7 ms·

Here is my logic as a retail investor. The market has lost close to 20-30% from the peak. Will it regain the peak, for sure. By when ? Hard to predict. All I kn

Here is my logic as a retail investor. The market has lost close to 20-30% from the peak. Will it regain the peak, for sure. By when ? Hard to predict. All I know is that the rate of climb need not be the same as the rate of the fall. This virus will bring about significant collateral damage to the global economy. Already airlines, cruises are hurt. Soon, tourism and hospitality industry will be hit. Transport and logistics will be next followed by retail. So the cascading collateral damage is quite unpredictable at this time. Double this with plunging oil prices. So unless you are willing to wait for 10+ years from now, it's unwise to invest a lump sum amount at once. If it were me, I will just invest small amounts periodically. Like every couple of weeks or so.

Spacetoaster 7y ago
The argument could be made that if you do not have 10+ years to wait, you should not be investing large amounts in the stock market at any time. So now would probably even be a good time to do so, but of course, nobody knows.
- darkwater 7y ago
  This is a mantra repeated by everyone in the field but what about if I have been in the stock market for 10+ years and I wanted to get out in the next month for my retirement? Sure, maybe I have gained something anyway but between this periodic crashes and the commission fees everybody applies looks likr the real winners are just the bankers
  - bluGill 7y ago
    You should have been buying bonds in larger amounts over the past years. Any target date retirement plan is doing that for you, because you are targeting a % of your portfolio in bonds/stocks you are probably buying more stocks than bonds now to get into balance. If you are self managed and haven't been doing that - well too bad, delay your retirement. Note that even if you are retired you should still have some stocks as a hedge against your retirement having more than a year left before you die.
    - darkwater 7y ago
      Well personally I'm not going to retire tomorrow but in my specific case I do have a retirement plan which buys from an allegedly vast portfolio and yet right now, after almost 10 years, if I take into account commission fees I own like 10% less of what I put into it. So at least in this case, putting my savings under a mattress would have been a better option.
      - bluGill 7y ago
        There are some bad plans. Demand your HR department give you better options.
        jfk13 7y ago
        Trouble is, it's easy to identify the bad plans in hindsight. Reliably predicting which plans will be good for the next few decades and which will be bad may not be so easy.
        bluGill 7y ago
        If you didn't choose a good plan that is on you. If a good plan wasn't an option you should complain. Most big companies had good plans. Fidelity's target date plan have been good, so why are those not an option?
  - deleted 7y ago
    [deleted]
  - riffraff 7y ago
    if you had been in the market for the last ten years with SP500 you would be up something like 150% of your initial investment, even with the latest drops. You would be very upset about the latest drop, but you would still be happy with your choice. EDIT: saw your other reply: sadly many investment funds are just not worth it, it's not your fault, banks and similar are often incentivized to sell you a fund which has high fees and generally trails the market, the best choice is to invest in low cost index-tracking funds, but this is not obvious knowledge.
  - SkyBelow 7y ago
    >but what about if I have been in the stock market for 10+ years and I wanted to get out in the next month for my retirement? You shouldn't be. Unless you plan to die soon and really live it up, you should be have money you need now, money you need next year, money you need next decade, etc. When you approach retirement, you should start moving the money you need now (at the point of retirement) into much less volatile investments. A year later you should move the money you need next year (at the point of retirement) into a similar vehicle. As you get closer, each bucket of money eventually moves into the safest vehicle possible (FDIC insured savings/checking account, ready for you to use it in day to day transactions). At the point of retirement, assuming you plan to live for a few more decades, most of your money should still be in the market but what you need in the short term should be in cash already and what you need in the medium term should be in a low risk investment to protect against inflation. This is the general pattern, the exact situation depend upon your own financial situation, health situation, family situation, and many other factors that a financial/investment adviser would be able to help you with.
dangerface 7y ago
The last pandemic was the spanish flu which lasted a year, I think the markets will have recovered within a year or two.
- alkonaut 7y ago
  The swine flu in 2009/2019 was a worldwide h1n1 pandemic that killed 150k to 500k depending on who you ask/how you count. The h1n1 prior to that was the 1918 one that killed 500M people.
- comicjk 7y ago
  That doesn't follow. If people expected the markets to be back up in two years, they wouldn't be this low right now. Just because the pandemic ends doesn't mean the value of companies returns - some will have shrunk, some will have failed.
  - zaat 7y ago
    Does it still make sense to talk about what people expects when discussing the markets? isn't the vast majority of the action these days is coming from algorithms that try to predict the very very near future?
    - AznHisoka 7y ago
      Furthermore, parent is assuming investors are rational. In an environment like the current, when ppl see their portfolio drop 10% in a single day and worry about their lives, they aren’t making rational pros vs cons decisions. They aren’t calculating future value. They are panicking and just do whatever they can to make their lizard brains feel better.
CrackpotGonzo 7y ago
The majority of individual investors should be dollar cost averaging (investing the same amount of money at consistent intervals) over the long haul. This pandemic isn't impacting my strategy and i'm staying the course. I'm not aiming to retire for 20 years so this will (hopefully) just be a blip in my long-term returns.
- unlinked_dll 7y ago
  Meanwhile people about to retire are watching their retirement funds evaporate.
  - whatshisface 7y ago
    They might be, but hopefully they realized that you need to change your composition as you get closer to retirement.
    - CrackpotGonzo 7y ago
      Exactly, your strategy evolves as you age. But allocation, investment schedule and amount shouldn't change over a short time period or in light of any external factors.
      - dragonwriter 7y ago
        External factors can impact expected lifespan, expected retirement date, amount available to invest, and long-term structural factors impacting allocation. Those things shouldn't change in response to short-term market fluctuations, but not all external events are limited to short-term market fluctuations.
  - samfriedman 7y ago
    I'd really hope that people about to retire don't have a significant amount of their investments in equities...
    - 7y ago
cfontes 7y ago
10+ years looks a bit extreme. But the small amounts is a wise advice.
- cdiddy2 7y ago
  if you bought near the top of the dot com bubble or the 2008 top, it took until 2013 for the S&P500 to reach new highs. not counting dividends though.
glofish 7y ago
Historical analysis says that generally speaking, dollar cost averaging is inferior to one-time lump sum investments unless you buy lump-sum at the very top of a bull cycle. Lump-sum investment is usually better in all other cases, you get the benefit of interest as well, which is at least 30% of the total return. This is even more true in cases of bear markets. Since the market will most likely rise compared to where it is now, going all-in in a severely depressed market is usually advantageous. Psychologically, of course, it is more difficult to do so as you have to go against "common wisdom". Don't get me wrong though,dollar-cost averaging is a great strategy if you don't have lump sums laying around.
- sp332 7y ago
  I think "every couple weeks" was a reference to an automatic 401(k) contribution from a paycheck.
- dragonwriter 7y ago
  You seem to be referring to a hypothetical choice between investing a large accumulation of cash at the start of a period and portioning it out over the period, but the actual recommendation for dollar cost averaging is about moving money into investments as it becomes available rather than accumulating cash and trying to time the market. If you've already accumulated a large cash position, yes, it's almost always better to dump it in the market, but unless it was an unexpected windfall, that just means you were suboptimally failing to use DCA before.
  - deepGem 7y ago
    Yes, many people fail to understand this concept of currency cost averaging. Thanks for the succinct explanation.
Beltiras 7y ago
Invest in funds you know are bearish. That's the market for the next couple of months at the very least dealing with the shocks, even if we get a small rally after good news. I don't trust Trump to handle this situation with any more grace than he has till now so I predict more crash days. Buckle up. It's going to be a hell of a ride.
- deleted 7y ago
  [deleted]
jvanderbot 7y ago
Absolutely. My plan is to increase my 401k and other market account contributions by a reasonable percent. I'm viewing this as a steep discount for 1-6 months or more.
SEJeff 7y ago
> If it were me, I will just invest small amounts periodically. Dollar cost averaging is always a solid investment strategy.
mschuster91 7y ago
> Double this with plunging oil prices. Who knows how long oil prices will be falling? In the end it's a pissing contest between Russia, Saudi-Arabia and the US. It may be over tomorrow, it may be over in a year...
- Robotbeat 7y ago
  A recession will depress oil prices all by itself. Plus dramatic reduction in air travel and now people teleworking (reduction in domestic fuel consumption). China has reduced output a lot, restricted movement (work from home), and exported less stuff, meaning less shipping and train oil consumption the world over.
empath75 7y ago
I'm saving money in case of lay offs. Investing is the last thing I'm thinking about.
- ggrrttyy 7y ago
  Definitely a smart plan. I've got six months of expenses in my emergency fund earning peanuts but my mind is much more at ease because of it. Worth it.
  - frank086 7y ago
    Same. It has long been a dinner topic, since my wife has wanted to invest the cash and I have been pushing to actually save more cash. Now suddenly the statement showing our savings and CDs is my spouse's favorite part of our portfolio. Index funds that should probanly recover given a sufficient tine don't cover emergency expenses tomorrow!
glofish 7y ago
We'll see but I think in six months the outbreak will be a distant memory. And we'll be wondering why were we so unprepared (psychologically) that is. The disease is not nearly as severe to warrant this much worry. 15K people already died of the flu this year in the US alone (what is that, 200 people per day?), yet nobody talks about that, it is "normal". That being said I do think that some segments won't be the same for a long time - especially the type of superficial travel, where people only go to a place because other people did it and seemed so cool. I think "instagram travel" will have lost its shine.
- dhosek 7y ago
  I hope you're right. On the other hand, we can see six months into the future by looking at the southern hemisphere. Tom Hanks and his wife got Covid19 in Australia, during the Australian summer. I worry that this doesn't bode well for hopes of the spread abating in the warmer months.
- doubleunplussed 7y ago
  The death rates are only low because people are able to get hospital care. ~20% of cases require hospitalisation and a large fraction of them will die without hospital care. At the current growth rate (of confirmed cases) in the US, in about two weeks there will be more cases in the US requiring hospitalisation than there are ICU ventilators in the entire United States. We need to get that growth rate down, or a decent chunk of the people who are hospitalised and unable to get a ventilator will die.
  - glofish 7y ago
    I think that initially there is a strong selection for discovering cases that do require hospital care. We'll see what the future holds. In China the CFR (crude fatality rate) started at 17% and dropped to 0.7%, check figure 4 here: https://who.int/docs/default-source/coronaviruse/who-china-joint-mission-on-covid-19-final-report.pdf https://who.int/docs/default-source/coronaviruse/who-china-j... I the end it might be that Chinese response will be the most effective model to how to best respond to an epidemic.
archview 7y ago
Highly encourage everyone to heed the advice in OP's last line. Hedge your investments. Rather then dump 100k at once into SPY (SPX if not using your 401k) or similar. Invest 10k per week/month. Thousands of people way smarter than you and with 20-30 years of experience fail at timing the market. You will not be able to time the market. Hedge into your investments.
- andreilys 7y ago
  Or buy puts on spy/calls on VXX and hedge your downside in an uncertain market
  - archview 7y ago
    Yes, but options trading is not for the average trader/faint of heart. You can easily lose your entire position if not timed correctly.
logfromblammo 7y ago
The market call still go down after you call a bottom. The market can still go up after you call a peak. The market can remain irrational longer than you can remain solvent. I don't think it's wise to judge based on the peaks and bottoms. Those are the outliers. The price touched there for a fleeting moment and then backed away. I'd rather calculate a trend-line over a long timespan that covers multiple boom-bust cycles, and note when the price crosses it. When the price is below the line, that's a relatively better time to be buying, if you have spare cash, and when it's above the line, that's a relatively better time to be selling, if you have the stocks. You'll drive yourself crazy trying to predict the optimal timing for large orders. Putting in a little at a time, or taking out a little at a time, based on broad criteria and your own goals as an investor, is way better than intensive analysis or day-trading. Once a paycheck or once a month is fine. Even better if you can set it up to be automatic, and you don't have to think about it too much. Unfortunately, I don't have any spare cash, but those who heeded the warning of inverted yield and switched from "gradually buy" to "gradually sell" back then probably have enough cash savings and downward movement to switch back, or to at least stop selling for a while.
- imakwana 7y ago
  Perhaps trend-line based approach that you described is similar to the strategy called "Value Averaging" which is a valuation based approach to averaging (instead of dollar cost averaging), where CAPE ratio or expected return is used to estimate long term trend. [1] https://en.m.wikipedia.org/wiki/Value_averaging https://en.m.wikipedia.org/wiki/Value_averaging
andreilys 7y ago
“ Will it regain the peak, for sure. By when ? Hard to predict” I don’t think you can be so sure of this

Spacetoaster 7y ago

The argument could be made that if you do not have 10+ years to wait, you should not be investing large amounts in the stock market at any time. So now would probably even be a good time to do so, but of course, nobody knows.

darkwater 7y ago
This is a mantra repeated by everyone in the field but what about if I have been in the stock market for 10+ years and I wanted to get out in the next month for my retirement? Sure, maybe I have gained something anyway but between this periodic crashes and the commission fees everybody applies looks likr the real winners are just the bankers
- bluGill 7y ago
  You should have been buying bonds in larger amounts over the past years. Any target date retirement plan is doing that for you, because you are targeting a % of your portfolio in bonds/stocks you are probably buying more stocks than bonds now to get into balance. If you are self managed and haven't been doing that - well too bad, delay your retirement. Note that even if you are retired you should still have some stocks as a hedge against your retirement having more than a year left before you die.
  - darkwater 7y ago
    Well personally I'm not going to retire tomorrow but in my specific case I do have a retirement plan which buys from an allegedly vast portfolio and yet right now, after almost 10 years, if I take into account commission fees I own like 10% less of what I put into it. So at least in this case, putting my savings under a mattress would have been a better option.
    - bluGill 7y ago
      There are some bad plans. Demand your HR department give you better options.
      - jfk13 7y ago
        Trouble is, it's easy to identify the bad plans in hindsight. Reliably predicting which plans will be good for the next few decades and which will be bad may not be so easy.
        bluGill 7y ago
        If you didn't choose a good plan that is on you. If a good plan wasn't an option you should complain. Most big companies had good plans. Fidelity's target date plan have been good, so why are those not an option?
- deleted 7y ago
  [deleted]
- riffraff 7y ago
  if you had been in the market for the last ten years with SP500 you would be up something like 150% of your initial investment, even with the latest drops. You would be very upset about the latest drop, but you would still be happy with your choice. EDIT: saw your other reply: sadly many investment funds are just not worth it, it's not your fault, banks and similar are often incentivized to sell you a fund which has high fees and generally trails the market, the best choice is to invest in low cost index-tracking funds, but this is not obvious knowledge.
- SkyBelow 7y ago
  >but what about if I have been in the stock market for 10+ years and I wanted to get out in the next month for my retirement? You shouldn't be. Unless you plan to die soon and really live it up, you should be have money you need now, money you need next year, money you need next decade, etc. When you approach retirement, you should start moving the money you need now (at the point of retirement) into much less volatile investments. A year later you should move the money you need next year (at the point of retirement) into a similar vehicle. As you get closer, each bucket of money eventually moves into the safest vehicle possible (FDIC insured savings/checking account, ready for you to use it in day to day transactions). At the point of retirement, assuming you plan to live for a few more decades, most of your money should still be in the market but what you need in the short term should be in cash already and what you need in the medium term should be in a low risk investment to protect against inflation. This is the general pattern, the exact situation depend upon your own financial situation, health situation, family situation, and many other factors that a financial/investment adviser would be able to help you with.

dangerface 7y ago

The last pandemic was the spanish flu which lasted a year, I think the markets will have recovered within a year or two.

alkonaut 7y ago
The swine flu in 2009/2019 was a worldwide h1n1 pandemic that killed 150k to 500k depending on who you ask/how you count. The h1n1 prior to that was the 1918 one that killed 500M people.
comicjk 7y ago
That doesn't follow. If people expected the markets to be back up in two years, they wouldn't be this low right now. Just because the pandemic ends doesn't mean the value of companies returns - some will have shrunk, some will have failed.
- zaat 7y ago
  Does it still make sense to talk about what people expects when discussing the markets? isn't the vast majority of the action these days is coming from algorithms that try to predict the very very near future?
  - AznHisoka 7y ago
    Furthermore, parent is assuming investors are rational. In an environment like the current, when ppl see their portfolio drop 10% in a single day and worry about their lives, they aren’t making rational pros vs cons decisions. They aren’t calculating future value. They are panicking and just do whatever they can to make their lizard brains feel better.

CrackpotGonzo 7y ago

The majority of individual investors should be dollar cost averaging (investing the same amount of money at consistent intervals) over the long haul. This pandemic isn't impacting my strategy and i'm staying the course. I'm not aiming to retire for 20 years so this will (hopefully) just be a blip in my long-term returns.

unlinked_dll 7y ago
Meanwhile people about to retire are watching their retirement funds evaporate.
- whatshisface 7y ago
  They might be, but hopefully they realized that you need to change your composition as you get closer to retirement.
  - CrackpotGonzo 7y ago
    Exactly, your strategy evolves as you age. But allocation, investment schedule and amount shouldn't change over a short time period or in light of any external factors.
    - dragonwriter 7y ago
      External factors can impact expected lifespan, expected retirement date, amount available to invest, and long-term structural factors impacting allocation. Those things shouldn't change in response to short-term market fluctuations, but not all external events are limited to short-term market fluctuations.
- samfriedman 7y ago
  I'd really hope that people about to retire don't have a significant amount of their investments in equities...
  - 7y ago

cfontes 7y ago

10+ years looks a bit extreme. But the small amounts is a wise advice.

cdiddy2 7y ago
if you bought near the top of the dot com bubble or the 2008 top, it took until 2013 for the S&P500 to reach new highs. not counting dividends though.

glofish 7y ago

Historical analysis says that generally speaking, dollar cost averaging is inferior to one-time lump sum investments unless you buy lump-sum at the very top of a bull cycle. Lump-sum investment is usually better in all other cases, you get the benefit of interest as well, which is at least 30% of the total return. This is even more true in cases of bear markets. Since the market will most likely rise compared to where it is now, going all-in in a severely depressed market is usually advantageous. Psychologically, of course, it is more difficult to do so as you have to go against "common wisdom". Don't get me wrong though,dollar-cost averaging is a great strategy if you don't have lump sums laying around.

sp332 7y ago
I think "every couple weeks" was a reference to an automatic 401(k) contribution from a paycheck.
dragonwriter 7y ago
You seem to be referring to a hypothetical choice between investing a large accumulation of cash at the start of a period and portioning it out over the period, but the actual recommendation for dollar cost averaging is about moving money into investments as it becomes available rather than accumulating cash and trying to time the market. If you've already accumulated a large cash position, yes, it's almost always better to dump it in the market, but unless it was an unexpected windfall, that just means you were suboptimally failing to use DCA before.
- deepGem 7y ago
  Yes, many people fail to understand this concept of currency cost averaging. Thanks for the succinct explanation.

Beltiras 7y ago

Invest in funds you know are bearish. That's the market for the next couple of months at the very least dealing with the shocks, even if we get a small rally after good news. I don't trust Trump to handle this situation with any more grace than he has till now so I predict more crash days. Buckle up. It's going to be a hell of a ride.

deleted 7y ago
[deleted]

jvanderbot 7y ago

Absolutely. My plan is to increase my 401k and other market account contributions by a reasonable percent. I'm viewing this as a steep discount for 1-6 months or more.

SEJeff 7y ago

> If it were me, I will just invest small amounts periodically. Dollar cost averaging is always a solid investment strategy.

mschuster91 7y ago

> Double this with plunging oil prices. Who knows how long oil prices will be falling? In the end it's a pissing contest between Russia, Saudi-Arabia and the US. It may be over tomorrow, it may be over in a year...

Robotbeat 7y ago
A recession will depress oil prices all by itself. Plus dramatic reduction in air travel and now people teleworking (reduction in domestic fuel consumption). China has reduced output a lot, restricted movement (work from home), and exported less stuff, meaning less shipping and train oil consumption the world over.

empath75 7y ago

I'm saving money in case of lay offs. Investing is the last thing I'm thinking about.

ggrrttyy 7y ago
Definitely a smart plan. I've got six months of expenses in my emergency fund earning peanuts but my mind is much more at ease because of it. Worth it.
- frank086 7y ago
  Same. It has long been a dinner topic, since my wife has wanted to invest the cash and I have been pushing to actually save more cash. Now suddenly the statement showing our savings and CDs is my spouse's favorite part of our portfolio. Index funds that should probanly recover given a sufficient tine don't cover emergency expenses tomorrow!

glofish 7y ago

We'll see but I think in six months the outbreak will be a distant memory. And we'll be wondering why were we so unprepared (psychologically) that is. The disease is not nearly as severe to warrant this much worry. 15K people already died of the flu this year in the US alone (what is that, 200 people per day?), yet nobody talks about that, it is "normal". That being said I do think that some segments won't be the same for a long time - especially the type of superficial travel, where people only go to a place because other people did it and seemed so cool. I think "instagram travel" will have lost its shine.

dhosek 7y ago
I hope you're right. On the other hand, we can see six months into the future by looking at the southern hemisphere. Tom Hanks and his wife got Covid19 in Australia, during the Australian summer. I worry that this doesn't bode well for hopes of the spread abating in the warmer months.
doubleunplussed 7y ago
The death rates are only low because people are able to get hospital care. ~20% of cases require hospitalisation and a large fraction of them will die without hospital care. At the current growth rate (of confirmed cases) in the US, in about two weeks there will be more cases in the US requiring hospitalisation than there are ICU ventilators in the entire United States. We need to get that growth rate down, or a decent chunk of the people who are hospitalised and unable to get a ventilator will die.
- glofish 7y ago
  I think that initially there is a strong selection for discovering cases that do require hospital care. We'll see what the future holds. In China the CFR (crude fatality rate) started at 17% and dropped to 0.7%, check figure 4 here: https://who.int/docs/default-source/coronaviruse/who-china-joint-mission-on-covid-19-final-report.pdf https://who.int/docs/default-source/coronaviruse/who-china-j... I the end it might be that Chinese response will be the most effective model to how to best respond to an epidemic.

archview 7y ago

Highly encourage everyone to heed the advice in OP's last line. Hedge your investments. Rather then dump 100k at once into SPY (SPX if not using your 401k) or similar. Invest 10k per week/month. Thousands of people way smarter than you and with 20-30 years of experience fail at timing the market. You will not be able to time the market. Hedge into your investments.

andreilys 7y ago
Or buy puts on spy/calls on VXX and hedge your downside in an uncertain market
- archview 7y ago
  Yes, but options trading is not for the average trader/faint of heart. You can easily lose your entire position if not timed correctly.

logfromblammo 7y ago

The market call still go down after you call a bottom. The market can still go up after you call a peak. The market can remain irrational longer than you can remain solvent. I don't think it's wise to judge based on the peaks and bottoms. Those are the outliers. The price touched there for a fleeting moment and then backed away. I'd rather calculate a trend-line over a long timespan that covers multiple boom-bust cycles, and note when the price crosses it. When the price is below the line, that's a relatively better time to be buying, if you have spare cash, and when it's above the line, that's a relatively better time to be selling, if you have the stocks. You'll drive yourself crazy trying to predict the optimal timing for large orders. Putting in a little at a time, or taking out a little at a time, based on broad criteria and your own goals as an investor, is way better than intensive analysis or day-trading. Once a paycheck or once a month is fine. Even better if you can set it up to be automatic, and you don't have to think about it too much. Unfortunately, I don't have any spare cash, but those who heeded the warning of inverted yield and switched from "gradually buy" to "gradually sell" back then probably have enough cash savings and downward movement to switch back, or to at least stop selling for a while.

imakwana 7y ago
Perhaps trend-line based approach that you described is similar to the strategy called "Value Averaging" which is a valuation based approach to averaging (instead of dollar cost averaging), where CAPE ratio or expected return is used to estimate long term trend. [1] https://en.m.wikipedia.org/wiki/Value_averaging https://en.m.wikipedia.org/wiki/Value_averaging

andreilys 7y ago

“ Will it regain the peak, for sure. By when ? Hard to predict” I don’t think you can be so sure of this