Ghost of Igloi wrote:
My view is that we have had two market drops of more than 50% in the last 15 years. I see no reason not to prepare for another.
I see no reason not to prepare for another big drop also. What that means though is different for people. Here's what it means to me.
1) If you are not within 5 years of retirement, (and I am not) then everything remains the same. Continue to put money in your retirement accounts, and if the market does tank a lot and you have EXTRA money, then, unless we are in a Mad Max situation, you should be HAPPY to put that extra in the market. In the big drop from October 2007 to March 2009, it took me less than 3 years to get back to where I had been, and that is ONLY with reinvested dividends and growth, NOT additions, so, since I WAS adding money unwaveringly during that down time, 3 years later, I was WAY up from where I had been.
2) IF you are within 5 years of retirement, I am STILL not a fan of moving things out of stocks. The fact remains that while a big drop is likely at some point, you STILL do not know when it will happen, how much it will go down, and how long it will stay down, and stocks remain the best investment over the long term. This is why I always recommend that you retire with ZERO debt and three YEARS of expenses liquid. If you retire much before age 60, you might need to up that expenses fund or just plan to have to go get a job if things go bad while you are relatively young. If, though, you plan to retire at age 60 and you have three YEARS of expenses saved, even if the market tanked on day 1, you could still make it until age 63 and (or just 62) and start taking Social Security if you want. If you are debt free, that combination of three years of expenses and then Social Security should enable you to make it 3-5 years from age 60 and even longer if you are old enough to already be getting Social Security.