Expecting the stock market to crash soon?

New / Eng MDOy74
Sep 29, 2017 86 Comments

There seems to be lots of consensus that we're about due for a crash. Is it worth moving some funds out of the market and into something more stable for the short term?

I've got most of my savings in Vanguard's Retirement 2050 fund, and while it's done well (~15% per year) the last couple of years, it's 90% stocks, and the risk level according to Vanguard is 4 out of 5.

Is it worth moving to a less risky (2 or 3 out of 5) fund for the next year or two and then moving back into an aggressive 4 or 5 out of 5 fund after the market crashes a good bit?

Risk is the market won't crash immediately and I'll lose out on some big (15%) gains during that time. But I should still have moderate (5%) gains during that time. Benefit is if the market does crash, I won't lose nearly as much, and I can put most of it back into stocks and ride the wave back up.

Is this naive? I remember my portfolio taking a hit during the 2008 recession and it took a couple years to get back to even. Would be nice to avoid the dip. Seems extremely unlikely for the market to rise indefinitely without any correction.

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TOP 86 Comments
  • No one has a crystal ball. The consensus you mention is horseshit. The market goes up and down but up over the long haul. Stay invested.
    Sep 29, 2017 4
    • Microsoft / Eng Lucifer.M
      This ^
      Sep 29, 2017
    • Oracle oozing poo
      Is
      Sep 29, 2017
    • Nike / Eng uncle phil
      Sparta!
      Sep 29, 2017
    • Tesla / Eng OnVx58
      Stay invested, don’t stop the contributions while market is going down. You will understand what I am saying in 5-7 years, be patient
      Oct 2, 2017
  • Microsoft / Design FRQE40
    Someone on here put it perfectly awhile ago. Time in market beats Timing the market. Always.

    (Unless you have orange crop insider trading materials for next year)
    Sep 29, 2017 3
    • Jacobs / Eng Sept27
      I bet you $1 the freeze does NOT affect the orange crop.
      Sep 29, 2017
    • Microsoft / Design FRQE40
      Looking good, Billy Ray
      Sep 29, 2017
    • Fitbit
      Feeling good Louis.
      Sep 29, 2017
  • Tableau idontgitit
    I still can't believe that some people still attempt to time the market! There are countless studies that prove it's the worst investing strategy.

    Remember that to be successful with market timing, you have to be right (or more accurately, lucky) twice: when to get out and when to get back in.

    Yeah, sure we all know someone that was successful once or twice. But, NOONE can do it successfully on a consistent basis.

    Be wrong just once or a few times and your future self will hate you for being silly.
    Sep 30, 2017 13
    • New / Eng MDOy74
      OP
      I suspect a correction is coming soonish. Likely not in 2017. Perhaps in 2018. Fairly likely by 2019. I would hate to give up 10-15% returns to sit on cash that loses to inflation, especially if I have to wait a year or two when it becomes tempting to buy back in higher, as you noted.

      That's why I was wondering if going from 90% stock to 40% stock now makes sense. If the market continues to rise, I may only make 5-7% vs 10-15%, but that makes it a lot easier to wait a couple of years vs making 0% (minus inflation).

      While I'd be making less right now than staying in 90% stocks, I'd also lose much less if things do crash, and by switching from 40% stock back to 90% stock after the crash, it would effectively be doubling down after the crash, which could double the profits in the subsequent rebound.
      Sep 30, 2017
    • Workday LRocketMan
      OP, I think it's a fine idea, just be prepared to be in a situation a year from now that the market could be even higher. Consider what you might do then and if that changes what you might do now. Maybe start with 70/30?
      Sep 30, 2017
    • New / Eng MDOy74
      OP
      I really like that idea. Perhaps gradually phase into it... go to 80/20 now, then 70/30, 60/40, etc. Update the allocation every ~6 months and never go below 40% stock. Wouldn't get down to 40% stock for 2.5 years at that rate, but I'll still be better protected if it crashes a year from now than if I stayed at 90% stock indefinitely. It's also less lost gains in the meantime. Makes a lot of sense.
      Sep 30, 2017
    • Tableau idontgitit
      I appreciate the healthy debate guys. I think timing the real estate market is equally difficult but for me that's entirely different. You should buy a house because you need to live somewhere and prefer owning instead of renting for one reason or another. Not because you expect to turn a profit. Historically house prices just follow inflation.

      As for scaling back your stock portion from (say) 90% to (say) 40%, this is still timing the market so I think you can guess that I'm not a huge fan. However this is likely a better idea than completely getting out of the market.
      Sep 30, 2017
    • Groupon rahul
      CAPE.
      Sep 30, 2017
  • eBay pWrI68
    I sold most of my stock last Oct-Nov timeframe expecting a stock crash. Last week I swallowed my pride and rebought it. Biggest mistake of my life trying to time the market.
    Sep 29, 2017 4
    • New / Eng MDOy74
      OP
      Hmm... not to make you second guess, but I think the mistake might have been rebuying. If you're going to try to time when you sell, I think you have to stick with it more than a year. This is probably why it's best not to try to time the market in the first place.

      But what if you'd moved from stocks to bonds and lowered your return from 15% to 5%? You'd be behind today compared to the market but ahead today compared to cash. It's a safer form of trying to time the market.
      Sep 29, 2017
    • eBay pWrI68
      +1 on the bonds part. Not sure about correct time to rebuy stock. For all you know, this could go on another year!
      Sep 29, 2017
    • Workday LRocketMan
      timing the market is never a sure thing. In my opinion, t's not trying to time it that was dumb. It was not accepting or being prepared for the possibility of being wrong
      Sep 30, 2017
    • Facebook Gôoglę .
      Bonds also fall, folks.
      Sep 30, 2017
  • This comment was deleted by original commenter.

    • Fitbit bDUn33
      Doesn’t matter unless you’re about to retire. You still own the same number of shares, it’ll come back.
      Sep 29, 2017
    • Fidelity Investments trash1337
      Actually it's better during a dip because if u reinvest divs you get more shares
      Oct 2, 2017
  • Microsoft / Eng
    ➡Nutella⬅

    Microsoft Eng

    BIO
    Nutella
    ➡Nutella⬅more
    It's not like we're due for a crash. It's that we're in total economic shambles that QE simply delayed and made worse. It's blowing in the next months.
    Sep 29, 2017 4
    • Workday LRocketMan
      Economic shambles? What do you have in mind you creamy, chocolatey dessert?
      Sep 30, 2017
    • Groupon rahul
      Economy is not healthy.
      Sep 30, 2017
    • Fidelity Investments trash1337
      Yup the economy is bad shape. That why unemployment is low, housing market is on fire, and companies are posting record profits
      Oct 2, 2017
    • Groupon rahul
      I was going to say don't mention those 3 things as proof 😁
      Oct 2, 2017
  • Accenture / Other
    obamacare

    Accenture Other

    BIO
    Patient Protection and Affordable Care Act
    obamacaremore
    Stop trying to time the market. If there is a downturn, double down on your positions while asset values are low and then recoup your losses and then some when the market bounces back
    Sep 29, 2017 4
    • New / Eng MDOy74
      OP
      Double down with what money? That's the point of pulling some out early, no?
      Sep 29, 2017
    • Microsoft sde63
      LOL at "double down". Were you around in 2009?
      Sep 29, 2017
    • KPMG kETx61
      I was and did exactly that. Sitting on $50k in gains in my 401k as a result.
      Oct 1, 2017
    • Google QrhU10
      Get ready for another crash and going back into more negative
      Oct 2, 2017
  • New / Eng
    booboo08

    New Eng

    PRE
    barclays
    BIO
    Software Engineer with 10+yrs in wall st tech
    booboo08more
    One of my colleagues went “all cash” last December in anticipation that the market was about to crash. Did it?
    Sep 29, 2017 3
    • New / Eng MDOy74
      OP
      No, but let's consider $100k cash that could have otherwise been earning 10% per year:
      $100k today
      $110k - in one year
      $121k - in two years
      $133k - in three years
      $146k - in four years
      $102k - 30% crash in five years

      He'll be no further behind 5 years from now than if he'd kept it invested. If it crashes in the next 4 years, he'll come out ahead.
      Sep 29, 2017
    • New / Eng
      booboo08

      New Eng

      PRE
      barclays
      BIO
      Software Engineer with 10+yrs in wall st tech
      booboo08more
      “Cash” in that case was “bought us bonds”
      Sep 29, 2017
    • Databricks / Eng
      datadicks

      Databricks Eng

      BIO
      I suck
      datadicksmore
      Bonds is not cash
      Oct 1, 2017
  • Google QrhU10
    There will be some sort of pullback. 5-10% correction but there is no recession in near term. Look for yield curve inversion before confirming recession
    Sep 29, 2017 2
    • Workday LRocketMan
      No recession in the near term? Says what?
      Sep 30, 2017
    • Google QrhU10
      Says the yield curve inversion
      Oct 2, 2017
  • Facebook Goog .
    It’s obvious we will crash.
    Some day.
    And it may recover.
    Or maybe not.
    Oct 6, 2017 4
    • New / Mktg
      BeKind2You

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      BeKind2Youmore
      May not recover? The only thing that will stop it is the end of the world. And really at that point who cares about stocks
      Oct 6, 2017
    • Facebook Goog ,
      Or you are Japan. Or Europe post 2008. Or the Aztecs after the Spanish conquest.

      America has been well off but it doesn’t mean it’ll be like that always.
      Oct 6, 2017
    • New / Mktg
      BeKind2You

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      BeKind2Youmore
      Let's be realistic though ... in our lifetimes is America going to collapse? All signs point to continued growth and btw Japan and Europe are doing ok as well. Japan has a population issue that is affecting some markets but their market hasn't collapsed. You must be a doomsday prepper oh no it's the end of the world!

      It is an enormous mistake to take money out of the market expecting a crash that isn't going to recover. You'll end up hoarding cash that depreciates at 3-10% a year.
      Oct 7, 2017
    • Facebook Amzn .
      Knowing that you may not recover does not mean you shouldn’t invest your money.

      Investing is the only way to increase the probability of you doing well off, hence you should do it. But it’s not bullet proof, like anything in life ;)
      Oct 8, 2017
  • Wish / Eng
    kagamoto

    Wish Eng

    PRE
    Amazon, Facebook, Google
    kagamotomore
    “Far more money has been lost by investors trying to anticipate corrections, than has been lost in corrections themselves.” - Peter Lynch
    Oct 2, 2017 1
    • New / Mktg
      PVPk22

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      PVPk22more
      Sound advice I am a victim of this mentality myself. Made many investing mistakes trying to time the market and lost a lot of money foolishly.
      Oct 2, 2017
  • New Maze
    You're both wrong. Yield curve inversion is a great early indicator normally, but not in an era of QE. If it goes negative, certainly gtfo, but it does not have to go negative for their to be a recession again given QE.
    Sep 30, 2017 0
  • Wish / Eng
    kagamoto

    Wish Eng

    PRE
    Amazon, Facebook, Google
    kagamotomore
    We're far from crashing. If the consensus is bearish, you buy more. If you hear news/media talk about crashes it's time to buy more. You should get worried when someone who never bought stocks before want to get in. Otherwise, just to add some details on the yield curve, look at the yield curve flattening. Look for 10YR-2YR <= 0 https://fred.stlouisfed.org/series/T10Y2Y When we reach near zero GTFO
    Sep 30, 2017 3
    • Microsoft / Eng
      ➡Nutella⬅

      Microsoft Eng

      BIO
      Nutella
      ➡Nutella⬅more
      There's been 3 sputters of upside capitulation in the last 12 months with high resistance at dow 22-23k range. I'm waiting for that last capitulatiin on the upside and then kaput, dow 10000 here we come, erasing t years of growth over the next 18 months. Buy when the bottom capitulates.
      Sep 30, 2017
    • Microsoft / Eng Lucifer.M
      Lol Nutella
      Sep 30, 2017
    • Workday LRocketMan
      Kagamoto, agree with your argument, but it looks to me like consensus is bullish

      [Blind] How do you feel about tech stocks over the next 12 months? (Tech Lounge)
      https://us.teamblind.com/s/jJBbVpVE
      Sep 30, 2017
  • LinkedIn / Eng jiraapp
    REITs are a good way to diversify and they provide a solid passive income. Fundrise.com is what I'm currently using. Put some more into municipal bonds. You might get a little less return for a bit but will certainly protect from big losses in case of a downturn.
    Sep 29, 2017 2
    • Nextdoor hLoz28
      I heard about fundrise. How do you like them? How easy is it to get money out?
      Sep 29, 2017
    • LinkedIn / Eng jiraapp
      It wants you to hold for 5 years but you can request withdrawal every quarter
      Sep 29, 2017
  • New XY2000
    This is where the adage, Buy on the Rumor, Sell on the News comes from. The market will correct at times.
    Sep 29, 2017 0
  • New / Mktg
    PVPk22

    New Mktg

    PRE
    AKQA
    BIO
    I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
    PVPk22more
    Why are you worried about the market crashing? Do you think the us will just go bankrupt? Are you 60 old and need the money in 2yrs? If the market crashes who cares? When it inevitably does you fucking buy buy buy as much as you can.
    Oct 2, 2017 3
    • New / Eng MDOy74
      OP
      How do you buy more when it crashes if all your money was already in it before it crashed? Hence my original question.
      Oct 2, 2017
    • New / Mktg
      PVPk22

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      PVPk22more
      How is all of your money in the market? You have zero disposable income? Perhaps if you are concerned about the market rather than sell stock you save as much cash as you can by either making more money, saving more money, or reducing investments that don't have tax benefits such as money added to the market for trading. That way you have cash ready to add tot he market when there is a major scare.
      Oct 2, 2017
    • New / Mktg
      PVPk22

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      PVPk22more
      You can identify what performs the best during market crashes and buy some of that or otherwise diversify your portfolio. Examples precious metals, crypto, cash, real estate, developing countries markets, other foreign markets etc.
      Oct 2, 2017
    • eBay pWrI68
      "He's made similar calls, but they haven't materialized. In June, Stockman told CNBC the S&P 500 could easily fall to 1,600, which at the time represented a 34 percent drop. This week, the index was trading at record levels above 2,500."

      ^ quoting from the article
      Oct 2, 2017
  • New SCjP85
    I could almost guarantee you a 24% roi in 12 mos PM me
    Sep 30, 2017 1
    • New / Mktg
      PVPk22

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      PVPk22more
      Sounds like a scam to me
      Oct 2, 2017