TheHaitian
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Post by TheHaitian on Jul 26, 2019 8:44:46 GMT -5
Been watching this show on HBO “Years and Years” and basically it got me seriously thinking about the possibility of another 2008 or recession coming soon. Only 5 episodes so far out of 6, really good show if anyone has HBO.
Based on the show it seems : - cash is king - only keep under each account the amount the bank or feds would cover. - I think the US it is 250k pee person, per bank, per ownership.
Got me really thinking about dialing down on investing and stocking up on CASH (at least up to a safe/logical amount) and paying down debt.
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Gardening Grandma
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Post by Gardening Grandma on Jul 26, 2019 9:12:05 GMT -5
DH retired in 2008. Believe me, it's not a lot of fun watching your retirement account decline 30%.... We rode it out thanks to a pension, SS income and my part time job at the time. We also cut back on discretionary spending that year.
What I learned from it - I don't have the stomach for risk that I thought I had. Currently we are pretty diversified and I keep 20% of our retirement account in several laddered CDs earning between 2.5% and 3.5% in a different bank where it is insured and safe.
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resolution
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Post by resolution on Jul 26, 2019 9:22:44 GMT -5
Buying and selling based on market events is why the average investor only makes 5% while the market has returned 10% over the last 20 years. www.thebalance.com/why-average-investors-earn-below-average-market-returns-2388519Have you settled on a long term asset allocation and then periodically re-balanced to match your asset allocation? If you have an allocation set up that you are comfortable with, then you will automatically be selling high and buying low as the market changes over time. That being said, it is a good idea to have enough in cash to carry you through a potential job loss and to cover any planned expenses coming up. You don't want to have to cover emergencies or living expenses by selling stocks in a downturn. I am hoping to buy another house in the next few years, and am a bit concerned that so much of the down payment money is in index funds, so I am starting to add new money to a money market fund instead. That way if there is a downturn and property values go down, then we will have some cash for the down payment without selling stocks. However I am still adding to stock funds for retirement and other longer term stuff.
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Tiny
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Post by Tiny on Jul 26, 2019 10:00:33 GMT -5
I'm older now and closer to Financial Independence... I've moved some money to "cash" and more conservative investments - starting last year - kind of a reverse DCA plan. Some of the cash money is waiting for the right investment property to come along. I also re-directed some of my monthly investment money to 'cash' - mostly because I am so light on "cash" - a year ago nearly all my wealth was invested (something like 15% conservative/85% higher risk funds). I need "cash" if I want to FIre in 5 years or less. I've spent the last year slowly re balancing my investments to a 30/70 allocation. I don't want to loose too much of the wealth I've acquired in the next downturn - as my personal FIre date is about 5 years out... I'm not looking forward to the next downturn. But, I want to be prepared - just like I was for the Great Recession. I don't have alot of debt right now (mortgages all combined under 100K), manageable low monthly expenses (even with the mortgages), a paid off car (at mid life), cash on hand. The only 'worry' for me - would be loss of my high paying job this time around. But, odds are I could weather that too (thanks to the years of working towards a FIre date...) My best advice for surviving a downturn? Generic you here: Have and work a plan to pay down consumer debt BEFORE the downturn, hopefully you didn't stretch too much on a house (have a manageable shelter costs), hopefully you didn't stretch too much for a vehicle(s) (have manageable transportation costs), Have "cash" to cover expenses during a job loss (at least 3 months - maybe more like 6 months). Continue to save for future goals (retirement/college/what ever). Oddly enough, these are all the things you would do if you were aware of your finances and working towards financial goals. I'd also add in: be prepared (and brave enough) to take advantage of any wealth building opportunities that will occur during and after the crash. I bought rental properties in the after math of the last downturn.
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movingforward
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Post by movingforward on Jul 26, 2019 10:21:19 GMT -5
Well, if another 2008 is coming then I hope it gets here soon. I have just entered my high earning years and plan to funnel as much money as possible into the market over the next 10-12 years. At that point I will then start to move my money into cash and other "safe" investments (about 2-3 years before retirement). Best laid plans, right... I am just hoping the timing works here...One of my biggest fears is having a massive downturn right before I retire while a lot of my money is still in stocks.
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TheHaitian
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Post by TheHaitian on Jul 26, 2019 10:28:08 GMT -5
Buying and selling based on market events is why the average investor only makes 5% while the market has returned 10% over the last 20 years. www.thebalance.com/why-average-investors-earn-below-average-market-returns-2388519Have you settled on a long term asset allocation and then periodically re-balanced to match your asset allocation? If you have an allocation set up that you are comfortable with, then you will automatically be selling high and buying low as the market changes over time. That being said, it is a good idea to have enough in cash to carry you through a potential job loss and to cover any planned expenses coming up. You don't want to have to cover emergencies or living expenses by selling stocks in a downturn. I am hoping to buy another house in the next few years, and am a bit concerned that so much of the down payment money is in index funds, so I am starting to add new money to a money market fund instead. That way if there is a downturn and property values go down, then we will have some cash for the down payment without selling stocks. However I am still adding to stock funds for retirement and other longer term stuff. No one is talking about selling... but maybe instead of funneling ~40k towards 401k/403b, split 20k to go towards that and 20k to establish a stash and what not.
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Deleted
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Post by Deleted on Jul 26, 2019 10:45:31 GMT -5
Pick a reasonable asset allocation and stick to it through thick and thin, even the “experts” can’t time the market.
We have a whole generation of new investors that have never been through more than a stock market “sneeze” since 2008.
Things I took from 2008/2009:
People near retirement freaking out and if they were caught in a lay-off getting the double whammy of no paycheck along with their retirement savings being decimated. Some had to cash it in at the market low.
People at work watching the stock market crater on their blackberries and talking about their retirement accounts when they had never done so before with people from work.
My employer had a significant investment in a real estate holding that got smoked, I finally got hit in one of their lay off waves in early 2010 but had another job within a week, a lot of my coworkers weren’t so fortunate.
Your house is not an investment and can go down significantly, I sold a place I bought at 160kin 2002 for 120k in 2017. It still hasn’t recovered from the housing crash.
Don’t borrow money to invest, I know some on this board have that advice and in a 2008 scenario it is a bloodbath for your average investor.
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Tiny
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Post by Tiny on Jul 26, 2019 11:03:29 GMT -5
Buying and selling based on market events is why the average investor only makes 5% while the market has returned 10% over the last 20 years. www.thebalance.com/why-average-investors-earn-below-average-market-returns-2388519Have you settled on a long term asset allocation and then periodically re-balanced to match your asset allocation? If you have an allocation set up that you are comfortable with, then you will automatically be selling high and buying low as the market changes over time. That being said, it is a good idea to have enough in cash to carry you through a potential job loss and to cover any planned expenses coming up. You don't want to have to cover emergencies or living expenses by selling stocks in a downturn. I am hoping to buy another house in the next few years, and am a bit concerned that so much of the down payment money is in index funds, so I am starting to add new money to a money market fund instead. That way if there is a downturn and property values go down, then we will have some cash for the down payment without selling stocks. However I am still adding to stock funds for retirement and other longer term stuff. No one is talking about selling... but maybe instead of funneling ~40k towards 401k/403b, split 20k to go towards that and 20k to establish a stash and what not.You mean the equivalent of "buy gold! guns! and stockpile food! The government is gonna fail, the banks will fail, it's gonna be total chaos! Every man woman and child for themselves!!" ? Seriously, I haven't diverted any 'saved' money from my Retirement accounts. I HAVE changed how the money I'm currently putting in is allocated. I have increased the saving stream to my after tax account - but I started building this up 2 years ago (had $75 a month... just got it to $500 amonth my goal is 1K) - because I realized I had next to NO cash or investments outside my retirement accounts. If I want to FIre I need to have money available for the years before I can tap my Retirement accounts. It's ALWAYS to your advantage to know how much of your money is "insured" and to manage that risk. It's ALWAYS to your advantage to have some cash (or money that doesn't cost you money to use/withdraw). It's ALWAYS to your advantage to be aware of your risk tolerance and to invest accordingly. Doesn't matter if times are good or bad. Personally, if our banking system collapses into a heap of rubble that's impossible to resuscitate and/or our government crashes and burns without any hope of resuscitation I'm not gonna be crying over my lost million dollars.... How often does your house burn down to the ground - versus the seemingly never ending failure of some component (the water heater dies, the basement floods, the HAVAC goes out, the roof leaks, the toilet runs and runs, the sink drips, the carpet wears out, the landscaping gets overgrown OR the plants reach the end of their life). It's kind of that same thing - you have an "emergency" that takes up your attention, is inconvenient, and maybe you aren't quite the same when it's said and done. But you get thru it (and maybe you were somewhat prepared for it.) Our next downturn will be most likely be a "basement floods" kind of emergency and not a the house burned down to the ground kind of emergency.
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happyhoix
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Post by happyhoix on Jul 26, 2019 13:20:01 GMT -5
Well, if another 2008 is coming then I hope it gets here soon. I have just entered my high earning years and plan to funnel as much money as possible into the market over the next 10-12 years. At that point I will then start to move my money into cash and other "safe" investments (about 2-3 years before retirement). Best laid plans, right... I am just hoping the timing works here...One of my biggest fears is having a massive downturn right before I retire while a lot of my money is still in stocks. Our 401K has the option to put your money into investment plans based on your retirement year, so that as you approach retirement, they automatically move it from riskier assets to bonds and cash, and they keep rebalancing it to stay at a certain percentage of each type of investment.
I'm sure I could get earning a higher return if I had my whole 401K in something more aggressive, but I'm just six years out from retirement, and I don't want to lose as much as I lost in 2008, I don't have time to recover it.
At least I do have some in the stock market, my dad never trusted anything other than savings accounts. He lived through the depression and wasn't quite ready to bury his money in mason jars in the yard, but close.
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souldoubt
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Post by souldoubt on Jul 26, 2019 14:02:53 GMT -5
What aj said. If you reduce what you're currently investing and start building cash in anticipation of a market drop that's trying to time the market. History has shown individuals who invest with their emotions and try to time the market have lower returns over the long run. Set an allocation you're comfortable with now, adjust that allocation as you get closer to retirement and continue to invest as much as you can. If trying to time the market costs you money you could end up being too aggressive in your later years trying to make it up. If you do that during a recession or down period you could find yourself even further behind and delaying retirement if you aren't forced into it first.
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bookkeeper
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Post by bookkeeper on Jul 26, 2019 14:11:26 GMT -5
We took advantage of 2008 crash. DH was in his highest earning years. We plowed money into 401k, deferred compensation, health savings accounts and Roth IRAs. Instead of pulling back on investing, we doubled down. We managed to save 50% of our income from that point until 2014 when we retired. We also picked up a second home for very little money.
Our plan worked. We have been mostly invested in the S&P 500 and Bonds since retirement. The S&P 500 was at 1886 when we rolled our funds over in 2014 and today we are at 3023. The bond funds are also doing very well. We like to park money in our money market or bond funds for living expenses when the market is up. I like to keep 12 to 18 months of expenses liquid. I have also started to ladder some CD's with some inherited money. I would like to be ready for the next real estate bubble.
Cash gives you a myriad of options. That's my best advice.
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thyme4change
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Post by thyme4change on Jul 26, 2019 14:35:57 GMT -5
2008 was particularly bad. Divesting because you are afraid it will happen again is akin to divesting because the Great Depression happened.
Real estate lending isn't nearly what it was back then, and that drove the problem.
We will have a recession - maybe tomorrow, maybe in 5 years. We will have a down market, maybe this year, maybe in 2030. We can't tell the future.
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giramomma
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Post by giramomma on Jul 26, 2019 15:25:06 GMT -5
Why would want to stock up on cash? In your shoes, I would escalate paying off debt. From personal experience, having low monthly obligations and 15K in a savings account is all we've really needed to get us through when financial shit storms hit. Otherwise, we stay the course. The only exception is DS's 529 account...and that's only because he's a sophomore in HS and *hopefully* even two year program is just around the corner.
However, if he doesn't go to school in the immediate future, I'll move the funds out of safe choices and get them back more aggressive funds so the money grows faster than inflation.
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jerseygirl
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Post by jerseygirl on Jul 26, 2019 16:00:32 GMT -5
We’re both retired, no debt no mortgage We pulled some money out of stocks into an annuity that is based on SP500. Principle is guaranteed, won’t ‘lose’ money and has upside potential Using monthly income as about 80% of my RMD I need to take a large RMD but we give about 30% as gifts to grandkids for 529s, pay tuitions
Wish we had put money into Roth’s but we were over looking mit and didn’t know about ‘backdoor’ Roths
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tskeeter
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Post by tskeeter on Jul 26, 2019 17:36:07 GMT -5
Excessive caution is one of the biggest obstacles to wealth, not being over aggressive.
Cash pretty much guarantees you are losing buying power over the long haul. Returns on CD’s and money market accounts are usually less than the rate of inflation.
Bonds are a bit better. Maybe a few percent better than inflation.
Equities is were you grow wealth. On the whole, gains on something like an S&P 500 index fund are about three times the rate of inflation. Or, you can do something like I did for many years when I invested in international emerging markets. I enjoyed annual gains of 20% to 37% during the period that I invested heavily in emerging markets.
Yes, we took a beating in 2008 and 2009. Most of the investment accounts dropped by between 42% and 48%. The accounts in the care of professional managers were on the lower end of the range while the accounts I managed lost a bit more because I invested aggressively on top of holding almost no bonds. Between the investment accounts and the house, we lost a little over $1,000,000. The good thing is we had that much to lose.
It took about three years for our net worth to return to it’s peak. Our recovery was done with equities. Today, the market value for the house is still about $100K less than what we paid for it 13 years ago. To rebuild our investments I made some hyper aggressive moves. For example, I invested very heavily in emerging markets in Asia and the Far East. My reasoning was that US companies had significantly reduced inventories during the crunch and those inventories would have to increase again as the US economy started to recover. (I had helped my employer reduce inventories from $12 million to about $3 million. And about half of that inventory came directly from emerging markets suppliers.) I was a little early to the party, but I did enjoy the 53% annual return I got for the 18 months I held the investment.
The meek may inherit the earth, but the courageous will soar the skies.
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