What caught my eye this week.
Feels like only a couple of weeks ago I was reminding everyone via Weekend Reading that shares can go down as well as up.
Actually that’s because it was on a couple of weeks ago. Twice.
I needn’t have bothered. The past ten days – and most especially the past week – has provided an exhilarating reminder that stock markets can fall faster than you can say “no, for the hundredth time, UK government bonds are not riskier than shares.”
Indeed this has been the fastest decline from a high for the US stock market of all-time. UK shares are down 11% for the week, too, and the average UK pension fund has lost a whopping 5% to 6% of its value since Monday. Put that into your SWR calculator and smoke it.
Things were definitely feeling freaky by the fourth day of 3-4% declines. When the US market bounced higher into the close on Friday – perhaps on the expectation that central banks will make some sort of statement about interest rate cuts this weekend – you could almost feel the relief, even though all the main indices still ended the day in the red.
UK government bonds, for the record, are up.
Unstoppable
Just in case you’ve been living in a bunker – which is where we’ll all be in a few weeks, according to some – the cause is the novel coronavirus. COVID-19, as we groupies have started to call it.
This pesky not-quite-a-critter has been causing traders to second-guess their portfolios since it came onto the radar early this year. Only a few weeks ago I spoke with The Accumulator and revealed that I’d moved to my largest ever cash position in my portfolio, naughty active trader that I am. But in case that sounds clever, know that I’d halved this horde by the middle of the month when I saw the log graph of Chinese infections flattening out and thought, like many, that the end was possibly in sight.
Oops!
Below are two resources I’ve been glued to for weeks. You can take what you want out of the data they present – squint and it’s still possible to be optimistic – but for me that’s the beauty of them. Just the facts, ma’am:
I’ll keep checking in with those sites, but I suspect we’re in new phase now.
Everything changed for me (and many others, it seems, given the market sell-off) when it became clear that Italy had a major outbreak on its hands, almost overnight.
Italians are a warm, sociable, and tactile people with a beautiful country that people like to visit. I felt it was potentially game over for containment after that.
I won’t bore you with too much of my poundshop epidemiology. Suffice to say I have come to see the logic behind medical views like this:
Lipsitch predicts that within the coming year, some 40 to 70 percent of people around the world will be infected with the virus that causes COVID-19. But, he clarifies emphatically, this does not mean that all will have severe illnesses.
“It’s likely that many will have mild disease, or may be asymptomatic,” he said.
As with influenza, which is often life-threatening to people with chronic health conditions and of older age, most cases pass without medical care. (Overall, about 14 percent of people with influenza have no symptoms.)
The whole article is worth a read if you want to know more lore about COVID-19.
Incalculable
Perhaps the coronavirus will be with us for a year or longer, until it burns itself out.
Three months ago it didn’t exist in humans.
What does this mean for the world, for its economy, and for the future earnings of companies?
Markets are not falling because teenage traders are scared witless of a bogeyman. This seems much bigger than SARS and much deadlier than swine flu. To my mind the declines are a rational response, as investors try to discount three aspects of this health scare:
- The economic cost of the disease and death it causes.
- The economic cost of the attempt to avoid that disease and death.
- A bonus uncertainty discount because this situation is novel and we don’t know how exactly different companies and sectors will fare.
Only a market actually has any hope of figuring this out, because it’s so darn complicated.
For example, people may think it’s a practical idea to close airports and send everyone home from work. But that would have a massive economic impact, with long-term consequences.
Tax receipts would be lower, for instance, and so spending on other deadlier illnesses stretched. The supply of food, drugs, and other essentials would be disrupted. You might kill hundreds of people out of sight in an effort to avoid a couple of hundred people catching COVID-19 and a dozen dying a month before they would have anyway.
This is a nasty virus and any death it causes is a tragedy for that person and their friends and families. We should take reasonable steps to slow it.
But look at who is most likeliest to be killed by the virus1:
*Death Rate = (number of deaths / number of cases) = probability of dying if infected by the virus (%).
Source: Worldometers
The blunt economic truth is many if not most of the small minority (c.2%) of infected people who may ultimately be killed by COVID-19 would probably have died of something else before too long, anyway2. It’s horrible to think in these terms, but this is exactly the sort of choice governments are forced to make when deciding how to respond.
It’s also what the market is trying to guesstimate. Actual deaths will probably not be too insanely disruptive in a strict economic sense, even if it becomes a pandemic. (Most of its victims aren’t working, and most of their consuming is done.) But trying to slow the rate of deaths could still cost global GDP at least a trillion dollars, according to one estimate by economists today. That’s a high price to pay for something that may not even be effective.
Singapore and China have seemingly had some success in containing the virus. However it’s hard to imagine Western populations following their protocols.
Slowing down the rate of transmission could get us to a vaccine with fewer COVID-19 deaths. That would be desirable, notwithstanding my earlier comments about unintended consequences.
But keep in mind this kind of virus mutates. So a vaccine may not be fully effective, and would probably need continual updating. Or it may arrive when the virus is close to extinguishing itself anyway, and ultimately be of little practical use.
Unwavering
To my mind then the market declines have been orderly and pretty logical, in the face of the potential disruption. Outside some extremely expensive-looking glamour stocks and some clearly threatened individual sectors (especially tourism), most markets have declined by about 10-12%. Sectors have similarly declined about 10-12%. Everything has de-rated a notch, in other words, mostly from high levels.
The market seems to be saying we’re all in this together. Not quite the spirit of Brexit Britain or Trump Towers, I understand, but probably true. So its best response is to knock a year or twos of profits off the spreadsheet and wait to see if there’s a reason to put them back on, or else to get more aggressive.
So much for the wisdom of crowds. What should individual investors do?
I can tell you what investors have been doing, which is trade. Retail investor favourites like investment trusts plunged on Friday morning before recovering as the day went on. And in the US, Friday saw the first ever $100 billion trading volume day in a single security – the S&P 500 ETF with the ticker SPY.
As I noted on Twitter on Friday morning:
At least one UK broker/platform seems to have frozen with today’s torrent of selling and is currently unable to execute trades. 2008 vibes. Please don’t panic. There are bad scenarios but there are also many scenarios. Hopefully your diversification is working. Take a breath.
In the follow-up I was asked what somebody should do if they were 10% down.
The midst of a panic is the wrong time to be asking yourself this question. I replied:
If you’re a very rare trader with edge, you’ll act according to your strategy.
If you’re one of the majority of traders with no edge, this volatility may be revealing. Go passive.
If you’re a passive investor, don’t become an edge-less trader in a panic. Stick to your plan.
— Monevator (@Monevator) February 28, 2020
I understand it is easier said than done. Passive investing has delivered tremendous gains over the past decade, but when markets fall it can feel like you’ve set up your sun lounger in front of a combine harvester.
But weeks – or months or even years – like this are part of the deal when it comes to risk assets. We wouldn’t get those great returns without pain along the way, because if there was no pain then everyone would be at it and the gains would go away.
So stay calm. Stay diversified. Remember we’re playing a long game.
And have a great weekend! With a bit of luck the sun will come out soon. A bit of Spring might slow this thing down, if and when it takes off here.
More on Covid-19:
- Yes, it’s worse than the flu: Busting the coronavirus myths – The Guardian
- Fear and influenza: How viruses spread – A Wealth of Common Sense
From Monevator
How to calculate the capital and contributions you need in your ISAs and pensions – Monevator
From the archive-ator: The simplest, most effective investment decision you will ever make – Monevator
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!3
Two-in-five are draining their pension pots at a rate of 8%+ annually – ThisIsMoney
UK house prices rise at fastest rate for 18 months – The Guardian
Gains in UK life expectancy stall after decade of austerity, report says [Search result] – FT
The data-heavy Credit Suisse Equity Yearbook: 2020 edition is here – Credit Suisse
Dollar cost averaging vs. lump sum: The definitive guide – Of Dollars and Data
Products and services
The Financial Times has launched a campaign for clear pension charges [Search result] – FT
Freetrade has just cut the cost of Instant Orders to £0, so it’s now free to trade instantly – Freetrade [We both get a free share when you sign-up via that link]
ISA season will be another damp squib for cash savers – ThisIsMoney
“My investing firm won’t let me move half of my Isa funds to a rival without losing the tax wrapper” – ThisIsMoney
RateSetter will pay you £20 [and me a cash bonus] within 30 days of you putting in your first £10 – RateSetter
Monzo and RBS to enable customers to check their credit scores for free, in-app – Finextra
Funds versus investment trusts: A simple 10-year test – IT Investor
Why a ‘best buy’ fund from a selected list isn’t a sure bet [Gasp!] – ThisIsMoney
Comment and opinion
A crisis is the worst time to learn your risk tolerance – Pragmatic Capitalism
Warren Buffett’s sobering advice: ‘Reaching for yield is really stupid’ but ‘very human’ – CNBC
A rebalancing recap – Money Observer
Is £12 million enough to retire on? – Fire Vs London
You don’t owe your company your undying loyalty… – Slate
…sometimes you just have to ‘shed your skin’ and move on – Indeedably
Simon Lambert: Will the chancellor be brave enough to get rid of the 60p tax rate? – ThisIsMoney
A truly bold chancellor would scrap National Insurance and merge it with income tax – The Guardian
Markets have always been rigged, broken, and manipulated – A Wealth of Common Sense
Should index funds be illegal? – Matt Levine via The Big Picture
The easy path to retirement – The Simple Dollar
Naval Ravikant: How to get rich [Podcasts, with notes, two months old] – Podcast Notes [hat-tip Zude]
Naughty corner: Active antics
Judging VC skill: The hardest problem in finance? – Byrne Hobert via Medium
The massive divergence between large growth stocks and small cap value – Alpha Architect
Warren Buffett’s 2019 letter to Berkshire Hathaway shareholders [PDF] – Berkshire Hathaway
SSE: An investment in a greener UK power grid? – DIY Investor
The other dark side [Short US bonds] – The Macro Tourist
Diageo is overvalued – UK Value Investor
How to start a hedge fund [Video, US] – The Compound [Wish I’d thought of this name for a podcast!]
Politics and Brexit
Post-Brexit, Britain is going its own way. It looks expensive – The New York Times
Kindle book bargains
[Note: These deals will only run until the end of Saturday]
Lab Rats: Why Modern Work Makes Us Miserable by Dan Lyons – £2.99 on Kindle
Secrets of Sand Hill Road: Venture Capital—and How to Get It by Scott Kupor – £1.99 on Kindle
Hit Refresh: A Memoir by Microsoft’s CEO by Satya Nadella – £1.99 on Kindle
Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth by T. Harv Eker – £0.99 on Kindle
Off our beat
Where did the weekend go? How work stole our Saturdays and Sundays – The Guardian
Why you can’t sell your business – Permanent Equity
Netflix’s Love Is Blind makes one wonder: Are straight people doing OK? – Guardian
And finally…
“The beauty of value investing is its logical simplicity. It is based on two principles: What’s it worth (intrinsic value), and don’t lose money (margin of safety).”
– Christopher H. Browne, The Little Book of Value Investing
Like these links? Subscribe to get them every Friday!
- From the site: This probability differs depending on the age group. The percentage shown below does NOT represent in any way the share of deaths by age group. Rather, it represents, for a person in a given age group, the risk of dying if infected with COVID-19. [↩]
- Barring a mutation into something nastier. [↩]
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]
It has been a tough week, even for someone in the accumulation phase with 15+ years of buying left, like me. I have moved passed the start and the sell down brought about my first 5 figure lose in my portfolio. Even if I should be happy that my next months purchasers will be less, it still hurts and I even started second guessing myself. I managed to maintain my discipline and your weekend reading article has strengthened my resolve to continue with the Plan. Thanks
Typical. Last night me and the Mrs did our end of month financial spreadsheet.
I hadn’t logged in all week for obvious reasons and I told her not to.
Let’s just say it ended with her going upstairs saying “I hope you know what you’re doing”.
I would have been fine with the correction as I had decided (always having been 100% equity) to move to 30% bonds but put 10% back into equities in the event of the S&P 500 falling below 2,750 (it hasn’t yet but touched 2,850 yesterday) – a little bit of cheeky overbalancing.
The only problem is that I’m still waiting for a large transfer in from my old pension fund into my SIPP. I had three different funds and if it’s of interest to others planning this the transfer times were:
Standard Life – 4 days
Scottish Widows – 7 days
Willis Towers Watson (where most of my pension is) – 5 weeks and still waiting… no idea whether I’m still in equities or am now in cash.
That’ll teach me to try and time the markets!
Interesting at work this week to see the reactions of various people in workrooms around campus towards the Covid-19 virus. I am a union H+S Rep and, as such, listen on a weekly basis to H+S concerns.
The vast majority are just “business as usual, somebody else’s problem, I’m sure it will be OK, these things happen” . Perhaps 5% are demanding that management get pro-active with cleaning regimes, masks and plans for shut down, looking at vulnerable older staff, and a further 5% are in denial with glib statements like “5% death rate, I like those odds and one individual who surprised me with ” It’s about time we had a cull”.
I think this perhaps is a reflection of the wider audience. Time will only tell if things play out as bad, worse or better than the market. So far my personal risk tolerance is holding. A long game is still my plan. I may be a new VW golf down on the week and I may be saying the same thing next week but I wasn’t in need of a new car anyway.
JimJim
An interesting week for sure. As a personal investor 18 months into his journey I was lucky enough to ‘find’ my risk tolerance about 3-4 weeks ago – lots of buying and selling beforehand incurring fees, worry, sleepless nights…
Ended up 60% equities (75% in Fidelity Index World P and 25% in LS100), 10% gold (SGLP), 10% Short Term Global Bonds (Vanguard) and 20% Global ex-UK IL Bonds/TIPS (‘AAA’ only through the Real Return Fund). Low cost with the latter fund the sole ‘heresy’ in being active but relatively inexpensive.
I didn’t expect the ‘acid test’ to arrive a fortnight later! Equity funds have taken a hit. More defensive measures have seen an incremental rise. I did nothing. No sales, no purchases (yet).
Bumped into a friend last night who had sold out in the morning. It was his holiday spending money! I chose some appropriate words that were the opposite of what I was really thinking. Reminded me of the discipline needed to be an investor. Long term view, risk assessed portfolio (or acceptance that you will take a hammering now and again) with an annual rebalance.
I may be missing the point or being a bit dense (it’s early!) but when I see comparisons between lump sum and regular investing it seems to assume having that lump sum already lying around ready to go.
If you don’t have that lump sum ready, surely it’s better to drip feed into an ISA / Sipp rather than build up a pot over say a year and then invest in one go?
Ahh mate, I was roaring crying when I saw the stockmarket went down this week!
My strategy is to ignore it all. Just keep plugging away £500 a month into my world tracker.
@Stephen Taylor
Certainly if you’re accumulating then you invest as you go (possibly with the caveat of mimising fees if you’re using something like iWeb) so you inherently drip feed, but “what do I do with this lump sum?” is a common question on financial forums.
(Looking out from under the rubble…) Not too bad so far. I had taken the view about a year ago that valuations were looking too high and moved to 45% equities. Not to say things looked wonderful this morning – they didn’t. But the portfolio is still in reasonable shape.
The great question is what comes next. Months of doddling around at these levels or a brief period where bargain hunters prop the market up only for it to genuinely collapse?
Perhaps oddly, I am hoping for the proper collapse so that I can redeploy heavily into equities.
We will see.
I haven’t looked at my accounts. It will be painful, losses could easily represent several years’ spending. Normally I would be selling to use the CGT allowance in March, and buying in ISAs and pension in April, rebalancing with the purchases. I will likely stick to that (not much room for manoeuvre really, there is no point selling now, the window for that was 10 days ago) but I may choose to stagger the purchases if things are still volatile. I feel thankful that a) I am only 50% equities and b) I have a written asset allocation/investment strategy.
I think deriving comfort from the age related mortality rates is a bit foolish. 15% mortality is pretty frightening, and most of those over 80 year olds are someone’s mum or dad. As well as the emotional angle, if you’ve ever had frail elderly parents you’ll know that looking after them in a crisis can take a lot of time and energy, especially if they live far away. So working age people will be impacted. Plus, if services are overwhelmed, that affects everyone, irrespective of the age of the people filling up the beds.
And, although mortality is low in the under 50s, the infection rate is not, and every (known) infected person will be out of action, from the point of view of economic activity (producing or consuming), for several weeks.
Oh dear! After a couple of months of analysis paralysis and general procrastination I had decided to rebalance a bit towards bonds and paying down the mortgage. I sold one equity fund and moved it into gilts but too late for the rest now. Fortunately a lot of my procrastination was reassessing my risk tolerance and the conclusion was that I needed to begin being a little more conservative but generally happy to stay exposed to equities as the investment is for the long term so not too stressed. I am still dripping money into the market so hopefully I will benefit from pound cost averaging.
I quite enjoyed listening to Damodaran talking about “Fear vs Fundamentals”.
https://www.youtube.com/watch?v=1vJdCpVxO7s
No one knows how the virus will spread in the next weeks but as of 25th of Feb, he provided some estimates for the s&p 500 (3,000 pts, 12th minute) based on earnings drop assumptions and companies returning less cash to shareholders.
Now we may research & analyze all day, but the market can overreact. Fear > Fundamentals in the short term.
PS. Watched “Contagion” last night, great timing! 🙂
Although it’s mildly frustrating that this fall seemed very easy to predict (if I was to turn that part of my brain on), I know better than to do so.
Yes, I might have been right if I had sold out a week ago. But, I wouldn’t have been right about selling when Trump was elected, or the Iran conflict, or Brexit, or after 5 years in a bull market……etc etc.
And, I’d then have to work out when to get back in!
@vanguardfan — You make some great points about the age related impact of the virus, and I agree with all the consequences you highlight.
However from an *economic* point of view I think it’s unarguable that the impact will be much lower if an 80-year old with no dependents and a life expectancy of five years dies, versus if it was equally likely to kill a 40-yo with two kids and 45 years of work/spending ahead — let alone if it killed them at a higher rate like Spanish flu seemed to.
I don’t say this with any relish or personal relief. My own mum has chest issues, and would be right in the firing line.
I said it in the context of the market declines, and the attempts to estimate the economic hit from a pandemic.
Cheers!
@Vanguardfan
“Most of those over 80 year olds are someone’s mum or dad” – yes you would think this point would be obvious but I have seen so many people commenting that they are unconcerned because they are young and healthy and not worried because if they are infected it will just be like a bad cold. Myopic and selfish! If they are infectious then carelessly spreading it could cost someone else their life or at least make them very ill and put a dangerous burden on health services. The authorities know of this risk and have to act accordingly to protect the vulnerable which could lead to more draconian controls. For this reason I cancelled a trip to Asia I was supposed to take. I am in the demographic unlikely to get seriously ill but I cannot risk getting trapped abroad due to flight cancellations, lock downs, quarantine etc.
My work pension fell ~4%, I have it invested in default split of 60% equities and 40% bonds (with monthly rebalancing) so that helped somewhat with the bonds going up. I have the option of moving it 100% into equities which is tempting given the recent equity falls, but will probably leave as is and just let it do the usual rebalance. ISA on the other hand is down a lot more in percentage terms but as I only started that a year ago, in absolute terms it’s nothing to worry about. I’ve got £5k in a cash ISA and am thinking might not be a bad time to move it into an index tracker – or have a bit of a punt on Imperial Brands (buy and hold).
I am 100% in equities with 20 years time horizon. I am tech heavy circa 20% of my portfolio. I have taken a massive beating this week. My Thursday I stopped logging in. I am down about about 15% for the week. I am all passive so I rise and fall with the market.
I know it’s bad. But the more the markets fall the happier I am. As long as I can make sure I have a job for the next 12 months, I am trying to get every penny I have into the market. Yes, stocks may have further to fall, but already it feels like Christmas has come early. Personally, I really hope the markets live in a state of fear for as long as possible *crosses fingers*
Sitting tight with 30/65/5 -all trackers-Portfolio down about 2%
Trackers doing their thing
Aged retiree-73
2 years cash in expenses-some of which I took 2 weeks ago even though not due to drawdown till after April 5-re tax(cashed in some funds for cash withdrawal-now sitting in SIPP)
Market timing? -thought the market was so high that it could not last-was due to take this year’s withdrawals soon so why not do it now-aged investors instinct?
So far so good as Wiley Coyote famously said!
xxd09
guess it was too late to make the weekend reading, i did enjoy RIT’s post today entitled Perspective http://www.retirementinvestingtoday.com/2020/02/perspective.html
A company demanding loyalty… Sounds like the customer of a, ahem… ‘pleasure’ worker demanding actual love from her.
It’s just a transaction.
painful loss for me especially as I am just about to buy a property and was counting on some of the money for a deposit. Luckily I pulled out half my portfolio last week just before the big monday sell-off so things could of been even worse, still even when your only 50% invested this sell-off really hurt.
Im now wondering if I should just put off buying a property until next year and just buy the dip!
ftse100 trackers offering 4.8% yield is attractive.
8% fall in my SIPP. Thanks to Monevator, I’d realised that 100% equities was too rich for our blood 2-3 weeks ago and we switched 21% into bonds.
One important concept that’s often forgotten when choosing an equity allocation is minimum regret. By feeling slightly low on beta, you feel smug about these drawdowns. Kinda like Markovitz on being 50:50. It’s also a psychological benefit of pound cost averaging.
I just did our month end financial figures with graphs etc. I’ve been in drawdown since Nov 2018 and am taking 6.2% of my SIPP pa as I want to reduce its value before SP kicks in a decade down the line. We have ISAs etc. and we’re at sub 4% pa of the total pot. Still too much, but this will drop come state pensions.
So after 16 months of drawdown, and the stock market drops of last week, I have 1% less in my pot than I started with. We wife’s SIPP isn’t fairing as well, but we’re taking 8% pa from that as I want to to be down close to zero in a decade.
I also took a look at our ISAs, noticed we’d got far more cash than planned due to dividends, and did 3-4 trades in each to top up whatever equities were below plan.
I guess I could flap/moan/panic etc. but this is what equities do and the volatility can actually help as long as you keep a cool head and rebalance.
The passive part of my portfolio took a hit in the last week. The equity funds (S&P, Nasdaq etc) lost around 11% on the week but EM bonds lost 1.1% and the long-duration UST fund made 6.7%. So net about 3.1%. YTD it’s still up around 5.9%, thanks to the 19% return from USTs. On a 12-month lookback, the portfolio is still up 24.0%, with the S&P up 10%, Nasdaq 23%, EM bonds 14% and long USTs 37%.
The only thing I’ve done during the week to the passive portfolio was to access my margin loan, allowing me to sell out some of the long UST fund to buy 9x the amount of a short UST fund (i.e. a duration neutral switch, 18y vs 2y). The curve started to steepen as the market priced Fed cuts so I didn’t want to risk underperformance.
Returns in the last year on all assets were just bonkers, so I find it hard to be surprised when a fraction of that disappears. I think it’s good for markets to feel a dose of genuine volatility again. Albeit I’d prefer the driver of that volatility not to be something that can kill my family or I.
Relative to 08 and 98, both of which I sat through, last week was actually very orderly. By the end of the week derisking was being seen in all asset classes and the macro hedges started to fail (note gold down over 3% on friday), a sign that the underlying assets are being sold out. Liquidity didn’t collapse and very little in funding stress was seen. Of course, it doesn’t mean it will stay that way. I could have said the same about the Russia default in 98 and Lehman in 08 in week 1.
As per Jim Brown I’ve prob got 20 or 30 years and am 100% equities with my lisa. I’ve not even looked, not really that bothered it’s the beginning of a long journey…
What Jim said. My assumption is that:
1) Everyone will get the virus.
2) 2% or so will die, heavily weighted to people over 80.
3) There will be significant short-term economic disruption.
4) There will be essentially zero long-term economic impact and therefore very little impact to equities 10 or 20 years from now.
John commented thusly:
” 1) Everyone will get the virus.
2) 2% or so will die, heavily weighted to people over 80. ”
That would be horrendous, and quite a pessimistic assumption John. I’m predicting science comes up with a solution before 2% of the UK die. That would be 1.3 million deaths after all.
We live about one hour west of Milano and my wife sent me a Whatsapp from her skiing trip in the Dolomites to ask about food in the shops. I replied that everything is fine, plenty of beer, wine, gin etc. I don’t think she appreciated it. If you didn’t know about the virus, you wouldn’t notice any difference while driving around, shopping etc. However, schools and creches are now closed until further notice, sports matches cancelled and people have been warned to avoid large gatherings where the virus could be transmitted vary fast.
Re. stockmarket drops, well forgive me if I’m wrong, but haven’t people been saying for years that the USA markets were overvalued and could burst at any time? Also, it seems like yesterday that I was watching the FTSE100 reach 7000 and wondering ‘What the hell..?’ The stockmarket is like gold, silver, house-prices (and maybe overpopulation); nobody bats an eyelid while they keep going up, but God help us if they dare to come down!
Steve
OK, many many thanks to Monevator for pointing out a while back (Jan 7) that whilst shares had done well, bad things could happen. I found I was 75%/25% shares/bonds, whereas my strategy/risk/age says 35%/65% shares/bonds, absurdly out of kilter. The rebalance was immediately set in motion, took about 9 days to implement.
What a saving, what a complete fluke. A scary moment, the principles not to be forgotten again.
I’ll still be dripping into index funds though, no strategy change.
@john and AAJ. A Harvard epidemiologist Mark Lipsitch suggests 40-70% of the population may become infected if the virus spreads widely, absent effective containment measures.
As far as the mortality rate goes, the factor most likely to influence that is whether spread can be slowed enough to make the epidemic low and flat, rather than massive surges of infection that will overwhelm health services. A major aim behind the current containment measures is to render it possible for services to cope with the rate of cases coming through.
It’s not ‘science’ that will save us, it’s effective implementation of very basic public health control measures. Simple but not easy. On the treatment side, again it’s all stuff we know about, oxygen, respiratory and other supportive care while the body fights back if it can. The main issue will be access (hence back to the need to delay spread).
There may be some improvements to outcome if any of the ongoing trials of antivirals show significant effectiveness, but they tend to need to be used very early in incubation to be helpful. Similarly, a vaccine may help in the long run, but unlike influenza, coronavirus vaccines have not so far been very effective. Certainly it won’t help this year.
spelling: s in JohnS Hopkins
All a bit awkward with my retirement in 1 month.
Maybe it is a good time to also reflect from a non-investment angle. We have climate change happening, which is due to a mix of our habits and our sheer numbers. Maybe Covid-19 is nature trying to address the latter factor. Maybe its successors will be more effective. Mind you, in another way this is only history repeating itself – the Venetian Empire fell largely due to a virus apparently imported from their trading with China. I have an authentic Venetian plague doctor mask, which might yet be useful. The Venetians tried to stop it spreading by making vessels wait for forty (quaranta) days before unloading and hence the word quarantine. But it did not work and they lost around a third of the population.
Well done. Always stay the course
Best to only do the spreadsheet with your other half during market highs in future
Have your learnt your lesson though?
The problem with getting a market timing decision correct is it gives some the mistaken belief it was due to skill rather than luck.
Unfortunately there is no cure for old age (and the multitude of associated diseases). Many people who die from coronavirus will be people with things like end stage dementia, terminal cancer, heart failure etc. There are worse things than death
Maybe a wee tip as a thank you to monevator?
On the Guardian article about merging NI and income tax. I understand that the hang up in government about doing this centres on the fact that NI is currently per job. For example a cleaner with more than one job, each one having its own minimum NI threshold, doesn’t pay any NI. Any chancellor that does this merger has to explain why they are penalising people working all hours and struggling to make ends meet for their families. As Sir Humphrey would say “a brave decision Minister”.
100% equities here (sold at the peak and bought back into about 2% of the way through the dip because I remembered I have no particular insight as to the direction of the market, and gave myself a stern word about being too active). Overall 8-9% down from the week (though still roughly flat over a month due to my market-timing dabbling). Not having been through the 2008 crash, turns out that psychologically, high valuations give me more itchy-feet to sell than seeing my portfolio go down in value (fast).
I reckon that active fund managers won’t be able to justify staying out of the market for long, and will soon come back
Wouldve been a good time to have transferred all to vanguard sipp (shrugs -i didnt want to be out the market!) but it was true then as it is now that we didn’t know and i cant time these things
I would definitely want to buy, if I could
100 % equity here. Aged 39. I bunged some money in after 2 consecutive 3% falls with the result the market of course fell another 4% just proving the adage that you can’t time the market. Now just wondering if I can justify dipping further into my emergency fund (which is all I keep in cash) to buy more. its funny while I’m earning I’m finding the drops now they are larger amounts easier to cope with. I’m 25k down between pension and isa a) it feels such a big number it doesn’t seem real b) I’ll have contributed more than that in about 12 to 15 months.
In contrast I’ve been trying to calm my pensioner dad down yesterday who’s lost 70k from his portfolio (about 2m bear in mind) and is ‘putting in a phone call to his adviser to find out what he can do about it’ my response?
‘If it makes you feel any better ill tell you what your man will say if he’s any good when you speak to him. Stay calm stay invested. Yes it may drop further. No the world’s not gojng to end this will get better (and if it doesn’t look on the bright side your pension won’t make any difference as we’ll all be living in caves again). Things like this are a good test of whether you are too exposed to stocks’. I suggested he reviews his asset allocation
I’ve got a v small part of my portfolio in 40 % equities 60 % stocks (which is why I’m basically 100% equities it’s just there for more short term needs) . That’s fallen about 2% so far. Much more palatable than the 16% the 100% equity has fallen
Covid-19 is interesting in that – unlike H1N1 – the older people don’t have the advantage of partial immunity. However, I expect experiments with small molecule antivirals (as used against HIV, HEPC, Ebola, etc.) to find some that are effective (individually or in combinations) and these could be focused on the most vulnerable. There are also some signs that anti-malarials (such as chloroquine phosphate) are effective, and there are already distribution channels for these in the tropics. Data is already starting to arrive and we have large numbers of these drugs that have already passed all of the required safety trials and could easily to cleared for use against Covid 19.
Well, I wish I had some cash lying around to buy in now. But, while riding the equities boom, why would I have some cash lying around doing nothing, going nowhere? Most of my investments are in a Vanguard 80/20 pension which is being humped senseless at the moment, but so what? I don’t need to access it right now and, even if I did, I doubt I’d be taking out more than 4% of it, virus or not. So, my preferred strategy of “do nothing” is being tested, or it would be if I was tinkering around with my spreadsheets. Funnily enough, I’m hardly looking at them now as opposed to the almost daily glee of playing with the numbers when the good times rolled. It’s almost good to get a break from worrying about when the correction was going to come and to find myself thinking that even if the value of my portfolio is halved, well, I’ll just have to get on with it. Like everyone else.
Inspired by TA, I’ve been looking at a liability matching/glide path to retirement. At 54, I’ve got 13 years to go until I can claim the state pension and maybe a couple less to claim my small civil service pension. So over the last 4 months I’ve been moving from 100% equities to about 60/40. Last week I got a bit spooked an moved the final 10% ahead of schedule. Bad Brod!
Each year extra I work, I’ll move 5% back into equities then into drawdown until I’m 90/10. Should be able to retire with about £17k of inflation linked income from state and civil service pensions in 4 years or so.
I decided to take early retirement at the end of last year so this drop in the markets feels much more personal than at previous times.
In reality though, I don’t need to touch my investments for 2 years or so and the world will be a different place again by then. Plus you’ve got to expect that the markets will rise and fall, so just keep playing the long game.
As a passive investor since Jan 2017, regular monthly investing with a few lump sums thankfully 2018 came along and taught me a lesson about time in the market. At one point in 2018 my pot was worth less than I paid in but I continued to plod away. Before the falls of the last fortnite it had recovered to 17% more than I’d paid in and even after this week’s falls it still remains at just under 10% more, still better returns than if I’d left it in a savings account.
If I analyse individual payments the news is even more heartening in most cases with only those of the last 6 months making a loss. The very first one I made is still up just over 17% at the end of this week, way better than any savings, not far off the “7% long term average” and still well in line with a 4% SWR.
Time in the market definitely seems to be the way to go.
Im hoping that my family will see how we ride out problems and lose their fear of the markets
“As of Feb. 26, CDC had performed a total of 445 tests. For comparison, the UK, with a
population five times smaller than the US, had conducted over 7,000 tests.”
Shockingly complacent. And Italy clearly aren’t testing enough people, their revised relaxation of testing policy is bonkers.
https://www.worldometers.info/coronavirus/covid-19-testing/
a couple of non pandemic links overlooked this week
Companion piece to the campaign for clearer charges:
https://www.ft.com/content/d1790e6f-1c87-49e3-b6fb-43e73ebad1f6
Earnings by degree subject:
https://www.ft.com/content/eb7d6304-5a2a-11ea-abe5-8e03987b7b20
My main (plausible) personal/selfish fear about Covid19 is that school closures may disrupt my children’s public exams and university entrance. Can do nothing about that though except wait and see.
@aidan – yes, the American response will be absolutely crucial in determining the economic impact of the virus. So far not promising.
And the Italians are looking overwhelmed in the outbreak areas.
4% down on the month. So far calm (‘cos in cash terms it looks like a lot, but I keep reminding myself “it’s only 4%”). We will see what happens next. This could be the long-awaited test of my passive credentials.
@Matthew My wife has always been fearful of investing. But the present correction has made her think it might be a good idea. Even if prices fall further, as we expect them to, it feels like we are getting more for our money this week than previously. Its like a 10% off sale. There may be a final 20% off sale later, but it’s still much nicer than paying full price 🙂
luck might mean that the new ISA year allowance lump dump coincides with low prices. Hamburgers taste great when theres a discount.
My pension (60/40) is down 6%. My ISA (70/30) is down 10%. The two equate to around six figures but thats the price i pay for the good times I suppose. Im not planning to hit the eject button from work just yet, but its a brilliant reminder of the need for a cash reserve.
Like others I have read the studies that say holding cash is a long term drag on returns. I dont dispute that at all. But I do think the ability to turn off the TV and know that a couple of years worth of expenditure is sat in the bank will provide a much better nights sleep.
I once read you should write yourself a letter to open at a time of maximum panic. I havent done that but essentially I refuse to sell up my retirement tokens so someone with bigger balls can snap them up and watch them rise in value over the longer term.
What if the market drops a further 50%? What if we enter a Japan style 40 year equity slump? All you can do is diversify across goegraphies and asset classes and rely on the ingenuity and greed of mankind to keep chasing money. For that reason, this too will pass.
Intrigued by the articles suggesting changes in tax by incorporating NI and/or stopping the threshold loss.
The suggestion there are no votes in tax gains for the rich may be misguided at the moment: those earning over £100K have traditionally been thought of as core Conservative voters. So it could be their way of ticking the “reduce taxes” box without too much disruption.
Abolishing the separation between income tax and National Insurance I see as more problematic politically. Apart from the sleight of hand involved in claiming lower than actual tax rates, there really are some differences. If the qualifying income for a year’s credit towards state pension moved to the income tax theshold then that would impact many of the lower paid who lack occupational pensions. My feeling is that actually lowering the NI threshold would be fairer, for example so people working 50% part time on minimum wage earned qualifying years. And if any government were to seriously want to create a solution to old age social care, raising the necessary money would be politically easier if it were sold as part of the National Insurance, extending it to the higher paid in employment and those with decent pensions.
@aaj – certainly understand how its less scary buying when it feels like there’s money off and the feeling that the market has let off its steam and that the odds feel better starting from a lower point
However bear in mind that during a normal bull run buying on year X is probably 10% cheaper than it will be buying on year X+1, there is opportunity cost in delaying that usually outweighs what you save at the point of buying on a dip
And also the normal above inflation rises in equities in a bull market is not unsustainable at all, when you consider that companies expose you to inflation in a leveraged way (corporate debt) – and they make profit, and they grow
When we get market these market dips retiring on dividends appears pretty attractive https://ace-your-retirement.blogspot.com/2020/01/retiring-on-dividends.html. Wish I had some cash to drip feed into the market – I´m very envious of the youngsters starting their retirement savings who are likely to be able to get some real bargains during the downturn.
Down a very healthy six figure sum. Firstly hope all readers stay fit and healthy. A few thoughts.
No one can predict the future. We all talk about how things are unpredictable. This is great evidence. I don’t recall anyone talking about intended equities fallout in the previous weeks comments or generally. So for me this is a great example of how there are two types of market timers. Those you can’t time the market and those who don’t know they can’t time the market.
This has not been a particularly significant drop so far. If you have an equities allocation you should expect a 50% drop from time to time. So divide your equities allocation in two, take a long hard look and ask yourself if you’ll hold your nerve. if you will fine, if not maybe your asset allocation isn’t correct. I am slightly intrigued by a few of the worried comments. Sure 13% in a week is a lot but this is just a correction – it’s nothing like a bear market yet.
The FTSE 100 is kicking off a 5% trailing yield on a CAPE of circa 14. Sure the index constituents aren’t particularly attractive and dividends may get cut and CAPE has its critics but still it does not look expensive looking ahead. FTSE 250 probably looking better now than the FTSE 100 too.
If you are still wondering about passive and active – well passive did its job this week, it followed the market, like it always does. Take a look at those long only active funds you sort of like and see how they did. Probably not much difference. So they can’t time the market either.
I guess if this hadn’t happened there would have been a lot of chat around WB annual letter. I feel he said something v interesting this week, supporting the 4% SWR critics of today. He said
“People say, ’Well, I saved all my life and I can only get 1%, what to do I do? You learn to live on 1%, unfortunately,” he said
Sure SWR is not all about the yield of course, but it’s a reflection of the bidding up of all assets.
Looking at myself, as I am still Seeking FIRE and not FIRED, I am pretty comfortable around a 50% fall in equities from here – for sure, I’d be leveraging up and swinging the bat into equities at that point if that happened.
If I’d retired and no other sources of income, there’s no way I’d be as comfortable. It’s been instructive learning therefore for me from that perspective from an asset allocation perspective.
Again, hope everyone stays healthy in the coming months. Hopefully it blows over shortly.
Hmmmm. I have only been seriously interested in investing for about 10 years, so this is worst I have personally known, I was invested in financial crisis but probably only checking pension every 6 months or so, so did not seem as real.
I’m ‘only’ about 5-6% down, which as others have said sounds much better than the £ number itself. Target allocation is currently 25% bond / cash, 55% equity, 20% property/alternatives. Too late to do anything about it but now, but I am now wondering if this was / is too aggressive, as I’m only about 4-5 years away from when I’d like to retire. Before last week 5% pa would have got me to my planned target, now I need more like 7%. Not intending to sell any equities and in fact I might well buy more, because I’m not at 55% anymore! I normally rebalance quarterly, but might tempted to do this early.
I think maybe like other Monevator readers I really enjoy TA’s passive posts and I’m probably about 50-60% passive funds myself. But there is also a sizeable active part of my portfolio.
I was wondering when reality would hit those who have only been invested for a decade or so (not that I knew anything more than anyone else) – the answer is probably to do nothing, and are we seeing a classic “dead cat bounce” this morning? Who knows.
Mind you, if I was only 4-5 years away from retirement, like @Whettam, I don’t think I would be quite so heavily into equities!
And the annuities keep on paying their instalments!
@Mark Meldon Thank you I think?! 😉 I think you have said in the past you would not recommend annuities for early retirement. I am 51 and am not convinced that an annuity will be the best approach for us, if we are able to retire at 55, as I would like to do. I’m not against annuities, but I don’t believe currently they offer decent value until you are at least 65 ish.
I acknowledged myself my allocation is quite aggressive, maybe too much so, only time will tell. The common opinions though are contradictory, because on the one hand its “40-50% bond allocation this close to retirement” and on the other its “don’t invest anything in equities, that you will need in next 5 years”. I have veered more towards the latter, 25% of my portfolio would satisfy about 5 – 6 years income requirements, hence my allocation. Additionally part of my bond allocation (about 8%) is actually an old with profits scheme that has a guaranteed 4% pa growth, not surprisingly its never delivered more than the guarantee, but I’m pretty sure from the T&C’s will not loose value, so I’m viewing this as even better than a bond 🙂
I personally struggle with the “how much can you stomach loosing” definition. But I have not actually lost anything unless I sell, which I do not intend to do, timeless to me see the logical way of looking at this.
I’m also hoping my 20% allocation to Alternatives and Property, help de-risk my equity allocation. My allocation to alternatives has held up well, property not so, but both these are currently paying decent income. If this is a real long term downturn, then I will consider reinvesting the dividends back into equities, as opposed to same asset class.
My comment was not really a “reality would hit” moment, I always knew that there could be a significant fall and I’m making my own decisions and accept responsibility for them. I saw an advisor once and they added together inflation adjusted numbers with non inflation adjusted numbers and then compared them to other non adjusted numbers, amongst other numerous basic mathematical mistakes, so I decided I could make my own mistakes just as well as them!
It was more just an observation that this is a new experience on my investing journey, I have been lucky to start investing in a period which has been kind to us all. I may well to have to work longer (or wait longer for FI just for you @TI 😉 than I ideally wanted, but that’s not so bad.
Bonds doing well again this morning as market prices global coordinated central bank policy easing. I’m dubious that bonds are a good hedge for equities in all scenarios. In some scenarios like late 18, when the S&P went down 20% quickly, it was higher bond yields that were the actual driver for equity falls. Nonetheless, in slowdown/recessionary or risk-off scenarios (like this) bonds are a good hedge.
Underlines, yet again, the need for diversification. The fact that bonds are not just cash. That yields can always go lower, however low they may seem. It also underlines why short-duration bonds won’t provide much protection for cash constrained investors and that long-duration is better (obviously this is different for leveraged investors).
I’m down 4% in the month and am relieved that I decided to start shifting up my bond allocation slightly (from 10% to 30% of my ETF portfolio) from the middle of last year.
Like @Jim McG, I don’t have spare cash lying around, all my cash meant for investing gets invested as I earn it, so I’m just sticking to my plan of investing on a monthly basis.
Must confess however that the urge to dip into my emergency fund to pick up some ‘bargains’ is tempting.
@zx48k – yes, I’ve been rebalancing into bonds since late November so I can create a glide path to equities each year I keep working or for drawdown if I don’t. Not really liking long term gilts, I bought iShares Core Global Aggregate Bond UCITS ETF GBP Hedged as i thought it a good long term/short term compromise to maintaining my capital. It’s done what I thought it would and a little more.
As this coronavirus has kicked in, I’ve also bought a 15+ year Gilts fund thinking if this does get nasty, maybe Central Banks will cut rate again? Can’t see rates going up right now though, as this is a potential supply shock rather than a demand one, short supply might inflation leading to increased base rates,
Ho-hum.
@Wettam,
I wasn’t being personal! It just seems to me that many Monevator readers have yet to experience the market turbulence we are currently seeing. Now I know that you are under 55, I’d agree that annuities are unlikely to represent an attractive option for a decade or more. Mind you, should gilt yields suddenly start to rise, admittedly unlikely, annuity rates might improve, perhaps substantially.
Trouble is, the pension fund might well be smaller!
Best do nothing, I’d say, but we could be in for prolonged “difficulties” my unreliable hunches say.
I am actually in the process of setting up a SIPP with Interactive Investor and have been filling in the transfer forms over the past week. Luckily/unluckily I have actually been 90% in cash since July 2018 but been investing in my DC company pension each month since. I think I might be one of the very very lucky people as I am just about to move into various 60:40 type strategies. Vanguard/HSBC/MyMap as well as the “John Edwards” Portfolio. The current numbers as at Friday night for these are -3.97/-4.68/-5.64/-6.4
And a nice juicy 50bp Fed rate cut today. Hope we don’t get a real recession in the near future!
The market volatility gives me a problem with rebalancing. First, if I rebalance now how does this differ from trying my hand at market timing. Second, as I hold gold as an Armageddon hedge, now hardly seems the time to take profits. Upshot is paralysis of action, which might turn out to be the best approach even if a consequence of funk rather than rational strategy.
I think if you have rebalancing rules then that should include when to rebalance – ie this should be decided in the cold light of day and not in the heat of a downturn. I rebalance annually, around March/April to coincide with new tax allowances.
Seems to me Fed just blew 50bp. S&P down 2%, USTs up 2%. Gold up 3%.
Like all junkies, the market always wants more stimulants. The Fed, the junkie’s favourite dealer by far, has been providing those stimulants cheap for over a decade. Problem is the junkie wants more and more, cheaper and cheaper. Eventually the Fed is going to have to pay the junkie to buy the drugs (negative rates), like many other dealers, the ECB, BoJ etc, already have to.
I think this is spot-on. People should do what they long ago decided to do — whether the times are good or bad.
All sorts of friends of mine have contacted me in the past few days saying “what should I do?!”
And my answer is stick to your plan… or if you didn’t have a plan then at least realize now you need one!
I’ve traded a lot over the past two weeks, but I’m always trading. I will live or die by that sword (and most who try will ‘die’ of course, in terms of probably lagging the market and almost certainly wasting a lot of time and getting grey hairs!) In other words, I was faffing about when the market was at all-time highs, and when it plunged I had my trading responses too. It was not novel to me.
In contrast a passive investor deciding that actually they should do something to their portfolio only when times are terrible and fearful is making a mistake. Even if you think you’re being contrarian rather than scared (say shifting some bonds to equities to ‘bravely’ take advantage of the falls) you have to be aware that all bear markets start with corrections like this.
So what are you going to do if the market keeps falling? More trading? What if you’re 50% down? And are you now an active investor? Are you ready to re-balance on the way up again? Do you want this life? Almost certainly not.
I’m not predicting a bear market, by the way. Who knows. I am just saying stick to your knitting, as calculated on a chill bright sunny Saturday last May or whenever, not when the media is telling you the world is ending and your portfolio is screaming red.
With all that said, there is a passive method that re-balances into these declines, called threshold rebalancing.
For those who want a halfway house, it might be worth considering (but again I’d consider whether it should be your long-term approach when all this is done and settled, not in the teeth of a crash):
https://monevator.com/threshold-rebalancing/
It’s more stress though, in that you have to monitor markets to watch your thresholds.
Excellent summary of the findings of the World Health Organization (WHO) on China’s response. Quite encouraging:
https://www.reddit.com/r/China_Flu/comments/fbt49e/the_who_sent_25_international_experts_to_china/
I think a bigger obstacle to this will be the treatment of NICs, or the adjusted rate of IT, for pensioners. As I understand it, NICs are paid on earnings irrespective of them then being put in a pension. If so, then effectively paying NICs as the pension is drawn would be double taxation. I may have this all wrong, and even if I’m right then allowances can be made e.g. reduced tax rate for pensioners, but it would remain messy.
Call me a naughty market timer if you like, but I just did some strategic rebalancing. I normally invest surplus cash from dividends when funding ISAs in April, but last Friday I decided to go for it and put the cash into whatever was most below target. BestInvest were having a bad day, and quote and order wasn’t working as it timed out, so I ended up doing limit orders. Eve these kept giving errors, so I ended up doubling up on VUKE rather than buying more VWRL. I fixed this Monday AM, and ended up benefiting from a milt recovery that AM, and a dip by the time I rebought! Of course, it could all have gone very wrong. Come April 6th, I’ll want another £20k into our ISAs and just do what the spreadsheets day, BestInvest permitting!
Sitting on the sidelines while this turbulence continues seems a sensible approach right now. It’s way too late to do much, anyway. However, my long-held belief that we would one day see a liquidity crunch in the ETF/Index fund market might be happening now, especially in the bond market. “ETFs purport to offer daily liquidity, often in asset classes that exhibit limited liquidity.”, wrote Peter Spiller of Capital Gearing Trust in 2017.
He continued…
“In ordinary times, sales of underlying stock either by the ETF or the Authorised Participant (AP), with whom investors actually trade, are easily absorbed. But in the event of sustained redemptions, those APs will not be willing to finance large inventories, not least because regulatory change has raised the cost of their capital. They will simply lower their bid for the shares in the ETF, perhaps to a significant discount to the NAV or enough at least to show a profit after accepting discounted prices themselves to place the above normal market size of the individual assets.”
“Effectively, investors will be unable to realise their assets at close to their ‘real value’. If investors hold on until markets have stabilised, they should not suffer too much harm – but it is easy to see ho downward momentum could gather in difficult markets. Given the size of ETFs, their problems could powerfully effect the valuation of the asset class. Put another way, the change in nature of illiquid assets could make the dynamics of the next bear market in various assets quite different from those of the past. And the consequences for the real world are important. If the primary market for junk bonds, for instance, dries up, then companies may have difficulty in refinancing maturing debt.”
Mr Spiller was, it certainly seems to me, right “on the button” when he wrote that 3 years ago.
Index funds have similar problems in fast moving markets in that, certainly in the US, they are effectively the market, with the big companies such as Fidelity, Charles Schwab, Vanguard, etc. owning a vast chunk of the S&P 500 – to whom can they sell stock to raise cash for redemptions? Each other, seems to be the answer.
Whilst the majority of my clients do have some exposure to index funds, I’m jolly glad that most also have lost of investment trust shares with cash reserves and covered dividends. My drawdown clients also have 2-3 year’s worth of their income requirement in the bank, so they don’t need to sell assets right now to raise money for income purposes, so can ride this out.
When you are 60+, you just can’t handle too much market volatility, as time is short, which is why many clients have a mixture of secure lifetime income (DB pension, annuity, state pension) and non-guaranteed drawdown funds on top.
Hold on to your hats!