Author Topic: So we're basically on track for a bear market by tomorrow?  (Read 12575 times)

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #100 on: December 26, 2018, 04:21:29 PM »
This is a nice bounce.  It jumped up about 5 percent today, nice.  I guess these are people making money on the dip. (the bounce)  Stocks are sort of a commodity just like oil or lumber.  They used to say oil was somewhat inelastic in price.  People needed oil to survive.

How elastic or inelastic are index funds?  One may not need them to survive until they retire.

I disagree with Sol on this point. I think having 2-5 years in defensive assets that you sell from when a bear market hits is a smart idea. McClung has a rule like only sell stocks when it is 1.2 times above your initial retirement point. If it isn't at that level sell bonds/use cash. Of course there may come a point when you have no choice but to use stocks and you can probably only fire that type of bullet once or twice.

As do I.  I retired in August and due to my overly conservative nature and the fact that the market was red-hot, I kept many hundreds of thousands in cash.  I can outlast a 10 year long bear market :-)

Might I pay for this in terms of reduced returns over 30 years ?  Sure.  But my assets allocation is still 60% stocks, (or rather it was, I haven't recalculated it) and man it's worth it to be able to sleep so well during downturns like this.

I'll throw some decent amount into the market when the dust settles in the new year as well.  Looking forward to the higher returns on those sums.


People on this website are certainly disciplined.  Most folks live paycheck to paycheck.


maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #101 on: December 26, 2018, 04:49:57 PM »
Stocks are sort of a commodity just like oil or lumber.  They used to say oil was somewhat inelastic in price.  People needed oil to survive.

How elastic or inelastic are index funds?  One may not need them to survive until they retire.

I would argue stocks are quite different from a commodity, and (part*) of the reason is that elasticity. In a commodity, like oil, when the price goes up people buy less and when the price goes down people buy more. How big a change in purchasing you get for a given change in price is what determines the elasticity of that particular commodity.

Stocks are different in that, when the price goes up, people buy more and when the price goes down people buy less.

*A much bigger part of the difference is that the expected annual return of owning stocks is positive. Price fluctuations happen when people change their minds about HOW positive. In contrast for commodities the expected annual return is zero.