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Comment by mathgeek | Hacker News Reader

The next market recession will happen the same as the previous ones: some lucky people will predict it, most won't, and everyone will in hindsight declare how obvious the signs were.

The best strategy is still to diversify your investments, keep enough emergency assets to ride the wave, and not worry about it.

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Completely agree with this mindset. All the non-cash assets and investments I hold onto I intend to keep for over 20 years. Short term corrections in the market even as bad as 2008/9 don't concern me. As long as you're not speculating debt against market performance and have emergency cash on hand you can hold and buy the assets at a lower valuation.

but frankly even trying to time a bottom as a buying opportunity can be dangerous, because it can prevent you from making common sense investments at decent prices.

I buy assets on a consistent scheduled basis and am not waiting for some big crash to happen. But if I do notice the market is pretty bearish then I may decide to purchase more beyond that regular investment schedule.

Yep. This is a problem for people like my parents, who are 80+ and living off investments. A big downward correction is very scary for people in that situation, but not at all worrying for me.

Yeah agreed I know some folks in that situation back in 08/09. I'm still in my 20's so not sure how I'm going to deal with investing as I get into my retirement years. It can be scary to have over half your retirement wipe out with no time for correction. Probably a more cash heavy asset allocation would be the solution. Not sure though.

I think dividend income is a typical solution. It doesn't matter what the stock price does if the company continues paying dividends. If the company is strong and pays a dividend, the stock can be looked at like a low-yield bond. Except that dividend-companies tend to increase the dividend every year when possible, so it's also a bond where the yield increases. Coca-Cola has paid about 3% for years and years.

That's not something worth worrying about in your 20's. Just set up a recurring investment in index funds or similar and forget it exists until you're at least in your 50's or later.

Random catastrophes do happen to younger folks, of course, but those are something to deal with if and when they happen.

Shouldn't their investments already been moved to Bonds/Money markets? At 85, if you have to worry about stock market, you are doing it wrong.

Depends on whether they want to pass on appreciated equity at a step up basis to their offspring.

That's a good point. My mother is 80 (in a few months) and it's all about life expectancy. Her mother lived to 95. She is in good health. Should she assume the best or worst case? The choice she makes will greatly effect her lifestyle.

Hard problem.

>diversify your investments

Diversify into what though? Once market crashes, it takes everything down with it.

Not cash.

Could you explain why? In 08/09 everything became cheaper -> cash became more expensive. Isn't it?

The benefits of having assets in cash during a crash only outweigh the downsides if you know when the crash is going to happen. Since you don't know that timing, you're statistically better off investing anything beyond your emergency funds.

Healthcare index funds weathered the last recession very well (e.g. https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I... )

This is not necessarily true. To avoid volatility, invest across asset classes with low correlation [1]. E.g., bonds will probably not tank when U.S. equities do.

[1] https://www.investopedia.com/terms/c/coefficientofvariation....

Bitcoin does not correlate with anything. Should people diversify into it?

Bitcoin wasnt around during the last recession. We don't know what will happen in the next one.

I said asset classes ;-) Bitcoin is not an asset in financial terms.

But cash is?

I would call Bitcoin a "speculative asset" right now, actually. Compared to major currencies, it is highly volatile.

Bitcoin also is, in some sense, similar to a fiat currency (Bitcoin has no intrinsic value) without having the typical fiat currency backing (a supporting government, complete with armies, laws and their enforcement agencies, etc. sponsoring the currency). This adds a degree of risk to Bitcoin most other currencies do not have.

Definitely I'd see it as an asset though.

Not being government backed does add risk? Bitcoin cannot declare bankrupty, but governments can (ok, affecting bonds primarily). Also, governments can abandon currencies and use different ones.

Governments can attempt to legislate away / restrict Bitcoin at any time, and have muscle power to attempt to enforce this. The converse is not true. This is the main reason I say that there is added risk.

You are correct that government backed currency is indeed absolutely not risk free either in all cases; if confidence in the government is lost, the "official" currency might end up as worthless, and alternatives may prosper even despite heavy-handed government efforts in some cases. There is such a thing as speculative fiat currency.

Having said that, even though forex is generally considered more risky than other sorts of investments, the likelihood of the governments of the major currency players executing the sort of serious humdingers to move their currencies into the "speculative" category seems quite low to me. (Of course, nothing in investing is guaranteed, but still...)

I'll also add that, from what I see, Bitcoin "governance" -- the technical code decisions (https://www.economist.com/blogs/freeexchange/2017/09/not-so-...) -- is somewhat in flux right now, eg the dramas over bitcoin blocksize limits. This also adds risk.

It will be, if it continues to not-correlate with anything (not become like gold for example) and stay usable (all miners leave).

It will be so interesting how Bitcoin price behaves in the next recession.

Sure it does. During a recession, people will lose their jobs, the value of their assets will go down, etc. Do you think they won't cash out any of their BTC in order to cover expenses?

Even in a recession people look for investments. If stocks, bonds, etc all go down they look further. Gold has gained value during the last recessions.

I think this is no longer true. Many bonds would default and even if they don't the yields on bonds is so small right now that you might as well just keep cash.

As long as you don't need the assets during the downturns, this doesn't matter.

US Treasuries went up in 2007 by like 20% or something ridiculous.

There's always an asset class that outperforms during a crash.

Bonds, precious metals, ETFs tracking industries that do well during downturns.

exactly! you should really only be worried about a need to time some action if you are very close to retirement. otherwise just watch and wait, markets tend to rise and they will rise again eventually.

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