Posted on by Steveark

The Sky is Falling!

It’s kind of surreal watching the market plummet again today.  Nine days ago my net worth was at an all time high.  That was two hundred thirty-three thousand dollars ago.  That means I’ve lost $26,000 a day for nine straight days.  That seems like a lot to me due to my personal history.  I had one of the highest job offers in my engineering class when I graduated, a long time ago, and it was for $18,000 a year!  So in the last nine days I’ve lost thirteen years worth of my starting income.  In nine days!  And that’s with a very diverse portfolio that is less than half invested in stocks and index funds.  Those numbers are kind of staggering to me from the math side of things.  And it is only noon, the market will probably fall another percent or two by the end of the day. 

So what to do?  Panic, sell, make a run on Walmart for Kraft Mac an Cheese?  Or we could cancel our upcoming hiking trip to Switzerland in a few months, the most expensive vacation we’ve ever planned. It is also costing significantly more than a year of my income back in the day for just nine days of travel and hiking.  Seems to be some symmetry around nine days for me.  I remember 2000, and 2008 when losing a few hundred thousand was pretty huge because I did not have as large a portfolio of investments as I do now.  I was also 100% invested in the stock market, no bonds or money markets.  But I was also saving aggressively, living on less than I made and never, ever pulling anything out of savings.  So, while it hurt to see my paper net worth drop like a hot rock I knew that the math was OK. 

It feels a little different this time because I’m no longer earning a large income.  My hobby jobs pay the bills but they just barely pay them and do not make extra to save and invest.  I guess technically I’m still investing because I do not spend the dividends and interest my index and bond funds generate, I just let them reinvest.  But the fact that I’m kind of living paycheck to paycheck now makes seeing my net worth go down feel less theoretical than when I could simply out earn any bad market performance that happened.  So what to do now?  I’d say doing absolutely nothing sounds like the best plan.  Just do nothing different.

 I might shift some cash into the market, circumstances have left me cash heavy and I’ve been needing to do that anyway, and this dip makes this a better than average time to handle that bit of housekeeping.  But I’ll mostly just stay diversely and conservatively invested.  I do not need to make a high rate of return and do not need to take a lot of risk because, once you’ve won the game you really can stop playing.  And you probably should if losing would impact your lifestyle because making more money isn’t going to accomplish anything useful once you’ve got enough.   

That’s an easy perspective for a boomer who made the right choices over the last thirty years.  But what about you?  You are more likely closer to where I was in 2000 or 2008. 

What are you planning to do in response to this falling market?

Have you ever reacted to a falling market in a way you later regretted?

As usual if you do not see a comment box then just click on the title of the post to make it appear!

15 Replies to “The Sky is Falling!”

  1. i think we’re in between you in 2000 and you today, steve. we’re barely contributing much outside of my 401k to get the match. i feel like we’ve won the game too but not yet at your level of security. all that being said i love our 15% cash position and look to grow it each year as get deeper into our 50’s and are living off wages still. if i can sell into strength and have 10 years cash available that wouldn’t hurt my feelings. we’re not greedy wannabe billionaires.

    1. No you are definitely not that! I think your attitude toward money is as good as I’ve seen. I actually have about ten years of cash right now which didn’t suffer any decline today at all. I know that’s overly conservative but I tend to look at risk much differently now that I’m not earning more than I am spending. Its a different kind of paycheck to paycheck than the average American but it shares some similarities.

  2. Steve, I’m two years into retirement and have been diligent in keeping Bucket 1 topped off throughout my retirement. I refilled it in January, and have a healthy 3+ years of cash (plus 7 more years in Bucket 2, bonds), so I can go ~9-10 years without selling any stocks. I’m avoiding the noise, investing a bit of cash into equities on big down days, and enjoying life. I’m surprised how little worry I feel. The bucket strategy is working! Good post.

    1. Thanks Fritz, I’m with you. I’m almost shocked that I feel no anxiety with so much of a paper decline. It’s nice when what you know intellectually to be true and your feelings are alligned.

  3. “But I’ll mostly just stay diversely and conservatively invested. I do not need to make a high rate of return and do not need to take a lot of risk because, once you’ve won the game you really can stop playing. And you probably should if losing would impact your lifestyle because making more money isn’t going to accomplish anything useful once you’ve got enough”.

    My new investing mantra, thank-you.

    1. Thank you! It’s very hard to advise others on what level of risk is appropriate. I spent 90% of my investing career in 100% stocks. And that was very good for my performance. But for the last five years I’ve been close to 50% stocks. That felt right when I was building wealth, this feels right now that I’m maintaining it.

    1. I never followed the market during my accumulation years but maybe that was more related to my age than my financial status. Plus of course, to somebody my age smart phones and instant access to virtually everything is still kind of a new concept. I check my net worth a lot now but up or down it doesn’t matter much.

  5. Steve –

    If anything, being in my 30’s, it’s causing me to save even more (though my wife and I have had over a 70% savings rate!) and invest on dips. We have ~1.5 years of cash and all investments are equity. I can’t wait for the reinvestments at lower prices from dividends this upcoming month : )

    -Lanny

    1. Yes market slumps are a gift to younger investors. And in your case you are killing it anyway. You have a remarkably well crafted plan and consistent execution. As Dave Ramsey sometimes says, you are going to be so wealthy!

  6. Good to hear the views of someone with experience talking here. I’m determined no to panic and ride this one out. As it’s my first bad dip it makes it all the more scary!

    1. Crazy right, I mean basically nothing changed with Corona. Only some guesses about what the world banks might do.

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