What to do if you've taken the hit!

As with everything I do I have a contingency plan. It's like going to war, when war is declared, you pull out a canned plan and make the adjustments as needed. My plan was canned back in December 2009 and I blogged about it.

Plan A: Avoid the loss in the first place (duh). I could have done this, but just couldn't seem to find a good opportunity.

Plan B: Look for a 50% retracement, bump up contributions to lower the cost bases per share. For those who had the stones to stick it out in 2008 it worked. It wasn't the best thing to do, but it was better than selling at the bottom then being too afraid to get back in, something many folks did back then.

Here is a study of Bear Market recoveries you might find helpful.

2010: Bear Market Recoveries
Bears take the elevator down.
Bulls take the stairs up.

 

[Boghie]

I've eaten all the Satan S*@t Sandwiches made so far

I might bail on another 10% - but, good God I hate locking in losses...

I, too, have been looking at buffering this loss with increased contributions. I was lucky enough not to get absolutely hammered in 2008 and to take the advice to chew on yummy, cheap equities... This time I think I will take the punch and pepper back with enhanced DCA.

 

[Boghie]

BTW, thanks for the advice.
It is far more imporant and valuable when things are not going well...

 

[law87]

JTH wheres the support for this damn thing?

 

[twohorsefarm]

A quick reference to the TSP low of 09. Present price and May 2011 high. Helps a little with risk assessment.[TABLE="class: tspStandard"]
[TR="class: oddRow"]
[TD="class: leadingCell"]May 10, 2011
[/TD]
[TD="class: packed"] L-15.0644
[/TD]
[TD="class: packed"] 2020-17.8611
[/TD]
[TD="class: packed"] 2030-18.5091
[/TD]
[TD="class: packed"] 2040-19.0920
[/TD]
[TD="class: packed"] 2050-10.5864
[/TD]
[TD="class: packed"] G-13.6300
[/TD]
[TD="class: packed"] F-14.5412
[/TD]
[TD="class: packed"] C-16.5118
[/TD]
[TD="class: packed"] S-23.4688
[/TD]
[TD="class: packed"] I-21.4454
[/TD]
[/TR]
[/TABLE]


[TABLE="class: tspStandard"]
[TR="class: oddRow"]
[TD="class: leadingCell"]Aug 08, 2011
[/TD]
[TD="class: packed"] L-14.5840
[/TD]
[TD="class: packed"] 2020-16.0394
[/TD]
[TD="class: packed"] 2030-16.1540
[/TD]
[TD="class: packed"] 2040- 16.2969
[/TD]
[TD="class: packed"] 2050-8.8356
[/TD]
[TD="class: packed"] G- 13.7186
[/TD]
[TD="class: packed"] F-15.0254
[/TD]
[TD="class: packed"] C- 13.6893
[/TD]
[TD="class: packed"] S-18.0443
[/TD]
[TD="class: packed"] I-17.5362
[/TD]
[/TR]
[/TABLE]


[TABLE="class: tspStandard"]
[TR="class: oddRow"]
[TD="class: leadingCell"] Mar 09, 2009
[/TD]
[TD="class: packed"] L-12.1112
[/TD]
[TD="class: packed"] 2020-10.8084
[/TD]
[TD="class: packed"] 2030-10.2343
[/TD]
[TD="class: packed"] 2040-9.8133
[/TD]
[TD="class: packed"] 2050-N/A
[/TD]
[TD="class: packed"] G-12.7996
[/TD]
[TD="class: packed"] F-12.4323
[/TD]
[TD="class: packed"] C-7.8673
[/TD]
[TD="class: packed"] S-9.0631
[/TD]
[TD="class: packed"] I-10.2903
[/TD]
[/TR]
[/TABLE]

A repost, good base line to watch.

 

[JTH]

Law87 http://www.tsptalk.com/mb/showthread.php?6089-JTH-s-Account-Talk&p=326789&posted=1

 

[JTH]

BTW, thanks for the advice.
It is far more imporant and valuable when things are not going well...

Thanks Boghie this is a tough time to stick it out, in the end we each have to make our own choices, I am a long way from retirement this race ain't over yet.

 

[WorkFE]

That was my point on a thread that was discussing this issue. If you missed the decline don't eat it unless you have to. (Time not on your side).
When you're stuck on stupid don't make it worse.
As always thanks JTH.

 

[JTH]

Although the end result is stupid, I find there's more too it. In a typical pullback you wait for the bounce and that's the right thing to do in an uptrending market. When we broke below the previous SPX swing low around 1300 that should have been an exit. It's just really hard to make thiose decisions in the here & now. Those TSP restrictions can really hinder your ability to make a rational decision.

 

[GUCHI]

jth
your logic seems very good, which got me thinking on my situation. you mentioned bump up contributions and i have in a sense. i took out a loan 3/11 and of course started paying back shortly after that. my allocation is split 50/50 L2040/I. so every 2 weeks im buying shares back thru my loan ($415) and 10% of my salary. this situation seems ideal for me since i have a little time left before retiring (3 yrs). buy em cheap!!!! i guess this is the silver lining for me. i don't know if anyone else is in or thought about this scenario, but anyway food for thought.

thanks
john

 

[JTH]

jth
your logic seems very good, which got me thinking on my situation. you mentioned bump up contributions and i have in a sense. i took out a loan 3/11 and of course started paying back shortly after that. my allocation is split 50/50 L2040/I. so every 2 weeks im buying shares back thru my loan ($415) and 10% of my salary. this situation seems ideal for me since i have a little time left before retiring (3 yrs). buy em cheap!!!! i guess this is the silver lining for me. i don't know if anyone else is in or thought about this scenario, but anyway food for thought.

thanks
john

I took out a loan back in 2008, it ended up protecting me from the brunt of the bear market decline it wasn't as good as DCA (due to the timing) but it certianly made things better.

 

[Birchtree]

We may just have experienced the shortest bear market in history due to electronic trading.

 

[Happy_Trails]

And one of the fastest declining bears ever, sheesh.

 

[Adventurer]

Good thing I bought in this morning. . .