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No it doesn’t because technically everyone loses the same amount of their account % wise when the market drops, assuming the same exposure to equities (I.e. VTI, or similar). Assuming the same % of your NW is invested in the equities market it’s pretty ignorant for you to say you’re $200k loss on 2 million is worse than another guys $60k loss on $600k it’s still the same % of someone’s portfolio being evaporated. If a guy worth 200 million loses 20 million is that a bigger loss than you losing $200k on your $2 million? I’d argue the bigger your portfolio gets the less a 10-20% loss matters regardless of the raw #
I’m not arguing about percentage, of course it’s the same regardless of your nest egg size. I merely respond to your comment that you’re 100% in equities and you lost $60k. If you have bigger nest egg, it could 3 times that or more.
I’m not arguing about percentage, of course it’s the same regardless of your nest egg size. I merely respond to your comment that you’re 100% in equities and you lost $60k. If you have bigger nest egg, it could 3 times that or more.
Isn’t that obvious? It seems you’re implying it matters more if you “lose” a larger raw value. I’m saying it doesn’t. If it makes you feel better, go for it though.
I’m not arguing about percentage, of course it’s the same regardless of your nest egg size. I merely respond to your comment that you’re 100% in equities and you lost $60k. If you have bigger nest egg, it could 3 times that or more.
i have seen close to 60k moves in a day . 60k is no big deal it is the norm for for one of those exceptional down days when you accumulate enough . heck if it was only 60k i would be glad that is all it was ..
No it doesn’t because technically everyone loses the same amount of their account % wise when the market drops, assuming the same exposure to equities (I.e. VTI, or similar). Assuming the same % of your NW is invested in the equities market it’s pretty ignorant for you to say you’re $200k loss on 2 million is worse than another guys $60k loss on $600k it’s still the same % of someone’s portfolio being evaporated. If a guy worth 200 million loses 20 million is that a bigger loss than you losing $200k on your $2 million? I’d argue the bigger your portfolio gets the less a 10-20% loss matters regardless of the raw #
the problem with the logic , looking at percentage , is that for someone earning a " more normal salary " as an example but who has accumulated a tidy sum in their investments , that loss may be many years of salary vs a very high earner with the same amount accumulated .
the mental effect of being reduced by multiple years in salary can be very different than being reduced a few months like the high earner , yet we both can have the same amount in our portfolio .. .
i was never a very high earner but i did do well as an investor so the dollars represent different things to many people who watch dollars and not percentages.
as i always say , a 7% drop is no big deal but today that represents 9 years of me maxing out my 401k AT CATCH UP . that is not the case for someone still in their accumulating years or just starting out . that amount also represents a few years in withdrawals in retirement as well . notice i said years , even though it is a small 7% change ..
eventually you may not think think in terms of percentages , you think in terms of dollars and what those dollars represent , especially in retirement. but you need a certain level of equities so you need to be able to just accept it is what it is or take a reduced draw for life on fixed income ..
generally those who say they don't care , either have not accumulated large investment amounts yet , have decades to go , or are very high earners and can make it up . i doubt you will find many retirees or pre retirees who depend on markets for their survival who say they don't care about sizable "DOLLAR " drops regardless of percentage. especially because just 4% now represents a whole year of income .
Last edited by mathjak107; 12-01-2018 at 05:11 AM..
That still lacks context. Someone that earns $60k and contributes $6k/yr to their 401k feels it just the same as someone who makes $180k/yr and contributes $18k/yr when comparing a $60k loss to a $180k loss. Again all you are saying is because your # is bigger it is a bigger deal.
Let’s compare lifetime earnings and the % of that that’s been lost in the market over the past 2 months shall we? I guarantee you I lost a larger % of my lifetime earnings over the past months than you did regardless of if yours was a larger raw #. But again, my point was just because your # is bigger doesn’t mean it’s somehow a bigger deal than someone else’s. You guys are just assuming it is. By saying my $60k is quit and your $180k is real money.
However I will agree with you on it likely being different for people in or close to retirement, but again I probably wouldn’t want that much exposure if it did bother me. I’d looking into an immediate annuity to support my lifestyle or something along those lines if it bothered me.
most who accumulated sizable amounts will tell you that is not how we work mentally when it comes to our money . most do not think in terms of percentages who depend on that balance to set various aspects of spending , it is usually dollar based concern .' we tend to compare what we are down to annual salary or draw , or a car we could have bought or some large expenditure .
there is a difference between concern and worry . we all have concern when markets take a dip . but we all don't worry and lose sleep .
Last edited by mathjak107; 12-01-2018 at 07:22 AM..
well if the 60k means little to you then yeah i would say you have not reached the point yet in dollars where it triggers concern . let your balance continue to grow and then report back when your dollars down are 2 to 3x where they stand now since you are not phased at this point .
like they say , everyone has a price . well everyone has a trigger point of concern in dollars and you obviously are not there yet
Going back to my casino chips example in my first post.
I understand your point.
However, from my perspective, casino games are not a particularly good analogy for the stock market for the following reasons:
* When you play a game in a casino against the house, you have a negative expectation (well, there are some instances when you play with zero expectation). You never have a positive expectation. Some assert that games such as poker - where you do not play against the house - are not games of chance but rather games of skill. That is true of elite players, of course, but not true for most people who sit down at the table (I once played a no-limit hold'em tournament with 2800 entrants and I came in 2nd; yes, it is a game of skill even though I do not count myself among the elite).
* When you own equities, you have a positive expectation. You own a piece of a successful business model, a competitive business strategy, a distribution channel, a brand promise, a trained workforce, a supply chain, satisfied customers, etc. There is risk, of course - in fact the reason you can expect a positive return is because you chose to incur that risk (own the stock) when there are other people who evaluated it and explicitly declined to own it, for in their judgment the potential reward was not worth the risk.
I guess I’ve always looked at it differently after reading the Intelligent Investor, but perhaps you are right, perhaps at some point I won’t. I will agree with another point you made in that we are currently putting over $100k/yr into the equities market, so anything less than that in a drop isn’t going to bother me at all.
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Hopefully I’m at 2-3 million by the time I hit 50.
