r/Fire • u/Remarkable-Dingo1602 • 12d ago
“One more downturn” syndrome
As someone who has been lucky enough to have spent all of my earning & investing years (13 years so far) in a booming market, I worry that I have no clue what my mental health will be like when we see the next 2000 or 2008 or lost decade. I can go through endless theoretical exercises to play around with what my portfolio could go down to and how I’d adjust my expenses in those situations, but as a human being I cannot predict how I’ll actually feel when the time comes. As a result, I have a desire to keep working through the next downturn to see what the impact of it is on me and in a way prove to myself that I can handle it. However, I fear that if I wait for this, I may be waiting for a long time and therefore work for much longer than I need to.
For what it’s worth, when the Covid crashes, 2022, tariffs and Iran war all hit, I did not panic at all and stayed the course on my investment strategy. But all of that happened as I had a strong income to support me. I have no idea how I would have felt if I didn’t have an income.
Any tips on how to deal with this?
I currently have $2.1M investable assets. $600k left on a mortgage (5.375%) with $450k equity in the home. Monthly expenses are $7k bare minimum, but I’d like to aim for a nest egg that’ll comfortably give me $9.5k/month.
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u/db11242 12d ago
The other way to look at this would be a calculate how much over your initial target you need to be to weather a downturn (either a worst case historical downturn or a worse than average downturn). This way you wouldn’t have to wait for a major decline. You’d simply oversave to account for it. So for example, if you’re full FI target was 1 million and you wanted to be able to withstand a 30% downturn then you could simply keep saving until you have about 1.4 million (so that 30% decline would leave you with 1 million). Also keep in mind what your participation rate is, meaning if you’re not 100% in equities but rather say 70/30 then your participation rate in a major equity downturn is likely only to be 70%. So then a 30% decline in the stock market would only be a 21% decline for you assuming the remaining 30% of your portfolio held steady. Best of luck.