I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Wednesday Wealth, I write about money management, retirement, estate, and long-term care planning.
In the dotcom boom, the Nasdaq Composite index rose from roughly 1,000 in 1995 to a peak of about 5,048 in March of 2000 — the bubble’s peak. Then it crashed almost 80% through its nadir on October 9, 2002. It took about 15 years to fully recover.
Here’s a chart of the run-up and the crash.
This is relevant for today because we are almost certainly in a bubble. The question is how much further does it have to run? Are we in 1998, with another 250% to go? Or are we in February 2000, almost to the peak?
No one knows, though many people will analyze it and try to predict.
What to do if you are retired or almost there?
If you’re close to retirement — or already basically retired, like me — this matters because you don’t have fifteen years for your money to recover, should the broad market crash. You may need that money in the near future.
Now may be a time to begin slowly adding diversifiers that may do well even if the S&P 500 and Nasdaq Composite index struggle, if their main big holdings lose air. That is, if you don’t already hold them. I’m pretty well diversified in my biggest retirement account across all factors — geography, company size, value vs growth, commodities, fixed income, and alts.
In the early 2000s, value stocks held up better than growth and outperformed for several years. Small cap value, international stocks, commodities and natural resources investments, gold, and bonds did well.
But meanwhile, probably a good idea to stay bullish on the stocks that are doing well, so as not to miss out on what are likely to be more incredible gains!