Author Topic: Who Panics in a Market Downturn?  (Read 19391 times)

brooklynguy

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Re: Who Panics in a Market Downturn?
« Reply #50 on: March 20, 2015, 05:40:23 PM »
Just so we're all on the same page, the quote you guys are talking about had no data backing it whatsoever.

As skyrefuge pointed out in reply # 36 above, the data suggests that higher account balances are correlated with a higher likelihood to panic.

skyrefuge

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Re: Who Panics in a Market Downturn?
« Reply #51 on: March 20, 2015, 07:43:12 PM »
Skyrefuge --> Very interesting!  I assume this takes into account all the schlocky high MER fee funds everyone was offering that were sold?   (I remember 2008 footage of large lines of people at banks waiting to withdraw their mutual funds completely.)

The data I posted only involves defined contribution plans at Vanguard (and some at Fidelity). Neither house has particularly "schlocky high MER fee funds", and no one who was lining up at banks to move out of those funds; they were simply making a few clicks on the provider's website to change the asset allocation in their 401(k).

So no, as of yet, this thread does not take into account individuals who held funds outside their retirement accounts. There are reasons to believe that group of investors may have been more susceptible to panic than those with only retirement accounts, but reasons to believe they could be less-susceptible too. We unfortunately don't have data.

Regarding lines of people at banks in 2008, I don't recall seeing much coverage of that in the US, and even if it happened, it seems much more likely that those were people who simply wanted to get deposit accounts out of a possibly-failing bank, not mutual fund investors.

Also, I see the stats there but it must be very difficult to measure the lack of new monies into equities.

Not really difficult, at least in terms of 401(k)s. Allocation of new contributions to equities dropped from 73% to 68% in 2009, rebounding to 71% two years later. In the same period, allocation of new contributions to cash went from 13% to 15%, and then fell back to 12% two years later.

In terms of total money saved, the average participant's yearly contributions dropped 2.4% in 2008, and another 1% in 2009, before resuming the upward trend they had been on.

So the avoidance of equities and investing during 2008/2009 is definitely visible in the data, though again, much less visible than the giant canyon in an S&P500 price chart.

skyrefuge

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Re: Who Panics in a Market Downturn?
« Reply #52 on: March 20, 2015, 08:19:33 PM »
And a bit more possibly-meaningless data from Vanguard's 'How America Saves 2014' (pdf).

p.29 breaks down the changing salary deferral rates to 401(k)s in various ways, most usefully for us by age and by account balance. They just posted grids full of numbers, and while 2008/2009 is visible in those numbers (deferral rates definitely decreased), I wondered if converting them to line graphs would reveal any more insights. I'm not sure if they did, but since I went through the work, I might as well post them here.

First, deferral rates by age:


It looks like the 65+ people dropped their contributions the most, while the ages in the middle kept them more constant. Does that mean 65+ people are panicky? Or just that people born before 1950 are more panicky? Or are they not panicky at all, and just wanted to build up their taxable cash buffers more? Who knows! (and "401(k) deferral rate", while perhaps slightly informative for this thread, isn't exactly a prime metric for 'panic' anyway.)

Next, deferral rates by account balance:


This one is a bit more interesting, and almost the opposite of the other chart. Here the middle ranges show the biggest dips, while the outer ranges are smaller. Most interesting is that the $250k+ line doesn't follow the pattern of all the others. Does this mean that people with big accounts are better market-timers, reducing their contributions before the crash, and then increasing them after (unlike everyone else who reduced them after the crash)? Perhaps, although I bet that $250k+ bucket has a relatively small number of people in it, and just those low numbers could be creating the volatility.

Again, remember that there's an overall downward force in these graphs (even after 2010) due to the increasing prevalence of auto-enrollment at a default deferral rate.

forummm

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Re: Who Panics in a Market Downturn?
« Reply #53 on: March 20, 2015, 08:20:50 PM »
But then if we look at the 91-99%-equity bucket, the 2008-2009 period is much more detectable, as the number of participants in that bucket dropped sharply from 13% in 2007 to 8% in 2008.

My explanation for this is that a significant number of participants in the 100% bucket are "unaware" participants, who picked the default S&P500 fund when they signed up for their 401(k), and haven't thought about it since. So they didn't even notice the crash (or know what to do about it), and their behavior is not a reliable answer for us. On the other hand, that 91%-99% bucket is the perfect group, because it's almost surely all "aware" investors. This is because you have to consciously create a multi-fund portfolio to achieve 91-99% equity, since no Target Retirement funds go above 90% equities.

And the data shows this bucket did make a significant move away from equities in 2008, much greater than any other decile bucket, including the 81-89% bucket, which dropped only from 19% to 18% (but again, now we're in the bucket where any market-induced shift is at least partly masked by the long-term trend of new participants into Target Retirement funds).
That shift could be easily explained by the fact that the equity side of their portfolios suddenly lost 50% of it's value and the bonds side rose somewhat. Maybe not enough people rebalanced as much as they should have. But with 401k's, a lot of people just set their investments on some trajectory and forget about them.

gimp

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Re: Who Panics in a Market Downturn?
« Reply #54 on: March 20, 2015, 08:27:56 PM »
Skyrefuge, fantastic post(s).

skyrefuge

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Re: Who Panics in a Market Downturn?
« Reply #55 on: March 20, 2015, 09:28:57 PM »
That shift could be easily explained by the fact that the equity side of their portfolios suddenly lost 50% of it's value and the bonds side rose somewhat. Maybe not enough people rebalanced as much as they should have. But with 401k's, a lot of people just set their investments on some trajectory and forget about them.

Good point. I stupidly assumed the stability of the 100%-equities line showed that the market effects were not important, but of course someone who starts in the 100% bucket (or 0% bucket) will stay in that bucket no matter what the market does, while everyone in the middle will shift with the market (if they don't rebalance, and the report notes elsewhere, under normal conditions that, "Among “do it yourself” investors, most participants do not trade—not even to rebalance their account." Only 14% of those DIY investors made a trade in 2013, and Vanguard classified only 6% as "rebalancers". Of course some could be rebalancing via their contributions.)

Kaspian

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Re: Who Panics in a Market Downturn?
« Reply #56 on: March 23, 2015, 12:18:16 PM »
Just so we're all on the same page, the quote you guys are talking about had no data backing it whatsoever.

Yeah, okay--touché, I got nothing.  ...But what I don't get is that if there wasn't a general population "panic" per se, how did equities lose 40% of their value overnight?  Doesn't the value drop when a million people are trying to sell and only a hundred are willing to buy?  I can understand if it was only isolated to subprime investments, but when there's a mad selloff of DJA and unrelated Fortune 500 companies?  There must've been a general gross panic somewhere in the pipe?  It can't all be explained away by rebalancing, life "happening", and tax shifting by seniors?  Skyrefuge has put very valid points as to why there wasn't a panic and (theoretically) why there wasn't a crash.  ...But there was.  So WTF?

Kriegsspiel

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Re: Who Panics in a Market Downturn?
« Reply #57 on: March 23, 2015, 12:38:36 PM »
...But what I don't get is that if there wasn't a general population "panic" per se, how did equities lose 40% of their value overnight?  Doesn't the value drop when a million people are trying to sell and only a hundred are willing to buy?  I can understand if it was only isolated to subprime investments, but when there's a mad selloff of DJA and unrelated Fortune 500 companies?  There must've been a general gross panic somewhere in the pipe?  It can't all be explained away by rebalancing, life "happening", and tax shifting by seniors?  Skyrefuge has put very valid points as to why there wasn't a panic and (theoretically) why there wasn't a crash.  ...But there was.  So WTF?

There may have been a specific panic, among the relatively few managers of other people's money?

skyrefuge

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Re: Who Panics in a Market Downturn?
« Reply #58 on: March 23, 2015, 04:44:52 PM »
Skyrefuge has put very valid points as to why there wasn't a panic and (theoretically) why there wasn't a crash.  ...But there was.  So WTF?

My data only covered US 401(k) participants. In 2014, 401(k) plans held $4.4 trillion in assets. Probably about $3 trillion of that is in stocks. The US equity total market cap in 2014 was $21 trillion, and the world equity market cap was $42.2 trillion. So 401(k)s account for something like ~10% of money in the market.

Hopefully that makes it easy to see how huge swings in the market can still occur even when "individual investors" stay the course. And its the behavior of those individual investors that we're concerned with for this thread, not that of professional participants in the equity markets, who apparently were more responsible for the 2008 "panic".

a1smith

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Re: Who Panics in a Market Downturn?
« Reply #59 on: March 23, 2015, 09:27:06 PM »
When stocks are down 50%, many sell and run as fast as they can in the opposite direction.  So many people were selling stock in Sept-Oct 2008 and buying bonds that bond yields went negative.

A store puts items on sale for 50% off and people trample (and kill) each other at the entrance of the store and then fight each other in the store to buy the items!

There is a confusion of cause and effect that happens in financial markets that makes the store analogy a poor one.

When people sell and run as fast as they can, that CAUSES the price to drop.  People subsequently sell more and run faster reinforcing the crash.   

The stock market doesn't go on sale because some owner needs to move his stagnant inventory of business equity.  It goes on sale because people refuse to buy at the higher prices anymore.  As they get burned by price declines, people generally want stocks less and less.  If pricing based on the last transaction happened in stores the "sales" would very quickly evaporate.

You can't separate the price decline and the selling in financial markets.  They are one and the same. 

This is also why it makes sense that there was a shift into equities in April -June 2009 in the Vanguard report.  Of course there was, that was part of the overall trend that was driving the prices up off the March 2009 low!

What I presented is not an analogy; it is a dichotomy.  Stocks being down 50% was presented as an a priori condition so the people selling stock that I mentioned did not contribute to the initial 50% decrease.  I was referring to the different behavior of some, not all, people presented with two items that are "50% off" - stocks and retail items.

Supply-demand curves regulate pricing in both the stock market and in retail stores/websites which is what you are discussing.  That's not what I was focusing on.

Actually, many websites do base sales prices on the previous transactions.  And websites adjust prices for individuals, as well. It's called dynamic pricing, you can Google it and find out more.  Here is an article on dynamic pricing on Amazon http://www.cio.com/article/2870961/consumer-technology/report-analyzes-amazons-dynamic-pricing-strategy.html

Here is another article discussing pricing based on location, browser history, computer type (more likely browser type, Safari probably means Mac owner who will pay more), etc.  http://lifehacker.com/5973689/how-web-sites-vary-prices-based-on-your-information-and-what-you-can-do-about-it

I've experienced it myself; although it was a while ago.  I logged into Amazon and found the price for an item.  Then, I logged out, cleared my browser cache, and went back to Amazon without logging in.  The price was different (lower).  So, I put it in the cart, then logged in, and was able to buy at the lower price.  I haven't seen this recently so Amazon has gotten better at this.  Now they have more ways to ID you besides browser cookies.  Why do you think the ISP's rarely, if ever, change your IP address?  Sure, it is a DHCP address, but it is what is called a static DHCP address.  The DHCP server hands out the same IP address to the same MAC address every time.  I'm referring to DSL and cable modems; I think phone modems still get random IP addresses.  Does anyone remember phone modems anymore???  :-D

Also, the Black Friday sales, etc. do quickly evaporate because they only sell a "limited quantity" of items at the low, low sale price - thus the stampede.  The store did not put those items on sale because they had stagnant inventory - it is to get customers in the door to "shop till they drop."  More behavioral science at work.  The after Christmas sales are to get rid of stagnant inventory and that's the best time to buy wrapping paper, Christmas lights, etc!




sirdoug007

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Re: Who Panics in a Market Downturn?
« Reply #60 on: March 24, 2015, 08:02:16 AM »
When stocks are down 50%, many sell and run as fast as they can in the opposite direction.  So many people were selling stock in Sept-Oct 2008 and buying bonds that bond yields went negative.

A store puts items on sale for 50% off and people trample (and kill) each other at the entrance of the store and then fight each other in the store to buy the items!

There is a confusion of cause and effect that happens in financial markets that makes the store analogy a poor one.

When people sell and run as fast as they can, that CAUSES the price to drop.  People subsequently sell more and run faster reinforcing the crash.   

The stock market doesn't go on sale because some owner needs to move his stagnant inventory of business equity.  It goes on sale because people refuse to buy at the higher prices anymore.  As they get burned by price declines, people generally want stocks less and less.  If pricing based on the last transaction happened in stores the "sales" would very quickly evaporate.

You can't separate the price decline and the selling in financial markets.  They are one and the same. 

This is also why it makes sense that there was a shift into equities in April -June 2009 in the Vanguard report.  Of course there was, that was part of the overall trend that was driving the prices up off the March 2009 low!

What I presented is not an analogy; it is a dichotomy.  Stocks being down 50% was presented as an a priori condition so the people selling stock that I mentioned did not contribute to the initial 50% decrease.  I was referring to the different behavior of some, not all, people presented with two items that are "50% off" - stocks and retail items.

Supply-demand curves regulate pricing in both the stock market and in retail stores/websites which is what you are discussing.  That's not what I was focusing on.

Actually, many websites do base sales prices on the previous transactions.  And websites adjust prices for individuals, as well. It's called dynamic pricing, you can Google it and find out more.  Here is an article on dynamic pricing on Amazon http://www.cio.com/article/2870961/consumer-technology/report-analyzes-amazons-dynamic-pricing-strategy.html

Here is another article discussing pricing based on location, browser history, computer type (more likely browser type, Safari probably means Mac owner who will pay more), etc.  http://lifehacker.com/5973689/how-web-sites-vary-prices-based-on-your-information-and-what-you-can-do-about-it

I've experienced it myself; although it was a while ago.  I logged into Amazon and found the price for an item.  Then, I logged out, cleared my browser cache, and went back to Amazon without logging in.  The price was different (lower).  So, I put it in the cart, then logged in, and was able to buy at the lower price.  I haven't seen this recently so Amazon has gotten better at this.  Now they have more ways to ID you besides browser cookies.  Why do you think the ISP's rarely, if ever, change your IP address?  Sure, it is a DHCP address, but it is what is called a static DHCP address.  The DHCP server hands out the same IP address to the same MAC address every time.  I'm referring to DSL and cable modems; I think phone modems still get random IP addresses.  Does anyone remember phone modems anymore???  :-D

Also, the Black Friday sales, etc. do quickly evaporate because they only sell a "limited quantity" of items at the low, low sale price - thus the stampede.  The store did not put those items on sale because they had stagnant inventory - it is to get customers in the door to "shop till they drop."  More behavioral science at work.  The after Christmas sales are to get rid of stagnant inventory and that's the best time to buy wrapping paper, Christmas lights, etc!

Why do you think people respond differently when confronted with a 50% price decline in stocks or retail goods?

From my perspective, the answer is in the buyers expectations.  A buyer of a laptop that is suddenly 50% off has the same expectations for usefulness and enjoyment from the laptop even at a steep discount.  I don't believe this is true for equity in a company.  When it suddenly drops in price by 50%, most people believe they will get significantly LESS usefulness and enjoyment as most people are suddenly pessimistic about the stock.  It is ironic that this is exactly the time when investors have a better chance to get MORE return out of a stock, but it certainly doesn't feel like it at the time.  “If it makes me feel like I want to throw up, I can be pretty sure it’s a great investment.” – Brian Posner

Wolf359

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Re: Who Panics in a Market Downturn?
« Reply #61 on: March 24, 2015, 12:44:19 PM »
If you want to see if people are selling during a downturn, just google the statistics for fund inflows and outflows.  It's better than looking for anecdotal pictures of people lining up at banks.

Attached is an interesting chart of fund flows during 2007-2009.

What's of particular interest is that the equity fund outflows were continuing throughout 2009.  If you look at a chart at the time, stocks were recovering in 2009.  In other words, money was continuing to flee the market even after it rebounded. 

dragoncar

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Re: Who Panics in a Market Downturn?
« Reply #62 on: March 25, 2015, 12:43:31 PM »
If you want to see if people are selling during a downturn, just google the statistics for fund inflows and outflows.  It's better than looking for anecdotal pictures of people lining up at banks.

Attached is an interesting chart of fund flows during 2007-2009.

What's of particular interest is that the equity fund outflows were continuing throughout 2009.  If you look at a chart at the time, stocks were recovering in 2009.  In other words, money was continuing to flee the market even after it rebounded.

Remember that "money flows" don't really exist for equities as a whole, although money can certainly flow into and out of mutual funds.  But every dollar someone withdraws from their account as a seller, ends up as a dollar deposited into the buyer's account.

Kaspian

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Re: Who Panics in a Market Downturn?
« Reply #63 on: March 25, 2015, 01:46:02 PM »
What's of particular interest is that the equity fund outflows were continuing throughout 2009.  If you look at a chart at the time, stocks were recovering in 2009.  In other words, money was continuing to flee the market even after it rebounded.

I remember this.  I remember because at the end of the year they polled people and the average believed the market had gone down that year.  That belief seemed to hold for most of 2010 as well.  I had to personally show friends and coworkers that the market had gone up and was in recovery.  Fighting common misconceptions is like trying to convince people that George Washington didn't have wooden teeth and that wedding rice doesn't make pigeons explode.

Wolf359

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Re: Who Panics in a Market Downturn?
« Reply #64 on: March 25, 2015, 03:49:41 PM »
If you want to see if people are selling during a downturn, just google the statistics for fund inflows and outflows.  It's better than looking for anecdotal pictures of people lining up at banks.

Attached is an interesting chart of fund flows during 2007-2009.

What's of particular interest is that the equity fund outflows were continuing throughout 2009.  If you look at a chart at the time, stocks were recovering in 2009.  In other words, money was continuing to flee the market even after it rebounded.

Remember that "money flows" don't really exist for equities as a whole, although money can certainly flow into and out of mutual funds.  But every dollar someone withdraws from their account as a seller, ends up as a dollar deposited into the buyer's account.

Correct, but the US mutual fund industry is approximately $15 trillion in size, and the US market capitalization is approximately $18 trillion.  While the mutual fund industry number includes more than just equities, the available statistics do provide a really good benchmark for what was going on.  Mutual funds hold a significant portion of the equities market.

dragoncar

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Re: Who Panics in a Market Downturn?
« Reply #65 on: March 25, 2015, 04:04:26 PM »
If you want to see if people are selling during a downturn, just google the statistics for fund inflows and outflows.  It's better than looking for anecdotal pictures of people lining up at banks.

Attached is an interesting chart of fund flows during 2007-2009.

What's of particular interest is that the equity fund outflows were continuing throughout 2009.  If you look at a chart at the time, stocks were recovering in 2009.  In other words, money was continuing to flee the market even after it rebounded.

Remember that "money flows" don't really exist for equities as a whole, although money can certainly flow into and out of mutual funds.  But every dollar someone withdraws from their account as a seller, ends up as a dollar deposited into the buyer's account.

Correct, but the US mutual fund industry is approximately $15 trillion in size, and the US market capitalization is approximately $18 trillion.  While the mutual fund industry number includes more than just equities, the available statistics do provide a really good benchmark for what was going on.  Mutual funds hold a significant portion of the equities market.

Right, if a million shares of VFINX are sold that's considered an outflow.  But all that means is (simplified) Vanguard has to turn around and sell underlying shares of S&P500 companies.  Someone buys those underlying shares.  The number of underlying shares remains the same.

At best, it would seem that mutual fund flows can demonstrate retail investor sentiment.  A cynical person would reword the original statement as "dumb money was continuing to flee the market even after it rebounded," since ultimately someone was still buying up those shares as the price was rising (smart!).
« Last Edit: March 25, 2015, 04:06:43 PM by dragoncar »

skyrefuge

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Re: Who Panics in a Market Downturn?
« Reply #66 on: March 25, 2015, 05:13:57 PM »
If you want to see if people are selling during a downturn, just google the statistics for fund inflows and outflows.  It's better than looking for anecdotal pictures of people lining up at banks.

While it's certainly better than bank-line data, this is the same top-down data used by things like the DALBAR study discussed early on in this thread. Its main shortcoming (as you're seeing in the replies) is that it doesn't do a good job of isolating "investors like us" from the broader market.

At best, it would seem that mutual fund flows can demonstrate retail investor sentiment.  A cynical person would reword the original statement as "dumb money was continuing to flee the market even after it rebounded," since ultimately someone was still buying up those shares as the price was rising (smart!).

Or, a less-cynical but equally-valid interpretation could be, all the people who "bought low" in early 2009 were "selling high" in late 2009 (smart! ...at least since they didn't yet know they'd later be able to sell much higher).

It's not exactly the same type of data, but the earlier-referenced Vanguard papers note that, of money moving between equities and fixed income in their 401(k)s, the net flow tends to be out of equities and into fixed income, even in rising markets. This makes sense after a second of thinking about it, because equities have a higher long-term return than fixed income, so most rebalancing will appear as a movement away from highly-appreciated equities to lower-appreciated fixed income. In that world it's possible for money to be flowing away from equities even as equities increase in value.

KBecks2

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Re: Who Panics in a Market Downturn?
« Reply #67 on: March 29, 2015, 12:25:57 PM »
I had a baby in 2008, I was not paying attention to the market at all.

forummm

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Re: Who Panics in a Market Downturn?
« Reply #68 on: March 29, 2015, 12:32:03 PM »
If you want to see if people are selling during a downturn, just google the statistics for fund inflows and outflows.  It's better than looking for anecdotal pictures of people lining up at banks.

Attached is an interesting chart of fund flows during 2007-2009.

What's of particular interest is that the equity fund outflows were continuing throughout 2009.  If you look at a chart at the time, stocks were recovering in 2009.  In other words, money was continuing to flee the market even after it rebounded.

Remember that "money flows" don't really exist for equities as a whole, although money can certainly flow into and out of mutual funds.  But every dollar someone withdraws from their account as a seller, ends up as a dollar deposited into the buyer's account.

Correct, but the US mutual fund industry is approximately $15 trillion in size, and the US market capitalization is approximately $18 trillion.  While the mutual fund industry number includes more than just equities, the available statistics do provide a really good benchmark for what was going on.  Mutual funds hold a significant portion of the equities market.

I think something like 2/3 of assets are in bonds 1/3 in stocks.

FIRE me

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Re: Who Panics in a Market Downturn?
« Reply #69 on: March 30, 2015, 01:29:50 AM »
Has anybody come across a good data source for a review of panic in a market downturn?

What percentage of people "panicked" in 2000 or 2008?

In my own situation, I didn't panic in 2000. 
When the planes hit the towers in 2001, I put every penny into the market as soon as they reopened
In 2008, I kept buying all the way down.  I lost over $400k that year and didn't worry about it a bit
In Oct 2014, apparently the S&P500 dropped 10%+.  I just learned this now because I just now looked (I don't watch TV, and seldom look at the market)

Am I a freak? 

Yes you are, just like most of the people here.

My neighbor got out at the very bottom in 2008. He told me right after he did it. The words “My God!” slipped out of me quite involuntarily.

On the way down, I bought all I could afford. My neighbor is a very good man, but not at all wise about money. He makes a lot more money than I do. Now he is almost 80 years old and cannot afford to retire.

I think it goes against instinct – when the market is soaring everyone wants to buy buy buy like the party will never end. When it tanks, due to losses, people start saying they will never own stock again. Then they sell and lock in their loss.

I have tried to explain it to my friends like this: think of the crashes as like when a consumable (like soft drinks or beer) is on a deep price cut sale. Buy all you can because you know it will go back up.

When the market is up and everybody is happy, that is when to sell.

Most don't get it, but for a few you see the understanding in their eyes.

 

a1smith

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Re: Who Panics in a Market Downturn?
« Reply #70 on: March 30, 2015, 08:18:31 PM »
My neighbor got out at the very bottom in 2008. He told me right after he did it. The words “My God!” slipped out of me quite involuntarily.

.............

When the market is up and everybody is happy, that is when to sell.

As long as your neighbor got back in at the absolute bottom in March 2009 he would be a happy camper.  My guess is he didn't do that.

So, do you think it is time to sell (in US) now?  All indexes recently hitting new highs, Fed getting ready to start tightening, . . .  And by selling I don't mean getting completely out of stocks, it is not a 0-1 decision.  You could reduce stock allocation for a while, etc.

dungoofed

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Re: Who Panics in a Market Downturn?
« Reply #71 on: April 09, 2015, 04:04:00 PM »
Does anyone know of any blogs/primary evidence/etc where people were documenting in detail which "buy" trades they were making during the 2008 crash?

I remember at the time Warren Buffett announced that he was moving in and there are details of his purchases of BOA stock. The newspapers were also filled with articles from portfolio managers, Vanguard, etc saying that you should be snapping up bargains or sticking the course respectively. I'm looking more for examples of individuals who had blogs at the time, and the specifics of what they wrote.

bigchrisb

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Re: Who Panics in a Market Downturn?
« Reply #72 on: April 09, 2015, 09:48:41 PM »
I kept a journal of these on networthiq month by month - the data is now on my networthshare profile.   Re-reading them brought back some painful memories of margin calls and forced sales, but also makes me smile about my comments about stock purchases in late 2008/early 2009, commenting on companies being beaten up, but probably good long term value.  Those particular investments have been over 200% returns since! (ANZ, NAB, WES) all Australian large caps, along with a few index ETFs.

dungoofed

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Re: Who Panics in a Market Downturn?
« Reply #73 on: April 09, 2015, 10:56:04 PM »
Awesome. I think if I just continue to hang around here then I'll probably be ok.

FIRE me

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Re: Who Panics in a Market Downturn?
« Reply #74 on: April 12, 2015, 02:03:59 AM »

So, do you think it is time to sell (in US) now?  All indexes recently hitting new highs, Fed getting ready to start tightening, . . .  And by selling I don't mean getting completely out of stocks, it is not a 0-1 decision.  You could reduce stock allocation for a while, etc.

I have no idea what the market is about to do. I got out of stock a couple of years ago. Not because I thought a correction was due. But because I didn't want to have to delay my retirement and ride out the downturn if it happened.

Now, with the clarity of hindsight, if I had stayed in the index fund, I might have been able to retire today. 

Next big downturn after I retire I will get back in. I refuse to buy heavily when it is at record highs.

NearlyThere

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Re: Who Panics in a Market Downturn?
« Reply #75 on: April 12, 2015, 03:14:49 AM »
I've not experienced a negative portfolio in my 2 years investing. It will make the first major downturn come as a huge challenge.

I've a paid off mortgage (offset) which I can draw from at any point. There's close to 30% of my overall FIRE amount in there which I have earmarked for fully depositing when the next correction comes. I'll be following this section of the forum a whole lot more closely then.

In the meantime, I'm investing as normal and putting money into stocks as and when I can afford it.

a1smith

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Re: Who Panics in a Market Downturn?
« Reply #76 on: April 21, 2015, 10:47:20 PM »

So, do you think it is time to sell (in US) now?  All indexes recently hitting new highs, Fed getting ready to start tightening, . . .  And by selling I don't mean getting completely out of stocks, it is not a 0-1 decision.  You could reduce stock allocation for a while, etc.

I have no idea what the market is about to do. I got out of stock a couple of years ago. Not because I thought a correction was due. But because I didn't want to have to delay my retirement and ride out the downturn if it happened.

Now, with the clarity of hindsight, if I had stayed in the index fund, I might have been able to retire today. 

Next big downturn after I retire I will get back in. I refuse to buy heavily when it is at record highs.

I've reallocated a little -- from low 80% range to mid 70% range for stocks.  Also, have done like Vanguard will starting June 2015 and increased my international exposure about 10% more.  YTD, VTIAX is 8.87% and VTSAX is 3.21%

a1smith

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Re: Who Panics in a Market Downturn?
« Reply #77 on: April 21, 2015, 10:51:40 PM »
I've not experienced a negative portfolio in my 2 years investing. It will make the first major downturn come as a huge challenge.

Here's a funny story for you - back in the 2000 tech wreck one of my colleagues, who was heavily invested, was asked how he was sleeping.  He said "Oh, I sleep like a baby!  I wake up every two hours and cry!"  :-D

It's only taken 15 years for the NASDAQ to get back to where it was in 2000.

mrpercentage

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Re: Who Panics in a Market Downturn?
« Reply #78 on: April 22, 2015, 01:05:57 AM »
It is human nature to panic. The market is counter intuitive.
I view it like a tree. It may loose leaves and look dead but it will come back bigger and with a vengeance. You just have to be willing and have the time to ride out looking dead. If you are close to retirement or need the money remotely soon you need bonds. It is a need. Even then you are not 100% safe because companies can go under but you are much safer.

What is Securities Analysis about? It's about screening bonds. Making money is as much about preserving capital as it is growing it. Dividends, Bonds, and Gold man.. get some.. spread diversity. Statically September is a bad month. Doesn't take a rocket scientist to figure out seasons. Winter comes on a regular basis, and on a brighter note so does spring. If something is going to come and screw us there isn't too much we can do about but have faith and ride it out like we have done from the beginning. Squirrel a few nuts in various places but you can't win if you never play.

just wanted to add----- if you are worried about interest going up check out FLOT.. it is adjustable interest rate bonds.. they don't pay much NOW.. but if it really goes south you will be the credit card company raising rates on people.
« Last Edit: April 22, 2015, 02:20:23 AM by mrpercentage »