Are you planning for a stock market correction

dont_use_vistaprint

It is often said that failure to plan is planning to fail. Right now lots of people with stocks , particularly certain trackers and tech are anxious about a big correction, it almost seems inevitable and a big one could be followed by years to recovery, another lost decade maybe ? 

But many seem to be very relaxed , citing corrections are normal, and can't be predicted , maybe they are not planning on retiring for another 15+ years , or don't  have huge amounts invested, or are so diversified that 3-5% is fine, it's hard to know, but what about everyone else, what steps are you taking 

[Deleted User]

Yes, I am.

- reduced equities holdings to 50%
- increased cash equal to 3 years income
- reduced exposure to tech, mag 7 and trackers period.

jaypers

Not really……if things drop I’ll buy more as they always go back up again! 

Zekko

With 15+ years until retirement, I'm staying invested in a low-cost global index fund.

Keep calm and carry on.

Alexland

dont_use_vistaprint said:

it almost seems inevitable

It is inevitable, there will be corrections and crashes, we just don't know when exactly.

I don't want to risk seeing my whole portfolio drop 50%+ anymore, it's been too hard a slog building it up in the past couple of decades, and I'm down to around a decade to go until retirement and only need modest 2% return above inflation to produce ample lifetime income. I'm not interested in risking events that might cause me to delay retirement as that would be the tail wagging the dog.

Equity risk premium seems low at the moment so it's not really worth going 100% equities right now IMHO as that's a lot of risk for low potential additional returns. So I've gone from taking more risk than I was comfortable with during the zero-interest years (in which equities were the only answer) to taking less risk now ILGs are offering both diversification and good returns. I've checked-out of the high risk club (for now, at current valuations at least).

I look at the US stock market and it doesn't look healthy from several perspectives but it keeps staggering upwards as there seems to be a lot of optimism hoping for past returns supporting valuations. That could be a problem if we see earnings growth tail off.

So like chiang_mai I've reduced to 50/50 as I don't want high volatility and don't need the potential upside.

Linton

My investments are important for current ongoing income. They are structured on the assumption that a correction could happen at any time so I dont need to do anything different now.  That is sensible planning. Reacting on increasing fears of some imminent future event is not, in my view.

OldScientist

The short answer is 'no' since, like @Linton, a correction is already planned for. The income from our investments is a fairly small fraction of our overall retirement income with an income floor currently consisting of an inflation linked (a fraction of which is capped) DB pension (and SP in future). We are currently at about 65% equities, so a correction that sees a drop of 50% will reduce our investment income by about a third which is a reduction we can live with (i.e., slightly fewer treats!). 

Eyeful

1. Your investments should not cause you to worry or lose sleep at night. 
If they are you need to reduce the level of risk you are taking.

2. I follow this simple guidance I state above. As I have told you before, I just ignore the financial noise in the markets and get on with life.

3. Your posts suggests you do not want to go down this route.
That's fine for you but expect a lot of worry & grey hairs along the way. 

[Deleted User]

Linton said:

My investments are important for current ongoing income. They are structured on the assumption that a correction could happen at any time so I dont need to do anything different now.  That is sensible planning. Reacting on increasing fears of some imminent future event is not, in my view.

It's only not sensible if later the investor changes back to their previous structure. In some cases, the fear of an impending fall is the catalyst that makes the investor adopt a more sensible and appropriate risk averse asset allocation. It would be good if we were all born with the knowledge and wherewithall to adopt the right allocations and structures from day one but for most of us this is a learning process where we do get there eventually.  

kempiejon

dont_use_vistaprint said:

It is often said that failure to plan is planning to fail. Right now lots of people with stocks , particularly certain trackers and tech are anxious about a big correction, it almost seems inevitable and a big one could be followed by years to recovery, another lost decade maybe ? 

But many seem to be very relaxed , citing corrections are normal, and can't be predicted , maybe they are not planning on retiring for another 15+ years , or don't  have huge amounts invested, or are so diversified that 3-5% is fine, it's hard to know, but what about everyone else, what steps are you taking 

Lots of people with stocks are anxious you say - are you projecting perhaps?

The sky is falling, gold is romping, Martin Lewis is doing stocks on TV to the great unwashed. 3-5%? When Mag7 explodes and contagion rolls around the world 30-60% is a big correction and 10 years or more to come back. If Russia doesn't start a war in Europe or China romp into Taiwan. Oceania had always been at war with Eurasia.

[Deleted User]

Eyeful said:

1. Your investments should not cause you to worry or lose sleep at night. 
If they are you need to reduce the level of risk you are taking.

2. I follow this simple guidance I state above. As I have told you before, I just ignore the financial noise in the markets and get on with life.

3. Your posts suggests you do not want to go down this route.
That's fine for you but expect a lot of worry & grey hairs along the way. 

I don't believe for one moment that risk tolerance is a straight line event that doesn't change. Risk is more akin to a sine wave that rises and falls based on events, perception, age and time. It's a brave genius who fixes risk tolerance at a certain level and doesn't change it, year in year out.