People tend to freak out over market farts. And I always get well-meaning people asking me if I’m doing OK when Mr. Market isn’t so happy. While it can be tough to watch 20% of your net worth evaporate in a couple of days, know that:
- It’s normal: Short-term volatility and non-linear growth are what you sign on for when you invest in stocks. It’s the price you pay for returns that beat bonds or banks over the long term.
- Zooming out, it’s not that bad: Looking at a chart of the S&P 500, we’re back to where we were at a couple of different times not even 12 months ago:
What To Do?
If you’re still in the accumulation stage: These market farts are great! You’re buying the same thing you bought last month, but at a discounted price.
If you’re going to retire soon: If you don’t have any cash (see my next point), perhaps it’s worth sticking around for a bit longer to accumulate a buffer.
If you’re recently retired: I hope you have a little cash cushion to live on. When Mindy leaves work, we’ll keep a little cash on the sideline. In times like these, we’ll live off of that instead of selling investments. We’ll keep 6-12 months of cash around.
If you’ve been retired a while: You’ve had the incredible fortune of benefiting from one of the greatest bull runs of all time. Since 2010:
- There have only been two down years. TWO!
- The markets returned over 10% ten times
- The markets returned over 20% six times
- The markets returned over 30% twice
These returns are staggeringly good. If you lived by the 4% Rule and retired in 2010, you have way more money than what you started with:
And finally, if you’ve unexpectedly lost your job, I’m sorry. My career lasted two decades and I lived in constant fear of losing my job (more below). I’d have horrible nightmares about it. I’d wake covered in sweat, my heart racing. It was terrible.
My fear was for nothing as I never lost a job, but I’m really sorry if this is something you’re going through now.
Us
I looked at our net worth this morning and we’re now down over a million from our all-time high set just back in February. Mindy and I may kill or postpone a big project we had been working on, but that’s fine. The project would have been fun, but life has already exceeded all of my expectations. I have nothing to complain about and much to celebrate.
My reason for pursuing FI was always security. Childhood chaos is tough. Money made me feel safe and secure. It puts distance between you and the past.
The more money you have, the more resilient you become. Life can throw a lot of shitballs at me which I can deal with either because I have the time to solve them or the money to pay someone else to solve.
You
I hope y’all are doing OK. If you’re reading this, you’re probably a saver, so can weather a financial shitstorm. At some point, it will stop raining and the sun will come out again. Life will go on and you’ll be stronger for having dealt with a little adversity.
Onward an upward.
Also see JL’s wise words.
Hi Carl! Hope you, Mindy and the family are doing great, even though I know it has been a while.
I definitely fit into the “If you’re recently retired” camp. Well, not retired. More like we flipped roles for several reasons other than money, somewhat similar to what you and Mindy did. The 12-18 months of cash cushion, among other things, has given us the confidence to make this extremely unusual move, by normal standards.
I still remember your words of “Your kids just want your time” which ring truer with everyday that passes. I am incredibly thankful for every moment I get to spend with them. Even a month into this new world there has not been a shred of regret. But like anything, it’s a work in progress 🙂
I like to keep 2-3 years of cash cushion because the average length of a bear market is around 9 to 12 months from peak to trough but the average time it takes for the market to recover after a bear market is around two years.
Exactly! Those of us who have been in the FI game for a while have done this dance before. If you’re doing it right, you have an emergency fund and some low risk stuff, so you can just sit back and watch the rest go up and down. And if you’re not doing it right, now is a great time to build up your safety net.
I lost my job at the end of 2008 and it seriously felt like I would never work again. One thing that really helped me is that my grandfather left a letter about what is was like in the Depression. He said that the problem wasn’t that there were no jobs, it was that there were no good jobs. That made me feel good about all of the crappy temp jobs that I got by on until I found my next permanent gig a year later. So for all of the folks who are facing a job loss or who have already lost their jobs, what you are going through sucks and my heart goes out to you. But just know that this won’t last forever and you will be back.
“My reason for pursuing FI was always security. Childhood chaos is tough. Money made me feel safe and secure. It puts distance between you and the past.
The more money you have, the more resilient you become. Life can throw a lot of shitballs at me which I can deal with either because I have the time to solve them or the money to pay someone else to solve.”
Samesies. Love it.
This is my first big dip since knowing about the FIRE community. I am 46 and will be retiring this summer and it is painful to watch this. In the past down markets, I had sold, pulled money out, held it out too long and got back in at a terrible time. Oh, and I didn’t contribute while it was down as well. Ugh….I just didn’t know any better.
Now, I am just riding it out and will keep contributing. I feel that my knowledge now, reading posts like this, have all educated me to make smarter decisions and understand that dips are part of the market Thanks for taking the time to post.
Tyler! I made bad mistakes too. Back in 2008, I stopped contributing to my retirement accounts and put my head in the sand for 3 years. Whoops. I’m sure that’s a 6 figure mistake already. It will eventually be a 7 figure mistake. Better to learn those lessons early on though.
And you could be in an awesome spot to retire. I’d much rather retire after a bunch of economic chaos when everything is on the way back up than at the top of a bull market. Sequence of returns and all that. You’re going to be alright.
When you make it to Colorado, let me buy you your beverage of choice to celebrate!
Hey Carl – great post as usual – an I needed this – wife retired in Sept. I still work part time plus in a good situation that is very flexible and allows us to travel. We are just a bit older than you and Mindy and are very similar. This recent drop in the market had me very worried. We are on coast fire and the part time job pays all the bills and allows us to still save a bit. However seeing the drop had got me anxious. My wife is the best – don’t worry about we are fine and if I need to work part time we can. Just watched your JL Collins link and it so reminded me to relax and reflect that this is to be expected. We are still in it for the long term and live below are means and will be ok…. We are planning a route 66 road trip in Sept and maybe coming back to MI via Colorado on the way back and see the town of Longmont (the mecca of FIRE) if so will shoot you a message and the first beer is on me….
Thanks again for the great post
Kevin! Mindy is the same! She calms my ass down when I start to get a little nutty! 🙂
It’s all going to be OK. Hell, it could all bounce back next week. Who knows.
For me, having a little cash to ride out these things goes a long way to saving my sanity.
Longmont visit! That would be awesome! See you in the fall!
Hi Carl, I checked in to see if you wrote anything about the recent market downturn.
Thank you for this post…..
I think we are going to hear a lot of “ but this time it’s different!!”
And I will hear JL’s voice saying “Nope. Every market drop feels like “This time is different.”
Hope to see you soon!
Mahnosh! Hope you and S are doing awesome, despite the not-so-fun economic events.
I’ll probably be out by you this week! Hope to see y’all then!
Hi Carl,
For selfish reasons, I love market fluctuations. I am in accumulation phase and I don’t have much cash to put into market. I just increased my contribution from paycheck. But damn, next paycheck seems too far.
Every turn, life has few teachable moments. I want to capture the learnings and move forward.
Hoping everyone, no matter where they are in their journey, will come out positive at end.
Cheers!!!
The funny thing with all of us FIRE minded people is that we all tend to live in a world of scarcity. We focus on whether we have enough saved to live on 4% and quit our jobs. This makes us feel like any lost money is terrible.
If you forget about FIRE for a minute though, we can realize that we’re actually insanely rich compared to the average American. While we might lose more in total dollars we’re so much further from actual financial trouble than most.
If you think about it in that light it makes it a little easier. You may have lost a million, but 90% of your neighbors will never even see a million in their lives.
Wow, great comment! This is sooooo true: “This makes us feel like any lost money is terrible.”
Life is pretty great.
Hey Carl, thank you so much for this encouraging and grounding post have been following you and Mindy for years. Have lived with the FI mindset for decades. Was so great to stumble upon this community of like-minded folks. This has supercharged my FI journey.
I have been retired for several years. Always have lived well below my means. Took this opportunity to scrutinize the debit column. Canceled subscriptions and went to Wi-Fi hotspot from my phone. Freed up 100 or so a month… Should have done that a while back.
Spent some time years ago in the front range. Rock climbing in El Dorado Canyon and hanging in Boulder. Love that area.
Thanks for the kind comment!
This too shall pass and we’ll be OK.
Look me up next time you make it back here!
G’Day Carl! Hope you are all looking forward to Summer being here soon? Rode a Waymo a few times in SF over Spring Break with my 17yo daughter. We were so excited before we took our first ride…more anticipation than for anything Disney has ever had to offer. Certainly felt like the future has arrived.
cheers!
“…more anticipation than for anything Disney has ever had to offer.”
That’s great! It’s quite amazing, isn’t it?
Summer! I’m more of a cold-weather person. I don’t like heat and it gets toasty here in Colorado towards the end of summer.
Hey Carl!
Thanks for posting another update!
I’m now about 8 days away from retirement… have been helping some family with medical concerns & the time has come to get rid of the distracting job that is too much to juggle right now, and move back home to help my parents and take the time to take care of me too.
Finding the FIRE community and buckling down to learn and apply what I learned is why I can pull the trigger now, despite the current stock market and economic uncertainty. The ability to say that I need to go help my family NOW is priceless! Thank you for all the posts over the years – it helps to read, when so many folks around me are spending their hard earned money on things other than their freedom.
I’ll be heading east at the end of May/early June and will be stopping in the Loveland/Longmont area – so I’ll give you and Mindy a ping – see if you’re up for frosty libation!
Wendy! We will be around! See you soon!