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No one will be able to time this. We don't even know if this is the start of a [global?] recession or depression. If you haven't already, put your retirement i

No one will be able to time this. We don't even know if this is the start of a [global?] recession or depression. If you haven't already, put your retirement into bonds and hold on. Honestly it might be a good idea to grab some cash from the bank to keep at home - bank runs are not outside the realm of possibility, although we have credit cards and other internet based payment methods now so it's probably less of a concern now. Edit: let me just preface my advice by saying if you have extremely high risk tolerance, now is a good time to buy, but be prepared to lose. If you are near retirement, now is probably the time to pull all of your funds out of the markets and into something safer. Based on the 100 year history of the DJIA, and the fact that the virus is just starting to spread in the U.S., the floor could be much lower.

wincent 7y ago
> If you haven't already, put your retirement into bonds and hold on. Are you advising to sell equities right after they've taken a beating? Sounds awfully close to "buy high, sell low".
- kazinator 7y ago
  Well, "nick checks out", at least. :)
- creaghpatr 7y ago
  Depends on your retirement horizon, but if it's inside of 5 years the investor should have already tamped down the risk profile.
- allovernow 7y ago
  If you look at the 100 year history of the DJIA, there's still a LOONG way for it to potentially drop. It's about minimizing risk. Those with high risk tolerance I would advise to buy now, but be prepared to lose everything. If you're close to retirement you lose nothing by pulling out now.
  - the_gastropod 7y ago
    > Those with high risk tolerance I would advise to buy now, but be prepared to lose everything. If you're close to retirement you lose nothing by pulling out now. If your risk tolerance can't handle what's happening, your asset allocation was already wrong. Trying to "fix" that now, as a response to this downturn, would very likely be a mistake.
zyang 7y ago
Please don't shuffle your retirement investments based on market volatility. Best thing is just do nothing and ride it out.
- the_gastropod 7y ago
  I'd tweak this advice _slightly_. After this pretty significant swing, it's probably a good time to re-visit your asset allocation. If you're, for example, holding 10% bonds, your allocation is now going to be overweight bonds. So it's a good time to sell some bonds, buy equities, and get back to your 90%/10% allocation.
- allovernow 7y ago
  This isn't market volatility. The is a global geopolitical event exposing the weakness of the US and global markets that people have been warning about for something like 3 years. Some treasury notes have dropped by more than 30%. We're years overdue for a cyclical recession. The fed has little room to lower rates. I could go on but the point is this is the closest we've been to a Black swan in decades.
  - nostrademons 7y ago
    If it's really your retirement money then presumably you are 20-40 years out from needing it. Cyclical recessions typically last 1-2 years, and even the biggest Black Swan events like the Great Depression last maybe 10 years. By the time you retire you will have largely forgotten about this. (If your retirement is less than 5-10 years away, you should have diversified away from stocks years ago, and it's a little late now. Most target-date funds and financial advisors do this anyway.)
- thedance 7y ago
  This advice is both common and crazy. Each individual does not live the average life. Being able to recognize once-in-a-lifetime events, and act on them, is a rational strategy, even if it seems like it is not the optimal strategy for the perfectly spherical portfolio belonging to a person with infinite lifetime.
jamesjyu 7y ago
"No one will be able to time this" "put your retirement into bonds and hold on" facepalm
- allovernow 7y ago
  What? That's how you minimize risk because there's a good chance the markets will continue to slide. It's literally why the markets are down - because investors are pulling out and parking their cash in safer havens.
  - gtaylor 7y ago
    If you are approaching retirement, you should already have a good % of your portfolio in bonds and other lower risk investments. If you have indeed done that, there is little reason to rush off and potentially buy high and sell low right before retirement. For everyone else not near retirement, most are going to be better served by ignoring the volatility and continuing to invest as usual. Time in the market vs timing the market and all of that jazz.
  - the_gastropod 7y ago
    I think you're missing the point "Nobody can time this" and "If you haven't already, put your retirement into bonds and hold on" are completely at odds. Pulling out of equities to buy bonds is timing this. People should have an asset allocation, and stick to it. Right now, people should be re-balancing by selling off their now overweight bond allocation to buy equities. What you're suggesting is counter-productive.
    - allovernow 7y ago
      Look, until two weeks ago my 401k was tracking 14% gains. By gradually moving it over the last week and last night, I've locked in 10% gains. The alternative would have been 0% gains as of today (market is back about where it was when Trump was elected) and losses in the likely case that the market continues to slide this week. At this point we have likely entered recession or depression territory. The rebound is unlikely to be instantaneous (unless a convenient cure is found) and when things calm down I can put my money back into the market starting from a 10% locked in gain.
unethical_ban 7y ago
All of this advice is a bit too late. If you're near retirement, you should have already had a large percentage of your allotment in bonds and cash. If you are not near retirement (> 5-10 years) then ride it out. I am 30+ years from retirement and I don't think this is world ending, so my high-volatility mutual funds will stay right where they are.
rlucas 7y ago
Dear Lord please DO NOT put your entire retirement into bonds right now. Bond yields are at an all time low. That means prices are at an all time high. This is not the time to massively rotate into an asset class at an all-time high price due to fear/risk aversion.
- allovernow 7y ago
  Serious question, perhaps I'm misunderstanding something: So long as bond yields are positive, they cannot depreciate in value, can they? As in if I pull out X dollars from the market and into bonds, assuming yields stay positive, I'm guaranteed X dollars out? Or have I totally misunderstood how bonds work?
  - rlucas 7y ago
    You have totally misunderstood how bonds work on a "present value" or "mark to market" basis. (All of the below assumes the bonds actually pay as agreed. Actual default risk is something totally different, and still present here.) When you buy a bond and hold it to maturity, you're sort of right. If you put in $10,000 into buying a coupon bond, you will get the coupons plus the $10,000 back at the end. And if you buy a zero-coupon bond for whatever amount, which will be worth $10,000 at maturity, you'll get the $10,000 back at the end. In fact, you don't even need to "assum[e] yields stay positive." When you buy individual issues and hold to maturity, you don't really care what everyone else's yields do; you get what you contracted for. The problem comes if you want to actually sell out of your position, OR to know the true value of your position (essentially equivalent operations) along the way. If you put in $10,000 into a bond yielding 5% coupon, and the next day yields spike to 10%, nobody will want to buy your bond for $10,000 any more. You most certainly have lost value. "Aha," the naif says, "but I could always hold to maturity and get my principal back!" Sorry. Do the thought experiment where instead of buying the 5% issue on day 1, you instead buy the 10% issue on day 2. Compare the cumulative sum you receive under each scenario. Investing on day 1 (at 5%) is strictly worse than investing on day 2 (at 10%). Likewise, if yields instead crash from 5% to 1% on day 2, your position will be worth much more. Your $10,000 notional bond yielding 5% will net a buyer so much more than $10,000 spent on a 1% yielding issue that she will pay more than $10,000 for it. You have had a real gain, even if not realized. The same thing applies to bond funds or indices but with much more smoothing across a portfolio. With bond funds, however, there is not even the illusory "X dollars out" guarantee; since they are marked to market every day you might well never enjoy a breakeven price.
anm89 7y ago
>If you haven't already, put your retirement into bonds and hold on. Good lord is this terrible advice. Please nobody do this.

wincent 7y ago

> If you haven't already, put your retirement into bonds and hold on. Are you advising to sell equities right after they've taken a beating? Sounds awfully close to "buy high, sell low".

kazinator 7y ago
Well, "nick checks out", at least. :)
creaghpatr 7y ago
Depends on your retirement horizon, but if it's inside of 5 years the investor should have already tamped down the risk profile.
allovernow 7y ago
If you look at the 100 year history of the DJIA, there's still a LOONG way for it to potentially drop. It's about minimizing risk. Those with high risk tolerance I would advise to buy now, but be prepared to lose everything. If you're close to retirement you lose nothing by pulling out now.
- the_gastropod 7y ago
  > Those with high risk tolerance I would advise to buy now, but be prepared to lose everything. If you're close to retirement you lose nothing by pulling out now. If your risk tolerance can't handle what's happening, your asset allocation was already wrong. Trying to "fix" that now, as a response to this downturn, would very likely be a mistake.

zyang 7y ago

Please don't shuffle your retirement investments based on market volatility. Best thing is just do nothing and ride it out.

the_gastropod 7y ago
I'd tweak this advice _slightly_. After this pretty significant swing, it's probably a good time to re-visit your asset allocation. If you're, for example, holding 10% bonds, your allocation is now going to be overweight bonds. So it's a good time to sell some bonds, buy equities, and get back to your 90%/10% allocation.
allovernow 7y ago
This isn't market volatility. The is a global geopolitical event exposing the weakness of the US and global markets that people have been warning about for something like 3 years. Some treasury notes have dropped by more than 30%. We're years overdue for a cyclical recession. The fed has little room to lower rates. I could go on but the point is this is the closest we've been to a Black swan in decades.
- nostrademons 7y ago
  If it's really your retirement money then presumably you are 20-40 years out from needing it. Cyclical recessions typically last 1-2 years, and even the biggest Black Swan events like the Great Depression last maybe 10 years. By the time you retire you will have largely forgotten about this. (If your retirement is less than 5-10 years away, you should have diversified away from stocks years ago, and it's a little late now. Most target-date funds and financial advisors do this anyway.)
thedance 7y ago
This advice is both common and crazy. Each individual does not live the average life. Being able to recognize once-in-a-lifetime events, and act on them, is a rational strategy, even if it seems like it is not the optimal strategy for the perfectly spherical portfolio belonging to a person with infinite lifetime.

jamesjyu 7y ago

"No one will be able to time this" "put your retirement into bonds and hold on" facepalm

allovernow 7y ago
What? That's how you minimize risk because there's a good chance the markets will continue to slide. It's literally why the markets are down - because investors are pulling out and parking their cash in safer havens.
- gtaylor 7y ago
  If you are approaching retirement, you should already have a good % of your portfolio in bonds and other lower risk investments. If you have indeed done that, there is little reason to rush off and potentially buy high and sell low right before retirement. For everyone else not near retirement, most are going to be better served by ignoring the volatility and continuing to invest as usual. Time in the market vs timing the market and all of that jazz.
- the_gastropod 7y ago
  I think you're missing the point "Nobody can time this" and "If you haven't already, put your retirement into bonds and hold on" are completely at odds. Pulling out of equities to buy bonds is timing this. People should have an asset allocation, and stick to it. Right now, people should be re-balancing by selling off their now overweight bond allocation to buy equities. What you're suggesting is counter-productive.
  - allovernow 7y ago
    Look, until two weeks ago my 401k was tracking 14% gains. By gradually moving it over the last week and last night, I've locked in 10% gains. The alternative would have been 0% gains as of today (market is back about where it was when Trump was elected) and losses in the likely case that the market continues to slide this week. At this point we have likely entered recession or depression territory. The rebound is unlikely to be instantaneous (unless a convenient cure is found) and when things calm down I can put my money back into the market starting from a 10% locked in gain.

unethical_ban 7y ago

All of this advice is a bit too late. If you're near retirement, you should have already had a large percentage of your allotment in bonds and cash. If you are not near retirement (> 5-10 years) then ride it out. I am 30+ years from retirement and I don't think this is world ending, so my high-volatility mutual funds will stay right where they are.

rlucas 7y ago

Dear Lord please DO NOT put your entire retirement into bonds right now. Bond yields are at an all time low. That means prices are at an all time high. This is not the time to massively rotate into an asset class at an all-time high price due to fear/risk aversion.

allovernow 7y ago
Serious question, perhaps I'm misunderstanding something: So long as bond yields are positive, they cannot depreciate in value, can they? As in if I pull out X dollars from the market and into bonds, assuming yields stay positive, I'm guaranteed X dollars out? Or have I totally misunderstood how bonds work?
- rlucas 7y ago
  You have totally misunderstood how bonds work on a "present value" or "mark to market" basis. (All of the below assumes the bonds actually pay as agreed. Actual default risk is something totally different, and still present here.) When you buy a bond and hold it to maturity, you're sort of right. If you put in $10,000 into buying a coupon bond, you will get the coupons plus the $10,000 back at the end. And if you buy a zero-coupon bond for whatever amount, which will be worth $10,000 at maturity, you'll get the $10,000 back at the end. In fact, you don't even need to "assum[e] yields stay positive." When you buy individual issues and hold to maturity, you don't really care what everyone else's yields do; you get what you contracted for. The problem comes if you want to actually sell out of your position, OR to know the true value of your position (essentially equivalent operations) along the way. If you put in $10,000 into a bond yielding 5% coupon, and the next day yields spike to 10%, nobody will want to buy your bond for $10,000 any more. You most certainly have lost value. "Aha," the naif says, "but I could always hold to maturity and get my principal back!" Sorry. Do the thought experiment where instead of buying the 5% issue on day 1, you instead buy the 10% issue on day 2. Compare the cumulative sum you receive under each scenario. Investing on day 1 (at 5%) is strictly worse than investing on day 2 (at 10%). Likewise, if yields instead crash from 5% to 1% on day 2, your position will be worth much more. Your $10,000 notional bond yielding 5% will net a buyer so much more than $10,000 spent on a 1% yielding issue that she will pay more than $10,000 for it. You have had a real gain, even if not realized. The same thing applies to bond funds or indices but with much more smoothing across a portfolio. With bond funds, however, there is not even the illusory "X dollars out" guarantee; since they are marked to market every day you might well never enjoy a breakeven price.

anm89 7y ago

>If you haven't already, put your retirement into bonds and hold on. Good lord is this terrible advice. Please nobody do this.