4 ms·

I agree, but a well set trailing stop (% behind based on volatility) is probably the next best thing and lets you sleep at night and go on holidays without worr

I agree, but a well set trailing stop (% behind based on volatility) is probably the next best thing and lets you sleep at night and go on holidays without worrying.

ThrustVectoring 9y ago
Why bother with that when you can buy an index fund and hold onto it for twenty years? If the S&P 500 halved tomorrow, what I'd do is literally nothing.
- SirLJ 9y ago
  Last 20 years we had 2 times when the market fell in half, and if you are retired to recover from 50% loss, you'll need a 100% gain... why lose money when you can make a killing on the way down? In Japan, the second strongest economy at the time they are still half way down from the top with no recovery in sight and a lot of retirees loosing their savings in the process of "buy and hope trading strategy"
  - stouset 9y ago
    Because any such strategy to make a killing when the market goes down by 50% either requires advance knowledge of this event, or runs the risk of misfiring when the market recovers earlier than expected, forcing you to double down and hope for another crash or buying back in at a loss.
    - SirLJ 9y ago
      No advanced knowledge needed, just follow the trend in up or down markets...
- stouset 9y ago
  Exactly. If you're worried about your portfolio halving, you're either too heavily invested in risky assets for the timeframe you wish to start drawing down, or you're not and you need to stop looking at the day to day performance of financial markets. Your automatic order is just as likely to misfire and sell just before a recovery than it is to prevent you from losing everything. And worse, you need to realize that just because the markets have fluctuated, you haven't actually lost anything but paper value — you still own the same number of shares in the same number of companies. Selling those during a downturn is just cementing that loss in real dollars. And so say you've sold. That's only half the problem. Now you still need to figure out when to buy into the market again, unless you're planning on just hoarding the cash under your mattress.
- airbreather 9y ago
  What if I don't have 20 years? What if my risk appetite is to invest in speculative stocks? Not everyone is suited to an index fund and not everyone wants to only invest in index funds. You would also want to consider one of the reasons a wide range of index funds have an attractive yield history is the demographics of the growing population associated with the baby boomers, which is now in decline. I will be extremely surprised if the next 20 years is such a gimme, you will need to pick an appropriate index fund which is not that easy without a crystal ball, once again demographics are you best friend here. PS: If the S&P halved tomorrow the smart thing to do would be to buy more.
  - ThrustVectoring 9y ago
    > If the S&P halved tomorrow the smart thing to do would be to buy more. With what money? If you can buy more tomorrow, you could have bought more today, which is better on average.

I agree, but a well set trailing stop (% behind based on volatility) is probably the next best thing and lets you sleep at night and go on holidays without worrying.

ThrustVectoring 9y ago

Why bother with that when you can buy an index fund and hold onto it for twenty years? If the S&P 500 halved tomorrow, what I'd do is literally nothing.

SirLJ 9y ago
Last 20 years we had 2 times when the market fell in half, and if you are retired to recover from 50% loss, you'll need a 100% gain... why lose money when you can make a killing on the way down? In Japan, the second strongest economy at the time they are still half way down from the top with no recovery in sight and a lot of retirees loosing their savings in the process of "buy and hope trading strategy"
- stouset 9y ago
  Because any such strategy to make a killing when the market goes down by 50% either requires advance knowledge of this event, or runs the risk of misfiring when the market recovers earlier than expected, forcing you to double down and hope for another crash or buying back in at a loss.
  - SirLJ 9y ago
    No advanced knowledge needed, just follow the trend in up or down markets...
stouset 9y ago
Exactly. If you're worried about your portfolio halving, you're either too heavily invested in risky assets for the timeframe you wish to start drawing down, or you're not and you need to stop looking at the day to day performance of financial markets. Your automatic order is just as likely to misfire and sell just before a recovery than it is to prevent you from losing everything. And worse, you need to realize that just because the markets have fluctuated, you haven't actually lost anything but paper value — you still own the same number of shares in the same number of companies. Selling those during a downturn is just cementing that loss in real dollars. And so say you've sold. That's only half the problem. Now you still need to figure out when to buy into the market again, unless you're planning on just hoarding the cash under your mattress.
airbreather 9y ago
What if I don't have 20 years? What if my risk appetite is to invest in speculative stocks? Not everyone is suited to an index fund and not everyone wants to only invest in index funds. You would also want to consider one of the reasons a wide range of index funds have an attractive yield history is the demographics of the growing population associated with the baby boomers, which is now in decline. I will be extremely surprised if the next 20 years is such a gimme, you will need to pick an appropriate index fund which is not that easy without a crystal ball, once again demographics are you best friend here. PS: If the S&P halved tomorrow the smart thing to do would be to buy more.
- ThrustVectoring 9y ago
  > If the S&P halved tomorrow the smart thing to do would be to buy more. With what money? If you can buy more tomorrow, you could have bought more today, which is better on average.