This is Scaring Me

[Vegasgirl]

For real, I've been tooling along for the past 20 years with my Fidelity account at 6-8% great years I consider 10-12%.  Just went in and looked and saw this:

1-Year Rate of Return
+41.18%
As of 10/31/17

This is f'ing crazy - never seen anything like it.  I just wish it would go ahead and crash already.

Ok got it out.

[Roe]

That looks pretty insane.

On the other hand, if it doesn't crash, you will be FIRE in no time! ;)

[LadyDividend]

That's incredible! Is it in a registered account?

[Vegasgirl]

Yeah - It's my Fidelity account through my employer.  It's 100% stocks and its Fidelity Large Cap Growth.  It just seems weird like some sort of run up - I'm just not used to seeing this and it sort of makes me nervous.  I'm the type that just puts the $$ in each pay period and then let it go.

And yes currently just shy of my goal that I was planning for end of 2018.  I'm just waiting for the opposite to happen - it's almost like I don't even want to watch :)

[acroy]

If you are 1yr away from FIRE then it may be time to change investments from 100% equities to manage downside risk.
regardless, good luck!!

[Vegasgirl]

So here's my logic and why I've kept in 100% stocks.  I think of this account as my extra, sort of play money.  I'll be getting a pension (all be it reduced due to younger age) but when I FIRE next year DH will still be working - his choice.  I planned on shoveling as much money into this account as possible between now FIRE then letting it sit for say 8-10 years.  I'm willing to watch and let it roller coaster for at least a couple more years since it's not my primary source of income.  Flawed logic? 

[Livingthedream55]

So here's my logic and why I've kept in 100% stocks.  I think of this account as my extra, sort of play money.  I'll be getting a pension (all be it reduced due to younger age) but when I FIRE next year DH will still be working - his choice.  I planned on shoveling as much money into this account as possible between now FIRE then letting it sit for say 8-10 years.  I'm willing to watch and let it roller coaster for at least a couple more years since it's not my primary source of income.  Flawed logic?

Nope - historically at least - the market tends to recover within 2-3 years of a downturn. So if you know that you can wait it out and emotionally you know yourself well enough that you will not sell when the inevitable downturn occurs, your logic is fine.

See illustration:

https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=4ecfa978-d0bb-4924-92c8-628ff9bfe12d

[Tyler]

Nope - historically at least - the market tends to recover within 2-3 years of a downturn.

Unfortunately that chart is a little deceptive.  By resetting the values to zero at the end of every bear market, they obscure how long it took to recover (You and I don't have the ability to negate our losses like that, and compounding from that much lower number is a lot more difficult).  Also note that it ignored inflation in the meantime.

For an alternative viewpoint of the exact same S&P500 index, try this:  https://www.crestmontresearch.com/docs/Stock-Matrix-Tax-Exempt-Real3-11x17.pdf  There you can see that it the stock market taking more than a decade to recover from a big loss is not that uncommon historically.  There have even been a few times when it took 20 years for an investor to break even. 

FWIW, I'm not at all saying that people should panic and sell.  But I do think it's a good time to think about how volatility will truly affect you when we inevitably hit another one of those cold spells, and to select an asset allocation you'll be happy with in both good times and bad. 

[DarkandStormy]

Yeah - It's my Fidelity account through my employer.  It's 100% stocks and its Fidelity Large Cap Growth.  It just seems weird like some sort of run up - I'm just not used to seeing this and it sort of makes me nervous.  I'm the type that just puts the $$ in each pay period and then let it go.

And yes currently just shy of my goal that I was planning for end of 2018.  I'm just waiting for the opposite to happen - it's almost like I don't even want to watch :)

None of the Fidelity Large Cap Growth funds are up 41% in the last year.  Is there a ticker?

[bacchi]

Maybe the formula doesn't handle employer contributions correctly? Or you're invested in company stock?

[Livingthedream55]

Nope - historically at least - the market tends to recover within 2-3 years of a downturn.

Unfortunately that chart is a little deceptive.  By resetting the values to zero at the end of every bear market, they obscure how long it took to recover (You and I don't have the ability to negate our losses like that, and compounding from that much lower number is a lot more difficult).  Also note that it ignored inflation in the meantime.

For an alternative viewpoint of the exact same S&P500 index, try this:  https://www.crestmontresearch.com/docs/Stock-Matrix-Tax-Exempt-Real3-11x17.pdf  There you can see that it the stock market taking more than a decade to recover from a big loss is not that uncommon historically.  There have even been a few times when it took 20 years for an investor to break even. 

FWIW, I'm not at all saying that people should panic and sell.  But I do think it's a good time to think about how volatility will truly affect you when we inevitably hit another one of those cold spells, and to select an asset allocation you'll be happy with in both good times and bad.

Thanks Tyler!  Very informative and right on about picking an AA and sticking to it (as for me I am at a very conservative AA at this point as I don't need to take unnecessary risk - and I rebalance only once a year!!) 

[Vegasgirl]

@DarknStormy - it's this: Fidelity ® Growth Company Commingled Pool ???  For the longest time I had everything in Fidelity Blue Chip Growth which has done well this year too but then I noticed employer had changed allocation choices and our assets got transferred to whatever was the closest objective match.  I tried looking for a ticker on this a while back and couldn't find one so it must be something specifically set up for employer related ????

[DarkandStormy]

@DarknStormy - it's this: Fidelity ® Growth Company Commingled Pool ???  For the longest time I had everything in Fidelity Blue Chip Growth which has done well this year too but then I noticed employer had changed allocation choices and our assets got transferred to whatever was the closest objective match.  I tried looking for a ticker on this a while back and couldn't find one so it must be something specifically set up for employer related ????

Your ticker is FDGRX and hot damn, what a run.  13.44% annual ROI over the last 15 years.  It's pretty tech heavy (40+%).  Steve Wymer looks to be the manager.

Who cares about fees with those returns lol.

[effigy98]

For an alternative viewpoint of the exact same S&P500 index, try this:  https://www.crestmontresearch.com/docs/Stock-Matrix-Tax-Exempt-Real3-11x17.pdf  There you can see that it the stock market taking more than a decade to recover from a big loss is not that uncommon historically.  There have even been a few times when it took 20 years for an investor to break even. 

What a cool chart! Another note in my journal to keep me staying on the course on diversification. Thanks Tyler!

[smallstache]

So here's my logic and why I've kept in 100% stocks.  I think of this account as my extra, sort of play money.  I'll be getting a pension (all be it reduced due to younger age) but when I FIRE next year DH will still be working - his choice.  I planned on shoveling as much money into this account as possible between now FIRE then letting it sit for say 8-10 years.  I'm willing to watch and let it roller coaster for at least a couple more years since it's not my primary source of income.  Flawed logic?

There is "100% stocks" and then there is being 100% invested in a "growth" stock fund that allocates over 40% of its capital to one sector, and over 78% to just three.

I would be scared, too, until I cashed out that fund and spread my wealth out some.

[Scandium]

So here's my logic and why I've kept in 100% stocks.  I think of this account as my extra, sort of play money.  I'll be getting a pension (all be it reduced due to younger age) but when I FIRE next year DH will still be working - his choice.  I planned on shoveling as much money into this account as possible between now FIRE then letting it sit for say 8-10 years.  I'm willing to watch and let it roller coaster for at least a couple more years since it's not my primary source of income.  Flawed logic?

There is "100% stocks" and then there is being 100% invested in a "growth" stock fund that allocates over 40% of its capital to one sector, and over 78% to just three.

I would be scared, too, until I cashed out that fund and spread my wealth out some.

Although since the fund is actively managed, then the manager will presumably  change or rotate the asset allocations within the fund depending on where they anticipate future growth.

... But if one is sure that they are getting those three things, then I see no reason not to take advantage of it.

haha! good luck with that.

[BTDretire]

I was scared the other direction.
I funded my son's Roth IRA for 2016 and 2017.
I ask him the balance a while back and it seemed to low.
We recently got together and I ask to see all the numbers.
Everything was right except my understanding of the time of deposits.
 I thought I put them in at the begining of the years.
But, I put 2016 Roth in April of 2017 and 2017 Roth in May of 2017.
Lost a lot by that end of year 2016 deposit rather than doing it at the beginning of the year.
"Time in the Market, not timing the Market"  :-)

[surfhb]

It will all avg out when the wash is done.    Add a couple -20 to -30% years in there when the market corrects ;)

Whats your return the total 20 years?   That's the important number

[DarkandStormy]

It will all avg out when the wash is done.    Add a couple -20 to -30% years in there when the market corrects ;)

Whats your return the total 20 years?   That's the important number

https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults

CAGR the last 20 years is 10.88% (inflation adjusted - 8.55%).

[Frankies Girl]

FDGRX (the growth company fund the OP is holding) is the only fund I had left in my portfolio from the before times - I rebalanced my portfolio  to a 3 fund (total U.S. market stocks/total U.S. market bonds/total U.S. market REIT indexes) after discovering index investing around 4 years ago.

But FDGRX was the one mutual fund I couldn't bring myself to sell since it was performing SO INCREDIBLY WELL and I only had a few thousand invested and I still really liked holding a tech heavy fund even if it was for irrational reasons. I was allowing myself to play with a tiny bit of my portfolio. So I still have less than 1% of FDGRX, and it's fun to see it grow, but I'm not going to hold a significant portion in FIRE.

As amazing as it would have been if I'd just gone heavy into that fund, I don't think I would leave it as a significant portion of my own portfolio at all at this point. I know enough now to know that it would have been a lousy choice for me to have made, but even lousy choices are sometimes insanely lucky.

OP, my advice is that you should be happy about your luck, but don't press it at this point - rebalance while things are still high into a "safer" AA if you plan on retiring in the next year or two.

I consider myself pretty comfortable with high risk/volatility, but having a tech stock being the main portion of my total portfolio just seems... like gambling more than anything. I'm FIREd just under 3 years and no plans of ever earning/working for income ever again, with an AA of roughly 85% stock, 10% bond, (all total market index funds) with 5% cash. 

Totally my take on this, but to me, the flaw in your logic (of holding the FDGRX 100% in your portfolio) is that it is a tech heavy stock and is not a broad market fund at all. It is very narrow, and has a rather high expense ratio to boot. Not sure if you remember what happened when the dot com bubble burst in the 2000s, but being overbalanced in one sector isn't a great game plan in my opinion just based on that (actually that could also be a take-away from the real estate crash of 2007/08). You could still hold 100% stocks, but as a broad market index fund like Fidelity's Total Market Index (FSTVX)* that would track the market better. The advantage/disadvantage to this is that you would not have the crazy highs/lows that comes about from investing in a narrowly-invested mutual fund.

*Edited to fix the error where I accidentally pasted the Growth fund's ticker instead of the total market one I meant to put there.

[Exflyboy]

^^^^This^^^^

The question you should ask is.. Would you buy your FDGRX fund now with record closes for AAPL and similar for tech names?... I wouldn't!

If I were you I'd sell it immediately and rebalance as Frankies Girl suggested.. I hold an almost identical AA coincidently and have been fully FIRED for 18 months.

[Vegasgirl]

Thanks for all the thoughts - I think I feel better?  Actually, I've has this account for 20+ years now and yes in 2008/2009 I lost 30% with it taking 1 year to bounce back to previous level.  Since this is not my primary source of income in RE, I've been just letting it go.  At this point the earliest I'm planning on withdrawing anything is 11 more years.  I still think I have enough recovery time if a correct should come any time soon.  I figure I'll reevaluate in another 5 years or so.

[pecunia]

Well - I am no investor.  I was hoping one of you intelligent folks would advise me whether I should re-balance to more conservative stuff soon.  These markets seem to run in 8 year cycles and I'd think the balloon would be popping soon.

On the other hand, how big of a "correction" is expected?  Times seem to be getting better.  There are jobs out there.  Despite the problems in Texas, gas is still at a decent price.  Wages are rising, albeit very slowly.  Inflation seems to be in check.  How big a hit if I let it ride?  It is mostly Index Funds.

[Exflyboy]

Well - I am no investor.  I was hoping one of you intelligent folks would advise me whether I should re-balance to more conservative stuff soon.  These markets seem to run in 8 year cycles and I'd think the balloon would be popping soon.

On the other hand, how big of a "correction" is expected?  Times seem to be getting better.  There are jobs out there.  Despite the problems in Texas, gas is still at a decent price.  Wages are rising, albeit very slowly.  Inflation seems to be in check.  How big a hit if I let it ride?  It is mostly Index Funds.

Well the answer depends on how long you have to retire. If you 15 to 20 years then being 100% into STOCK index funds is fine (as long as you can stop yourself selling during a big correction.

If you have 5 to 10 years then you need at least enough bonds to last you through say a 4 year down turn (shorter term bonds are better) and you can buy bond index funds to follow the Barclays index. You will also want say 1 years worth of cash.

I am FIRED and run at about 80/17/3% stocks/bonds/cash. But then if I count my pensions as bonds it would put me at about 60/40. Up until two years ago I was 100% stocks, but then I had access to one of my pensions if required.

The point about market timing is that its proved to be a pretty bad idea 9 times out of 10. Yes you might think we are in for a pullback.. it may keep running up for another 2, 3 or 4 years.. If you get out, you then have no way to know when to get back in.

Set your desired allocation (depending where you are in your journey to FI and how well you sleep at night) and leave it alone is most often the very best thing we can do... As in rebalance every 6 to 12 months to get back to the desired asset allocation.

[Livingthedream55]

Well - I am no investor.  I was hoping one of you intelligent folks would advise me whether I should re-balance to more conservative stuff soon.  These markets seem to run in 8 year cycles and I'd think the balloon would be popping soon.

On the other hand, how big of a "correction" is expected?  Times seem to be getting better.  There are jobs out there.  Despite the problems in Texas, gas is still at a decent price.  Wages are rising, albeit very slowly.  Inflation seems to be in check.  How big a hit if I let it ride?  It is mostly Index Funds.

Well the answer depends on how long you have to retire. If you 15 to 20 years then being 100% into STOCK index funds is fine (as long as you can stop yourself selling during a big correction.

If you have 5 to 10 years then you need at least enough bonds to last you through say a 4 year down turn (shorter term bonds are better) and you can buy bond index funds to follow the Barclays index. You will also want say 1 years worth of cash.

I am FIRED and run at about 80/17/3% stocks/bonds/cash. But then if I count my pensions as bonds it would put me at about 60/40. Up until two years ago I was 100% stocks, but then I had access to one of my pensions if required.

The point about market timing is that its proved to be a pretty bad idea 9 times out of 10. Yes you might think we are in for a pullback.. it may keep running up for another 2, 3 or 4 years.. If you get out, you then have no way to know when to get back in.

Set your desired allocation (depending where you are in your journey to FI and how well you sleep at night) and leave it alone is most often the very best thing we can do... As in rebalance every 6 to 12 months to get back to the desired asset allocation.

+1

[talltexan]

It's not just about being 100% in stocks. It's about being 100% in THOSE stocks.

Many people on this forum are comfortable with being 100% VTSAX. That is considerably less tech exposure than this animal.