Perhaps I am too rigid, because I'm an engineer and I tend to think in mathematical absolutes (that includes the uncertainty that's associated with stock/bond portfolio performance, but that volatility can be quantified and hypothesis tests can be formulated in the presence of noise with estimated confidence and power).Let me try this hypothetical - I inherit $1M a portfolio all invested in Amazon and Facebook. A month before shares are moved over to my brokerage, US govt for some reason bans internet! Both fall 50-60% by the time shares are settled in my account. What should I do?
Still sell them all and move to VTI/VXUS? Sure index funds will be down too with such a draconian govt action but not same degree as these 2.
Or wait it out a bit and see how things normalize? Surely internet won't stay down for ever.
Covid was once in a life time thing, I think OP did the right thing by not panicking and selling at the bottom. I would have done the same.
Maybe I don't have the the best example but life is more nuanced, we BH seem too rigid at times it seems.
"Or wait it out a bit and see how things normalize? Surely internet won't stay down for ever." -- This option seems like market timing. For me it's not something I'd do. If I inherited $1M in Taxable split among AMZN and META, I'd be unloading them per a windfall plan on a schedule (likely driven by limiting my LTCG gains to stay in the 15% bracket each year of the plan; if stepped up basis then probably a 1-year plan). I would not be acting on the news and changing the plan based on my speculation about what may (or may not) happen next.
"I think OP did the right thing by not panicking and selling at the bottom" -- I would not have been able to foresee the bottom before it happened, like most I could guess using technical charts with exponential moving averages, Bollinger bands, MACD trailing divergence, volume indicators, etc., but I won't know where the bottom was until it's been established as a historical event that happened in the past (at which point I can no longer take advantage of side-stepping the bottom or exploiting it for a buying opportunity).
Coming up with a plan that makes sense for some criteria important to the investor seems pretty easy. Sticking with that plan in the presence of market news cycles that evoke greed/fear responses is difficult, as is controlling most emotions. When it comes to financial plan execution, maybe some would say I'm a green-blooded Vulcan.
It wasn't always that way. I played with that technical analysis concept in my mid-20s (in retrospect, I'd say that was greed naïvely thinking I could beat the market). I got over that emotional investing mindset before I hit 30 after reading Bogle's Common Sense on Mutual Funds and finding Vanguard Diehards on Morningstar (now transitioned to Bogleheads.org). So perhaps I still have some holdover when I see that behavior in posters here; a voice whispering to me from my past saying "don't let them make the mistakes you made!"Statistics: Posted by bonesly — Fri Aug 16, 2024 9:11 pm