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I think that's good advice. My mom lost about 70% of her retirement savings during the GFC, but a few years later that value had recovered.
It's terrible for people currently trying to live off their savings or those who can't postpone retirement. For everyone else, it ends up not really mattering too much (unless they panic sell the bottom).
that's pretty insane, i get not panic selling and, after btc, that concept is pretty well ingrained in me, but if a person was already retired and living off that income, they're screwed no? like wham, -70%
how do index funds work in this case, do they just rebalance themselvs and then prey you can withstand the drawdown
how do index funds work in this case, do they just rebalance themselvs and then prey you can withstand the drawdown
I'm not sure. That sounds plausible enough. If so, that's similar to systematically selling the bottom, because you'd be getting rebalanced away from whichever stocks fell the most.
I watched several of my older coworkers in 2008 bail out of the market at the very bottom of the bear market. They were down nearly 60% with maybe 10 to 15 years to go to their anticipated retirement. Ironically that was the absolute worst move - if they had stayed invested and kept contributing they would have been making new highs within 5.5 years and their contributions during the bear would have been up tremendously. I think our own psychology and trepidation is our own worst enemy when it comes to investing.
I don't know what your mom should do, but I would try to make a plan she can stick to and take all the emotion out of it. What happens if the market goes down 50%? Will she be able to rebalance and take advantage of that opportunity, or just panic? What happens if the market melts up? Will she fomo in at the top, or rebalance and take some gains?
I would think carefully about goals and risk tolerance, then make a spreadsheet of possible market moves and how her portfolio should ideally respond to each. Follow the plan, not the pit in your stomach.