hands off my own money I felt no real pain at all. Today might be the day that some of you decide to turn to a financial planner or a financial advisor yourself, or it might be the day you take your money back into your own hands to manage.

It would be interesting to know what the last few days felt like to you. And whether that provided you an insight into your own thoughts about your journey to financial independence and perhaps early retirement. Please let me know. Now as for me I’m expecting 10 to 15 inches of fresh powder tomorrow here in Breck, something that the weather guys are actually fairly decent at predicting. Maybe we should let them try to model the stock market?

12 Replies to “Down Six Figures in Six Days”

  1. Hi Steveark, Today’s blow off finally caught my attention. Last week, I was busy and didn’t pay much attention. Starting to sniff around for some higher yields now. I have committed little new cash to the market over the past 6 months so unless it gets 2008/2009 kind of scary I’m ready to put some of that cash to work. Tom

    1. It is hard to be excited about buying stocks or index funds when the price to earnings ratio is beyond rational. I am the lowest in equities I’ve ever been but I also hate to try to guess right, its why everything but the cash is being controlled by managers.

    1. Caroline, that makes you the smart one! It used to make me feel bad but now I can watch it go high or low without feeling like it matters a whole lot.

  2. Good post and good questions! I am glad I don’t’ own Bitcoin either. I must admit I felt a bit nervous. Then I channeled my nervous energy by doing something and set an order for more index ETF purchase. This is why I would want to be FIRE and not have a safe withdrawal rate or not have to rely on withdrawing it at all. I know that calculations prove that even with market downturns you can still withdraw safely but psychologically I would feel better to not withdraw at all if I were FIRE’d.

    1. I’m with you. I am FIRE but I’m also at a zero withdrawal rate because the side gigs I do for entertainment pay 100 % of my expenses and my spouses. I think it would hurt a little bit if I was withdrawing from my investments when the market corrects. You have the right mind and will to succeed!

  3. I’m the lowest I’ve ever been in equities as well. And I am an avid fan of Jeremy Siegel’s “Stocks for the Long Run”. It just concerns me that we have never had this situation of really low interest rates and massive quantitative easing for what, a decade now.

    I personally think the recent decline is just a blip and the real test for investors is weathering a much bigger storm. I like your idea about forecasting. I sure wish the stock market forecasting was as good as the weather report. Oh well, enjoy the fresh powder.

    1. I think you are right, I wouldn’t be surprised to see the market hit 18,000 in the next two years. I hope not because there are a lot of lean FI people. They’d be fine because they are world beaters, but many would stress a little and who needs that?

  4. I hate to say it but I was a little upset that I didn’t have money lying around so I can buy more shares of the companies like. But other than that, I really wasn’t bothered by the decline one bit. I did notice that the overall value of my portfolio was lower, which is something I am not used to seeing. But, because I plan to be in the market for another 15 years at least, and quite possibly much longer than that, the ups and downs of today or even the next decade is of little consequence.

    But, it shows the importance of having cash ready to be deployed when opportunities arise for those who have a long term horizon. The way I look at it is that I have an opportunity to buy more shares at a cheaper price.

    Of course, I can imagine that those who are in retirement or who otherwise depend on the stock market for income were a bit nervous and to that extent, I feel for those people. Hopefully, they have a properly diversified portfolio to help mitigate risk and investment losses.

    1. DP, Sounds like you have the temperment of a successful investor! That is a huge advantage for you over most of us. I have my portfolio under the control of three low cost advisory companies with different strategies. I just didn’t enjoy making trades myself so I do not consider myself a natural investor but knowing my limitations I’m willing to pay some fees for peace of mind. I really wished I enjoyed doing it myself, but I tried that and it wasn’t fun at all!

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