30% drops in S&P 500:
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Glad we werenāt around in the 1920ās.
This is a good summary IMO, only 2008 & 2002 had an awful return year to year. One pet peeve of mine is when a finchās writer picks some arbitrary date to compare things to instead of the calendar year.
We know many people who took all their money out in 2008 they tried to get back in well after the market rebounded. They had a tough time.
Iād bet our returns would be similar to this record. Some really great years over time.
Not sure why you would limit returns to year to year. People donāt necessarily invest or retire on year to year basis. Downturns donāt necessarily care about calendars. And unfortunately, many people take money out of the market in downturns (and then typically do not reinvest until the market has recovered at least somewhat ā selling low and buying high (on relative bases)).
Here is something else in terms of expectations of downturns in the market (looking at bear market (decline of 20%)):
https://www.hartfordfunds.com/practice-management/client-conversations/bear-markets.html
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IMO, year to year keeps financial people honest. Iām not interested in what my account has done based on some arbitrary dates someone pick. With calendar year, I can compare to the market. How am I doing compared to how is the market doing. You can easily look at things like retiring mid-year. YMMV>
I have no issue with bear markets money can be made there too. I like investing for the long term. But we keep a close eye on current yields and what the market is doing. I donāt find it difficult to watch our portfolio dip ( but not more than 20% which is my comfort level). 30% would take us two very good years to make up and that wouldnāt suit us at all.
What do you do if an investment dips more than 20%? Sell it?
I donāt think the info I have posted involves arbitrary dates. There is a definition of a bear market (20% decline). The dates that have been listed have been when that definition have been met and how long those bear markets have lasted.
With software/data available, you can calculate returns on a daily basis (for the past month, quarter, year and multiple years). I think only looking at calendar year ends is arbitrary as well.
But as you note, if it works for you, so be it. You (and your spouse if applicable) have to live with your savings/returns; no one else does.
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I love Hidden Brain. Listening now. Thanks!
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I mean that your portfolio needs to be able to withstand multiple bear markets over your retirement timespan without significantly threatening your security. That is why many work to amass a much larger nut than they actually need to throw off the annual income they desire.
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If something dips below 20% we usually sell it. Sometimes if it dip for a particular reason weāll reconsider. But usually itās gone.
Dates are fine depends on what you like. We have seen reports from various firms that tweak dates to make returns look better. We donāt look at daily returns but I do eyeball to see overall value of portfolio daily: Then check individual stocks once a week or every other week.
Got it. Yes, you do need to strive for a bigger nut than youāll rely on. Sorry the 20-30% got me.
I am very content to have my Vanguard Personal Advisor rebalance my portfolio as needed after she consults with me about upcoming earning and spending, and my risk tolerance. Easy peasy!
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I have often read that many investors do not realize the average returns for their particular investments because they try to time the market. Selling on dips and buying on gains rather than holding long term.
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Thatās my investment strategy, buy high, sell low. 
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Yes, I agree. I check multiple return values. IF you are saying something else I donāt understand. The portal we use letās investors check returns about 20 ways. So much info. Itās great not like years ago.
What I also said is we sell stocks that lose more than 20%. The reason is, itās very hard for the stock to come back and still get a return also considering the time value of money.
Some of our best stocks weāve held since the 1990ās. Many we hold for a while make our money then get original investment back and move on to something else. I love it when we hold stocks for more than 10 years. Not always possible but just great. We had a lot of early tech stocks. Harder to do these days IMO.
I retired almost 8 years now and havenāt touch my nut yet, Iām not going nuts about it though. One day Iām going to use it, Iām sure. I bought some more today, it may not be the bottom, but itās down enough to buy some more. Itās nuts to sell when itās down, so why not buy some more, hey thatās my counterintuitive stragety.
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one thing to consider during these downdrafts is some tIRA-to-Roth conversions āat a discountā so to speak.
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The January 2022 hit took all the gains we made in 2021. We are on the road for 3 weddings in 3 weekends in 3 distant states (last wedding is 1150 miles to home), and just before we left the latest ānoiseā on stock market - we just are on āholdā - our belief is if we got out we would not know when to get back in nor want to watch things with eagle eyes. We see our financial guy after our next āstate of the marketsā group presentation. When I get home I will look at week by week on what has been happening with our 401k, but I cannot control what happens nor can I have any certainty on forecasting what is going to happen.
More on the front of our concerns is another health issue of DH (2 bulging discs causing tingling down one leg when standing for even a short period) which means he has to cancel a trip with family which involves canoeing to camp site (fishing trip). Trying to get in with the spine MD he has seen before as soon as we get back. DH is not use to injury or illness so he is not handling well. Plus we have been at his parents house 2 nights, and walking in the door he is thinking of his mom (who died 3-2021) - they were in this house over 60 years. We believe one of the grand-daughters will be purchasing the house, but no rush - being held and furnished at this point like a AirBB except no cable. We have wifi off next door neighbor (who has use of garage and carport for his boats). Nice to have long-term neighbors. We have at our house as well.
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Thereās a couple of times when Roth conversions may not make sense.
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When you will move from a high income state to a low or no income state. if you live in California and plan on moving to Texas, Nevada, etc. Or NY to Florida, etc. If you convert Trad IRA to Roth before you move, that could be a more costly conversion than if you waited. of course the market could go up or down between that time period but all things being equal, state income taxes should at least be considered.
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Converting a Trad to Roth at age 63 - a couple of years before Medicare. Medicare premiums are based on income. A Roth conversion at the wrong time may force you to pay higher Medicare premiums as it may artificially inflate your income.
This isnt advice but just some considerations to think about.
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Yes, point #2 really needs to be considered if planning Roth rollover.
Here is one article on the topic - https://www.thestreet.com/retirement-daily/your-money/converting-dont-forget-medicare
with this chart
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Also a good time for tax loss harvesting
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I have another question about retirement stuff for my 27yo.
Remember, I asked about opening a Roth IRA for him now that heās doing contract work and isnāt getting any kind of employer match and doesnāt have an automatic saving mechanism. Heās happy to let us help in that way! (I was worried that heād be insulted, but he wasnāt.) That started a much longer convo about his 401k from a previous job and some stock he got from the previous employer. The 401k is at Fidelity. The stock is with Merrill Lynch. The Roth will be at Vanguard. Hereās my understanding after talking to Vanguard today after I called to ask about the Roth ā¦ If he wants to āsimplifyā things and move everything to Vanguard, he can convert his Fidelity 401k into a Vanguard rollover IRA with no tax implications. Is that correct? And then if/when he gets another job with a 401k, he can reconvert that rollover IRA to the new 401k. Still correct? I was surprised by that, but thatās what I understood. The stock at ML can be transferred to Vanguard with no tax issues, right?