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> the financial education to buy-and-hold through thick and thin I find this somewhat dubious. If you buy-and-hold for a lifetime, you'll face at least a once-

> the financial education to buy-and-hold through thick and thin I find this somewhat dubious. If you buy-and-hold for a lifetime, you'll face at least a once-in-a-lifetime level of shock at some point. The possibility that this shock will happen just when you need the funds occurs fairly regularly to generations of retirees: but always seems to be forgotten by gold-standard financial advice.

devlopr 6y ago
That's why you move from a risky stock portfolio to a safer bold driven portfolio as your age increases.
- throwaway2245 6y ago
  This helps, but not that much. (Assuming your risk assessment is correct) Suppose a shock happened right before I planned to shift into a safer portfolio. What do I do then? The only really correct answer is: "well, I didn't need that money anyway."
  - devlopr 6y ago
    The idea is you are always shifting rebalancing. If you are 45 you might be at 50/50 (safe/risky growth) by 55 25/75 by 60 90% is safe. If something happens at 60 where you lose 50% of the 10% in growth stocks stats show that a 5 year recovery to base levels is likely.
  - stouset 6y ago
    There shouldn't be an exact moment you switch to a conservative portfolio. As you get nearer to retirement, you gradually rebalance. Often this is as easy as simply placing new contributions in safer investments. Less often it just involves exchanging one set of funds for another, say once per year. Again, Target Retirement funds handle this completely transparently for you and require literally zero hands-on involvement. This is quite simply nowhere near as hard as you're making it out to be.
    - throwaway2245 6y ago
      > This is quite simply nowhere near as hard as you're making it out to be. I'm going to quote a (sarcastic) reply to another of your comments: "This is easy. Just find a job that pays you $350,000 a year." If you have plenty of wealth and income, then it's easy. But then, if you have plenty of wealth and income, it doesn't really matter what you do.
stouset 6y ago
Avoiding that shock is generally (though not completely) resolved by going with a "target retirement"-style fund that shifts your portfolio towards less-risky assets the closer you get to depending on them. Barring this you can also approximate it yourself by weighting further into bonds and fixed-income assets as you age. The FIRE community does something similar with the "bond tent" strategy. That said, I'm honestly deeply confused as to what you think the alternative is It's impossible to reliably predict crashes or their extent so by selling you're generally just locking in your losses. I personally know multiple people who liquidated during the Great Recession, and... well, not only did they sell at rock bottom prices during the fire sale, but they also failed to get back in to the market during the incredible rally of the last decade. I know multiple people who got out during the Trump administration, expecting total financial meltdown. Those people are materially worse off than if they'd simply held. I know several who panic sold when the markets took a hit at the beginning of the pandemic. Yet again, they've locked in their losses and missed out on the positive returns that have occurred since then. So, barring access to a crystal ball, what exactly do you think is the alternative?
- bdavis__ 6y ago
  i was one of those that was just certain trump was going to tank the economy. my thinking was "he has no clue, and his bumbling around will ruin it". very wrong, and missed out on a lot of gains. and not too sure of when to start dollar cost averaging back in.
  - dkubb 6y ago
    The only correct answer to this is now. Right now. No one knows if this is the top of the market and tomorrow everything will come crashing down, or if this is the very bottom of a 10 year bull market. On average you do better not trying to time the market and just contribute on an automated schedule. Set up monthly contributions and buy regardless of whatever is happening in the market and then try to forget about it for most of the year.
    - bdavis__ 6y ago

devlopr 6y ago

That's why you move from a risky stock portfolio to a safer bold driven portfolio as your age increases.

throwaway2245 6y ago
This helps, but not that much. (Assuming your risk assessment is correct) Suppose a shock happened right before I planned to shift into a safer portfolio. What do I do then? The only really correct answer is: "well, I didn't need that money anyway."
- devlopr 6y ago
  The idea is you are always shifting rebalancing. If you are 45 you might be at 50/50 (safe/risky growth) by 55 25/75 by 60 90% is safe. If something happens at 60 where you lose 50% of the 10% in growth stocks stats show that a 5 year recovery to base levels is likely.
- stouset 6y ago
  There shouldn't be an exact moment you switch to a conservative portfolio. As you get nearer to retirement, you gradually rebalance. Often this is as easy as simply placing new contributions in safer investments. Less often it just involves exchanging one set of funds for another, say once per year. Again, Target Retirement funds handle this completely transparently for you and require literally zero hands-on involvement. This is quite simply nowhere near as hard as you're making it out to be.
  - throwaway2245 6y ago
    > This is quite simply nowhere near as hard as you're making it out to be. I'm going to quote a (sarcastic) reply to another of your comments: "This is easy. Just find a job that pays you $350,000 a year." If you have plenty of wealth and income, then it's easy. But then, if you have plenty of wealth and income, it doesn't really matter what you do.

stouset 6y ago

Avoiding that shock is generally (though not completely) resolved by going with a "target retirement"-style fund that shifts your portfolio towards less-risky assets the closer you get to depending on them. Barring this you can also approximate it yourself by weighting further into bonds and fixed-income assets as you age. The FIRE community does something similar with the "bond tent" strategy. That said, I'm honestly deeply confused as to what you think the alternative is It's impossible to reliably predict crashes or their extent so by selling you're generally just locking in your losses. I personally know multiple people who liquidated during the Great Recession, and... well, not only did they sell at rock bottom prices during the fire sale, but they also failed to get back in to the market during the incredible rally of the last decade. I know multiple people who got out during the Trump administration, expecting total financial meltdown. Those people are materially worse off than if they'd simply held. I know several who panic sold when the markets took a hit at the beginning of the pandemic. Yet again, they've locked in their losses and missed out on the positive returns that have occurred since then. So, barring access to a crystal ball, what exactly do you think is the alternative?

bdavis__ 6y ago
i was one of those that was just certain trump was going to tank the economy. my thinking was "he has no clue, and his bumbling around will ruin it". very wrong, and missed out on a lot of gains. and not too sure of when to start dollar cost averaging back in.
- dkubb 6y ago
  The only correct answer to this is now. Right now. No one knows if this is the top of the market and tomorrow everything will come crashing down, or if this is the very bottom of a 10 year bull market. On average you do better not trying to time the market and just contribute on an automated schedule. Set up monthly contributions and buy regardless of whatever is happening in the market and then try to forget about it for most of the year.
  - bdavis__ 6y ago