Open Discussion - The Bear Market

[Ax6isB]

I’m glad this was posted as I’ve been thinking the same as the market continues it’s path. How are people doing?
1) How is your portfolio doing?
2) Have you considered making any changes to your portfolio?
3) Are you buying the dip, keeping dry powder, or simply staying the course?
4) Do you think this will be a short term bear market or are you expecting more pain for longer?

I’m down about 10% YTD and it’s a struggle to get to this number.

Yes I’m making changes. I’ve started buying inverse “stuff”. For example I traded YCS to hedge against the yen, TBT to short bonds, PSQ to short NASDAQ. They’re hedges and take up only a small (but growing) % of my portfolio but as I stopped out of some positions in stocks, it seems crazy to me to put more money into stocks now as I think there’s more rate hikes and pain ahead (and geopolitical instability that no country seems to be trying to mitigate, bonkers!). Any savings we are accruing is being allocated to a house we’re building in Japan.

I cannot see how Japan will avoid rate hikes in their effort to control the yen. I am not a financial advisor either

[mighty58]

Market downturns don't happen in isolation, they can, and often do, coincide with losing your job for an extended period or even worse a medical or family emergency that requires you to tap in to your investments right when the market is bottoming. As someone else said, we all have different risk tolerances and not having everything in stocks is perfectly rational for many people.

It's not my intention to gaslight your personal risk tolerance level, so apologies if it came across that way.

What you're saying sounds like a decent argument to put a small portion, perhaps your emergency fund (which is money set aside for precisely the situation you describe) into bonds. Especially if doing so adds to your peace of mind.

But for long-term investment horizons, i.e. funds you don't intend to touch until retirement, bonds don't really make much sense. You don't gain any extra "safety" over equity (actually less), you kneecap your upside potential, and you thus force yourself into a situation where you need to save that much more just to meet the same end goal, which means unnecessarily sacrificing on spending while younger.

[Zoomtokyo]

Staying the course, in the belief that current economic and financial-market conditions won't last longer than about a year. I've been adding J-REITs due to Japan's low interest rates and that the underlying assets are priced in the relatively cheap yen.

Asset managers overseas apparently like Japanese property these days. So if it's good enough for them...

[captainspoke]

This is one that I re-read now and then:

https://www.fool.com/investing/2020/11/ ... you-money/

[TokyoBoglehead]

Market downturns don't happen in isolation, they can, and often do, coincide with losing your job for an extended period or even worse a medical or family emergency that requires you to tap in to your investments right when the market is bottoming. As someone else said, we all have different risk tolerances and not having everything in stocks is perfectly rational for many people.

It's not my intention to gaslight your personal risk tolerance level, so apologies if it came across that way.

What you're saying sounds like a decent argument to put a small portion, perhaps your emergency fund (which is money set aside for precisely the situation you describe) into bonds. Especially if doing so adds to your peace of mind.

But for long-term investment horizons, i.e. funds you don't intend to touch until retirement, bonds don't really make much sense. You don't gain any extra "safety" over equity (actually less), you kneecap your upside potential, and you thus force yourself into a situation where you need to save that much more just to meet the same end goal, which means unnecessarily sacrificing on spending while younger.

So, may I ask are since you are in the accumulation phrase, and focused on long-term growth with time for recovery, you must be in a leverage fund right? The logical conclusion to this line of thinking is that we should all be using margin/leverage to maximize gains when we are you as we have lots of time to recover, right?

Well, that does seem to be true on paper. But in reality few have the stomach. (See HFEA. Headgefundues Excellent adventure, via Bogleheads Forum).

https://www.google.com/finance/quote/SS ... ARCA%3AVOO

[mighty58]

Leveraged fund? Or leverage itself? Dear God no
I'm advocating for a position that provides MORE stability long term than bonds, and for some reason you think I'm a gambler? 3x'ing, 4x'ing potential volatility is definitely not something I'm looking for. I'm trying reduce volatility, not maximize it. Directly leveraging is even worse as it will expose you to margin calls that will wipe you out when the inevitable big corrections come.

As for where I am, I'm in my mid-40's, but am still only around 50-66% towards my final goal. This is because I starting investing a bit late, spending my first decade and a half as an adult chasing tail and paying good money for the privilege of transporting beer from the tap to the urinal. I also wasted a lot.

[TokyoBoglehead]

Leveraged fund? Or leverage itself? Dear God no
I'm advocating for a position that provides MORE stability long term than bonds, and for some reason you think I'm a gambler? 3x'ing, 4x'ing potential volatility is definitely not something I'm looking for. I'm trying reduce volatility, not maximize it. Directly leveraging is even worse as it will expose you to margin calls that will wipe you out when the inevitable big corrections come.

As for where I am, I'm in my mid-40's, but am still only around 50-66% towards my final goal. This is because I starting investing a bit late, spending my first decade and a half as an adult chasing tail and paying good money for the privilege of transporting beer from the tap to the urinal. I also wasted a lot.

Ah, so we have found your risk tolerance

You argument that pure stocks have more stability doesn`t follow logically. You can see this empirically by backtesting the data and looking and the SHARPE/CAGR.

https://www.quantstart.com/articles/the ... portfolio/

*30th September 2003 to 3rd December 2019

[mighty58]

I did provide a link to my source up thread, and did specify it was for 20yr periods or more, and that it was for equity vs. bonds, not equity vs. 60/40. So let's compare apples to apples.

[TokyoBoglehead]

I did provide a link to my source up thread, and did specify it was for 20yr periods or more, and that it was for equity vs. bonds, not equity vs. 60/40. So let's compare apples to apples.

Perhaps we are talking past eachother then. I've never heard anyone recommend a 100% bond portfolio seriously. I am not sure how useful that metric is.

60/40 is considered the standard American allocation. 70/30 has become more popular recently.

Many Japanese funds split 50/50

The pension fund is 50% stocks domestic/international, 50% bonds domestic/international.

I do not think anyone on this board would advocate 100% bonds at any time.

[Ax6isB]

I’ve been of the thinking that with all the dire news we must be at an inflection point and markets will start to turn. But the news coming from JP and UK has me a bit concerned regarding a potential financial crisis regarding these currencies. The stronger dollar seems to be a bit of a wrecking ball and JP and UK and intervening to prop up their currency. The jpy/usd is bouncing around 146 again which is near where the last $20b intervention happened. I don’t see how a central bank successfully controls this particularly when there’s a lot of cash (speculation) riding on a currency crash. Worry wart?