Sally Vixxxens wrote:
113 wrote:This remains one of the funniest threads I've ever read. I don't know if it's funnier that you were so wrong, or that you refuse to admit to being wrong. Both are hilarious.
K5 certainly has his faults, but he did admit to panicking and getting out at the wrong time.
This is why you don't do such things. If you are invested in the stock market as you should be and you have your financial house in order as you should, then there is never a time to panic.
It's the mindset of too many investors that gets them into trouble.
For example, we've heard MANY times that people LOST over 50% when the market crashed from late 2007-early 2009. Well, while that is technically true (value perhaps lost, but no realized loss unless you sold), it is unrealistic to assume you could have cashed out when the Dow spiked to 14,100 in October 2007, and that's the point at which people are saying we all lost from. Bogus. The run up in 2007 to October was great, so all of this 'money' that people had then before the fall was newly-acquired. Big freakin' deal. For LONG TERM investors, they were still way up from when they began anyway, even after the crash. I began investing when the Dow was at 2,700.
Chasing tops and bottoms is silly and fruitless. K5 has shown that to be true in this thread.
How do you set yourself up so that you NEVER panic in the stock market?
1) Have emergency fund of 3-6 months of expenses - in retirement can have as much as 3 years of expenses in CASH.
2) Debt free but for the house OR maybe a big student loan if you are going to make big coin (doctor, lawyer, etc.). In retirement have ZERO debt including a paid-for house.
3) Invest 15% or more into diversified mutual funds within retirement plans (401k, 403b, IRAs, etc.).
4) IF you want, as you get PAST AGE 35, add some bonds to your portfolio. If you don't want to do this, then you can stay invested in stocks within mutual funds, but you should bump your cash position to 2-3 years of expenses. OR if you have a pension in addition to Social Security and you could live on that if the market crashes, then that would work too.
The reason why in retirement you CAN decide to have a big position in cash rather than bonds is that if the stock market crashes, you can use your cash to weather the storm while your stocks have a chance to rebound (because they WILL). Once they rebound, start drawing again from then and build back up your cash position (unless you're getting really old at that point and you have lots of money...then just spend it or give it to heirs before you die).
People who 'panic' in the stock market either shouldn't be in it or haven't positioned themselves properly to be in it.