Author Topic: I pulled my index funds because fear of market crash  (Read 22260 times)

eli44

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I pulled my index funds because fear of market crash
« on: December 27, 2020, 07:51:57 PM »
Hello everyone-
I am a new investor I had about 30K in index funds and pulled my funds back until this whole covid thing is over. I fear there may soon be a market crash. What should I do with the money? Should I put it in the bank, an IRA, or invest it something else? Please share your suggestions below. We are late 30's and would like to retire early.

MDM

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Re: I pulled my index funds because fear of market crash
« Reply #1 on: December 27, 2020, 08:07:22 PM »
Go back a couple of years to when Many are saying a crash is iminent.

How did that work out?

eli44

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Re: I pulled my index funds because fear of market crash
« Reply #2 on: December 27, 2020, 08:27:56 PM »
I kept investing in gold, silver and kept crypto at 10k. Imminent means- ready to happen. There is no timeline. Noone knows what will happen but seeking advice what to do with index fund cash out.

Pomegranate12

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Re: I pulled my index funds because fear of market crash
« Reply #3 on: December 27, 2020, 08:28:57 PM »
Hello everyone-
I am a new investor I had about 30K in index funds and pulled my funds back until this whole covid thing is over. I fear there may soon be a market crash. What should I do with the money? Should I put it in the bank, an IRA, or invest it something else? Please share your suggestions below. We are late 30's and would like to retire early.

Why not just buy and hoard laptops and batteries.  When ww3 happens you can sell them in the aftermath
This plan is safer than broad diversified index funds long term

bacchi

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Re: I pulled my index funds because fear of market crash
« Reply #4 on: December 27, 2020, 08:35:46 PM »
Hello everyone-
I am a new investor I had about 30K in index funds and pulled my funds back until this whole covid thing is over. I fear there may soon be a market crash. What should I do with the money? Should I put it in the bank, an IRA, or invest it something else? Please share your suggestions below. We are late 30's and would like to retire early.

Why not just buy and hoard laptops and batteries.  When ww3 happens you can sell them in the aftermath
This plan is safer than broad diversified index funds long term

And solar panels. Those laptops won't charge themselves.

SwordGuy

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Re: I pulled my index funds because fear of market crash
« Reply #5 on: December 27, 2020, 08:58:35 PM »
Dude, you need to chill out.

You have $30k invested in the market and you're scared?     That's just plain foolish.

You've got a hell of a lot of investing to do before you have enough to FIRE on.     That stock needs to sit in the market until you are nearly ready to FIRE.   

Now, if that $30K is your emergency fund, your "I just lost my job but I'll be able to get by for months set of money" then it shouldn't be in the market in the first place.    That money needs to be in a non-volatile investment.

Otherwise, you need to put it back in the market and let it ride.    Google "JL Collins Stock Series" and read the entire thing from start to finish -- at least twice.   Maybe that will help you get over this irrational fear before it costs you a bundle.




Jack0Life

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Re: I pulled my index funds because fear of market crash
« Reply #6 on: December 27, 2020, 09:43:07 PM »
Wants to retire early but worried about $30k will do in the market ?? That $30k ain't gonna make or break you.

RWD

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Re: I pulled my index funds because fear of market crash
« Reply #7 on: December 27, 2020, 09:46:37 PM »
I had about 30K in index funds and pulled my funds back
That's it? You're at the starting line and have chosen to crawl instead of run.

I fear there may soon be a market crash.
There was. Back in March. You missed it.

What should I do with the money?
Probably put it back in the market. Unless you need it around for something else in the near term. Tangentially related: Investment Order.


1/2013  [SP500 = 1462]
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reeshau

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Re: I pulled my index funds because fear of market crash
« Reply #8 on: December 27, 2020, 10:33:37 PM »
Hello everyone-
I am a new investor I had about 30K in index funds and pulled my funds back until this whole covid thing is over.

...

We are late 30's and would like to retire early.

If you have just 30k invested, you are far from retiring early.  Far enough away that no market downturn will impact your overall investments more than leaving them to grow, rather than trying to play with the market.  You are something like 20+ years out.

Rather, you should have an adequate emergency fund, and either confidence in your job(s) or side hustles you could rely on to get through a job loss.  Those will do much more to help you sleep at night than a bump in the road with your current stash.

ToTheMoon

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Re: I pulled my index funds because fear of market crash
« Reply #9 on: December 27, 2020, 10:49:29 PM »
Hello everyone-
I am a new investor I had about 30K in index funds and pulled my funds back until this whole covid thing is over. I fear there may soon be a market crash. What should I do with the money? Should I put it in the bank, an IRA, or invest it something else? Please share your suggestions below. We are late 30's and would like to retire early.

I kept investing in gold, silver and kept crypto at 10k. Imminent means- ready to happen. There is no timeline. Noone knows what will happen but seeking advice what to do with index fund cash out.

Try following the advice you received two years ago with similar questions? I am guessing that none of it suggested gold, silver, or crypto. Where has that gotten you over the last two years?

https://forum.mrmoneymustache.com/ask-a-mustachian/advice-for-a-big-family/msg2224782/#msg2224782

You might be better served by doing a case study where you can get help with hard numbers, and people can help you address your fears.

Do you still have a large family income?

EDIT: To fix the quotes
« Last Edit: December 28, 2020, 11:23:16 AM by ToTheMoon »

Freedomin5

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Re: I pulled my index funds because fear of market crash
« Reply #10 on: December 28, 2020, 12:38:16 AM »
You should invest it back in the market and “Buy and HOLD” except actually hold it this time instead of jumping in and out and in and out due to fear.

You also need to learn from Bob, who bought at the worse possible times right before a crash over 30 years. Read the article to find out how he fared.

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

After you’re done reading about Bob, read this article about DCA-ing, and how it’s not about “timing the market” but “time IN the market”, then go put your money back in the market.

https://www.kiplinger.com/article/investing/t047-c032-s014-with-market-at-its-peak-should-you-wait-to-invest.html
« Last Edit: December 28, 2020, 12:45:32 AM by Freedomin5 »

eli44

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Re: I pulled my index funds because fear of market crash
« Reply #11 on: December 28, 2020, 01:54:02 AM »
Thanks for the advice I will put it back in!

vand

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Re: I pulled my index funds because fear of market crash
« Reply #12 on: December 28, 2020, 07:12:09 AM »
Thanks for the advice I will put it back in!

Well at least you put up a fight.

Metalcat

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Re: I pulled my index funds because fear of market crash
« Reply #13 on: December 28, 2020, 07:20:10 AM »
I'm curious, have you read JL Collins stock series already?

Did you react this way because you don't know better or because you do know this stuff intellectually, but freaked out anyway?

If it's that you just don't know, then you can easily read your way towards understanding why what you did is absolutely ridiculous.

If you already know why it's ridiculous, and why people are teasing you, but you did it anyway, then you have a much bigger issue on your hands.

For example, if you only have 30K, that means you are at the very, very beginning of your investing journey. Are you aware that a market crash lasting many years would be the greatest thing that could possibly happen to your money right now?

With only 30K in the market, you should be praying for a crash soon.

So if you are anticipating a crash soon and reacted with fear, you have 3 major logical problems

1: Far smarter people than you have failed to predict crashes, far FAR smarter people than you who make enormous sums of money for their predictions, and they fail all the time. You are more likely to predict a market crash by chance than by insight.

2: In the words of MMM himself, there is ALWAYS a crash coming. If your investing plan doesn't account for crashes, it's a stupid plan. A crash isn't like losing your job, where it could happen, but it's devastating. A crash is a normal part of the cycle, it's just incredibly difficult to predict it's timing.

3: If a crash is stressing you, and you aren't about to retire, then you don't understand what you are doing. As I said before, your reaction to a nearing crash at this time should be opportunistic glee, not fear over a piddling 30K. 

In summary: a crash is coming, no one can predict exactly when, and there's no reason to be afraid of it. If that is not intuitive to you, then you either haven't read enough, or you have and need to do some work on your psychological connections between your feelings and your reactions.

So, for us to best help you, don't just do what strangers on the internet tell you to do with your money. Let us know what you have read and why you did what you did, and we can perhaps help guide you towards resources that might be able to settle your mind and focus you on more productive ways of thinking about your investments.

Chuck Ditallin

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Re: I pulled my index funds because fear of market crash
« Reply #14 on: December 28, 2020, 07:29:00 AM »
If you've 30k invested, what you want to happen is that the market goes through the doldrums for the next 20 years while you keep investing every month; you then get more shares for your money. After that, a spectacular bull run would see you as a multi-millionaire in no time.

Steeze

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Re: I pulled my index funds because fear of market crash
« Reply #15 on: December 28, 2020, 10:20:27 AM »
Just keep in mind that some day you will have $1,000,000 invested and your account will go up and down +\- $5000-$10000 every day!!

So don’t worry about your $30,000 account losing $10,000 in a huge market drop, eventually that kind of movement will just be background noise.

Most important is to invest as much as possible as often as possible and learn to relax! Best thing you can do is learn how to control your anxiety over the impending crash, because there is always going to be an impending crash. Then, when the crash does eventually happen, learn to control your anxiety so you are not tempted to sell for a loss. Selling during a large market event can be catastrophic when you have a large balance. Train your mind while your account is small.

Best way to control anxiety is a solid education. Read as much as you can about buy and hold investing. JL Collins is a great start.

Blonde Lawyer

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Re: I pulled my index funds because fear of market crash
« Reply #16 on: December 28, 2020, 10:58:15 AM »
I just want to thank you for your post instead of making fun of you. For many of us that didn't grow up with a lot of money, $30,000 in cash is a huge sum, even if we know we need far more to FIRE.  It is likely more money than our parents ever had in the bank at any given time.

I also pulled my index funds near the start of the pandemic but for a different reason than you.  We decided to pursue adoption and needed to have $50k-$60k liquid at any point in time.  That adoption ended up falling through and now I'm in the process of getting the money back into my index funds. 

I have to transfer it from one account to another, get another approved for transfer, etc. so it is a multi-day process.  We all know we can't time the market but we also all know that if you happen to buy low and sell high you get the optimal outcome.  It's hard to know when to jump back in when the market is volatile.  I know the answer is just do it and I'm in the process of just doing it but you aren't the only one that struggles putting a large chunk of your savings into a non-guaranteed fund.  I fully know it is the way to make money but when you come from a family that had their measly savings in envelopes in the hutch, it is hard to wrap your head around.

John Galt incarnate!

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Re: I pulled my index funds because fear of market crash
« Reply #17 on: December 28, 2020, 11:39:50 AM »
Hello everyone-
I am a new investor I had about 30K in index funds and pulled my funds back until this whole covid thing is over. I fear there may soon be a market crash. What should I do with the money? Should I put it in the bank, an IRA, or invest it something else? Please share your suggestions below. We are late 30's and would like to retire early.


OP, as others have advised you should reinvest your $30K in the stock market.

If you are still hesitant consider reinvesting $15K now and the remaining  $15K  @$15K/6 for the next 6 months or @$15K/12 for the next 12 months.

It is true that if you keep your $ in the bank and the stock market plunges you will have a welcome buying opportunity.

It is also true that timing the stock market  might be a successful strategy but more often than not it isn't because no one can reliably predict when a plunge will occur nor  its depth or duration.

 Stomach-turning  plunges are  normal stock-market behavior that result in a  terrific opportunity to purchase "stocks on sale."

Finally, look at the minuscule,  ~90-year total  return  for long-term, passive  investors who attempt to time the stock market but miss the gains that occur on its best days.



Bank of America analyzed the total return of the S&P 500 since 1930.

It is 14,962%.

If an investor missed the S&P's 10 best days of each decade their total return would be  an unimaginably paltry 91%.



!!!!! HAPPY NEW YEAR AND HAPPY INVESTING !!!!!


« Last Edit: December 28, 2020, 12:06:23 PM by John Galt incarnate! »

yachi

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Re: I pulled my index funds because fear of market crash
« Reply #18 on: December 28, 2020, 12:53:38 PM »
You should invest it back in the market and “Buy and HOLD” except actually hold it this time instead of jumping in and out and in and out due to fear.

You also need to learn from Bob, who bought at the worse possible times right before a crash over 30 years. Read the article to find out how he fared.

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

After you’re done reading about Bob, read this article about DCA-ing, and how it’s not about “timing the market” but “time IN the market”, then go put your money back in the market.

https://www.kiplinger.com/article/investing/t047-c032-s014-with-market-at-its-peak-should-you-wait-to-invest.html

I googled "world's worst investor" so I could get this link, also so I could introduce OP to Bob.  That said, I did move some funds from Vanguard Large Cap funds to Vanguard Small Cap Value Fund because I wanted less exposure to certain large companies.

Steeze

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Re: I pulled my index funds because fear of market crash
« Reply #19 on: December 28, 2020, 01:27:33 PM »
I just want to thank you for your post instead of making fun of you. For many of us that didn't grow up with a lot of money, $30,000 in cash is a huge sum, even if we know we need far more to FIRE.  It is likely more money than our parents ever had in the bank at any given time. (Snip)

I am right there with you. My parents never had more than $10k ever, and only then because of a severance pay when my dad was fired.

I think the first $100k is pretty scary - it takes sooo long to obtain. I worked for over 15 years to get $100k! Losing $20 had been an unacceptable loss for my entire life.

Then the second hundred came in under 2 years. Then the third in a year. Now the fourth in less than a year. My losses this spring were around $50k! Insanity! Lose an entire year’s pay (for most people) in a few weeks.

Still blows my mind when the market goes up and down 2-3-4% in a day. $1000s of dollars made and lost. Can make or break a month of salary easy. At this point the numbers are too big to have an emotional attachment to. I cannot rationalize a $10,000+ swing in my accounts. I was up $40k in November. Still not sure what it means. Just a number in a spread sheet at this point.

Gives you a really weird perspective on money when you make and lose a few grand in a day doing nothing - especially coming from being broke and on food stamps, or working multiple full time minimum wage jobs.

firestarter2018

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Re: I pulled my index funds because fear of market crash
« Reply #20 on: December 28, 2020, 02:45:22 PM »
There's a fun little calculator on Moneychimp (http://www.moneychimp.com/articles/randomness/outliers.htm)  that shows you what your returns would have been for a specific period of years, showing a) if you're invested in the market all days during that period vs. b) if you pulled your money out and skipped the 20 (or 30, or whatever) best days of that period. It's eye-opening!  Here's 1980-2017, $1000 invested for the whole time vs. skipping the best 20 days:

9584 trading days
 annualized return: 11.6%
 $1000 grew to $65,214

Omitting the 20 best days
 annualized return: 8.2%
 $1000 grew to $20,225

WhiteTrashCash

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Re: I pulled my index funds because fear of market crash
« Reply #21 on: December 28, 2020, 02:47:20 PM »
When the market goes up, invest more. When the market goes down, invest more. When the market approaches peak, invest more. When the market crashes, invest more. Then, when you retire, take out 4% per year. That's the method of success.

Jack0Life

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Re: I pulled my index funds because fear of market crash
« Reply #22 on: December 28, 2020, 04:02:20 PM »
I just want to thank you for your post instead of making fun of you. For many of us that didn't grow up with a lot of money, $30,000 in cash is a huge sum, even if we know we need far more to FIRE.  It is likely more money than our parents ever had in the bank at any given time.

I also pulled my index funds near the start of the pandemic but for a different reason than you.  We decided to pursue adoption and needed to have $50k-$60k liquid at any point in time.  That adoption ended up falling through and now I'm in the process of getting the money back into my index funds. 

I have to transfer it from one account to another, get another approved for transfer, etc. so it is a multi-day process.  We all know we can't time the market but we also all know that if you happen to buy low and sell high you get the optimal outcome.  It's hard to know when to jump back in when the market is volatile.  I know the answer is just do it and I'm in the process of just doing it but you aren't the only one that struggles putting a large chunk of your savings into a non-guaranteed fund.  I fully know it is the way to make money but when you come from a family that had their measly savings in envelopes in the hutch, it is hard to wrap your head around.

I don't think we are down playing the $30k. The point the OP was trying to make is "retire early", yet he's trying to time the market with $30k. Now if the OP was talking about $300k and retire early + market downturn, then I could relate to the situation more.

bmjohnson35

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Re: I pulled my index funds because fear of market crash
« Reply #23 on: December 28, 2020, 04:37:48 PM »

I remember when I pulled out of my stock based mutual fund shares back when I had around $150k in the 401k account.  Everything I read said that a major correction was coming.  I missed out on a killer bull run for the next year or so.  That's many years ago, but it taught me to leave it alone.  Although I recently retired, I still choose my allocation and leave it be.  The only thing I do is rebalance from time to time.

   

RedmondStash

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Re: I pulled my index funds because fear of market crash
« Reply #24 on: December 30, 2020, 11:41:17 AM »
I'm not going to tease you, OP. I know this is scary stuff, especially before you get a handle on it conceptually.

But I will ask you this: Why are you afraid of a crash?

So many people who worry about an imminent crash don't seem to realize that there is Life After Crash. The market drops, the market recovers. When you're starting out, it's easy to focus on "OMG I might lose half my money!" without also realizing that the truth could be "OMG I might lose half my money a month from now, then regain it next year, then double it in eight years."

Just remember that a crash isn't the end of the story. Or hasn't been to date, anyway. That's why folks here aren't worried about a crash; they are taking a much longer view. Historically, over time, the market eventually recovers and goes up. (Of course, historical performance does not necessarily predict future performance, caveat caveat, blah blah blah.)

Glenstache

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Re: I pulled my index funds because fear of market crash
« Reply #25 on: December 30, 2020, 12:22:30 PM »
This reads to me as learning about what your risk tolerance is. This is an important thing to know about yourself. That tolerance can change, up or down, over time. I think that John Galt Incarnate's recommendation is a good one. Put half back in (in an index fund with low load), and then spend some time doing some deeper reading on the basis of the 4% rule, dollar cost averaging, survivorship bias in hedge funds and the associated risks of timing and highly managed investing, and do some modeling in things like cFIREsim or similar. Investing in things like gold is not "safe" as those markets are volatile too. Keeping assets in bank accounts is a guaranteed loss due to inflation.

At 30k, you have a good start, but are only a small percentage of the way to your goal. The throughgoing theme in the posts above is that a long view, and acknowledgement of drops and decreases is a part of that long term view. The losses in the market are only real if you sell at the low point and lock them in (same goes for transient gains, don't get overly optimistic/confident because of short term spikes).

If we had another 30% drop in the market, you'd still have $20k, which is a comfortable buffer for a lot of people. Having an emergency fund does a lot to buffer the anxiety of market swings.
« Last Edit: December 30, 2020, 03:58:06 PM by Glenstache »

onespeed

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Re: I pulled my index funds because fear of market crash
« Reply #26 on: December 30, 2020, 03:17:17 PM »
Like others have said, pulling all of your investments out of the market at once will likely hurt worse in the long term.  Being 100% cash is not a place I would want to be right now either, unless I had no other choice to maintain an emergency fund.  You're guaranteed to get poorer sitting in all cash as each day goes by with these near 0% rates.  World central bank policies are forcing you to not sit cash right now.  I highly recommend tools to help discover your true risk tolerance and go from there.  Ray Dalio's "All Weather Portfolio", or slight variations within the overall framework, could be a good starting point to look at.  This strategy can help you face stock equity volatility fear while maintaining some growth, although I don't know if I would recommend the heavy long term bond allocation within the strategy personally.  At the end of the day. portfolio allocation is something you have to study and determine your best course of action based on risk tolerance and overall goals.  One thing I've taken away from investing is there is always something more to learn in investing.  The more you know, the more you can grow your confidence to meet your goals and select a course of action that is most comfortable for you.  Picking your right portfolio allocation and sticking to your strategy is half the battle.

Johnez

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Re: I pulled my index funds because fear of market crash
« Reply #27 on: January 02, 2021, 12:33:00 AM »
You should invest it back in the market and “Buy and HOLD” except actually hold it this time instead of jumping in and out and in and out due to fear.

You also need to learn from Bob, who bought at the worse possible times right before a crash over 30 years. Read the article to find out how he fared.

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

After you’re done reading about Bob, read this article about DCA-ing, and how it’s not about “timing the market” but “time IN the market”, then go put your money back in the market.

https://www.kiplinger.com/article/investing/t047-c032-s014-with-market-at-its-peak-should-you-wait-to-invest.html

Thanks for sharing Bob's story. Will send to my bro next time market takes a dump and he asks me whether to sell or not.

Adventine

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Re: I pulled my index funds because fear of market crash
« Reply #28 on: January 02, 2021, 12:49:44 AM »
Based on OP's post history (old 2018 posts mention 10k invested in cryptocurrency and a 200k household income, among other things), they definitely need to do more reading and research before making emotional decisions based on things such a fear of a market crash.

Seems that OP is easily swayed by news. Before making any more big moves, they'll have to address the behavioral issues that led them to pull the 30k in the first place.
« Last Edit: January 02, 2021, 01:00:13 AM by Adventine »

use2betrix

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Re: I pulled my index funds because fear of market crash
« Reply #29 on: January 02, 2021, 06:04:55 AM »
I just want to thank you for your post instead of making fun of you. For many of us that didn't grow up with a lot of money, $30,000 in cash is a huge sum, even if we know we need far more to FIRE.  It is likely more money than our parents ever had in the bank at any given time.

What does someone growing up with money have to do with anything? Using your past as a crutch/excuse for your present/future actions and success (or lack thereof) is a terrible mindset to have. There are countless members here who group up poor and are now millionaires.

The people who grew up poor are actually at an advantage in some ways, in regards to weathering through market volatility. If someone is starting with a small amount in the market as their investments/income grows after college, they get used to the volatility at a much smaller level.

If it takes you 20 years to go from $10k to $1,000,000, you slowly learned to mentally block the emotions as the market takes dumps. In fact, most here would agree that during these drops is the best time to continue dumping any “extra” money you have into the market as well. You have likely already learned to ignore $5k-$10k market drops countless times before experiencing $20k-$50k market drops.


Imagine someone grew up “with money,” but never had an incredibly successful career like their parents. They spent their adulthood meandering along, getting by and maybe having enough to retire at 65. Then, at 35, while they have a $75k net worth, their parents die and they inherit $1,000,000. They take the advice of this forum, and dump it all into the market. Then, a few months later, the market takes a 20% dip. They have never experienced anything like this before because they hadn’t been working up to it.

In my opinion, THOSE people are at more of a disadvantage. People who grew up poor and have worked hard and made smart decisions, have many advantages over those who didn’t.

wenchsenior

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Re: I pulled my index funds because fear of market crash
« Reply #30 on: January 02, 2021, 01:26:53 PM »
Based on OP's post history (old 2018 posts mention 10k invested in cryptocurrency and a 200k household income, among other things), they definitely need to do more reading and research before making emotional decisions based on things such a fear of a market crash.

Seems that OP is easily swayed by news. Before making any more big moves, they'll have to address the behavioral issues that led them to pull the 30k in the first place.

This.  When the market tanked last spring, our portfolio dropped by several hundred thousand dollars. My husband (who is more emotional about money) started to freak out: "We'll never get to a million in cash now!" "I'll have to work for 20 more years to make up for this!" etc.  I (who have ice-water in my veins when it comes to money) insisted that it was just an awesome buying opportunity, and we should just chill out.  He knows to trust me, so we didn't change anything, just kept investing as usual.

Guess who became millionaires this year?
« Last Edit: January 02, 2021, 01:29:13 PM by wenchsenior »

ReadyOrNot

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Re: I pulled my index funds because fear of market crash
« Reply #31 on: January 05, 2021, 12:17:13 AM »
I don't even look at my long term investments more than a couple times per year.  When you invest for the long term, short term fluctuations should be of zero concern.

honeybbq

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Re: I pulled my index funds because fear of market crash
« Reply #32 on: January 05, 2021, 02:34:58 PM »
It takes a long time... and being a seasoned investor to be able to "not look not care".

I've lost and gained 100k in a day before. You really just need to invest it and forget about it other than rebalancing once a year (or less).

It is hard, but think of that money for a long long long time from now. It's an acorn that needs to grow into an oak.

HBFIRE

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Re: I pulled my index funds because fear of market crash
« Reply #33 on: January 05, 2021, 03:00:59 PM »
There were many posters on here who felt as you do back in March of last year....look at where the market is now.  Basically people who didn't do anything (or better yet, invested throughout the year) did very well last year.   Sure, there may be another crash like there was then, but you don't know when it will happen and you have to be right twice -- when to sell and then when to buy back in.  Try this little game to see how good at that you are:  https://engaging-data.com/market-timing-game/
« Last Edit: January 05, 2021, 03:03:07 PM by HBFIRE »

lutorm

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Re: I pulled my index funds because fear of market crash
« Reply #34 on: January 05, 2021, 03:38:44 PM »
It seems the situation is quite a bit different if you're already FIRE though. In the accumulation phase you can console yourself with the fact that stocks are on sale and when the market's recovered you'll be better off than you were. When you're drawing down, though, there's not only the direct portfolio drop, there's also the sequence of returns effect so that even when the market's gone back up, you've been permanently hurt.

John Galt incarnate!

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Re: I pulled my index funds because fear of market crash
« Reply #35 on: January 05, 2021, 04:07:27 PM »
It takes a long time... and being a seasoned investor to be able to "not look not care".

+1



 You really just need to invest it and forget about it other than rebalancing once a year (or less).

+1

It is hard, but think of that money for a long long long time from now. It's an acorn that needs to grow into an oak.

+1

John Galt incarnate!

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Re: I pulled my index funds because fear of market crash
« Reply #36 on: January 05, 2021, 04:09:28 PM »
I don't even look at my long term investments more than a couple times per year.  When you invest for the long term, short term fluctuations should be of zero concern.

'Tis true.

The Frugal Expat

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Re: I pulled my index funds because fear of market crash
« Reply #37 on: January 18, 2021, 12:12:13 AM »
Who says a crash is coming? Most people saying a crash is coming is throwing around a 50/50 chance they are right. If you read, JL Collins book The Simple Path to Wealth, you will know that a crash is coming, but we do not know when. JL Collins also talks about the market will go up.

Fidelity did a study from 1980-2018. They took a hypothetical number of $10,000 invested in 2018. If you missed the 5 best days in that era due to pulling out your money or even day trading, you would have lost 35% of what you could have had. You miss the best 10 days and your money would have lost more than half.

So it should be simple just buy and hold and when the market tanks just buy more and hold. Don't let people say a crash is coming and deter you. Stay strong and just keep buying and holding.

Linea_Norway

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Re: I pulled my index funds because fear of market crash
« Reply #38 on: January 18, 2021, 12:54:52 AM »
It seems the situation is quite a bit different if you're already FIRE though. In the accumulation phase you can console yourself with the fact that stocks are on sale and when the market's recovered you'll be better off than you were. When you're drawing down, though, there's not only the direct portfolio drop, there's also the sequence of returns effect so that even when the market's gone back up, you've been permanently hurt.

I think that is true. Therefore a FIREd person should preferably have another source of income so that you don't need to sell the 4% in a very low market. Many have a year's expenses in cash, some even more. If you have rental income, that will help. Others do the trick with stocks and bonds. In a downtime, they use bonds to buy stock and in good times, they sell stock and buy bonds.

RedmondStash

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Re: I pulled my index funds because fear of market crash
« Reply #39 on: January 18, 2021, 11:46:14 AM »
The thing to remember about market crashes, beyond what's already been said, is that they don't affect the percentage you own of the companies in your index funds. If you owned, say, 1% of Amazon before the crash, you still own 1% of Amazon after the crash; it's just worth less for a while. But if & when Amazon recovers, that 1% will recover along with it. (And yeah, I know 1% of Amazon is a huge pile of money. I'm just using a simple example for clarity.)

So although you've lost value on paper during a crash, you haven't lost the thing you actually bought unless you sell it. And the thing you bought is likely to recover its value at some point.

I think getting over a fear of market crashes & drops is one of the most important parts of investing. It's such a common question, and you can feel the fear behind it: "What if I lose everything?"

When you realize that you still own the same pieces of the same companies after a crash that you did before a crash, it gets easier. And when you realize that index funds mean you own smaller pieces of lots and lots of companies, most of which are likely to survive and recover even if a few don't make it, you realize the point of reducing risk via the diversification inherent in index funds.

Glenstache

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Re: I pulled my index funds because fear of market crash
« Reply #40 on: January 18, 2021, 11:59:19 AM »
The thing to remember about market crashes, beyond what's already been said, is that they don't affect the percentage you own of the companies in your index funds. If you owned, say, 1% of Amazon before the crash, you still own 1% of Amazon after the crash; it's just worth less for a while. But if & when Amazon recovers, that 1% will recover along with it. (And yeah, I know 1% of Amazon is a huge pile of money. I'm just using a simple example for clarity.)

So although you've lost value on paper during a crash, you haven't lost the thing you actually bought unless you sell it. And the thing you bought is likely to recover its value at some point.

I think getting over a fear of market crashes & drops is one of the most important parts of investing. It's such a common question, and you can feel the fear behind it: "What if I lose everything?"

When you realize that you still own the same pieces of the same companies after a crash that you did before a crash, it gets easier. And when you realize that index funds mean you own smaller pieces of lots and lots of companies, most of which are likely to survive and recover even if a few don't make it, you realize the point of reducing risk via the diversification inherent in index funds.
It is not "what if I lose a huge chunk of my investment?" but, "It is expected that at some point I will lose a huge chunk of my investment during a downturn. This is part of the 4% rule. I will plan for that mentally ahead of time."

Scandium

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Re: I pulled my index funds because fear of market crash
« Reply #41 on: January 18, 2021, 02:08:46 PM »
Really curious as to how you are doing overall on your path to FIRE since your post in 2018 seeking advice?  An update would be great!

From what we can tell OP has gone from 10k to 30k invested in two years. And I saw someone mentioned 200k in income. I'd say not very promising so far. Might be FIRE around 2088

GuitarStv

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Re: I pulled my index funds because fear of market crash
« Reply #42 on: January 18, 2021, 02:14:55 PM »
The thing to remember about market crashes, beyond what's already been said, is that they don't affect the percentage you own of the companies in your index funds. If you owned, say, 1% of Amazon before the crash, you still own 1% of Amazon after the crash; it's just worth less for a while. But if & when Amazon recovers, that 1% will recover along with it. (And yeah, I know 1% of Amazon is a huge pile of money. I'm just using a simple example for clarity.)

So although you've lost value on paper during a crash, you haven't lost the thing you actually bought unless you sell it. And the thing you bought is likely to recover its value at some point.

I think getting over a fear of market crashes & drops is one of the most important parts of investing. It's such a common question, and you can feel the fear behind it: "What if I lose everything?"

When you realize that you still own the same pieces of the same companies after a crash that you did before a crash, it gets easier. And when you realize that index funds mean you own smaller pieces of lots and lots of companies, most of which are likely to survive and recover even if a few don't make it, you realize the point of reducing risk via the diversification inherent in index funds.
It is not "what if I lose a huge chunk of my investment?" but, "It is expected that at some point I will lose a huge chunk of my investment during a downturn. This is part of the 4% rule. I will plan for that mentally ahead of time."

Your investments will go up and down quite a bit over time.  The only time you actually lose anything is when you sell.

Malossi792

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Re: I pulled my index funds because fear of market crash
« Reply #43 on: January 22, 2021, 04:02:30 AM »

guitar_stitch

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Re: I pulled my index funds because fear of market crash
« Reply #44 on: January 26, 2021, 01:56:30 PM »
Hi!  Much like you, I'm fairly new to investing.  I started in 2017, built up around 19k, then used that to purchase a house.  I got my financial picture aligned and started investing again in early 2020.  I too came up in a family where $1000 of unspent money was a fortune.  Dumping hundreds or thousands of dollars into some unknown repository just to watch the valuation drop is a nerve-wracking experience.  Self preservation kicks in and you want to stem the bleeding.

Any time I think about a crash and feel nervous, I hear Pete (or what I imagine him sounding like anyway..) in my head saying "Rejoice, for stocks are on sale!"  Time and time again, we've witnessed the temporary nature of stock crashes.  Eventually, you'll get comfortable seeing those drops.

I honestly wish I had more patience because I'd sit on my cash between major bull runs and invest on the dips.  Since we can't really predict the market, I just rely on dollar cost averaging.

MilesTeg

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Re: I pulled my index funds because fear of market crash
« Reply #45 on: January 26, 2021, 03:07:04 PM »
The thing to remember about market crashes, beyond what's already been said, is that they don't affect the percentage you own of the companies in your index funds. If you owned, say, 1% of Amazon before the crash, you still own 1% of Amazon after the crash; it's just worth less for a while. But if & when Amazon recovers, that 1% will recover along with it. (And yeah, I know 1% of Amazon is a huge pile of money. I'm just using a simple example for clarity.)

So although you've lost value on paper during a crash, you haven't lost the thing you actually bought unless you sell it. And the thing you bought is likely to recover its value at some point.

I think getting over a fear of market crashes & drops is one of the most important parts of investing. It's such a common question, and you can feel the fear behind it: "What if I lose everything?"

When you realize that you still own the same pieces of the same companies after a crash that you did before a crash, it gets easier. And when you realize that index funds mean you own smaller pieces of lots and lots of companies, most of which are likely to survive and recover even if a few don't make it, you realize the point of reducing risk via the diversification inherent in index funds.
It is not "what if I lose a huge chunk of my investment?" but, "It is expected that at some point I will lose a huge chunk of my investment during a downturn. This is part of the 4% rule. I will plan for that mentally ahead of time."

Your investments will go up and down quite a bit over time.  The only time you actually lose anything is when you sell.

I bought a big chunk of Nvidia in about 2000. I promptly lost most of it but said 'fuck it I'll let it ride'. Then Bitcoin happened and people started buying up GPUs like mad and now Nvidia is skyrocketing. Yay!