![[original_title]](https://rawnews.com/wp-content/uploads/2024/09/Spending-down-cash-in-a-stock-market-downturn-does.jpg)
Have a query about your private investments? Irrespective of how easy or advanced, you possibly can ask it right here.
Re: Spending down cash in a stock market downturn – does this actually work?
Wanderingwheelz wrote: ↑Thu Sep 05, 2024 12:29 pmalex_686 wrote: ↑Thu Sep 05, 2024 10:49 amWanderingwheelz wrote: ↑Thu Sep 05, 2024 4:17 am
Historical past says in any other case. The broad inventory market is extra more likely to go up after it drops than to go down extra.Inform me extra. What statistical checks and methodology are you utilizing?
I’m utilizing widespread sense. Would anybody danger their capital within the inventory market if it didn’t have an upwards bias?
Future market efficiency is irrelevant when you might have rapid money wants.
If somebody avoids promoting equities when they’re down 20% to attend for a greater time to refill money after which discover themselves with no money when they’re down 40%, they are going to be worse off then if that they had simply offered periodically (aka rebalanced) on the best way down.
- Posts: 685
- Joined: Wed Jul 05, 2023 12:56 pm
Re: Spending down cash in a stock market downturn – does this actually work?
Wanderingwheelz wrote: ↑Thu Sep 05, 2024 12:29 pmalex_686 wrote: ↑Thu Sep 05, 2024 10:49 amWanderingwheelz wrote: ↑Thu Sep 05, 2024 4:17 am
Historical past says in any other case. The broad inventory market is extra more likely to go up after it drops than to go down extra.Inform me extra. What statistical checks and methodology are you utilizing?
I’m utilizing widespread sense. Would anybody danger their capital within the inventory market if it didn’t have an upwards bias?
No, however “previous efficiency doesn’t assure future outcomes.” So in that sense retirees with a heavy focus in shares live on hope and maybe a dearth of different choices. Hope just isn’t a plan.
Whereas the inventory market *could* proceed to go up over time, the one time-frame that issues to many retirees is the one which represents their remaining days on this earth. Can a bear market outlast these? You wager.
Re: Spending down cash in a stock market downturn – does this actually work?
Wanderingwheelz wrote: ↑Thu Sep 05, 2024 12:29 pmalex_686 wrote: ↑Thu Sep 05, 2024 10:49 amWanderingwheelz wrote: ↑Thu Sep 05, 2024 4:17 am
Historical past says in any other case. The broad inventory market is extra more likely to go up after it drops than to go down extra.Inform me extra. What statistical checks and methodology are you utilizing?
I’m utilizing widespread sense. Would anybody danger their capital within the inventory market if it didn’t have an upwards bias?
Nicely, what does your second assertion have something to do along with your first? I can have the market expectations that the market may have constructive returns. However we’re not speaking about that. We’re speaking about if the market is a random stroll or if there’s a market timing trick – that’s – Does the market have greater returns after a down market? It might be widespread sense that it does but it surely actually hasn’t proven up market information.
A easy instance. Toss a coin. Heads wins you $1.20, tails you lose a $1.00 Web anticipated worth is $0.10, or a ten% return. The coin is flipped and comes out tails. What are the chances that the following coin flipped will probably be heads? If the coin is honest then regardless of the final flip did doesn’t matter. I may flip 8 tails in a row and if the coin was honest I might anticipate a 50/50 probability of heads on the following flip – even when widespread sense informed me I used to be due for a heads.
Former brokerage operations & mutual fund accountant. I hate danger, which is why I research and embrace it.
- Posts: 10592
- Joined: Mon Might 18, 2009 5:57 pm
Re: Spending down cash in a stock market downturn – does this actually work?
Random Poster wrote: ↑Thu Sep 05, 2024 12:16 pmTriple digit golfer wrote: ↑Thu Sep 05, 2024 10:58 am
Why not preserve the AA regular? That’s, should you’re aim is 50/50 and a market downturn brings you to 46/54, spend from the 54 till you are again at 50/50.This may have you ever spending money or bonds when equities are down, and vice versa, thus at all times promoting excessive, at the very least relative to your different holdings.
Did that plan work when each shares and bonds have been down?
There appears to be some perception that when shares (or bonds) lower, bonds (or shares) enhance.
However that perception ought to have been eviscerated over the previous few years.
Relies upon what your definition of “labored” is. If all you might have is shares and bonds and each are down, it’s a must to spend one thing.
Apart from – I stated “money or bonds,” assuming that the investor had money holdings. In any case, one can not spend money if one doesn’t have money.
- Posts: 8831
- Joined: Wed Apr 08, 2015 11:31 am
- Location: West coast of Florida, close to Champa Bay !
Re: Spending down cash in a stock market downturn – does this actually work?
If one is a long-term investor who has been investing in Whole Inventory Market Index mutual fund you might have many shares of the mutual fund that you simply paid a considerably lower cost than the present worth.
Consider your exercise of promoting right now with Whole Inventory Market down some quantity from the ATH this manner:
Wow, I simply offered a few of my Whole Inventory Market Index mutual fund I purchased in August of 2015 for $49.78 for $132.33!
Perhaps pondering like that makes any sting lighter.
Damaged Man 1999
“If I can not drink Bourbon and smoke cigars in Heaven then I shall not go.” – Mark Twain
Re: Spending down cash in a stock market downturn – does this actually work?
Broken Man 1999 wrote: ↑Thu Sep 05, 2024 2:48 pm
Perhaps those that worry promoting equities in a inventory market downturn ought to take a look at their inventory holdings differently:If one is a long-term investor who has been investing in Whole Inventory Market Index mutual fund you might have many shares of the mutual fund that you simply paid a considerably lower cost than the present worth.
Consider your exercise of promoting right now with Whole Inventory Market down some quantity from the ATH this manner:
Wow, I simply offered a few of my Whole Inventory Market Index mutual fund I purchased in August of 2015 for $49.78 for $132.33!Perhaps pondering like that makes any sting lighter.
Damaged Man 1999
It’s true that the VTI I’ve in my taxable brokerage account is now appreciated 460% over its price foundation. I assume once I promote a few of it to make a withdrawal I haven’t got to fret that I’m promoting inventory when it’s “down.” That is the sort of factor that makes me surprise what this “down” factor is meant to be about. I imply, actually, aren’t folks smarter than that.
- Posts: 8831
- Joined: Wed Apr 08, 2015 11:31 am
- Location: West coast of Florida, close to Champa Bay !
Re: Spending down cash in a stock market downturn – does this actually work?
dbr wrote: ↑Thu Sep 05, 2024 3:20 pmBroken Man 1999 wrote: ↑Thu Sep 05, 2024 2:48 pm
Perhaps those that worry promoting equities in a inventory market downturn ought to take a look at their inventory holdings differently:If one is a long-term investor who has been investing in Whole Inventory Market Index mutual fund you might have many shares of the mutual fund that you simply paid a considerably lower cost than the present worth.
Consider your exercise of promoting right now with Whole Inventory Market down some quantity from the ATH this manner:
Wow, I simply offered a few of my Whole Inventory Market Index mutual fund I purchased in August of 2015 for $49.78 for $132.33!Perhaps pondering like that makes any sting lighter.
Damaged Man 1999
It’s true that the VTI I’ve in my taxable brokerage account is now appreciated 460% over its price foundation. I assume once I promote a few of it to make a withdrawal I haven’t got to fret that I’m promoting inventory when it’s “down.” That is the sort of factor that makes me surprise what this “down” factor is meant to be about. I imply, actually, aren’t folks smarter than that.
I am certain there are those that is perhaps on the sting of getting simply sufficient belongings to fund their retirement do endure some anxieties when the market has a downturn, so I get the priority.
Damaged Man 1999
“If I can not drink Bourbon and smoke cigars in Heaven then I shall not go.” – Mark Twain
Re: Spending down cash in a stock market downturn – does this actually work?
Broken Man 1999 wrote: ↑Thu Sep 05, 2024 3:27 pmdbr wrote: ↑Thu Sep 05, 2024 3:20 pmBroken Man 1999 wrote: ↑Thu Sep 05, 2024 2:48 pm
Perhaps those that worry promoting equities in a inventory market downturn ought to take a look at their inventory holdings differently:If one is a long-term investor who has been investing in Whole Inventory Market Index mutual fund you might have many shares of the mutual fund that you simply paid a considerably lower cost than the present worth.
Consider your exercise of promoting right now with Whole Inventory Market down some quantity from the ATH this manner:
Wow, I simply offered a few of my Whole Inventory Market Index mutual fund I purchased in August of 2015 for $49.78 for $132.33!Perhaps pondering like that makes any sting lighter.
Damaged Man 1999
It’s true that the VTI I’ve in my taxable brokerage account is now appreciated 460% over its price foundation. I assume once I promote a few of it to make a withdrawal I haven’t got to fret that I’m promoting inventory when it’s “down.” That is the sort of factor that makes me surprise what this “down” factor is meant to be about. I imply, actually, aren’t folks smarter than that.
I am certain there are those that is perhaps on the sting of getting simply sufficient belongings to fund their retirement do endure some anxieties when the market has a downturn, so I get the priority.
Damaged Man 1999
How does an individual know the market has a downturn? There are definitions of things like a bear market:
In response to the Securities and Change Fee (SEC), a bear market happens when costs fall steeply by 20% or extra over at the very least a two-month interval. A lower between 10% and 20% would imply a market correction part and a drop between 5% to 10%, a pullback.
Is that what folks imply?
But when the result’s that the allocation to shares falls under goal, then not solely does one not promote shares, however one buys them. Are we speaking about circumstances the place shares have fallen and outline a bear market, however bonds (together with money) have fallen greater than that and we nonetheless should promote shares and purchase bonds.
Re: Spending down cash in a stock market downturn – does this actually work?
You’d assume, however lots of people are pushed by emotional greed/worry with regards to “their hard-earned cash” in comparison with any rational “good evaluation” takes a again seat when greed/worry takes over.
Rational investor: My inventory is up 460% over common price, so if I promote at 450% after a “down” month, I am nonetheless up total.
Grasping investor: My inventory was up 460% on the peak and now it is all the way down to 450%, so I can’t promote a penny till I “break even” to 460% once more!
It is shocking what number of fall into that second investor classification (even ones who ought to know higher).
Do not do what Bogleheads inform you. Hearken to what we are saying, contemplate different sources, and make your individual choices, since it’s a must to dwell with the dangers & rewards (not us or anybody else).
- Posts: 13654
- Joined: Thu Jan 21, 2016 10:11 pm
- Location: outdoors the echo chamber
Re: Spending down cash in a stock market downturn – does this actually work?
I preserve no money and let the chips fall the place they could. Whereas some could really feel that is dangerous, my definition of danger is extra associated to the life influence of an motion, not the influence of short-term volatility. And in keeping with that definition of danger, I am a lot better off, although I would lose some cash if my want for money coincides with an enormous crash in each shares and bonds.
Re: Spending down cash in a stock market downturn – does this actually work?
whodidntante wrote: ↑Thu Sep 05, 2024 3:41 pm
I preserve no money and let the chips fall the place they could. Whereas some could really feel that is dangerous, my definition of danger is extra associated to the life influence of an motion, not the influence of short-term volatility. And in keeping with that definition of danger, I am a lot better off, although I would lose some cash if my want for money coincides with an enormous crash in each shares and bonds.
Ditto.
Re: Spending down cash in a stock market downturn – does this actually work?
That is precisely what I’m questioning as nicely… down needs to be decrease than price foundation. Even in that uncommon case, the distributions (which do not go down as a lot because the market if in any respect) ought to present at the very least half the earnings if no more. The remaining can then come non permanent from a money cushion.
Re: Spending down cash in a stock market downturn – does this actually work?
DoctorE wrote: ↑Thu Sep 05, 2024 3:58 pmThat is precisely what I’m questioning as nicely… down needs to be decrease than price foundation. Even in that uncommon case, the distributions (which do not go down as a lot because the market if in any respect) ought to present at the very least half the earnings if no more. The remaining can then come non permanent from a money cushion.
How about if “down” is lower than the allocation goal? In case your goal (or place to begin) is 50/50 and the inventory portion is 49%, nicely then shares are “down”. Simplistic sure, however easy could be good!
Get most of it proper and do not make any massive errors. All else being equal, less complicated is best. Easy is as easy does.
Re: Spending down cash in a stock market downturn – does this actually work?
GaryA505 wrote: ↑Thu Sep 05, 2024 4:08 pmDoctorE wrote: ↑Thu Sep 05, 2024 3:58 pmThat is precisely what I’m questioning as nicely… down needs to be decrease than price foundation. Even in that uncommon case, the distributions (which do not go down as a lot because the market if in any respect) ought to present at the very least half the earnings if no more. The remaining can then come non permanent from a money cushion.
How about if “down” is lower than the allocation goal? In case your goal (or place to begin) is 50/50 and the inventory portion is 49%, nicely then shares are “down”. Simplistic sure, however easy could be good!
If I’ve an account with 50% SPY at $250 price foundation and 50% T-Payments, it implies that in some unspecified time in the future I have been promoting appreciated SPY ($550+) to purchase T-Payments. Underneath this state of affairs one was promoting the winner (SPY) to purchase the loser (T-Payments) with the intention to preserve the 50/50 AA. If SPY goes to $450 subsequent yr, that turns into one thing like 44%/56% so I might spend some T-Payments as an alternative.The associated fee foundation of SPY is $250 so why does it matter?
PS. You end up with more $ even by letting the winner run and never rebalancing into 50/50 with slight exceptions.
Re: Spending down cash in a stock market downturn – does this actually work?
DoctorE wrote: ↑Thu Sep 05, 2024 4:21 pmGaryA505 wrote: ↑Thu Sep 05, 2024 4:08 pmDoctorE wrote: ↑Thu Sep 05, 2024 3:58 pmThat is precisely what I’m questioning as nicely… down needs to be decrease than price foundation. Even in that uncommon case, the distributions (which do not go down as a lot because the market if in any respect) ought to present at the very least half the earnings if no more. The remaining can then come non permanent from a money cushion.
How about if “down” is lower than the allocation goal? In case your goal (or place to begin) is 50/50 and the inventory portion is 49%, nicely then shares are “down”. Simplistic sure, however easy could be good!
If I’ve an account with 50% SPY at $250 price foundation and 50% T-Payments, it implies that in some unspecified time in the future I have been promoting appreciated SPY ($550+) to purchase T-Payments. Underneath this state of affairs one was promoting the winner (SPY) to purchase the loser (T-Payments) with the intention to preserve the 50/50 AA. If SPY goes to $450 subsequent yr, that turns into one thing like 44%/56% so I might spend some T-Payments as an alternative.The associated fee foundation of SPY is $250 so why does it matter?
PS. You end up with more $ even by letting the winner run and never rebalancing into 50/50 with slight exceptions.
You’re assuming that you’d be periodically rebalancing. What should you begin at 50/50 and simply promote whichever one is greater, however don’t do the rest to rebalance? Sure, the AA could be very more likely to drift to the inventory aspect, given a protracted sufficient time frame, however so what?
Get most of it proper and do not make any massive errors. All else being equal, less complicated is best. Easy is as easy does.
Re: Spending down cash in a stock market downturn – does this actually work?
GaryA505 wrote: ↑Thu Sep 05, 2024 4:27 pmDoctorE wrote: ↑Thu Sep 05, 2024 4:21 pmGaryA505 wrote: ↑Thu Sep 05, 2024 4:08 pmDoctorE wrote: ↑Thu Sep 05, 2024 3:58 pmThat is precisely what I’m questioning as nicely… down needs to be decrease than price foundation. Even in that uncommon case, the distributions (which do not go down as a lot because the market if in any respect) ought to present at the very least half the earnings if no more. The remaining can then come non permanent from a money cushion.
How about if “down” is lower than the allocation goal? In case your goal (or place to begin) is 50/50 and the inventory portion is 49%, nicely then shares are “down”. Simplistic sure, however easy could be good!
If I’ve an account with 50% SPY at $250 price foundation and 50% T-Payments, it implies that in some unspecified time in the future I have been promoting appreciated SPY ($550+) to purchase T-Payments. Underneath this state of affairs one was promoting the winner (SPY) to purchase the loser (T-Payments) with the intention to preserve the 50/50 AA. If SPY goes to $450 subsequent yr, that turns into one thing like 44%/56% so I might spend some T-Payments as an alternative.The associated fee foundation of SPY is $250 so why does it matter?
PS. You end up with more $ even by letting the winner run and never rebalancing into 50/50 with slight exceptions.
You’re assuming that you’d be periodically rebalancing. What should you begin at 50/50 and simply promote whichever one is greater, however don’t do the rest to rebalance? Sure, the AA could be very more likely to drift to the inventory aspect, given a protracted sufficient time frame, however so what?
Sarcastically to this dialogue, all SWR calculators and spreadsheets that I’ve seen withdraw evenly from all belongings within the backtest. I’ve but to see one have the choice to take from the upper “out of stability” asset… can be attention-grabbing to see if there’s a materials distinction or if it’s only a psychological help, like DCA.
- Posts: 3503
- Joined: Mon Mar 04, 2019 8:52 am
Re: Spending down cash in a stock market downturn – does this actually work?
alex_686 wrote: ↑Thu Sep 05, 2024 12:50 pmWanderingwheelz wrote: ↑Thu Sep 05, 2024 12:29 pmalex_686 wrote: ↑Thu Sep 05, 2024 10:49 amWanderingwheelz wrote: ↑Thu Sep 05, 2024 4:17 am
Historical past says in any other case. The broad inventory market is extra more likely to go up after it drops than to go down extra.Inform me extra. What statistical checks and methodology are you utilizing?
I’m utilizing widespread sense. Would anybody danger their capital within the inventory market if it didn’t have an upwards bias?
Nicely, what does your second assertion have something to do along with your first? I can have the market expectations that the market may have constructive returns. However we’re not speaking about that. We’re speaking about if the market is a random stroll or if there’s a market timing trick – that’s – Does the market have greater returns after a down market? It might be widespread sense that it does but it surely actually hasn’t proven up market information.
A easy instance. Toss a coin. Heads wins you $1.20, tails you lose a $1.00 Web anticipated worth is $0.10, or a ten% return. The coin is flipped and comes out tails. What are the chances that the following coin flipped will probably be heads? If the coin is honest then regardless of the final flip did doesn’t matter. I may flip 8 tails in a row and if the coin was honest I might anticipate a 50/50 probability of heads on the following flip – even when widespread sense informed me I used to be due for a heads.
You narrow it off however I used to be replying to your remark that you simply made in regards to the inventory market:
“Happening would not suggest it’s will return as much as its outdated stage. It’s simply as more likely to fall extra as it’s to go up.”
My reply was that shares have an upward bias. The bias will not be sturdy for the following day (“solely” 55% of buying and selling days are constructive) or the following week and even the following month after a down day, however a yr or extra out your odds begin to look higher and higher.
I understand how coin flips work. With inventory market up days being about 55% of complete days a coin flip isn’t of a lot use in defending your stance because it’s simply as more likely to be up or down (which is precisely what you stated about shares).
Being fallacious compounds ceaselessly.
Re: Spending down cash in a stock market downturn – does this actually work?
DoctorE wrote: ↑Thu Sep 05, 2024 6:00 pmGaryA505 wrote: ↑Thu Sep 05, 2024 4:27 pmDoctorE wrote: ↑Thu Sep 05, 2024 4:21 pmGaryA505 wrote: ↑Thu Sep 05, 2024 4:08 pmDoctorE wrote: ↑Thu Sep 05, 2024 3:58 pmThat is precisely what I’m questioning as nicely… down needs to be decrease than price foundation. Even in that uncommon case, the distributions (which do not go down as a lot because the market if in any respect) ought to present at the very least half the earnings if no more. The remaining can then come non permanent from a money cushion.
How about if “down” is lower than the allocation goal? In case your goal (or place to begin) is 50/50 and the inventory portion is 49%, nicely then shares are “down”. Simplistic sure, however easy could be good!
If I’ve an account with 50% SPY at $250 price foundation and 50% T-Payments, it implies that in some unspecified time in the future I have been promoting appreciated SPY ($550+) to purchase T-Payments. Underneath this state of affairs one was promoting the winner (SPY) to purchase the loser (T-Payments) with the intention to preserve the 50/50 AA. If SPY goes to $450 subsequent yr, that turns into one thing like 44%/56% so I might spend some T-Payments as an alternative.The associated fee foundation of SPY is $250 so why does it matter?
PS. You end up with more $ even by letting the winner run and never rebalancing into 50/50 with slight exceptions.
You’re assuming that you’d be periodically rebalancing. What should you begin at 50/50 and simply promote whichever one is greater, however don’t do the rest to rebalance? Sure, the AA could be very more likely to drift to the inventory aspect, given a protracted sufficient time frame, however so what?
Sarcastically to this dialogue, all SWR calculators and spreadsheets that I’ve seen withdraw evenly from all belongings within the backtest. I’ve but to see one have the choice to take from the upper “out of stability” asset… can be attention-grabbing to see if there’s a materials distinction or if it’s only a psychological help, like DCA.
Precisely. Most assume you wish to preserve a continuing AA, however there isn’t any want to do this.
Get most of it proper and do not make any massive errors. All else being equal, less complicated is best. Easy is as easy does.
Re: Spending down cash in a stock market downturn – does this actually work?
dbr wrote: ↑Thu Sep 05, 2024 3:20 pmBroken Man 1999 wrote: ↑Thu Sep 05, 2024 2:48 pm
Perhaps those that worry promoting equities in a inventory market downturn ought to take a look at their inventory holdings differently:If one is a long-term investor who has been investing in Whole Inventory Market Index mutual fund you might have many shares of the mutual fund that you simply paid a considerably lower cost than the present worth.
Consider your exercise of promoting right now with Whole Inventory Market down some quantity from the ATH this manner:
Wow, I simply offered a few of my Whole Inventory Market Index mutual fund I purchased in August of 2015 for $49.78 for $132.33!Perhaps pondering like that makes any sting lighter.
Damaged Man 1999
It’s true that the VTI I’ve in my taxable brokerage account is now appreciated 460% over its price foundation. I assume once I promote a few of it to make a withdrawal I haven’t got to fret that I’m promoting inventory when it’s “down.” That is the sort of factor that makes me surprise what this “down” factor is meant to be about. I imply, actually, aren’t folks smarter than that.
Sure – “down” as measured towards what? Worth yesterday or 20 years in the past?
“Each deduction is allowed as a matter of legislative grace.” US Federal Courtroom
