My issue with stock market bubble fears
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Anonymous
| Market rise and fall. If you are in the market for the long-term, even a big crash isn’t gonna kill you. That’s what I don’t understand. Everyone talks about the market crashing, but if it’s crashing from being so high, and you’ve been in it for a long time then you’re still always gonna come out ahead. So what’s the problem? |
Anonymous
| You are assuming most have been it for a long time or have t he ability to ride it out or have diversified their assets and only have whatever percentage in there. At any given time there are people who need to withdraw for whatever reason. Brutal is that’s at a major downturn. I also think you are only picturing a correction, not a crash |
Anonymous
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There is no problem really. Most Americans don't have a pension. So most closely follow the stock market. It's human nature to have your emotions all over the place when you know the market has a non negligible impact on your life now and tomorrow.
Anyways most people have money in an index fund and are pretty much on cruise control. Whatever happens, it happens. Such is life. |
Anonymous
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The issue is that the bubble is so heavy at the top of the market, which has become outsized, so even people with broad market index funds are gonna take a hit.
But yeah if you have a long run view, you shouldn't really be doing anything, and we aren't. It's just hard to watch so many with so much money be so stupid, again and again, and they aren't the ones who will really pay the price. That plus the environmental impact of the energy usage of all these data centers. |
Anonymous
| Problem is when you near time to take money out or annuitize. We rode out the dotcom crash, 2008. We moved to more stable investments in late 2019 in our late 60s and never looked back. |
Anonymous
No, I’m talking about a crash. We’ve been through several since the 90s |
Anonymous
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It’s because people are emotional and let their political feelings dictate investment choices. They don’t think about tax consequences, having to be right twice (selling at the top of the market and buying at the bottom), or the fact that we do not live in a time period that is any more unique than other time periods. Enormous “unprecedented” events that have outsized market impacts actually happen fairly regularly throughout history and the obvious way through is to dollar cost average broad based index funds and to not panic sell.
And yes - as you note, if the S&P 500 raises 40% over 3 years than “crashes” 40%…and the starts going back up, it’s more likely you are going to screw up the timing of getting in and out of the market than just riding it out. |
Anonymous
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A lot of people don't have the time to ride out a stock market correction or crash, but they also need to stay invested in the market so their investments grow enough to cover a longer than expected retirement.
The problem is mostly for the retirees who are now living off their 401ks. Someone who has to withdraw funds for living expenses during a downturn is forced to sell assets at a low point. They've got to lock in the loss and they don't get to benefit from the eventual recovery. I'm GenX, so I didn't care much in 2000, 2008, etc. because I had plenty of time before I needed that money. But now I'm getting closer to retiring and hoping that when we have a correction (or a crash), I'll still have time for the market to recover before I need to use that money. Ageism in the job market is very real. If I lose my job in the next couple of years, I fully understand that I'll be getting a job at a much lower salary, if I get one at all. So that 401k money becomes even more important to me. That's the problem. At least it is for me. I mean, just take a look at the average and median 401k amounts for people in their 50s and 60s, and you'll see why they fear a crash. |
Anonymous
We have now gone a decent stretch with no real market downturn - and when it did go down, like Jan-Feb this year, it quickly climbed back up again to record highs. This has caused many people to drift into having too high a percentage of their assets in stock funds. Many people believe they have a risk tolerance that is higher than they actually do. Many people freak out when they actually see their investment balances declining. Many people end up needing their "long-term" savings earlier than they expected. In the middle of a crash, nobody knows where the bottom is. There absolutely will be another multi-year crash. Nobody knows when. None of this means we are in a "bubble" now, but it does mean that people are not dumb to be diversified, even if it means they are earning lower returns than if they were fully invested in stock funds. If you were really not worried at all, you should be fully invested in uncovered call options. |
Anonymous
Isn't the problem really self-explanatory? The market is basically gambling. When the market goes down, you are losing money. Who wants to lose money and how much is the more important question. It may not kill you to lose some but losing some means you have less to continue playing the market with = making less money as well. I mean there's "kill you" in that you lose all your money and there's "kill you" where you lose a lot of your money. It doesn't matter how long you're in the market for, it matters how much money you've lost in terms of how much you're invested. Someone who has $1M in the market, the market may tank and they lose $900K - unless they diversified enough to lose $300k. In any case, if you've lost 30% of your money, it may not "kill you" but bro - you gonna be happy about that? And are you ALWAYS gonna come out ahead if you have no more money to invest? Another issue is when you are expecting to cash out your winnings aka sell some stocks. When you sell low, you make nothing so yeah, it's quite upsetting when the market takes a big crash..I'm really not sure what part of all this makes no sense to you??! |
Anonymous
This. |
Anonymous
| Above is a good outline. We are retired, so we are not adding to what's already in the market unless we make more than what we take out (which so far, we have been able to do). My concern for my famoly is what happens when we have to take out the principal to live, rather than live on the interest |
Anonymous
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This thread is why I'm so glad that Social Security was never privatized. Remember when George W. pushed for that in 2005? I do. I think the 2008 crash put a stop to that kind of talk, hopefully for good. Social Security benefits might not be a lot, but they are a backstop for many people and for some people they are the whole deal. |
Anonymous
| OP here and I continued to be confused. The responses along the lines of “not everyone has time” are kinda bullshit, right? I mean, the whole idea is to buy and hold, usually to ensure your retirement. So you’re supposed to start early and hold, and if you do that you can ride the ups and downs without a problem. So what am I missing? |
Anonymous
But if you’re Gen X don’t you still have time? And haven’t you been benefiting from the strong bull market in recent years? |