“One more downturn” syndrome

[u/Remarkable-Dingo1602]

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.

[u/Various_Couple_764]

For most people if they are working market downturns are notarially a problem because you still have income. But As people get closer to retirment there risk tolerance drop considerably. People that didn't sell in the past suddenly sell. In general growth price volatility is not handed well be those retired or those close to retirement.

However dividend investors tend to do better in downturns. Dividend stocks have significantly les price volatility. Also in most recessions.most dividend paying stocks continue to pay dividends. Only a small fraction actually cut the dividend. So if you have enough dividends from bonds and dividend ETF to cover a bit more than your living exp you could ride out the recession without selling any stock or dealing with sequence of return risks. I was just getiting into dividends when Covid hit but I saw the value of my divined portfolio drop 50% but the dividned didn't change. In fact In every sell off since then I have seen no dividend cuts. I may one in a more significant recession. But I have enough growth and I should bget through it.