News panic standards?

[DeskJockey2028]

I'm about 2.5 years into my FIRE journey, where I'm conscious of what I'm spending, what I'm saving and what I'm investing.

Just to be clear, I'm not panicking and don't have any intention of doing anything differently than the past 2.5 years. All of my investments are automated and I don't fool around with 'em.

Looking at the headlines today though, and for the past few months, it's all pretty panicked regarding the direction the market's going. CNN even has an article titled "Stocks Are Up But This Could Be the Worst December Since the Depression". Lots of grim predictions, etc.

Since the majority of the time I've been aware of my financial health, it's been a market that's been really nice to me, I'm not really used to this. I'm assuming these gloom and doom headlines are par for the course? It seems like sometimes news sites are really reaching to actually create some kind of panic.

Do folks here, on this site, start getting panicky at these as well?

[Syonyk]

Covered on the front page, 5 years back: http://www.mrmoneymustache.com/2013/10/01/the-low-information-diet/

Simple answer, stop looking at the headlines daily.

[partdopy]

Yeah, as the poster above me pointed out, don't check new headlines.  Important stuff (and most of the unimportant stuff) will still trickle down to you.

As an aside, you'll certainly make back any losses unless the USA dissolves as a country, and any new investments you make during a crash will pay off handsomely when the market recovers.

[BrightFIRE]

Do folks here, on this site, start getting panicky at these as well?

Nope. I laugh at the headlines. Oh, noes, it's the lowest it's been in a whole hour/day/week/month/year! Lather, rinse, repeat.

My favorite is when I see 2 "headlines" that are totally opposed, like 1, "we're doomed, it's all going down, this time is different" and 2, "this is the correction we needed, the future is bright!" It's all nonsense. The low information diet is much better for your mental well being.

[Uturn]

CNN, MSN, FOX, et al., exist to sell ads and subscriptions.  "Don't panic, markets are naturally cyclical" does not sell any more than "another plane made it safely to its destination" does.  Besides, why are those people still working for a living if they can predict the future?

The time to make a decision on what to do in a down market is before it goes down.  Hopefully you have a plan, work your plan.  My plan is to continue to put the same amount into the same boring investments, ride it out.  You don't have to follow my plan, but I can say that I used the panic and get out of the market method in 2002 and 2008, and am still working at 48 because of it. 

[Syonyk]

Nope. I laugh at the headlines. Oh, noes, it's the lowest it's been in a whole hour/day/week/month/year! Lather, rinse, repeat.

That's right, Jim!  This is the lowest the markets have been on a the third Tuesday of a month factoring into a pair of 2s and a 3 with weather in New York above 36 but below 38 in a long time!  What does this mean for the future?  Well, for that, let's go live to John over in our other studio.  John?

Thanks, Jim!  There's a lot of uncertainty in these numbers right now - we're not 100% certain where things are going to go, but there's a pretty good chance that we're going to be seeing some gains and some losses in the weeks to come.  The markets are uncertain right now, because of the recent news from Washington, but we're expecting an announcement later this week that should insert some certanties back into the market.  We'll have to see how things react to that, but, for now, again, it's going to be a mix of ups and downs.  Back to you, Jim!

Thanks for that detailed analysis!

(repeat until you wish to bash your brain in while waiting for a flight)

[DeskJockey2028]

Oh yeah, I'm not doing anything differently. It's just amazing to me how... inflammatory these headlines are.

Three years ago I didn't pay attention to them because I wasn't doing much on the saving for my future front. Now I don't really pay much attention to them because they don't matter to me that much. I just happened to be checking the market, saw that it was heading up today and decided to see what the news outlets had to say.

The only thing I did to change my investment strategy this year was to invest a bit more when I got a pay raise. :)

[Aelias]

There's a MMM post for everything: http://www.mrmoneymustache.com/2017/06/20/next-recession/

Since you're still solidly in the acquisition / investing phase (as opposed to the FIRE drawing down phase) you should be JUMPING FOR JOY that you may soon have a good--even historic--opportunity to buy good companies at a bargain price.

I started my investing life in 2008, which was a glorious bit of good luck.  I credit staying employed and able to invest through a recession with setting me on a good FIRE path. The thought that I might have a SECOND opportunity to buy in during a deep recession is almost too good to be true.


Keep the faith, friend.

[LPG]

Similar to what @Aelias said, I think the way to handle the doom and gloom headlines is by keeping track of the context. If you started your aggressive investing 2.5 years ago, you're probably still pretty early in the accumulation phase. This means 2 things:

• While the value of your current investments may plummet in a bear market or recession you'll certainly have enough time for them to recover. And then some. Using the 2008 recession as an example, the S&P500 was back to the 2007 peak 6 years later. If you invest money on the day of the peak before the next recession it'll likely be back to that value before you retire. Or higher. And money invested before the peak (You've already been going 2.5 years, after all) would have returned significant money by then.
• When you're still this early in the accumulation phase "The worst December since the Great Depression" is probably a good thing for you! A long period of low stock prices gives you tons of time to buy as much as possible, and wait for their value to explode when the stock market value pops back up. I'm ~4 years into investing (Really 3, but I was always slightly mustachian in nature, so I could the background as ~1) and tend to think of FI as being one business cycle away. The next recession will be an opportunity for me to live cheaply and dump money into stocks, then the growth after the recession will increase the value of all those new shares and have me set.

[fattest_foot]

The "worst December since the Great Depression" one is kind of funny to me, because it's misleading when you decide to use arbitrary things like "months" to define something.

It ignores that the last week of November saw a six percent increase in the S&P 500.

If you cut that one week run-up out, the market is only down 3.2% in December. In fact, the market has been relatively flat overall since the end of October. It's just that there's been a ton of volatility every week. It makes for great headlines, but overall it's just noise.

[John Galt incarnate!]

I'm about 2.5 years into my FIRE journey, where I'm conscious of what I'm spending, what I'm saving and what I'm investing.

Just to be clear, I'm not panicking and don't have any intention of doing anything differently than the past 2.5 years. All of my investments are automated and I don't fool around with 'em.

Looking at the headlines today though, and for the past few months, it's all pretty panicked regarding the direction the market's going. CNN even has an article titled "Stocks Are Up But This Could Be the Worst December Since the Depression". Lots of grim predictions, etc.

Since the majority of the time I've been aware of my financial health, it's been a market that's been really nice to me, I'm not really used to this. I'm assuming these gloom and doom headlines are par for the course? It seems like sometimes news sites are really reaching to actually create some kind of panic.

Do folks here, on this site, start getting panicky at these as well?

My father taught me well about the folly of selling into a stock-market panic.

I never  get panicky for the reason that I understand that stock-market fluctuations of considerable magnitude are normal and that most investors who  panic  and sell are likely to be among investors who cause their own  abysmal, market  underperformance.


"The figures listed [below] look at time periods fall within the range of January 1, 1986, to December 31, 2015. That means the study includes the crash of 1987 and the big bear markets of 2000 and 2008, but also the fierce bull market of the 1990’s. The inclusion of these very significant market cycles and market swings perhaps best explain why the average investor is underperforming so badly: there are too many temptations to try to time the market."


For Equity Investors:

Investment Time Period Average Equity Investor [Versus]S&P 500

30-year period 3.66% 10.35%

20-year period 4.67% 8.91%

10-year period 4.23% 7.31%

 


 For Fixed Income Investors:

Investment Time Period Average Fixed Income Investor Barclays Aggregate Bond Index

30-year period 0.59% 6.73%

20-year period 0.51% 5.34%

10-year period 0.39% 4.51%

[skekses]

I'm about 2.5 years into my FIRE journey, where I'm conscious of what I'm spending, what I'm saving and what I'm investing.

Just to be clear, I'm not panicking and don't have any intention of doing anything differently than the past 2.5 years. All of my investments are automated and I don't fool around with 'em.

Looking at the headlines today though, and for the past few months, it's all pretty panicked regarding the direction the market's going. CNN even has an article titled "Stocks Are Up But This Could Be the Worst December Since the Depression". Lots of grim predictions, etc.

Since the majority of the time I've been aware of my financial health, it's been a market that's been really nice to me, I'm not really used to this. I'm assuming these gloom and doom headlines are par for the course? It seems like sometimes news sites are really reaching to actually create some kind of panic.

Do folks here, on this site, start getting panicky at these as well?

What is your current investment allocation? The markets go up and the markets go down. A more aggressive high equity portfolio will ride that crazy rollercoaster the whole way. If you can't stomach that idea and a downturn will make you do silly things, then switch to a more conservative portfolio that you can live with. You can always switch it again later.

[DreamFIRE]

Do folks here, on this site, start getting panicky at these as well?

No panic here.  I'm pretty unemotional about it.  I expect to FIRE in 6 to 16 months.  Over the last year or two, I've felt a recession would probably hit us in my early retirement and that we will see a big drop in the market.  So this is not so bad or unexpected.  I switched to a more conservative 60% equities back in July, but I'm still down six figures in my investments/savings combined since late September.  I would just as well it drop now than after I FIRE, but the long game is what really matters.

[effigy98]

The best thing to do is panic and sell when you see all this negative news. That is what I did in 2000 and 2008 with my 100% yolo stock allocation. The great thing about this is you get to keep working in a shit-tastic job you hate, with people you do not like, spending time away from those you love, while your health deteriorates because you are miserable and do not have time to take care of yourself.

[RedmondStash]

I don't get panicky, but that's partly because last time I did get panicky, I realized I had to adjust my AA. Once I did that and I started feeling calm even when markets dropped precipitously, I knew I was at the right AA.

Panic can be useful, in that it can tell you where your emotional tolerance lies. Sometimes that doesn't match up with your intellectual analysis. To some extent, you have to take your emotional reactions into account, or else you are spoiling your own ability to live happily.

There's nothing wrong with the low-info approach, but when I can read headlines daily and just laugh when the market drops, I know my AA is set right for me.

[Adam Zapple]

The best thing to do is panic and sell when you see all this negative news. That is what I did in 2000 and 2008 with my 100% yolo stock allocation. The great thing about this is you get to keep working in a shit-tastic job you hate, with people you do not like, spending time away from those you love, while your health deteriorates because you are miserable and do not have time to take care of yourself.

Don't forget to wait on the sidelines until all your coworkers, who know nothing about investing, start recommending "sure things" like bitcoin and marijuana stocks or vacation properties.  When that happens, it is time to go all-in and ride the money train to Wealthytown.

[DeskJockey2028]

Right now I'm about 93% Fidelity Total Market on my 403(b). I was about 90%, with 5% in bonds and 5% international. I just adjusted my holdings though to be more FTM. My allocations remain the same so I'll build up my bonds again over time. 

In my Roth, I'm 100% VTSAX.

I'm about 2.5 years into my FIRE journey, where I'm conscious of what I'm spending, what I'm saving and what I'm investing.

Just to be clear, I'm not panicking and don't have any intention of doing anything differently than the past 2.5 years. All of my investments are automated and I don't fool around with 'em.

Looking at the headlines today though, and for the past few months, it's all pretty panicked regarding the direction the market's going. CNN even has an article titled "Stocks Are Up But This Could Be the Worst December Since the Depression". Lots of grim predictions, etc.

Since the majority of the time I've been aware of my financial health, it's been a market that's been really nice to me, I'm not really used to this. I'm assuming these gloom and doom headlines are par for the course? It seems like sometimes news sites are really reaching to actually create some kind of panic.

Do folks here, on this site, start getting panicky at these as well?

What is your current investment allocation? The markets go up and the markets go down. A more aggressive high equity portfolio will ride that crazy rollercoaster the whole way. If you can't stomach that idea and a downturn will make you do silly things, then switch to a more conservative portfolio that you can live with. You can always switch it again later.

[Maenad]

I think your 2.5 years is an important piece of data - the financial news media has been predicting gloom and doom all throughout this latest bull market, and us crusty oldsters have seen how ridiculous it is. OMG you should have seen the panic in 2011 when we came thisclose to an actual bear.

Fear sells, and catches eyeballs. Bad for your mental health, though.

[dude]

I ignore those headlines entirely and never make decisions based on them. However, I do pay attention to certain people's analysis when it comes to long-term forecasting, and I've adjusted accordingly from time to time. Case in point -- future returns on U.S. equities. There's good reason to believe they will be lower in the coming decade than the historical average (4-5% real as opposed to 7% real). As a corollary, International equities look to be a better bet in the future. I haven't gone crazy with adjusting, just sorta hedged a little bit by increasing my international fund to @12% (from 5%) and decreased my U.S. equities by 7%. I'm 50/50 equities/bonds as of a year or more ago (from 60/40) because of U.S. valuations. I'm planning a rising glide path to 60/40 or 70/30 as I progress in retirement (5 months from now).

[Livingthedream55]

This is from September but the message is the same - take a long range view:

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

[skekses]

Right now I'm about 93% Fidelity Total Market on my 403(b). I was about 90%, with 5% in bonds and 5% international. I just adjusted my holdings though to be more FTM. My allocations remain the same so I'll build up my bonds again over time. 

In my Roth, I'm 100% VTSAX.

I'm about 2.5 years into my FIRE journey, where I'm conscious of what I'm spending, what I'm saving and what I'm investing.

Just to be clear, I'm not panicking and don't have any intention of doing anything differently than the past 2.5 years. All of my investments are automated and I don't fool around with 'em.

Looking at the headlines today though, and for the past few months, it's all pretty panicked regarding the direction the market's going. CNN even has an article titled "Stocks Are Up But This Could Be the Worst December Since the Depression". Lots of grim predictions, etc.

Since the majority of the time I've been aware of my financial health, it's been a market that's been really nice to me, I'm not really used to this. I'm assuming these gloom and doom headlines are par for the course? It seems like sometimes news sites are really reaching to actually create some kind of panic.

Do folks here, on this site, start getting panicky at these as well?

What is your current investment allocation? The markets go up and the markets go down. A more aggressive high equity portfolio will ride that crazy rollercoaster the whole way. If you can't stomach that idea and a downturn will make you do silly things, then switch to a more conservative portfolio that you can live with. You can always switch it again later.

I was probably similarly allocated and at about the same number of years into my journey as you when the last recession happened (although you may be contributing much more than I was then). It didn't feel great to see the numbers decrease, but I didn't have much to lose then either. I kept consistently putting money in anyway.

The part that really hurt? I got laid off from my job right as the stock market hit its low. I was so pissed that I was not working and had to be a responsible person and use my savings to support my life rather than throw what little I had into the market at that moment.

Next time I will be ready.

[Sibley]

I haven't really been watching the news. The market's down?

[RyanAtTanagra]

Next time I will be ready.

Ready how?  Meaning you have cash sitting around being unproductive waiting for the market to crash?

[dougules]

"Stocks Are Up But This Could Be the Worst December Since the Depression" - If you did the math right on your original FIRE numbers, you should be able to withstand an actual repeat of the Great Depression.  I'm guessing it would have a ways to go to even put you back to where you started, though, given that the market is still up a decent amount from 2 1/2 years ago. 

[cats]

My husband and I track our "adjusted" net worth as well as what it really is.  The adjusted number is what our money ought to be worth based on average returns.  We've been seeing pretty much since we started tracking that our real number is much higher than adjusted, telling us that our real networth is due for a correction.  At the moment, we focus primarily on the adjusted value as the metric for how far we are from FIRE.  I think this has kept us from getting too excited about the run-up in stock values over the past few years.  I checked our numbers the other day and December will need to get quite a bit worse before our real number is less than our adjusted number.

Now, I'm not quite sure yet what we are going to do if our FIRE date rolls around (likely within the next 18 months) and our real number is way less than our adjusted number, due to a big stock market decline.  I think it's possible we would decide to continue working for a bit longer, or start looking for some other options to trim our expenses to bring our needed number more in line with the real number.

[soccerluvof4]

Stay Calm and Carry on!

[Prairie Stash]

Remember that december after Trump got elected? Without getting into a political debate it was wacky headlines and stock markets.

Getting enough of these crazy headlines under your belt is important. Eventually you learn that news sells when its sensational, if the headlines more accurately reflected reality then people would stop reading.

I encourage you to pay attention over the next few months, just to personally get a feel for the disconnect between news and the market, its important to calm your nerves. Investing is an emotoinal ride for some of us, mastering emotions is key. However, in case this time the news is correct just remember a stopped clock is also correct twice a day.

[dougules]

My husband and I track our "adjusted" net worth as well as what it really is.  The adjusted number is what our money ought to be worth based on average returns.  We've been seeing pretty much since we started tracking that our real number is much higher than adjusted, telling us that our real networth is due for a correction.  At the moment, we focus primarily on the adjusted value as the metric for how far we are from FIRE.  I think this has kept us from getting too excited about the run-up in stock values over the past few years.  I checked our numbers the other day and December will need to get quite a bit worse before our real number is less than our adjusted number.

Now, I'm not quite sure yet what we are going to do if our FIRE date rolls around (likely within the next 18 months) and our real number is way less than our adjusted number, due to a big stock market decline.  I think it's possible we would decide to continue working for a bit longer, or start looking for some other options to trim our expenses to bring our needed number more in line with the real number.

I do something similar and adjust based on the CAPE since the market is so high right now.  What you're doing is probably even better.  I think I've realized that adjusting like that does have an extra benefit of making you less likely to get wrapped up in major market fluctuations. 

If it drops a whole lot right before we FIRE in a few years, we will grumble a bit then keep working for a little while longer.  I'd rather it happen right before than right after, but we'll be fine either way. 

[birdman2003]

This just cements the fact that my choice to contribute extra money towards my mortgage in 2018 has gained me a guaranteed 3% return on my money vs losing 6% or more!

[Unique User]

Meh.  Our FIRE date is March/April 2020.  If we are still under our number by then, I'll just adjust the plan and assume for part time work to cover most of our expenses for a couple years.  In 2007/8 when things were bad, I didn't open brokerage statements, just shredded them without looking. 

[SwordGuy]

This just cements the fact that my choice to contribute extra money towards my mortgage in 2018 has gained me a guaranteed 3% return on my money vs losing 6% or more!

Wrong.

No one who bought stocks AND DID NOT SELL THEM has "lost money".   They never "had money", they had stocks.   They still have them.

A mortgage is a long-term investment and so are stocks.


Now is the time to stop paying extra on the mortgage and instead invest in stocks.  When the market recovers you'll do awesome.

[maizefolk]

Panic can be useful, in that it can tell you where your emotional tolerance lies. Sometimes that doesn't match up with your intellectual analysis. To some extent, you have to take your emotional reactions into account, or else you are spoiling your own ability to live happily.

There's nothing wrong with the low-info approach, but when I can read headlines daily and just laugh when the market drops, I know my AA is set right for me.

If low-info works for a given person, they are going to do much better long term than if they need to adjust their asset allocation to get the same release from unhappiness. I haven't hit the point where I need to apply any level of low-info mode, but yes that'd be my approach (first I'd cut myself from information on my own net worth, and if things continued to get worse from news headlines).

So while I completely agree with you that the emotional aspect is extremely important, I'd urge anyone reading this to experiment with all the other ways to alter your emotional reactions to market swings before going to the "change your asset allocation away from what makes the most financial sense for your circumstances" option.

That cutting yourself off from information about it. Finding people on or offline you can laugh about it with. Given the net worths of a lot of people here, budgeting to fly off to another country and engaging in new experiences for several months every time the stock market dropped 30% or more might be cheaper long term than either adopting a low volatility but low return investment strategy or risking panic selling at the bottom of the market.

[Sultan58]

This just cements the fact that my choice to contribute extra money towards my mortgage in 2018 has gained me a guaranteed 3% return on my money vs losing 6% or more!

Wrong.

No one who bought stocks AND DID NOT SELL THEM has "lost money".   They never "had money", they had stocks.   They still have them.

A mortgage is a long-term investment and so are stocks.

Now is the time to stop paying extra on the mortgage and instead invest in stocks.  When the market recovers you'll do awesome.

Nahhh....not wrong at all....just a different viewpoint. Swordguy, if someone comes up to you tomorrow and says "hey id like to buy your house at its appraised value, you cant simply tell them...."well, I know it will probably only appraise for 300K right now but I paid 400K for it so that what I think its worth." If you own stocks then you own their present value.....not the value you bought them at months or years ago. If you include your house value in net worth calculations....you can't simply pretend your house is worth what you paid for it before it went down in value.

The poster is thinking "present value" of "stocks" vs "present value" of "mortgage" and that is a perfectly valid way to look at it.

This "paper loss" bullshit is just that...bullshit. I live in a present value world....and so does your accountant.

[Miss Prim]

I'm already retired and pulling 4% out per year and I am still over $100,000 ahead of where I was when I retired 3 1/2 years ago and I am not worried!  Yes, my "stache" has gone down over $100,000 from it's all time high, but as I said, it is still higher than when I retired and I have been pulling money out every year.  If necessary, I can adjust what I pull out every year and not travel as much or put off some expenditures until the stock market stabilizes. 
                                                           Miss Prim

[moof]

I’d rather spend my last few accumulation years buying through a trough than finding myself hovering over the ejection button at all time high evaluations, worried that I was at tail of the curve of SWRs.

I am not panicked and continue to be about 95% equities.  I’ve got five years left and we are buying like mad, on track for 30% higher saved this year than last, and likely 40% higher next year than this year (wife picked up a job this summer!).

I am far more worried for all the other parts of the shit-show that come with a recession.  CEO’s panic easily and do dumb shit.

[cats]

My husband and I track our "adjusted" net worth as well as what it really is.  The adjusted number is what our money ought to be worth based on average returns.  We've been seeing pretty much since we started tracking that our real number is much higher than adjusted, telling us that our real networth is due for a correction.  At the moment, we focus primarily on the adjusted value as the metric for how far we are from FIRE.  I think this has kept us from getting too excited about the run-up in stock values over the past few years.  I checked our numbers the other day and December will need to get quite a bit worse before our real number is less than our adjusted number.

Now, I'm not quite sure yet what we are going to do if our FIRE date rolls around (likely within the next 18 months) and our real number is way less than our adjusted number, due to a big stock market decline.  I think it's possible we would decide to continue working for a bit longer, or start looking for some other options to trim our expenses to bring our needed number more in line with the real number.

I do something similar and adjust based on the CAPE since the market is so high right now.  What you're doing is probably even better.  I think I've realized that adjusting like that does have an extra benefit of making you less likely to get wrapped up in major market fluctuations. 

If it drops a whole lot right before we FIRE in a few years, we will grumble a bit then keep working for a little while longer.  I'd rather it happen right before than right after, but we'll be fine either way.

So true!  It's honestly been a little annoying the past few years, seeing a market that is "too high" coincide with what are likely our peak earnings/savings years.  Will be nice if we can sneak in a little bit of investing when stocks are on sale.

[aceyou]

I've done something similar with my house valuation.   When. I started tracking net worth I'd go with the Zillow valuation each month.   But that would make my het worth fly around and insignificant.   I give my house a 600 valuation boost every month now and it calms the numbers.  Probably more accurate too.