I am not sure if there was a 60% crash the last 100 years (with the exception of 1929+). Even in 1929 it took less than 20 years to recover.
Also, if you had the nerves to continue investing after the crash then the recovery would be much faster.
As another mustachian pointed out, you do not take into consideration the profits before the crash 
. Chances are you didnât put a lampsum just before a 60% crash!
Thatâs true -: 2001 was 51% and 2008 was 57%
Seems 60% is only happening when tariffs are placed .. oh wait 
Even with the timing being known, there had been no hint of just high the tariffs would be. I think the people actively reading the tealeaves were probably expecting something much closer to the temporary 10% across the board than the numbers that were announced on the day of.
That said, I did prepare for this by rebalancing from US equities to ex-US and non-USD cash. I did not buy the dip, because even the highest of my target numbers was not reached. And Iâm not buying into the bounce because nothing has been resolve yet.
And just to be clear, this is definitely not me out of the market entirely. Itâs just a somewhat less aggressive allocation, optimized for psychological safety rather than . It seems to be calibrated pretty well, since no matter which way around the market is moving Iâm feeling pretty good about it.
But maybe a more actionable question than âwhy did we not see this comingâ is âwhat arenât we seeing coming right nowâ?
You donât because they are unrealised profits, so some people just remember the last highest value they saw. All things considered I bet mot of us here are still in profit in absolute terms (the older ones many times over). One could say itâsâŠpsychological 
I think what we arenât seeing right now is how many times Trump will do a 180 to guess if heâs more likely to go the opposite direction (scenario 1: back to Mag 7 PEs, US debt ceiling, wrangling with the Fed, with added uncertainty from ex-US) or the original one (scenario 2: set fire to the barn), either way the way I see it is:
Either works for me assuming I can keep my revenue.
This is irrelevant. It doesnât matter if you just lump sum invested everything, or have 10000% gains from investing in bitcoin or had $1bn and lost 99% of it. From an investing point of view, you just look at what you have now in your portfolio and look forward.
Iâm surprised that these well-known cognitive biases are still used as arguments in FIRE communities.
You cannot ignore the context of the reply.
Abs_max was analyzing a scenario with 200 lampsum just before the crash, 60% crash and 10 yearly investment after the crash and concluded that one needs 15 years to recover.
This is just a scenario out of a pool of infinite scenarios in someones investment journey.
Most of investors will not experience this scenario. And that actually matters.
That is without saying you shouldnât prepare for the worst.
Donât fight the last war. Trump has also telegraphed that he wants to devalue the USD to boost exports. The loss of trust in the US should also have that result and thereâs still a debt crisis hanging while the Trump administration has demonstrated by which cuts theyâre making and still pursuing income tax cuts that theyâre not at all serious about reducing the deficit.
The FIRE âcommunityâ is about squirrelling money and fawning over numbers on the screen, not spending it and certainly not enjoying it. But letâs not call out cognitive biases because they are emotions and emotional investing is baaaahd for FIRE.
And it was not as bad in real terms, as there was huge deflation happening back then.
âwhat arenât we seeing coming right nowâ?
A chinese invasion in Taiwan is a scenario that in my estimation will take place with a very high likelihood, within the next couple of years.
It will likely offer very good opportunities for buying, objectively at -20%, -30%, âŠ
If you feel courageous, you might even want to go short as the landing boats assemble off the coast of China. Everyone will not believe it before itâs actually happening (see Ukraine and also tariffs).
I am preparing already and plan to have some cash on the side when the time comes. I will likely go short with a limited amount, but go long fully at -20%, -30%, âŠ
It was something that has increased in likelihood given the Trump u-turn on Ukraine and his own pursuit of Greenland/Panama - maybe he is more sympathetic to it being Taiwanâs fault for starting any invasion of China?
Now combined with 100% tariffs already using up part of the âsanctionsâ dry powder that the US has in response to an invasion, then the calculus for invading Taiwan might shift sufficiently.
I still thing it would be very unwise for China to invade Taiwan, but the confluence of factors may make it an irresistible opportunity for the CCP.
I agree to a degree.
But what matters to me is âROI over (entire) timeâ, as I am not looking to âtacticallyâ sell and rebuy (and am incapable of employing options or such).
If I (unrealized) gained 1000% on an investment and it dropped 30%, I donât care nearly as much as if it was 0% P/L at the start.
As Mirager said - humans are not rational but emotional beings. 
What Iâm saying is, if I have 100k in my account today, it doesnât matter if I started with 1000k and lost 900k or started with 1k and gained 99k as all that is in the past.
I donât see it as sequence risk as it has already happened.
Or otherwise (except maybe for tax) tell me how your investment decision should change depending on whether you gained to get to the 100k or lost to get to the 100k?
If I (unrealized) gained 1000% on an investment and it dropped 30%, I donât care nearly as much as if it was 0% P/L at the start.
Sure, you might feel happier if you gained 99k than lost 900k. But you end up in the same position either way, so going forward, the decision making should be the same in both cases.
Something strange is going on today in this forum. There are more disagreements than usual, and itâs not for any serious reason. Is there a full moon or something?
As Iâm currently seeing an XTrackers by DWS advertisement painted on a tram passing by outside my office , I want to clarify that my previous comment was not about the decision-making process going forward.
Although itâs important to consider how you got to your current situation from a psychological perspective.
Try to persuade someone who has lost 90% of their money in the stock market - which has happened many times in individual countries - to stay on the road.
The risk profile is certainly affected, and thus the decision-making process going forward is impacted.
Anyway, looking forward:
In short: hindsight is 20/20.
Longer:
Bold statement, Cotton Sir.
If youâre right, youâll look smart (like the permabears predicting The End is Nigh year after year after year and occasionally hitting the joker every maybe 5-10 years).
If youâre wrong, weâre of course all nice forum colleagues and wonât crucify you (ok, maybe a little ⊠).
No.
We did not see this coming because it was in the future.
By definition, the future is not known.
Hence you donât know in the present moment if this is dip-buying territory or the prelude to a lost decade â or why not two lost decades? We havenât had any of those in about a hundred years â or just a quick intro into a run-off-the-mill couple of years bear market that will offer cheaper dips later.
I personally hope it was just dip-buying territory, but the hopes can of course be different in the eyes of the beholder, far or near retirement, steadiness and size of incoming cash flows, etc etc.
I think lot of investors are motivated by life time returns instead of periodic returns
Itâs not logical because only future returns should matter because what you already have is already in bag
However psychologically people always compare their returns versus a scenario where they never invested and kept all money in cash. This helps them feel better during bear market. And maybe that explains that more experienced investors are less prone to panic sell during bear markets because they are mostly not in absolute red.
Of course all this theory goes down the drain if the objective is to use the portfolio during next 7-10 years. Then every year matters and I think thatâs why most advisors believe that what you need for medium term should not be in volatile assets.
We need to count the risk of exodus from USD assets. The damage done to US credibility is real and long lasting. If executed (sell off) , this will dry up continuous supply of cash pouring into US Debt and risk assets. And this would increase US bond yields & reduce Stock market valuations.
This might catch many investors off-guard because most believe all what is happening is temporary
In my view economic war is same as military war. There is a limit to what people can forget and forgive. We need to remember lot of individuals in certain countries have strong ego and national pride. Specially in Asia. Humiliation and bullying is not good trick to play with those nations
There are also talks that US might use FED swap lines to leverage in tariffs negotiation if financial chaos is triggered by lack of trade. If this were to happen, it might help in short term USD but long term destruction
The problem with transactional governments is that they end up maximising short term gains for long term loss.
I believe itâs because we all have our personal narrative, worries and fears bout whatâs going on, and what we hope vs fear of happening in the next few months, and the last two weeksâ pump is just throwing more oil to the fire. Nobody is in any way at ease.
