To get through the latest bear market, I thought it would be fun to go through an exercise that will surely make you feel better. The exercise is a gratitude journal for money.

Simply write down all the things you spent money on that could have been invested in the stock market instead. That is the amount of money that you spared from getting torn to bits by the big bad bear.

Hopefully everybody has been practicing taking some profits here and there to pay for a better life for the past several years. Money is meant to be spent. Otherwise, there’s no point saving and investing if we’re just going to hoard all our money until we die.

The period to record all your spending includes how far back in time the current bear market has reset to. For example, perhaps the S&P 500 has declined by 30%, bringing it back to a level not seen since three years ago. Therefore, count all your spending from then until now to see how much you’ve not only spared, but also enjoyed.

Ironically, the bigger a spender you’ve been, the better you should feel. Frugal minimalists get the short end of the stick during a bear market. Not only did they not spend their money to pay for a better life, but they also lost a lot of money on their investments.

Warning: If you are experiencing tremendous financial hardship and stress, the examples in this post might piss you off. If you still want to proceed, please focus on your own examples.

Are you wondering when the stock market will bottom? So am I!

When there is stock market pandemonium, there tend to be a lot of worst-case scenarios thrown around e.g. zombie apocalypse with no food, electricity, or running water. Because of the hysteria, the stock market tends to both overshoot on the upside and on the downside.

As rational investors, we acknowledge that nobody can with certitude predict a stock market bottom. However, it’s worthwhile to at least think about various entry points to put additional capital to work if you are a long-term investor.

As long as we have excess cash flow, we can either hoard cash or make an investment. I tend to consistently do the latter since my cash allocation is generally at capacity.

On September 15, 2008, Lehman Brothers went bust. I remember this day clearly because I made a $200 side bet with my friend over the weekend that the US government would bail them out. To my surprise, the US government didn’t rescue Lehman, and the stock cratered that Monday and never recovered.

Despite all the economic devastation, I wouldn’t mind rewinding time and going back to 2008. I’d rather be 31 than 42, simply because I love life and want to live as many years as possible.

As we potentially head into another recession due to the coronavirus locking up economic activity and the collapse of oil prices causing tremendous job loss in the oil & gas sector, here are some lessons learned during and since the financial crisis.

One of the beautiful things about the internet is that I’ve never met someone online who has lost money in the stock market. When stocks are going up, the bulls are out in full force telling everyone how much they’ve made in XYZ. When stocks are going down, the bears all come out and say they shorted heavily right before the crash. As a result, I think we’re going to be just fine.

Unfortunately, I have about 20% of my net worth long in the stock market, which means I am getting my face ripped off as we speak. The stock market corrections are getting quicker and quicker. This latest 10%+ correction has been the quickest one of them all!

Losing money now is particularly painful because I made a silly goal to accumulate $1,500,000 more capital by September 2022 in order to return to early retirement life.

With the way the market is performing, I feel like I’m walking through a Fujita 3 tornado with a 150 mph headwind. Every financial step forward is one ass-flattening lurch back.

For those of you who are also secretly losing money during the coronavirus pandemic, I thought it would be nice to look on the bright side of things.

During the last downturn, I lost about 35% of my net worth in about six months. I don’t plan on doing that again.  

Losing 35% is not as bad as the S&P 500 losing ~60% during its worst period, but it still hurt like hell due to the speed and absolute dollar amount of the loss.

At the end of February 2020, the S&P 500 lost 10% faster than any other 10% correction in history. As a result, if we are equity investors, we must be extremely vigilant in guarding our net worth. 

Realistically, my target scenario during a recession is to stay flat – neither make nor lose money. This is the first rule of financial independence. But my blue sky scenario is to actually try and make lots of money as the world collapses all around.

Here’s how I plan to do it and how you might too if you’ve accumulated enough money or are planning to retire within the next five years.

It’s official! After 11 years, the S&P 500, the NASDAQ, and the Dow Jones Industrial Average have all entered into a bear market on March 12, 2020 thanks to the coronavirus fears.

The last bear market for the S&P 500 ran from October 9, 2007 through March 9, 2009, falling 57% in the period. The average bear market declines about 33% over 270 days.

With this bear market, we got here in under 30 days. Therefore, there is a hope that this bear market won’t last as long as average. We are seeing economic recovery in China, where the coronavirus first started. But obviously, nobody knows the future.

The Yin Yang Investor Mindset post talks about looking for opposite investment opportunities whenever one asset class is roaring. I used the sell-off in bonds as an example of finally beginning to build a meaningful muni bond portfolio to earn double taxation free income.

Now I’d like to highlight more reasons why folks who have a large enough financial nut, are within five years of retirement, or are already in retirement should consider allocating more towards bonds.

For over 20 years, I was heavily invested in equity to try and build my financial nut as quickly and as large as possible. However, after a 10-year bull market in equities that began in 2009, I decided to take down risk. As a family-man now, the last thing I want to do is lose money and have to go back to work. 

One of the reasons why I left institutional equities in 2012 was because I felt it was a dying business. Not only were trading commissions getting squeezed due to algorithmic trading and other technological advancements, assets under management (AUM) for active money managers was also declining due to poor performance.

Working harder and getting paid less was already demoralizing. Watching my clients I cared about work harder and underperform their respective indices made me feel like my job was pointless. When you feel like your job is pointless, it’s time to do something new.

Since the time I left my day job, the business has only gotten worse for actively managed funds. Yes, it is true that passive money managers gained a tremendous amount of assets during this time period. But there is no excitement speaking to an index fund manager or analyst because they don’t do any analysis. All they do is follow the moves of their benchmark indices. For example, if the S&P 500 removes one name from its index, so does the index fund manager.

As of 2020, the market share of passively managed equity funds has risen to 45 percent according to Bank Of America. For passively managed bond funds, the market share is roughly 25 percent. The market share gains will likely continue.

Let’s look at some active versus passive fund management performance in equities and fixed income over the past 10 years and see what we can discover.