Your plan for if the market drops

[Retire-Canada]

Money already in the VG Money Market fund... just waiting... then all on VTSAX for my brokerage account.

If nothing happens then Plan B. BiWeekly purchases of VTSAX.

When does Plan B kick in?

[Maenad]

Based on my experiences with the tech crash, 2008-2009, and the correction in 2011:

(Assuming I'm still working)
10% drop or bigger:
1. Switch to buying all VTIAX rather than splitting with bonds like I do now.
2. Try to ignore my plummeting total at VG.
3. Let myself freak out, but don't act on it.
4. Keep working and pout/moan/wail/pull-my-hair over the fact that my FI date got pushed out.

For big drops like 50%:
5. Worry some about the state of the world and if Really Bad Things are coming.

I'm currently 1.5 years from FI and 3 years from ER, so any big sustained drop could absolutely have a major effect on the amount of time I need to keep working.

The 2008-2009 crash was scary. Really effin' scary. I won't deny that another one like that would have a major, negative, emotional effect on me. However, I managed to stay the course despite that, and I expect I'll do so again in the future.

[jinga nation]

Money already in the VG Money Market fund... just waiting... then all on VTSAX for my brokerage account.

If nothing happens then Plan B. BiWeekly purchases of VTSAX.

When does Plan B kick in?

Depends on the looming govt shutdown.
Or plan B may start before plan A. What do I know about market timing?

[rxmurphy]

Based on my experiences with the tech crash, 2008-2009, and the correction in 2011:

(Assuming I'm still working)
10% drop or bigger:
1. Switch to buying all VTIAX rather than splitting with bonds like I do now.
2. Try to ignore my plummeting total at VG.
3. Let myself freak out, but don't act on it.
4. Keep working and pout/moan/wail/pull-my-hair over the fact that my FI date got pushed out.

For big drops like 50%:
5. Worry some about the state of the world and if Really Bad Things are coming.

I'm currently 1.5 years from FI and 3 years from ER, so any big sustained drop could absolutely have a major effect on the amount of time I need to keep working.

The 2008-2009 crash was scary. Really effin' scary. I won't deny that another one like that would have a major, negative, emotional effect on me. However, I managed to stay the course despite that, and I expect I'll do so again in the future.

Instead of ignoring in #2 above, why not temporarily change AA to bonds/cash? Serious question. I get that a market drop is a buying opprotunity. I wonder what to do with my mostly (90%) equity holdings if the markets starts to drop severely.

[sol]

Instead of ignoring in #2 above, why not temporarily change AA to bonds/cash?

Because that way you'll lose even more money.  You're more likely to make that switch after the drop and before the recovery, so you will have lost money on the drop and then sold low and missed out on the subsequent gains.

The better plan is to just ride it out.  You lose when it drops, you win when it gains, and you guarantee yourself average market returns.  Trying to time the market is the easiest way to do worse than average.

[Mighty-Dollar]

Maintain my predetermined allocation ratio regardless of the % of drop.

[SnackDog]

Most people focus on short-term history and are biased by it. We are constantly re-fighting the last battle while failing to realize the current battle is probably completely different and what worked in hindsight may be disastrous going forward.  I hear lots of youngsters jumping up and down saying they wish they could relive 2008 or 2011 and invest more. The next drop won't be the same and nobody knows quite how it will be different. There have been *10 year periods* of net negative Dow performance.  You may be investing in one the next one.  What goes down must come up, but it may come up too late for you to maintain your ER plans.

[MasterStache]

Maybe go fishing. Play some golf. Build something. Just like every other day

[talltexan]

Most people focus on short-term history and are biased by it. We are constantly re-fighting the last battle while failing to realize the current battle is probably completely different and what worked in hindsight may be disastrous going forward.  I hear lots of youngsters jumping up and down saying they wish they could relive 2008 or 2011 and invest more. The next drop won't be the same and nobody knows quite how it will be different. There have been *10 year periods* of net negative Dow performance.  You may be investing in one the next one.  What goes down must come up, but it may come up too late for you to maintain your ER plans.

This is indeed a good caution. Being in a 10-year period like you describe would be discouraging, but it's also a motivation to accumulate, which we are good at.

Also, you should have some international exposure.

[chasesfish]

Maybe go fishing. Play some golf. Build something. Just like every other day

More people might be fishing if companies lay off people...

Had to find a way to complain about it, I'll be out there with a wet line either way