Bear markets - strategies for coping

JohnWinder

In this simulation buying the dip, be it 5% or 50% or anything in between, gave a worse outcome than regular investing. https://www.bogleheads.org/forum/viewtopic.php?f=10&t=356671&p=6196749&sid=9378de92a67b7e76ee225011c3d84d72#p6196749

Swipe

JohnWinder said:

In this simulation buying the dip, be it 5% or 50% or anything in between, gave a worse outcome than regular investing. https://www.bogleheads.org/forum/viewtopic.php?f=10&t=356671&p=6196749&sid=9378de92a67b7e76ee225011c3d84d72#p6196749

I do both. If I'd lump summed my house sale proceeds at the end of December as I was told by everyone here and on other forums, I'd be down a whole lot more than I'm am already and would have none left to buy at these levels. I'd rather wait for the Fed to stop raising rates before I go all in.

dunstonh

The MiFIDII EU directive was flawed in a number of ways but one of the flaws was the requirement to issue statements quarterly.

The vast majority of people do not check their values until the statement arrives and many don't even do it then.  However, checking once a year means you miss most of the volatility.     We had one person come to us moaning his value fell at the end of 2018 saying his investments had never gone down before.     We looked into it and he had held unit linked equity funds since 2000.   So, clearly they had gone down many times.    In the early years, he was paying regular contributions.   So, those countered early volality.     The rest of the time, the drops and recovery happened between the annual statements.  So, he never saw it.     With quarterly statements, it draws your attention to the volatility.   And some people just cannot handle it.

Those that check their values daily are just doing their sanity no good whatsoever.

bd10

Reg_Smeeton said:

Inspired by today’s Monevator post... this is my second experience of a bear market as an investor. The Covid drop and recovery was so rapid, that with the added distractions of the pandemic, it hardly touched the sides. I’m possibly a bit better off than some others in this bear market as I’m slightly overweight on UK and Value stocks which are holding up well, but have to admit I’m starting to get the niggling feelings in the back of my mind that are chipping away at my motivation. I think it doesn’t help that I hit a personal finance milestone about four months ago and despite further contributions I’m now below it again!

Do other posters feel this? If so, how do you cope with it?

I didn't like the looks of things in Q4, so before NYE I massively reduced my risk position. Still keeping a handful of non-US stocks, rest in strategies/asset classes that have empirically proven to somehow withstand chaos. Every bear market is different, so nothing is bulletproof. Could have gone all cash but that's just a hassle not to mention the commission, YTD fluctuates between flat to -4% across all accounts. I'll keep saving up when things get interesting again, right now, just trying to hold enerything together.

As for UK large cap vs other markets, the game was easy so far to favour FTSE100 over S&P playing the combination of (a) value vs growth rotation, (b) commodity/minerals/mining and (c) the odd bank when rates expectations rose.

Now with a recession on our hands, commodities in general have been coming off, AUD weaker, question mark over China, so maybe FTSE100 is not the preferred hiding place. Don't know.

youth_leader

Thank you for starting this thread.  I do feel a bit wobbly this morning, I've just received my half yearly review, and my investment has dropped by £20K.  

I was widowed in 2016 and found an IFA to invest part of the lump sum I received for my future care.

I'm 65 now, so hope not to need it for ten years or more, or not at all so my children benefit.

Eyeful

Swipe said:

How can you buy the dip if you don't check them?

How do you know its a dip at the time you are buying? It could just fall farther, so instead of buying the dip, you end up catching a knife. 

Prism

Swipe said:

How can you buy the dip if you don't check them?

If you buy regularly then you end up buying the dip along with buying the peak. For example, I buy regardless of price so right now I guess I am buying the dip. 

JohnWinder

Here's a brutal take on catchy slogans:

'Also, of course, keep in mind that catchy slogans sound good-- a) "Buy the dip" b) "Buy low, sell high" c) "Don't try to catch a falling knife" d) "Cut your losses and let your profits run" --but a and b are the exact opposite of c and d. Slogans like "buy the dip" are not really sound or consistent advice on what to do. They are really a stock of things that pop into your mind as pseudo-justifications for whatever it is that you want to do. If you want to buy, you tell yourself that you are "buying the dip." If you want to sell, you tell yourself that you are "cutting your losses."'

Swipe

Eyeful said:

Swipe said:

How can you buy the dip if you don't check them?

How do you know its a dip at the time you are buying? It could just fall farther, so instead of buying the dip, you end up catching a knife. 

I'm 40% cash at the moment and only buying back in very slowly. Of course it could fall further but no one can time the bottom and no one knows if it was the actual bottom until the future. All I can ensure is I'm buying some units at a lower price than previously.

Swipe

JohnWinder said:

Here's a brutal take on catchy slogans:

'Also, of course, keep in mind that catchy slogans sound good-- a) "Buy the dip" b) "Buy low, sell high" c) "Don't try to catch a falling knife" d) "Cut your losses and let your profits run" --but a and b are the exact opposite of c and d. Slogans like "buy the dip" are not really sound or consistent advice on what to do. They are really a stock of things that pop into your mind as pseudo-justifications for whatever it is that you want to do. If you want to buy, you tell yourself that you are "buying the dip." If you want to sell, you tell yourself that you are "cutting your losses."'

So are you suggesting I should have just lump summed all my house sale proceeds into the market in January at the all time highs? Even the 2012 Vanguard study says that DCA is statistically better over lump sum in a falling market.