6 ms·

Lots of people have stronger stomachs for drawdowns than I do then!

nonethewiser 3y ago
It’s basically just determined by how closely you are watching the market.
phil21 3y ago
It's why having a plan and a strong conviction of that plan (for me this means having to schedule time to purposefully "sit down" with myself quarterly to ensure the plan is still accurate) is so important. When the shit hits the fan you want to be able to realize you are dealing with emotion, and to go look at your pre-flight checklist so to speak before you sell anything. If pre-set conditions aren't met, you have no decisions to make. If you go into a "situation" thinking you are already overleveraged or whatever, you are much more likely to do something silly vs. if you went into the same situation comfortable in the logic of how you have your finances configured.
sxg 3y ago
You don’t have to have a strong stomach if you don’t pay attention to the market. Buy and hold or “set and forget” are legitimately good strategies at least in part because of this reason.
- fantasticshower 3y ago
  Of course you also have to believe the theory of buy and hold is sound and likely to work in the future. I think that's another part of why I struggle with it.
  - trey-jones 3y ago
    Hello, fellow emotional trader. You would benefit from Set and Forget, heed my words.
    - fantasticshower 3y ago
      I do think it's important to be aware of our emotions when it comes to money and investing. I've realized that I won't be comfortable enduring drawdowns much more than 20% and so I've found alternative strategies that let me sleep at night.
Zetice 3y ago
Your stomach should turn more by actually realizing those losses rather than just letting it ride. Market downturns mean nothing! You lose literally nothing; you still own the same things you did in the morning, and will own those things again in 5 years (or more based on splits/dividends). Honestly yeah, this is kind of a critical part of profitable investing; if you can’t hold through downturns, you ought to find someone who can and then forget about that money entirely.
- fantasticshower 3y ago
  My thinking used to be this way but then I experienced some things in life that made me consider the non-zero possibility that something could happen to me that would require me to tap into retirement savings. If my retirement strategy involves waiting out large drawdowns, then there's a chance I would need to tap into my retirement accounts at the bottom of a large drawdown. I like the comfort of not having to endure large drawdowns for that reason.
  - Zetice 3y ago
    Er, you’re acting like you have a choice here, but you don’t. You either endure the drawdown or you just straight up lose your money. You’re trying to say that straight losing money is better than not losing money, but that’s nonsense.
    - fantasticshower 3y ago
      We all choose what investment strategy to follow. I have chosen other strategies that have smaller drawdowns. In the case where I have to tap into my retirement account because of unlucky life circumstances, I'm happier that I'm selling something I bought for 100 at 75 vs having to sell it at 50 (hypothetically).
      - Zetice 3y ago
        Except 50 was never on the table, and 75 is a fraction of what it would be worth if you stopped trying to actively manage your portfolio. I cannot overstate how bad of an idea this is. Investing is not the same as decorating, there are objectively bad ways of managing your investments and this is one of them. You will end up poorer as a result of this behavior. I hope that happiness is worth it, because you are paying through the nose.
ManuelKiessling 3y ago
If you think about it, actually you should PRAY for drawdowns, unless you are very close to retirement, and assuming you buy-and-hold an accumulating ETF. Here’s why: An accumulating ETF constantly uses the dividends from its underlying stocks to buy more of itself (instead of paying those dividends out to you). And it can buy twice as many pieces of itself when it is at 50 versus when it is at 100. It is thus to your advantage if the ETF is really low for a really long time.
- fantasticshower 3y ago
  > It is thus to your advantage if the ETF is really low for a really long time. As long as you don't start retirement at the beginning of one of those decade-long periods where the market is flat. It would hurt to have to start selling shares at 50 when you bought them for 100.

It’s basically just determined by how closely you are watching the market.

It's why having a plan and a strong conviction of that plan (for me this means having to schedule time to purposefully "sit down" with myself quarterly to ensure the plan is still accurate) is so important. When the shit hits the fan you want to be able to realize you are dealing with emotion, and to go look at your pre-flight checklist so to speak before you sell anything. If pre-set conditions aren't met, you have no decisions to make. If you go into a "situation" thinking you are already overleveraged or whatever, you are much more likely to do something silly vs. if you went into the same situation comfortable in the logic of how you have your finances configured.

sxg 3y ago

You don’t have to have a strong stomach if you don’t pay attention to the market. Buy and hold or “set and forget” are legitimately good strategies at least in part because of this reason.

fantasticshower 3y ago
Of course you also have to believe the theory of buy and hold is sound and likely to work in the future. I think that's another part of why I struggle with it.
- trey-jones 3y ago
  Hello, fellow emotional trader. You would benefit from Set and Forget, heed my words.
  - fantasticshower 3y ago
    I do think it's important to be aware of our emotions when it comes to money and investing. I've realized that I won't be comfortable enduring drawdowns much more than 20% and so I've found alternative strategies that let me sleep at night.

Zetice 3y ago

Your stomach should turn more by actually realizing those losses rather than just letting it ride. Market downturns mean nothing! You lose literally nothing; you still own the same things you did in the morning, and will own those things again in 5 years (or more based on splits/dividends). Honestly yeah, this is kind of a critical part of profitable investing; if you can’t hold through downturns, you ought to find someone who can and then forget about that money entirely.

fantasticshower 3y ago
My thinking used to be this way but then I experienced some things in life that made me consider the non-zero possibility that something could happen to me that would require me to tap into retirement savings. If my retirement strategy involves waiting out large drawdowns, then there's a chance I would need to tap into my retirement accounts at the bottom of a large drawdown. I like the comfort of not having to endure large drawdowns for that reason.
- Zetice 3y ago
  Er, you’re acting like you have a choice here, but you don’t. You either endure the drawdown or you just straight up lose your money. You’re trying to say that straight losing money is better than not losing money, but that’s nonsense.
  - fantasticshower 3y ago
    We all choose what investment strategy to follow. I have chosen other strategies that have smaller drawdowns. In the case where I have to tap into my retirement account because of unlucky life circumstances, I'm happier that I'm selling something I bought for 100 at 75 vs having to sell it at 50 (hypothetically).
    - Zetice 3y ago
      Except 50 was never on the table, and 75 is a fraction of what it would be worth if you stopped trying to actively manage your portfolio. I cannot overstate how bad of an idea this is. Investing is not the same as decorating, there are objectively bad ways of managing your investments and this is one of them. You will end up poorer as a result of this behavior. I hope that happiness is worth it, because you are paying through the nose.

ManuelKiessling 3y ago

If you think about it, actually you should PRAY for drawdowns, unless you are very close to retirement, and assuming you buy-and-hold an accumulating ETF. Here’s why: An accumulating ETF constantly uses the dividends from its underlying stocks to buy more of itself (instead of paying those dividends out to you). And it can buy twice as many pieces of itself when it is at 50 versus when it is at 100. It is thus to your advantage if the ETF is really low for a really long time.

fantasticshower 3y ago
> It is thus to your advantage if the ETF is really low for a really long time. As long as you don't start retirement at the beginning of one of those decade-long periods where the market is flat. It would hurt to have to start selling shares at 50 when you bought them for 100.