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Keep Calm And Invest On

December 31, 2018 by Mr. 1500 Days 19 Comments

  • Tyrion Lannister: l’m the captain of the ship, and if the ship goes down, l go with her.
  • Lord Varys: That is good to hear. Though l’m sure many captains say the same while their ship is afloat.

Keep Calm

The markets have had an interesting couple of weeks. And by interesting, I mean bad:

But how bad is it really? If you pay attention to the media, you’d think that the end is near:

From The Guardian

Take a step back from the edge and realize that despite all of the noise, the S&P 500 is back to where it was about 14 months ago. Contrast this with March 2009 when the index hit a low of 666, a number it hadn’t seen since 1996 (13 years!). And the most recent fall comes after a market that’s been charging upward for almost 10 years. In this perspective, it’s much less scary:

meh.

But, we still need to talk about how to prepare the mind for bad weather.

Storm Preparations

When is the best time to prepare for the following events?:

  • hurricane
  • divorce
  • old age

Hint: It’s not when the storm comes or your spouse walks out on you.

The time to prepare for shitstorms is when skies are clear and sunny. You don’t buy home insurance in a hurricane or negotiate terms of separation in the middle of a bitter battle. You don’t wait until you’re old and grey to eat well and exercise. The same goes for money.

The best time to plan for a downturn is when markets are happy and healthy. Consider the following:

  • How would a 30% drop in the S&P change your financial plan? Would it make you crazy with anxiety?
  • Are you the type of person who wants two years of cash on hand to ride out storms or are you OK with an emergency fund of $0?
  • If the market experienced a couple bad years, would you stay afloat?
  • Bullet points are a strong indicator of lazy writing.

While I have no idea where the market is going, keep in mind:

  • Investing is a long-term game. Over time, productivity gains and population growth grow economies which grow investment portfolios. But in the short-term, the markets are subject to the whims of politicians and geopolitical events.
  • Building on the above, when I put money into the stock market, I expect it to be there for at least a decade. For more on the topic, check out Mr. Collins excellent Stock Series and/or book.
  • Despite the recent market fireworks, 2019 could be much more chaotic. The trade war is only on hiatus. The North Korean nuclear issue hasn’t been resolved and is actually worse. Then there is American politics… Mr. Market doesn’t like uncertainty.
  • Timing the market is very difficult. Don’t forget that you have to be right twice; it doesn’t do any good if you sell at the top, but fail to get back in at the bottom.
  • Economic cycles are natural. Nothing goes up forever. They don’t go down forever either.
  • Yes, more bullet points; more lazy writing.
  • And on the topic of lazy writing, semicolons are another strong indicator.

Think long and hard about your plan before the market takes a big, steaming dump. The dump WILL happen and it won’t be comfortable, but it will be easier if you’ve set your mind right before it happens.

Keep Calm And Invest On

I had some money laying around that I was saving for a real estate deal. Instead, I threw some of it into the markets on 12/20:

I have another $30,000 in cash that I’ll throw into the fire if markets drop another 10%. Bring it on baby. Buy low, sell high. But, I wasn’t always this way.

When the Great Recession kicked my portfolio in the groin, I freaked out. I cut my 401(k) contribution and didn’t look at any of my portfolio balances for years.

Now, I’m in a different place. I know that no matter what the markets do now, there is a strong probability that they’ll be higher in a decade. I lose zero sleep when Mr. Market has a hissy fit. Instead, I welcome the drops by putting more dollars to work.

When the clock turns over to 2019, Mrs. 1500 and I will resume contributions into our 401(k) plans. If markets get really bad, we’ll throw some more after-tax money into the fire too.

If you’re investing for the long-term, I hope that you’re continuing to contribute money to the markets. The time to go shopping is when everything in the store is on sale. This is no different for the stock market.

Everything is going to be alright.


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Filed Under: Early Retirement Tagged With: stock market

Reader Interactions

Comments

  1. Dave @ Accidental FIRE says

    December 31, 2018 at 4:38 am

    Having been fully in vested in the 2000 and 2008 crashes, like you said – this ain’t nuthin’. It’s just a minor sale.

    Happy New Year dude!

    Reply
  2. Joe says

    December 31, 2018 at 4:46 am

    Retired people generally don’t have new money to put into the markets or their 401K, unless they are trying to time the markets. They just have to take what the market gives and depend on asset allocation.

    Reply
    • Mr. 1500 Days says

      December 31, 2018 at 4:59 am

      Yep. I’m fortunate here.

      But, I wouldn’t say that retired people don’t have to worry about investing money either. Many have more income than they can spend from dividends, deferred compensation plans, required minimum distributions, etc.

      Reply
      • Joe says

        January 1, 2019 at 7:02 am

        I think if someone early retired with a plan to withdraw 3-4% for living expenses, they are not going to have any leftover dividends for new investments, nor any RMDs. Not too many early retirees have def comp.

        Reply
  3. JRobi says

    December 31, 2018 at 4:56 am

    My boring, dollar-cost averaging monthly investments continue on despite the storm clouds…..and I just sunk some cash I had laying around into some high dividend-producing stock on sale, so maybe I’ll also get some growth mixed in if the stock market rebounds.

    I am convicted by the following statements:
    • Bullet points are a strong indicator of lazy writing – I thought I was just being efficient….
    • Semicolons are another strong indicator; really?

    Reply
  4. Michael from Foxy Monkey says

    December 31, 2018 at 5:29 am

    As counter-intuitive as it may sound, bad returns today are good for our future money. It’s not easy to invest in market downturns, but it’s what separates the professional investors from the rest.

    Great post, carry on!
    Michael from Foxy Monkey recently posted…Why a stock market crash is actually good for youMy Profile

    Reply
  5. FullTimeFinance says

    December 31, 2018 at 6:22 am

    We will drop our Roth IRA money on January 2nd as we do every year. The market can go up or down at any time. Long term it goes up though long term could be 6 months or thirty years. No one knows anything about the future so invest accordingly.

    Reply
  6. Wade says

    December 31, 2018 at 8:22 am

    I am fully invested, so I do not like December drops.

    401k was maxed out. Roths maxed out. HSA filled up. I did re-balance as we were 3% off between stocks/bonds. I managed to buy $500 2 times after the Christmas spend-a-whammy-shop-a-riffice-time.

    2019 should be interesting. Will the drops continue or find some stabilization ground? Nobody knows.

    I follow a number of blogs and the “December Updates” will not be pretty. Really the first sizeable drops since 2009ish. Many blogs started after this point.

    It happens and those $100k, $200k+ dips will come and go. Happy new year!

    Reply
    • nadir says

      January 2, 2019 at 3:12 pm

      Look on the bright side. A December drop can lead into a January drop or at least it’s a low. All your account maximums for 2019 reset to $0. Time to max them all out again at a discount.

      Reply
  7. freddy smidlap says

    December 31, 2018 at 10:26 am

    i’m glad i raised cash back in october from 3% to 17% of the portfolio. it was something i was meaning to do and writing about it and our proximity to retirement was the big driver of that. how could i put it on the page and not follow through? i’ll take another look later this week and if the stocks have shrunk to make the cash balance over 20% i’ll “rebalance” to maybe 18% and keep doing that if stocks keep going down. it feels good to have 4-5 years of living costs in cash just in case.

    all that being said it sucks to see over a 100k haircut in a few months.
    freddy smidlap recently posted…A Smidlap ChristmasMy Profile

    Reply
  8. Danny the Pizza Guy says

    December 31, 2018 at 11:41 am

    For the first time ever last night I invested my entire paycheck into the market. I was more than happy to do it, especially given the current climate. These days I’m way more worried about making sure the Personal Pan Pizza is eating enough and getting sleep (or more like us getting sleep) 🙂

    Reply
  9. wendy says

    January 1, 2019 at 6:56 am

    • Bullet points are a strong indicator of lazy writing.

    Jeez Carl, I almost spit out my coffee laughing
    What about the liberal use of graphs, charts, and pasted gifs; fills up a lot of page space, eh…? 🙂

    Best wishes for 2019 to the 1500 family and readers!

    Reply
  10. JL Collins says

    January 1, 2019 at 12:18 pm

    “You don’t wait until you’re old and grey to eat well and exercise.”

    *Wait.
    *What?
    *That is my; plan
    *Oh, and
    *thanks for
    *the link
    *s

    Reply
  11. John Massie says

    January 5, 2019 at 8:34 am

    As I navigate my ship to the retirement waters, this downturn is just what I needed. I am converting my remaining IRA’s to Roth IRA’s to take advantage of the downturn. As part of my planning, I use a tax calculator to determine how much I can convert to keep me in my budget. I have budget $20k per year in federal taxes and as the market sinks I can convert more shares to Roth. I have $130K left to convert and I will do so over the next 5 years to have all accounts completely converted before I retire.
    People ask why I am converting now. 1) More shares can be converted, 2) I have the cash to pay the taxes now, 3) It will allow me to take SS earlier and not have any of my SS taxed. 4) I firmly believe that with the new socialism that is hitting Washington that taxes will only be going up.

    Reply
  12. Revanche @ A Gai Shan Life says

    January 7, 2019 at 5:45 pm

    Same as you!

    I had been holding on to some cash, anticipating some drops, so I took that opportunity to buy when the market took that dive. I’m going to keep gathering cash throughout this year and stay on the lookout for any more drops. We’re lucky that at the start of this recession (well, whenever it decides to start), we’re still working and our debt is limited to a couple mortgages. I started tracking money and blogging in 2006 but didn’t have real assets until about 2008. I’m hoping our next decade starting from now will see the same level of exponential growth we had in the last one.
    Revanche @ A Gai Shan Life recently posted…2018 Goals: How’d we do?My Profile

    Reply
  13. nick says

    January 9, 2019 at 4:34 am

    Investing I think is very important in everyone’s life. Your article is really very good and very helpful too.
    nick recently posted…5 Reasons Your Property May Not Be Selling (& How To Fix it)My Profile

    Reply
  14. Emily Brown says

    January 10, 2019 at 5:23 am

    Investing is key in a business oriented person’s life.Putting money and focus on something you want requires patience since it builds with time.Make the right investment to ensure good returns which provide more opportunities to invest further.No matter how small it is,try investing in profitable things.
    Emily Brown recently posted…10 Money Saving Tips That Will Help You Get Through the MonthMy Profile

    Reply
  15. Susan says

    January 14, 2019 at 4:19 am

    Investing on the right place is the right move and pretty good tips up there it might be very helpful for people who are retired and thinking on how to invest their retirement funds.

    Reply
  16. Desmond Mar says

    January 24, 2019 at 8:53 am

    Great thoughts. Stock market crashes are just part and parcel of an economic cycle. Stay the course is the way to go. In fact for the past 90 years the stock market is still on uptrend despite countless stock market crashes. https://www.macrotrends.net/2324/sp-500-historical-chart-data
    Desmond Mar recently posted…How to Calculate Your Net Worth (And Why it Matters)My Profile

    Reply

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Freedom!

My goal was to build a portfolio of $1,000,000 by February of 2017; 1500 days from the birth of this blog (January 1, 2013). And hey look, I’ve since retired!

Investments only (primary home excluded)
1/1/13 (The Start): $586,043
1/1/14 (1 Yr Later): $869,635
1/1/15 (2 Yrs Later): $987,351
1/1/16 (3 Yrs Later): $1,057,961
1/1/17 (4 Yrs Later): $1,257,128
1/1/18 (5 Yrs Later): $1,527,701
1/1/19 (6 Yrs Later): $1,549,440
1/1/20 (7 Yrs Later): $2,035,040*
1/1/21 (8 Yrs Later): $3,379,746**
1/1/22 (9 Yrs Later): $4,762,642
1/1/23 (10 Yrs Later): $3,112,821

2023: Investments only
1/1: $3,112,821

Overall
2023 investment gains: $0
Investment gains since 1/1/2013: $2,526,778
Net worth***: $3,342,821

* The big jump between 2019 and 2020 was partly because we bought another home, but kept the previous (much more expensive) one as a rental. We have since sold it.

** Tesla.

*** Includes our primary home equity in addition to our investment portfolio.

Finally, we still have about $290,000 in mortgage debt (which I love!). No regrets about the debts!

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Investing is risky business. The information contained on this site is for informational purposes only. As with all matters financial, proceed with caution. Do your research and seek professional advice.

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