Author Topic: Trying not to feel too giddy about the stache's growth spurt  (Read 24666 times)

thenextguy

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #50 on: March 13, 2017, 10:00:57 AM »
Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead.

Corporate bonds don't do so hot when the stock market crashes.

BlueMR2

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #51 on: March 13, 2017, 10:12:34 AM »
Based on the posts in this thread I'll assume most of you are under 40 and have been investing less than  10-15 years?    Come back and visit this thread when markets tank 40 percent or so.  ;)

I also wish I was that young...  It was entertaining watching the market tank exactly while I was out of work...  I also lived through a big flat spot before that too.  I had money saved up, invested, ended up needing it 5 years later.  Took out slightly less than I'd put in 5 years before.  Sigh.  Bad things happen in the market, but really that's also why you need be in ALL the time, so you don't miss the good events that make up for it.

sol

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #52 on: March 13, 2017, 10:23:10 AM »
really that's also why you need be in ALL the time, so you don't miss the good events that make up for it.

You mean like the last eight years?

Yea, somebody who sat out the last eight years is probably kicking themselves for not being in the market for those rare "good events" that make up for the bad crashes.

Retire-Canada

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #53 on: March 13, 2017, 10:26:49 AM »
I lived through the Tech Bubble and 2008. Not fun at all, but if I hit my 4%WR $$ target in this rally I would FIRE without a second thought. I would ensure my asset allocation/plans could withstand a significant crash early on, but I wouldn't wait extra years to pad the stash more. The opportunity costs would be too high.

shuffler

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #54 on: March 13, 2017, 01:35:48 PM »
The problem with youth is that it is wasted on the young!  For the record, it took the NASDAQ 15 years to to break the 5,000 point mark it had originally set on March 9th, 2000.
I don't follow your point.  Neither about "youth", nor about the NASDAQ.

The NASDAQ isn't "the market".  The S&P500 (not "the market" either, but perhaps a better bellweather) took ~7 years to recover from that drop.

Last time I looked at it, the market really does spend most of its time near its all-time high.

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #55 on: March 13, 2017, 03:21:34 PM »
Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead. 

That's not mutually exclusive.  You can hold bonds while using a 4% WR.

When it recovers, sell some stocks off to replenish this fund. 

Rebalancing is a regular part of investing.  This should happen whether it's a bull or bear market.

I always thought the 4% rule is foolish and completely unnecessary.  It's like a number picked out of a magic rabbit hat.

Well then it's pretty obvious you don't know much about it.  It was chosen using historical data, not arbitrarily.  Maybe you want to read about the origins to learn a bit more?

The people who made it up assumed there are no viable "work arounds," yet there are.  You need not use 4% if you have work arounds.  That's also assuming a 100% equities portfolio. 

WildJager

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #56 on: March 13, 2017, 04:50:26 PM »
Any time I start to feel giddy about the run-up in the stock market, I just think about how much more health insurance is going to cost than I had originally planned.  That brings me down to earth real quick.

Why would health insurance costs go up just because the stock markets go up?
Health insurance depends on inflation and utilization.

He's not saying that health insurance is related to the stock market.  He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market.  In the mean time, it's unsustainable and the premiums increase every year.  Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care.  In other words, 25x your annual expenses may only be 20x in the future, for example.

Monkey Uncle

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #57 on: March 14, 2017, 04:36:58 AM »
Any time I start to feel giddy about the run-up in the stock market, I just think about how much more health insurance is going to cost than I had originally planned.  That brings me down to earth real quick.

Why would health insurance costs go up just because the stock markets go up?
Health insurance depends on inflation and utilization.

This, exacerbated by the loss of ACA subsidies/cost sharing for "low income" mustachians living off of $20-$30k/yr in capital gains and dividends.

He's not saying that health insurance is related to the stock market.  He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market.  In the mean time, it's unsustainable and the premiums increase every year.  Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care.  In other words, 25x your annual expenses may only be 20x in the future, for example.

TomTX

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #58 on: March 16, 2017, 10:03:54 AM »
Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead.  When it recovers, sell some stocks off to replenish this fund.  I always thought the 4% rule is foolish and completely unnecessary.  It's like a number picked out of a magic rabbit hat.

You are absolutely free to ignore the validated calculations and go your own way by your intuition. It's probably only a couple percent higher failure rate.

gerardc

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #59 on: March 20, 2017, 12:30:43 AM »
He's not saying that health insurance is related to the stock market.  He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market.  In the mean time, it's unsustainable and the premiums increase every year.  Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care.  In other words, 25x your annual expenses may only be 20x in the future, for example.

But the 4% rule already factors in inflation. Are you saying health costs increase at a faster rate than inflation? That may be true temporarily but can't go on forever.
« Last Edit: March 20, 2017, 02:06:49 AM by gerardc »

2Birds1Stone

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #60 on: March 20, 2017, 01:55:10 AM »
The people who made it up assumed there are no viable "work arounds," yet there are.  You need not use 4% if you have work arounds.  That's also assuming a 100% equities portfolio.

Clearly, you have very little clue as to what you are talking about.

CCCA

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #61 on: March 20, 2017, 12:58:56 PM »
yes, the recent run-up has made our stache balloon.  As a result, our CFiresim success rate has risen to well past 95% and even 100% in some scenarios (I like to try different spending and income scenarios).  I am planning to FIRE at the beginning of 2018, so depending on what the market does in that time, we'll may have an even greater safety margin.  Plus during that time, we can also figure out what the heck will happen with healthcare before my wife also retires (still unknown but within 1-2 years).

I'm just old enough where I started investing in 1999 and was unlucky enough to start investing at just the wrong moment (a modest lump sum).  2007-2008 was also a big setback in our investments.

We don't need to follow the 4% rule (on current spending) because our housing and childcare costs are a high % of our overall spending (HCOL SF Bay Area).  So childcare costs will go way down soon, and in 24 years when our mortgage is paid off, our spending would drop about about 55% of our current spending.  We also have growing rental income (assuming normal inflation) and SS which should cover 100% of our spending in about 20-25 years.

WildJager

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #62 on: March 20, 2017, 03:42:36 PM »
He's not saying that health insurance is related to the stock market.  He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market.  In the mean time, it's unsustainable and the premiums increase every year.  Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care.  In other words, 25x your annual expenses may only be 20x in the future, for example.

But the 4% rule already factors in inflation. Are you saying health costs increase at a faster rate than inflation? That may be true temporarily but can't go on forever.

Well, yes, that's exactly what I'm saying.  ACA premiums increased 25% last year alone, obviously well beyond inflation.  You're right, the market will level out at some point.  But if your FIRE budget was designed around 2014 health care costs, 2020 health care costs are probably going to be much higher.  Therefore, your budget will need to be higher.

The only reason why this is a problem is that healthcare is a relatively large percentage of most mustachian's basket of goods.  Most of our budgets are so refined that a large bump in cost of a particular item disproportionally affects our perceived inflation versus total inflation. 

For example, you start to notice that your grocery bill is ballooning due to the increasing cost of your nightly steak.  Easy, change to having nightly chicken instead which has gone done in cost.  While total inflation remained steady in the steak/chicken economy, the two sectors did not (but they balance out).

Unfortunately, there's no chicken healthcare that's an alternative to the ACA or whatever it becomes.  There are limited options for health insurance out there.  And with the insurance companies struggling to make ends meet with the new rules, they're charging more just to survive.

http://fortune.com/2016/10/25/obamacare-insurance-premiums-2017-healthcare/

Monkey Uncle

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #63 on: March 21, 2017, 04:48:28 AM »
He's not saying that health insurance is related to the stock market.  He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market.  In the mean time, it's unsustainable and the premiums increase every year.  Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care.  In other words, 25x your annual expenses may only be 20x in the future, for example.

But the 4% rule already factors in inflation. Are you saying health costs increase at a faster rate than inflation? That may be true temporarily but can't go on forever.

Well, yes, that's exactly what I'm saying.  ACA premiums increased 25% last year alone, obviously well beyond inflation.  You're right, the market will level out at some point.  But if your FIRE budget was designed around 2014 health care costs, 2020 health care costs are probably going to be much higher.  Therefore, your budget will need to be higher.

The only reason why this is a problem is that healthcare is a relatively large percentage of most mustachian's basket of goods.  Most of our budgets are so refined that a large bump in cost of a particular item disproportionally affects our perceived inflation versus total inflation. 

For example, you start to notice that your grocery bill is ballooning due to the increasing cost of your nightly steak.  Easy, change to having nightly chicken instead which has gone done in cost.  While total inflation remained steady in the steak/chicken economy, the two sectors did not (but they balance out).

Unfortunately, there's no chicken healthcare that's an alternative to the ACA or whatever it becomes.  There are limited options for health insurance out there.  And with the insurance companies struggling to make ends meet with the new rules, they're charging more just to survive.

http://fortune.com/2016/10/25/obamacare-insurance-premiums-2017-healthcare/

And with loss of the ACA, we somewhat older mustachian couples likely will be paying in excess of $20k/year for health insurance.  That's a 50% increase in our total projected spending.

MayDay

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #64 on: March 21, 2017, 05:00:59 AM »
Also, people forget that health insurance prices were outpacing inflation for long before the ACA came about. We've been saying "it can't keep going up forever!"  for ...... 15 years at least? So, lol that it's going to get fixed in the next few years if they couldn't figure it out in the last 15 years.

We are ~10 years out so hopefully things will have stabilised by then, but if I was retiring now, I'd budget at least 20k for current costs, plus inflation To a much higher rate than overall inflation.

Metric Mouse

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #65 on: March 21, 2017, 05:25:13 AM »
And with loss of the ACA, we somewhat older mustachian couples likely will be paying in excess of $20k/year for health insurance.  That's a 50% increase in our total projected spending.
I believe the current CBO report concludes average premiums would be 10% lower by 2026 for most people,"8-10% lower for 40 year olds (Yeah FIREEs!!) but up to 20% higher for 65+ year olds. (When compared to current ACA projections).

Quote
https://drive.google.com/file/d/0B4rblq-fxqLaT0VjNGR2bVpFQ3M/view

Monkey Uncle

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #66 on: March 22, 2017, 03:43:48 AM »
And with loss of the ACA, we somewhat older mustachian couples likely will be paying in excess of $20k/year for health insurance.  That's a 50% increase in our total projected spending.
I believe the current CBO report concludes average premiums would be 10% lower by 2026 for most people,"8-10% lower for 40 year olds (Yeah FIREEs!!) but up to 20% higher for 65+ year olds. (When compared to current ACA projections).

Quote
https://drive.google.com/file/d/0B4rblq-fxqLaT0VjNGR2bVpFQ3M/view

It depends greatly on income.  See table in the linked article below.  A low income 40 year old would see a net increase in premium paid (along with a decrease in the actuarial value of the policy being purchased), and the net cost would go way up as a person gets older.  High income people would see their net premiums decline.

http://www.vox.com/policy-and-politics/2017/3/13/14914596/ahca-cbo-premiums-age
« Last Edit: March 23, 2017, 04:30:48 AM by Monkey Uncle »

Bateaux

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #67 on: March 22, 2017, 05:35:01 AM »
Not too giddy this morning.  Mint says I've lost $14,000 the last two days.  Nothing like a correction to bring back reality.

Retire-Canada

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #68 on: March 22, 2017, 06:45:45 AM »
A correction would be a drop of 10%. That wasn't even a speed bump.

rantk81

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #69 on: March 22, 2017, 08:32:06 AM »
Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)

Retire-Canada

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #70 on: March 22, 2017, 08:33:43 AM »
Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)

If it does you are in for some bad times when we actually get a correction.

TheAnonOne

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #71 on: March 22, 2017, 09:06:34 AM »
Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)

If it does you are in for some bad times when we actually get a correction.
Well, it would be about 10 times worse!

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DeskJockey2028

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #72 on: March 22, 2017, 09:35:06 AM »
I just opened my new Roth IRA in February. Managed to get about $3600 into it. I find this graphic of my returns kinda funny (attached).

Bateaux

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #73 on: March 22, 2017, 11:21:14 AM »
A correction would be a drop of 10%. That wasn't even a speed bump.

Hold on to your britches.  I'm mentally preparing for a 15% downturn.   For me that's hundreds of thousands.

Retire-Canada

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #74 on: March 22, 2017, 11:29:02 AM »


I am checking the supplies in my bunker.

fattest_foot

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #75 on: March 22, 2017, 11:29:10 AM »
Not too giddy this morning.  Mint says I've lost $14,000 the last two days.  Nothing like a correction to bring back reality.

Well I'm jealous of your portfolio now.

If a 1% market dip causes you to lose 5 figures, you're in a pretty good position.

Bateaux

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #76 on: March 22, 2017, 11:44:30 AM »
Not too giddy this morning.  Mint says I've lost $14,000 the last two days.  Nothing like a correction to bring back reality.

Well I'm jealous of your portfolio now.

If a 1% market dip causes you to lose 5 figures, you're in a pretty good position.

Actually waiting out the next recession before FIRE.  I'm just throwing out that 15% drop from thin air.  We could push higher for a while or see a 30% or 40% drop in the next year or so.  I have no crystal ball.  One thing for certain, even with a nice stash I'm not trusting enough to FIRE till the next correction is bottomed. 

Retire-Canada

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #77 on: March 22, 2017, 11:47:21 AM »
Actually waiting out the next recession before FIRE.  I'm just throwing out that 15% drop from thin air.  We could push higher for a while or see a 30% or 40% drop in the next year or so.  I have no crystal ball.  One thing for certain, even with a nice stash I'm not trusting enough to FIRE till the next correction is bottomed.

So if we get 5yrs out from now without a correction and your 'stach has doubled you're going to keep plugging away?

JayhawkRacer

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #78 on: March 22, 2017, 11:58:55 AM »
Even though stocks are expensive now, keep buying if you are still working. 

...I'm not sure why your decision to purchase stocks depends on whether you are working.

I'm pretty sure they just meant "if you're pre-FIRE, keep buying stocks."

inline five

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #79 on: March 22, 2017, 12:08:11 PM »
Down ~$40k yesterday. Yeah, it kinda hurt, knowing I could buy a nice car for what I left on the table for the market Gods.

The only thing keeping me going is knowing that past history shows these things are typically blips on the RADAR. I don't think we'll see another 2008-2009 in our lifetime.

Bateaux

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #80 on: March 22, 2017, 12:08:44 PM »
I completely agree.  I'm hoping to FIRE by 2019 but if the recession doesn't hit and recovery start by then I may extend my date.  I feel it's coming 2017/2018 but who knows.  I'm just going to keep buying.   May readjust a bit but, I'm pretty solid on current position to ride it out and holding cash to buy dip.

dragoncar

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #81 on: March 22, 2017, 01:31:29 PM »
Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule. 

We've had a fantastic run over the past 8 years, I have no complaints about today's valuations.  We're living in the golden age of early retirements.

This last part makes me nervous. When so many of us are able to retire, doesn't it start to feel like a massive bubble?

I also find myself way more tempted to spend money. We are newly and tentatively FIREd, so I'm really trying to subdue this urge. But... Our house (Toronto) has increased in value by about 30% this past year to an absolutely ridiculous amount. Our financial assets have been going up about $20k/ month the past few months. Everything is feeling very frothy, so I don't want to get used to this. But mentally I'm really fighting the urge to SPENDspendspend. Every day browsing websites for nice clothes, makeup, handbags, etc. Argh!!

Anyone else going through this? How do you deal with this urge to shop?
It's very confusing because I've spent so many years deprogramming myself against consumerism. I typically hate shopping. With this kind of run-up, it feels like my old defence mechanisms are slipping away. Yet we really can't afford to loosen the reins, since we have such a long retirement ahead, and aren't through the period where sequence of returns risk matters. A crash (housing or financial markets) could be devastating, and is certain to happen at some point. I'm basically trying not to feel rich, or start acting like a rich person, because it could fall away at any moment.

I tend to spend that time browsing the forums here, instead of Amazon or Zappos or whatever.  :-)  Trying to be Mustachian requires you to swim upstream out in the real world, fighting a tide of commercialism.  I find the voices here -- all these people who are living happy lives on way less than everyone around me "needs" -- to be very helpful in realigning my perspective.  Plus, you know, the easiest temptation to avoid is the one that I don't even know exists.

Luckily my urge to shop really doesn't depend on my net worth.  I think you have to separate those things before you FIRE, since (as mentioned by others) severe drops are likely at some point in the future.  I guess if I had a few hundred million I would start shopping more to furnish my a new house

Dicey

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #82 on: March 22, 2017, 06:43:38 PM »
Down ~$40k yesterday. Yeah, it kinda hurt, knowing I could buy a nice car for what I left on the table for the market Gods.

The only thing keeping me going is knowing that past history shows these things are typically blips on the RADAR. I don't think we'll see another 2008-2009 in our lifetime.
You didn't buy a new car when the market went up, did you? What you "left on the table" is nothing. The number of stocks/shares you own has not changed. Focus on that, not dollars.

Best practice is to adopt a low information diet, as MMM recommends and just IGNORE the ups and downs on a daily basis. Try looking at your account balances once a month and no more. Dare you.

Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.

The reason I'm FIRE now is because 2008-2009 happened to coincide with the time I was saving and investing like a fiend. I sold nothing, and kept plowing money in. When the markets recovered, I found myself sitting on a giant ball o' money. FIRE followed in 2012. YMMV.

TomTX

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #83 on: March 22, 2017, 07:55:20 PM »
Down ~$40k yesterday. Yeah, it kinda hurt, knowing I could buy a nice car for what I left on the table for the market Gods.

The only thing keeping me going is knowing that past history shows these things are typically blips on the RADAR. I don't think we'll see another 2008-2009 in our lifetime.
You didn't buy a new car when the market went up, did you? What you "left on the table" is nothing. The number of stocks/shares you own has not changed. Focus on that, not dollars.

Best practice is to adopt a low information diet, as MMM recommends and just IGNORE the ups and downs on a daily basis. Try looking at your account balances once a month and no more. Dare you.

Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.

The reason I'm FIRE now is because 2008-2009 happened to coincide with the time I was saving and investing like a fiend. I sold nothing, and kept plowing money in. When the markets recovered, I found myself sitting on a giant ball o' money. FIRE followed in 2012. YMMV.

I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?

As mentioned, I am 100% stocks, mostly VTSAX (some VIIIX at current job)

sol

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #84 on: March 22, 2017, 08:22:20 PM »
I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?

It was down by over 1% yesterday.  Everyone is freaking out. 

gerardc

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #85 on: March 22, 2017, 10:08:59 PM »
Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.

What's your rationale? It seems likely to me that recessions will be lighter in the future, because buying low and selling high is becoming more and more common knowledge. Index funds are super popular, Vanguard keeps bombarding their page with "Hold your positions" messages when stocks go down, and people are generally aware of how much you lose by selling in a recession. I'm betting future lows won't be as bad because massive influx of internet investors now know that is a great time to buy.

It almost seems like mainstream fearmongering articles are made by Wall Street so that the suckers get worried and sell low in a recession, which they'll then buy and profit from.

TomTX

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #86 on: March 23, 2017, 04:56:58 AM »
I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?

It was down by over 1% yesterday.  Everyone is freaking out.

Everyone being the financial media?

Wake me up if it drops 35+%, I might get that HELOC set up in case it drops enough.

Mezzie

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #87 on: March 23, 2017, 06:25:55 AM »
I'm still above the amount I actually put in, so this little dip isn't much of a stress test. When it dips below the amount I would have had had I just put the money in a CD, that will be the real test. I think I'll be fine, though. I basically lost everything I'd saved in 2008, and all I did was move my 403(b) to a better company with lower fees and take advantage of the fact that the smaller amount in there meant a miniscule penalty for closing the account with the first evil company I got sucked into before I knew any better.

Bateaux

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #88 on: March 23, 2017, 08:07:06 AM »
I'm just stirring chit.  Mint this morning is down about $8K.  Less than 0.50% down now.  Can't wait to see the first big drop and watch Trump along with the GOP squirm.   

farmecologist

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #89 on: March 23, 2017, 08:16:41 AM »
The recent market run-up has the stache rocketing past our FI number, which has me feeling a bit giddy, even though I know it can all change dramatically any time, and even though the run-up appears to be due to things I don't otherwise support...so lots of mixed emotions right now.

It certainly has been good times for the average investor lately.  Unfortunately, the jubilation that I'm hearing literally everywhere lately ( Dow 50,000!, etc... ) were exactly the same sort of things I heard before the 'great recession'. 

The point is that if things do go bad, try to stay the course....Psychologically that can be hard to do for many.   







dandypandys

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #90 on: March 23, 2017, 09:07:02 AM »
I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?

It was down by over 1% yesterday.  Everyone is freaking out.

I don't know anything either.. this thread is my only link.

GrumpyPenguin

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #91 on: March 23, 2017, 11:21:33 AM »
I like to mentally prepare myself for a possible 30 to 40 percent downturn (hate to use the phrase "correction").  But then also do my best to continue with "the plan" either way, because I can't see the future. 

Funny note, for me it's easier psychologically to buy VTSAX via Vanguard than purchase VTI.  This is because when purchasing VTSAX, you denote only how much you want in exact dollars and you don't need to think about the (rising) share price. Vanguard deals with the share price for you and can give you fractions of shares.  I find it harder to buy VTI when prices feel "expensive" but when buying VTSAX, I don't even notice.

farmecologist

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #92 on: March 24, 2017, 09:06:26 AM »
Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)

If it does you are in for some bad times when we actually get a correction.


This is the point I was trying to make above.  I have the bad feeling that some folks have not 'lived through' a real correction/crash when they have a large sum of money on the line.  Frankly, everyone likes to talk big in the 'good times'.  However, I guarantee you that some will freak out and pull money out in the bad times...which is the very worst time to do that.   






Much Fishing to Do

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #93 on: March 24, 2017, 09:12:34 AM »
Yep.  Though experts say to stay the course, all of the sudden they ask people to re-check their risk tolerance when they are panicking.  Risk tolerance I believe is something that moves with the markets...and will inevitably cause one to sell low and buy high if examined at those times.  When markets are at a high is when I ask myself if I'm being too risky, and when they are falling fast is when I ask myself if I'm not being risky enough, and this always seems to leave me right where I started allocation-wise.

farmecologist

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #94 on: March 24, 2017, 09:25:32 AM »
Yep.  Though experts say to stay the course, all of the sudden they ask people to re-check their risk tolerance when they are panicking.  Risk tolerance I believe is something that moves with the markets...and will inevitably cause one to sell low and buy high if examined at those times.  When markets are at a high is when I ask myself if I'm being too risky, and when they are falling fast is when I ask myself if I'm not being risky enough, and this always seems to leave me right where I started allocation-wise.

Yeah..and then there are the extreme 'crash' scenarios.   People lose jobs...and then houses, etc...and obviously can't 'stay the course'.  People are already forgetting that this happened extensively during the '08-'09 crash.  In fact, I still remember a few families just in our subdivision that had to walk away from mortgages, etc...and obviously could not afford to 'stay the course' at the low point...

Edit: Not trying to be a debbie downer here but we all need to be very careful when 'irrational exuberance' takes hold.  I'm seeing signs of that more and more lately.





   
« Last Edit: March 24, 2017, 09:27:55 AM by farmecologist »

Retire-Canada

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #95 on: March 24, 2017, 10:02:34 AM »
In fact, I still remember a few families just in our subdivision that had to walk away from mortgages, etc...and obviously could not afford to 'stay the course' at the low point...

I doubt they were MMMers with black belt financial kung fu skills.

Mmm_Donuts

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #96 on: March 24, 2017, 11:19:37 AM »
Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule. 

We've had a fantastic run over the past 8 years, I have no complaints about today's valuations.  We're living in the golden age of early retirements.

This last part makes me nervous. When so many of us are able to retire, doesn't it start to feel like a massive bubble?

I also find myself way more tempted to spend money. We are newly and tentatively FIREd, so I'm really trying to subdue this urge. But... Our house (Toronto) has increased in value by about 30% this past year to an absolutely ridiculous amount. Our financial assets have been going up about $20k/ month the past few months. Everything is feeling very frothy, so I don't want to get used to this. But mentally I'm really fighting the urge to SPENDspendspend. Every day browsing websites for nice clothes, makeup, handbags, etc. Argh!!

Anyone else going through this? How do you deal with this urge to shop?
It's very confusing because I've spent so many years deprogramming myself against consumerism. I typically hate shopping. With this kind of run-up, it feels like my old defence mechanisms are slipping away. Yet we really can't afford to loosen the reins, since we have such a long retirement ahead, and aren't through the period where sequence of returns risk matters. A crash (housing or financial markets) could be devastating, and is certain to happen at some point. I'm basically trying not to feel rich, or start acting like a rich person, because it could fall away at any moment.

I tend to spend that time browsing the forums here, instead of Amazon or Zappos or whatever.  :-)  Trying to be Mustachian requires you to swim upstream out in the real world, fighting a tide of commercialism.  I find the voices here -- all these people who are living happy lives on way less than everyone around me "needs" -- to be very helpful in realigning my perspective.  Plus, you know, the easiest temptation to avoid is the one that I don't even know exists.

Luckily my urge to shop really doesn't depend on my net worth.  I think you have to separate those things before you FIRE, since (as mentioned by others) severe drops are likely at some point in the future.  I guess if I had a few hundred million I would start shopping more to furnish my a new house

Dragoncar - good point. I think the problem is that I've based my FIRE thinking on a variable spending plan, which has a fairly wide spread. When times are good, I think ooh, I can spend more! Though we are in early stages of FIRE and trying to spend closer to the bottom of the range, regardless of what the market's doing.

I have it in my mind that in a recession we can dial the spending way back. That part will be easy to do, because there will be some urgency to it. But it's harder to dial spending back when times are good. Early stages of FIRE for me are trying to figure out what the baseline should be, and stick to that. For the spending urges I mentioned above, we would be nowhere near the top of our variable spending range.

Laura33 - yes, thank you. Spending more time on this forum really helps reset my mindset and solidify my priorities. It definitely feels like swimming upstream most of the time, otherwise.

Dicey

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #97 on: March 24, 2017, 11:52:50 AM »
Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.

What's your rationale?
It seems likely to me that recessions will be lighter in the future, because buying low and selling high is becoming more and more common knowledge. Index funds are super popular, Vanguard keeps bombarding their page with "Hold your positions" messages when stocks go down, and people are generally aware of how much you lose by selling in a recession. I'm betting future lows won't be as bad because massive influx of internet investors now know that is a great time to buy.

It almost seems like mainstream fearmongering articles are made by Wall Street so that the suckers get worried and sell low in a recession, which they'll then buy and profit from.
I don't know how old you are, but everyone can see how old I am. I don't need no stinkin' rationale, I've lived it enough times. Hey, we could try comparing notes every decade or so. Yeah, I'm up for that meetup.

BTW, the concept of buying low and selling high has been common knowledge since ancient times. It predates the stock market, in fact. Knowing it and doing it are two vastly different things. And the total percentage of humans who see those Vanguard warnings is miniscule. Plus, all of your points were probably just as true prior to 2008. Dunno about the Vanguard warnings, tho, mebbe those are new.

gerardc

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #98 on: March 24, 2017, 09:04:40 PM »
BTW, the concept of buying low and selling high has been common knowledge since ancient times. It predates the stock market, in fact. Knowing it and doing it are two vastly different things. And the total percentage of humans who see those Vanguard warnings is miniscule. Plus, all of your points were probably just as true prior to 2008. Dunno about the Vanguard warnings, tho, mebbe those are new.

I don't think you can argue that those fundamental things didn't change since 2008:
1. A LOT more people are using index funds now
2. People have greater access to financial information via the internet (in contrast to maintstream media that tends to play on fear)

The index funds boom was probably caused by better information, and since indexing and "holding" advices usually come together, I bet we'll see better holding in the future.

inline five

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Re: Trying not to feel too giddy about the stache's growth spurt
« Reply #99 on: March 24, 2017, 09:26:49 PM »
Knowing when to buy is easy. It's knowing when to sell that is the hard part.