What a mess right now on the stock markets. For the first time in my life as an investor, I had at least seen this one coming. In 2000, I had not anticipated the bursting of the technology bubble. Worse, I was even starting to invest at that time, all excited to be able to participate in the big party of the moment. I already saw myself as a rentier in the space of ten years maximum. In 2008 I had not seen anything coming either, but the previous experience had taught me to become much more cautious in my investments. The damage was therefore partially limited. However, on closer inspection, quite a few warning lights were red and I would have had enough to protect myself even more.
But this time it's different. I really saw it coming. I would even say that I hoped for it, and that's perhaps why my critical eye on stocks was all the sharper. In 2017 I started to move away from overvalued American stocks and in 2018 I increased my cash share in my portfolio tenfold. If I waited so long for this moment, it's first because there are fewer and fewer stocks worthy of interest at a reasonable price. It's also because two years ago I set myself a very (too?) ambitious goal: to become annuitant in 2020. Obviously, with a cash portion currently representing more than half of my portfolio, it is impossible to achieve this objective. I therefore need the market to begin a real correction, to be able to "buy" myself an annuity with a good quality/price ratio, through securities paying increasing dividends.
If the market declines quickly (like in 2008), there is a small chance that I can return to the market in 2020, when prices have stabilized. But even if I imagine that I can be at 100% invested at that time, I will not have a year of hindsight on the payment of my annuity. However, this step is necessary to ensure that my projections work in reality. So, in the best case scenario, barring a miracle, I will not reach my objective until 2021. And if the bear market lasts as long as in 2000, it could even be 2023.
At the same time, even the most pessimistic scenario remains acceptable! And then I could of course lower my activity rate even further well before... So now I am watching this agitation on the markets with a mixture of hope and excitement!
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I look forward to seeing when you actually reach your goal of becoming an annuitant and I am happy for you! What surprises me a little is that you are clearly assuming that the correction is only just beginning and that we are going to experience a real massive crash like in 2000-2002 or 2008. Maybe you are right, but maybe we are already close to the bottom.
What I mean is that no one really knows how long or how intense this decline will be. By staying on the sidelines and always expecting the decline to continue, aren't you afraid of ending up with too much cash (which in the meantime is not earning anything) on your hands or returning to the market too late? For my part, I try to invest month after month ("dollar cost averaging"), rather than accumulating cash and hoping to find the ideal entry point.
Seeing what's happening in NY it seems that the bottom continues to sink! And Trump who continues to blame the Fed:
https://www.dividendes.ch/screenshot_2018-12-24-19-13-08/
LOL
More seriously, if I think that the market will fall further, it is simply because it is still very expensive overall, despite the fall.
I'm not trying to find an ideal entry point at all, I know that's statistically unlikely. It's just that I can't find anything interesting to buy at the moment. I'm also a fan of dollar cost averaging, but if nothing fits my criteria, then I'm forced to stay in cash. And right now I have to say that it's allowing me to get through the storm dry or almost.
Merry Christmas!
It's true, the US market is still overpriced, but in Europe it's much more reasonable. In Switzerland I find plenty of affordable stocks at the moment, which of course doesn't mean they can't go down much more.
Merry Christmas to you too my spiritual brother 🙂
Thanks bro. Yes, in Europe the prices are interesting again. In Japan and in emerging markets they are extremely attractive. On the other hand, in Switzerland and at the clown they are still generally too expensive. And then except perhaps for a few rare exceptions, I will first wait for the market to settle down a little before coming back in force.
Damn. Santa didn't give Trump a present yesterday!
I come back to this "future rentier's diary" to ask the following question: when you consider the time has come to become a rentier (and therefore to give up salaried employment), when you consider the investments made so far sufficient, do you intend to live solely on the income from these investments (dividends) or also on the capital by starting it? This second hypothesis is undoubtedly more delicate to manage, but allows you to consider yourself financially independent earlier.
Excellent question Laurent. It even gives me an idea for an article… coming soon!