Pulldown and Correction and Crash, Oh My! - Wizard of market turbulences

Every time our patience in buy-and-hold approach starts shaking due to emotional pain of loss during above turbulences, perhaps we need to remind ourselves that stocks are always volatile, but market eventually always recover. Several studies have proved that those who tried to time it have eventually lagged the non-timers.

I have seen over 30 pullbacks, 12 corrections and 2-3 bear markets in last 3 decades of my investing in stock funds. If I had tried timing all of these, my portfolio would have been perhaps just half of what it is.

If we want to learn from history (all the best if you want to learn from your own mistakes of market timing), following chart might help in broadening our perspective about these short-lived pains ,which otherwise might seem quite long-lasting (without such perspective)

Comments

Post a Comment

Popular posts from this blog

How much one needs to save in retirement portfolio to retire comfortably in early sixties age

Wondering as how much one needs to save in retirement portfolio to retire comfortably starting with one's early sixties (say at 62 age) for next 25-30 years of joint longevity and be lucky enough to survive  extreme uncertain period such as 2000-2010 lost decade (with two major crashes resulting in virtually zero compounding )?  Needless to say, it all depends on household's ongoing expenses during retirement.  If one retires at 62, one can collect reduced social security pension (say 75% of full 67 age benefit). Non-working spouse can also collect half amount as spousal benefit at 62. Combined household reduced  benefit could be around 25K to 30K a year for professional workers like us. If household's annual expenses, including medicare/affordable-care health insurance co-premiums/copays (typically 5-6K annually for retired household for routine care) are in 60K range, then perhaps one needs additional income of 30K to 35K beyond social security pension. If one has retir
Read more

SPDR® S&P Semiconductor ETF (XSD) - Excellent small cap semiconductor index fund

Recently I came across another *semiconductor* focused low cost index ETF which seems quite promising index. It's called SPDR S&P Semiconductor ETF ( *XSD*). Unlike iShares Semiconductor ETF SOXX ( https://financial-well-being.blogspot.com/2022/01/iShares-Semiconductor-ETF-SOXX-Passive-Semiconductor-technology-index.html ), which focuses primarily in *large* cap, XSD focuses into *small and mid* cap semiconductor companies of S&P Total index. It's *equal weighted* index and that's why it's average capitalization is in mid and small cap.Overall it's comparable or *even better* than SOXX. For example... - It's PE is comparable to that of SOXX - Dividend yield plus earnings growth of 16% as compared to lower 13% for SOXX - It's 3/5 year returns of 23/22% is 20% better than that of SOXX's 19/18%. It tracks *semiconductor small cap* sector which has been one of the top performer in technology sector with close to *20% annual return* for last 5, 10 an
Read more

Why bonds must be always part of our overall portfolio mix

If one's retirement horizon is quite far away, they need not invest any retirement money in bonds. Bond's long term REAL (after inflation) returns are too low (just 2%) as compared to that of stocks (which is 7%). Note that above suggestion of not keeping any retirement savings in bonds for younger (below mid fifties) workers comes with a caveat. It's only meant for savvy  investors (with higher risk tolerance ) who are able to effectively manage pain of loss during stock market downturns and stay course  without losing any sleep. With 100% stock portfolio, pain of loss is expected to be most severe . So, unless you believe in long term potential of stocks and are willing to exercise patient, don't try 100% stock portfolio. Rather, like typical  retirement saver, stay with target date retirement funds (which typically has decent bond allocation) so that short term losses during crashes is emotionally  better manageable for your lower risk tolerance. Near retiree (tho
Read more