6 ms·

Seems like a great depression-like downturn is imminent(?). Any advice on the best way to weather the storm? I'm not looking for huge gains or getting rich thro

Seems like a great depression-like downturn is imminent(?). Any advice on the best way to weather the storm? I'm not looking for huge gains or getting rich through it. I just want to make sure my money isn't worth 10X less and/or my family doesn't starve.

seibelj 6y ago
Gold / silver / bitcoin / ethereum / real estate (non-commercial) Anything desirable that can’t be created easily, as newly printed money will flow directly to it.
bla3 6y ago
Unless you're planning on retiring soon, same thing as always: don't touch your stuff. The same mindset you have right now would've made you stop buying your monthly N stocks this March, and then you would've missed out on all the gains this year. Every month, invest some portion of your income in a low-fee broad market index fund and don't think about it. In a few short decades, chances are you'll come out fairly ahead.
- dash2 6y ago
  When Tesla got hyped right into the S&P 500, index funds were forced to buy. The old advice of "just buy an index fund" may not be an eternal verity.
  - lotsofpulp 6y ago
    Assuming you think the public equity markets have the backing of the US federal government, why would you ever bet against an index fund? I consider a broad market equity index fund to be a risk free asset on a 5+ year timeframe. State and local government defined benefit pension obligations are invested in them, individuals' 401k and IRA accounts are invested in them, and the most influential members of society are invested in them. There is no political will to let the price of stocks fall (or even stagnate), and so either the US government keeps stock prices chugging along, or the USD has lost its buying power, in which case you have a bigger problem than your stock market holdings (if you're American).
    - dash2 6y ago
      The S&P 500 about halved following the dot com bubble, and did the same thing again in 2007-8. That doesn’t seem to fit your thesis.
      - lotsofpulp 6y ago
        I wrote that you have to be able to wait 5 years.
        dash2 6y ago
        That doesn’t work either. The S&P 500 was only just back to its 2000 level in 2008... and then crashed again.
        lotsofpulp 6y ago
        True about times before 2008, I only entered the game that year. I guess my feelings are more based on the fact that I have only seen the Fed have a trigger finger anytime markets go down or stagnate, and so I assume their strategy is to prop them up. I also see the pension mess wreaking having on state and local governments, plus increasing baby boomer population retiring with 401k/IRAs, so there's lots of political will to keep markets going higher.
        dash2 6y ago
        Yup, this is true. But that is not unlimited. I doubt if most central bankers would accept taking the health of major indices as a target. If some indices start to look very overvalued, or if pumping the markets starts to cause inflation more generally, then there will be a pressure to take the punch bowl away. Interesting times.
        dash2 6y ago
        Nb also this, which just came out: https://www.nber.org/papers/w28253 https://www.nber.org/papers/w28253
lifty 6y ago
Buy some canned food and store it in the basement. I’m half joking, but I knew an old fellow in my grandmother’s village that almost starved during WW2, who developed a habit of storing non-perishable food, so that no matter how low the chance of that kind of event happening again, he never has too pass through that kind of ordeal again.
Youden 6y ago
Depends on your risk tolerance and level of management. The easiest option is to exit the stock market entirely. Just hold cash. Spread it across multiple banks and accounts. Next easiest option is to change your stock/bond ratio. Make sure the bond ETF you use is diversified. Next easiest option is to keep a static portfolio but put more than a stock ETF and a bond ETF in it. There's a nice set of "lazy" portfolios here [0]. Next easiest option is to build a static portfolio for a particular level of risk. There's a handy tool here [1] that can spit out the optimal balance given a goal and a set of assets to choose from (I'd choose a selection of ETFs). If you're risk-averse, your goal is probably to minimize variance. Next easiest option is to switch to a dynamically-weighted portfolio that changes the balance of assets in your portfolio based on market conditions. This can be the same as the previous option but you'd recalculate the portfolio month-to-month. And finally, there's playing with derivatives. You can "insure" whatever portfolio you like using options and/or futures. I would strongly advise against anything "crypto". Either the financial system is still functioning and you'll benefit from regulated financial markets, or it isn't, and your cryptocoins will be useless, because they're difficult enough to use today, why would it be any easier when the world is crumbling? And this all assumes the US financial system is still functional. If that's not the case, I'd focus less on finance and more on doomsday prepping. [0]: https://www.bogleheads.org/wiki/Lazy_portfolios https://www.bogleheads.org/wiki/Lazy_portfolios [1]: https://www.portfoliovisualizer.com/optimize-portfolio https://www.portfoliovisualizer.com/optimize-portfolio
misiti3780 6y ago
Serious question (I'm not an expert) - Why would there be an imminent depression-like downturn when effective vaccines were announced < 1 month ago? I vaccines didn't exist, I would believe this but given they do, I can't image the future is not brighter.

seibelj 6y ago

Gold / silver / bitcoin / ethereum / real estate (non-commercial) Anything desirable that can’t be created easily, as newly printed money will flow directly to it.

bla3 6y ago

Unless you're planning on retiring soon, same thing as always: don't touch your stuff. The same mindset you have right now would've made you stop buying your monthly N stocks this March, and then you would've missed out on all the gains this year. Every month, invest some portion of your income in a low-fee broad market index fund and don't think about it. In a few short decades, chances are you'll come out fairly ahead.

dash2 6y ago
When Tesla got hyped right into the S&P 500, index funds were forced to buy. The old advice of "just buy an index fund" may not be an eternal verity.
- lotsofpulp 6y ago
  Assuming you think the public equity markets have the backing of the US federal government, why would you ever bet against an index fund? I consider a broad market equity index fund to be a risk free asset on a 5+ year timeframe. State and local government defined benefit pension obligations are invested in them, individuals' 401k and IRA accounts are invested in them, and the most influential members of society are invested in them. There is no political will to let the price of stocks fall (or even stagnate), and so either the US government keeps stock prices chugging along, or the USD has lost its buying power, in which case you have a bigger problem than your stock market holdings (if you're American).
  - dash2 6y ago
    The S&P 500 about halved following the dot com bubble, and did the same thing again in 2007-8. That doesn’t seem to fit your thesis.
    - lotsofpulp 6y ago
      I wrote that you have to be able to wait 5 years.
      - dash2 6y ago
        That doesn’t work either. The S&P 500 was only just back to its 2000 level in 2008... and then crashed again.
        lotsofpulp 6y ago
        True about times before 2008, I only entered the game that year. I guess my feelings are more based on the fact that I have only seen the Fed have a trigger finger anytime markets go down or stagnate, and so I assume their strategy is to prop them up. I also see the pension mess wreaking having on state and local governments, plus increasing baby boomer population retiring with 401k/IRAs, so there's lots of political will to keep markets going higher.
        dash2 6y ago
        Yup, this is true. But that is not unlimited. I doubt if most central bankers would accept taking the health of major indices as a target. If some indices start to look very overvalued, or if pumping the markets starts to cause inflation more generally, then there will be a pressure to take the punch bowl away. Interesting times.
      - dash2 6y ago
        Nb also this, which just came out: https://www.nber.org/papers/w28253 https://www.nber.org/papers/w28253

lifty 6y ago

Buy some canned food and store it in the basement. I’m half joking, but I knew an old fellow in my grandmother’s village that almost starved during WW2, who developed a habit of storing non-perishable food, so that no matter how low the chance of that kind of event happening again, he never has too pass through that kind of ordeal again.

Youden 6y ago

Depends on your risk tolerance and level of management. The easiest option is to exit the stock market entirely. Just hold cash. Spread it across multiple banks and accounts. Next easiest option is to change your stock/bond ratio. Make sure the bond ETF you use is diversified. Next easiest option is to keep a static portfolio but put more than a stock ETF and a bond ETF in it. There's a nice set of "lazy" portfolios here [0]. Next easiest option is to build a static portfolio for a particular level of risk. There's a handy tool here [1] that can spit out the optimal balance given a goal and a set of assets to choose from (I'd choose a selection of ETFs). If you're risk-averse, your goal is probably to minimize variance. Next easiest option is to switch to a dynamically-weighted portfolio that changes the balance of assets in your portfolio based on market conditions. This can be the same as the previous option but you'd recalculate the portfolio month-to-month. And finally, there's playing with derivatives. You can "insure" whatever portfolio you like using options and/or futures. I would strongly advise against anything "crypto". Either the financial system is still functioning and you'll benefit from regulated financial markets, or it isn't, and your cryptocoins will be useless, because they're difficult enough to use today, why would it be any easier when the world is crumbling? And this all assumes the US financial system is still functional. If that's not the case, I'd focus less on finance and more on doomsday prepping. [0]: https://www.bogleheads.org/wiki/Lazy_portfolios https://www.bogleheads.org/wiki/Lazy_portfolios [1]: https://www.portfoliovisualizer.com/optimize-portfolio https://www.portfoliovisualizer.com/optimize-portfolio

misiti3780 6y ago

Serious question (I'm not an expert) - Why would there be an imminent depression-like downturn when effective vaccines were announced < 1 month ago? I vaccines didn't exist, I would believe this but given they do, I can't image the future is not brighter.