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2021 Outlook

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Janey12
Posts: 15
Topic starter
(@janey12)
Active Member
Joined: 11 months ago

I know we cannot predict, but what are the thoughts on... if the Market will crash and when.  If so, how long would it last... If you have a 55% mix of VTSAX, VTI, VXUS and 35% mix of VGIT, VAIPX.  Could this cause a big loss????   Thank you

14 Replies
earlyretirementnow.com
Posts: 250
(@earlyretirementnowcom)
Member
Joined: 6 years ago

Good questions. There's no way to time the crash. But with a CAPE way above 30, I would expect a real equity return of only about 3% over the next 10 years. 

55/35 (what are the other 10%) stock/bond mix seems way too risk-averse if still accumulating. Probably even a bit too cautious if retired already. I would target 100% when working and 75% equities when retired.

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Janey12
Posts: 15
Topic starter
(@janey12)
Active Member
Joined: 11 months ago

Thank you so much.  So the other 10% is in Cash.  So the real issue I am in the process of divorce and I am worried that the market is going to crash by the time my divorce is final.  It will probably be finalized in about 5 months.  I know that is l long time in stock market time to project.  But I am wondering if it does crash within that timeframe, would it crash drastically and when would it bounce back up.  I do not  have the security of being able to now worry if about the market crashing and bouncing back.  If it crashes right before it is final then I will lose out.  I was just wondering anyone's thoughts to help me get through this.  Thank you again.

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1 Reply
NavyPack
(@navypack)
Joined: 1 year ago

Estimable Member
Posts: 161

@janey12 Tough to know what happens over 5-6 months.  Could be a/quick event like last Spring or longer like 2000 and 2008.

*This is just an idea, so do your own research*

While normally not a good idea to hedge, you can control downside risk with OOM puts, but is almost the opposite of Big ERN's strategy.

Buying a SPX put that settles in July 2021 with 3450 strike (about 10% below underlying) costs ~3% ($120 divided by 3850).  This limits downside to -13%, but locks in 3% reduction in the upside.  One put covers 385k in stock value.

Might be worth it, if your divorce split does not adjust with the market.

Again, I'm not an expert with options and hedging, but thought this might work and provide good discussion topic!

 

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Janey12
Posts: 15
Topic starter
(@janey12)
Active Member
Joined: 11 months ago

The one thing is I have no control over the funds.  I have my own funds too, but not the large portion of the estate.

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1 Reply
nobatmanjokes
(@nobatmanjokes)
Joined: 1 year ago

Trusted Member
Posts: 91

@janey12 your overall portfolio is locked in a 55/35/10? What asset allocation do you want it to be in? It may be possible to synthetically put yourself into the asset allocation that you want with the portion of assets you do control now and some assumptions about how much you will get from the splitting of assets.

My condolences for the difficult situation you’re in.

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Janey12
Posts: 15
Topic starter
(@janey12)
Active Member
Joined: 11 months ago

My portfolio is not correct now, but I am afraid to change it.  The reason is if I change it to grow then I would just have to give half of it away.  I am in a bad spot, because my portfolio will be totally split 50/50 with my ex (all marital) and his portfolio has a premarital portion.  That is my concern.  If the market crashes he will get to keep his premarital portion and the loss will be all marital.  And on the other hand my portfolio will be split 50/50, due to me accruing it during the marriage.  It is like he has the best of both worlds.  So I am trying to do my best to see when I think the market will be at it's best and time the finalization of the divorce, at least I have some money for retirement.  If that makes sense.  Thank you for you help.

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1 Reply
earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@janey12 what's the base for the premarital portion? What date are we talking about here? If he has a "floor" with the S&P 500 at 2000 points in, say, 2014, I don't think we will fall that low.

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