I am not a financial planner nor a financial advisor. This post reflects my own uninformed opinions and does not contain financial advice.
After a comeback rally Friday, the DJIA closed at ~24,200, still down about 9% from its high at the end of January.
For those of us with a long time horizon, this downturn is a blip. Whether the market bounces back or craters in the next year or two isn’t make-or-break for me, though it may shift my FI plans, depending on timing of the recovery.
That said, the recent stock market volatility has tipped the scales on at least one borderline decision:
Because I plan to quit my job, I have decided to build up my cash cushion a bit before maxing out my retirement accounts. I still plan to fill my 401k before I leave, but I want to make sure I have cash on hand first in case my employer terminates me early. I’ve dropped 401k contributions down from 50% of my income down to the match; I’ll push it back up after my cash cushion reaches optimal levels. The stock market volatility has, in effect, tipped the balance toward this more conservative course of action.
Other than adopting more conservative sequencing in preparation for my sabbatical, though, I have no plans to change my behavior. I’m pretty happy with my investment allocation. Charitable contributions continue apace. Given that I’m looking unemployment in the face, I’m feeling remarkably unfazed. That said, give it a few months and a potential recession and see whether I’ve changed my tune.
At least for now, though, all there is for me to do market-wise is to watch and to wait. And to idly speculate what may come next (mostly because it’s fun). With no real basis whatsoever– no data, not a finance person, etc etc etc hedging– my guess is this correction is going to be “the big one” we’ve all been waiting for. Maybe it’ll last a few months, maybe even a year. I wager– again, based on no knowledge, wisdom, or reliable intuition into these matters– this’ll end up being a 30%+ correction and the DJIA will drop below 20,000 once more. I’ll be DCA-ing in anyway, I’ve been wrong about this stuff before. But, hey, we all try to think about what’s next during crazy times, don’t we?
How are you reacting to recent market fluctuations (if at all)? How low do you think we’ll go?
Yet Another PF Blog 
I’m not doing anything different! I had thought that, when the market correction finally hit (I think I was expecting it to happen later), I would have enough cash savings that I might start thinking about shifting some of it into a brokerage account. That hasn’t happened quite happened, and I expect that my only investing this year will be through my 401(k) and backdoor Roth, and I’ll sock away a lot of cash into my savings account, both as a bigger “emergency fund” and to prepare for some future big life expenses. (I’ll also continue being pretty aggressive with student loan payments.)
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