Dow plunges 900 points, Nasdaq suffers worst month since 2008 | Hacker News Reader

Dow plunges 900 points, Nasdaq suffers worst month since 2008

thehill.com

56 pointsmgh232 comments

I can’t figure out why headlines still scream about the NUMBER of points the Dow (or other index) has plunged, when the percentage drop is more relevant. A plunge of 900 pts when the Dow is at 32K is not as bad as the same plunge when Dow is at 10K.

Oh wait, I just realized why they do this — something called clickbait.

https://ei.marketwatch.com/Multimedia/2017/03/23/Photos/NS/M...

Along these lines, a more informative form of headline might be: “Dow sinks to level seen X months ago”. In this case it seems like it’s back to the level seen in mid March 2022 , which gives a much better perspective.

Can you provide some context or analysis of this figure?

Context: this is a logarithmic chart of the Dow Jones Industrial Average, which is a (poorly designed) stock market index over 120 years, along with indicators of major events that had happened during that period. Many of those events being terrible and horrifying events that affected stock market returns. "Pearl Harbor - Attacked by Japanese" or "Terrorist Attack on World Trade Center & Pentagon", that can't be good for stocks, right?

Analysis: If you're a long term investor, don't pay attention to headlines like "Dow plunges 900 points" unless you (like me) enjoy doom porn. If you are a young person contributing money on a regular basis to investments in equities, you can just ignore this stuff.

There is and always will be this qualifying "if you are a young person" criteria for "don't pay attention". Unfortunately there are some who fall into the "down" period right during retirement, which may lead to disastrous consequences. Also unfortunately, the US (at least), whose retirement strategy is based on market investments (IRAs, 401Ks, etc.), combined with the high risk of health issues having the potential to have a large financial impact, and no other means for support of specific categories, has no mechanisms for adjustments / no social safety net.

Moral: if [still] in the US, make sure you stay young for ever ;-)

The recommended way to deal with that (by financial advisors I talked to / read) is that you start with the "risk/aggressive" slider all the way to the right and then move it back as you get closer to the retirement age. In practice that means that on the extreme end I'm 80-90% in shares, but 5 years to retirement I may be 50% in cash / bonds / something else stable.

(I don't know if you can do the same in the US, but I would expect something similar exists)

What makes you think bonds are stable? Vanguard's Total Bond Market Fund is down 8.03% in the past 3 months / 10.54% in the past year.

In regards to risk adjustment you can change your investments / asset allocation.

Target Date Funds do this automatically, otherwise you can manually move the investments. You'd only want to do this in retirement accounts or else you'll pay taxes on moving the money though.

If you mean buying actual bonds, that is a good method to mitigate risk, but most people can't do that in a retirement account.

Some bonds are, Hungarian government-backed bonds pay 6% guaranteed yield yearly. Been going strong for years even with covid and such. It is the textbook 'risk-free asset' from the Black-Scholes formula. Of course it's been a much better investment when their inflation was lower than that :) It actually blows my mind how much of financial modeling ignores taxes and inflation.

They're not as stable as cash, but more stable than stocks. I wasn't giving precise recommendation here, just commenting on how the people usually deal with the risk when getting close to the retirement. Similar to the target date funds, but at least in Australia I can do similar moves manually.

> If you are a young person contributing money on a regular basis to investments in equities, you can just ignore this stuff.

https://en.wikipedia.org/wiki/Dollar_cost_averaging — indeed the only lesson anybody needs to learn when investing part of their paycheck. Everything else is bollocks.

tl;dr: investing $50 every month is always better than a big amount once in a while.

I grew up reading Andre Kosztolanyi's books (the de facto financial guru before Warren Buffett) he always said don't pay any attention to actual stock prices. Only metrics like P/E, financials (income sheet, cash flow etc) matter on the long run as the market always corrects itself.

Why, do pay attention to headlines like that if you have money to invest. You want to buy good stocks at the bottom.

I know this is how it goes but I truly had the best possible timing of starting investing (outside of 401ks) for the first time ...

it's much better for the markets to be down when you start, than when you end your investing journey.

Over at Bogelheads they always like to post articles like this (time in the market is better than timing the market) which should make you feel better.

https://www.personalfinanceclub.com/how-to-perfectly-time-th...

That's generally true, however the yields generally come from short-term rallies that don't correct themselves. So if someone misses such an event it can be a really long time to recover from it. I think I could possibly show you a 20 year period in the past 100 years of US stock market without significant gains.

Looking for the best time to start investing sets you up for failure, time in the market is more important than when you enter the market.

And buying when markets are low is how you make profit.

Nasdaq-100 is 27.51% over one year ago.

I believe you are looking at the one year average annual return [0] which is 27.51% [1].

The Nasdaq-100 is down 22.10% YTD [3].

[0] https://www.investopedia.com/terms/a/aar.asp

[1] https://www.nasdaq.com/market-activity/total-returns

[3] https://www.slickcharts.com/nasdaq100/returns

How are these numbers calculated? It doesn't make sense to me.

There are apparently 2 different indices

NDX: NASDAQ 100 Index

2021-04-27 13960

2021-04-28 13902

2021-04-29 13970

2022-04-28 13456

2022-04-29 12854

https://finance.yahoo.com/quote/%5ENDX/chart

XNDX: NASDAQ-100 Total Return

2021-04-27 16360

2021-04-28 16291

2021-04-29 16372

2022-04-28 15880 (matches your [1])

2022-04-29 15170

https://www.barchart.com/stocks/quotes/$XNDX/interactive-cha...

I can't figure out what the difference is between them.

QQQ is a fund that tracks one of them, but I don't know which. It apparently all 3 match very closely:

https://seekingalpha.com/symbol/XNDX/charting?compare=XNDX,Q...

QQQ's "1-Year Daily Total Return" is -6.78% and its "1-Year" "Trailing Returns" "Monthly Total Returns" is 9.54%. How come those numbers are so different? Shouldn't they be essentially the same?

These other sites say QQQ's "1 Year Return" is -2.78%.

https://www.bloomberg.com/quote/QQQ:US

https://etfdb.com/etf/QQQ/#performance

I don't understand any of these numbers. How can this stuff be so contradictory?

NDX = capitalization-weighted index (i.e. the higher marker cap companies in the index will be a greater % of the index) [1]

XNDX = a total return index tracks the price + reinvests all dividends back in to the index [2]

[1] https://www.investopedia.com/terms/n/nasdaqcompositeindex.as...

[2] https://www.investopedia.com/terms/t/total_return_index.asp

I believe total return includes dividends. So QQQQ's price tracks the index, but your total return for QQQQ (i.e., increases in value plus dividends paid out to you) would track, well, the total returns. Not sure why different sites don't align.

That doesn’t seem to be the case. According to the source below it’s down 7%. What am i missing.

[1] https://www.cnbc.com/quotes/.NDX?qsearchterm=nasdaq

you’re not missing anything. slaw has called this one wrong

I don't see why anyone is shocked. The Western world is at financial war, the bill from ten trillion dollars in stimulus spending is coming due, and 2022 is the median year at which the baby boomers retire.

For the past few years I had this feeling of unease that this wild market was finally going to end in a correction and yet it just kept bouncing back. I have no clue what to believe anymore but I still have the feeling something bad will come.

> I still have the feeling something bad will come.

This feeling is what i'd call the risk of investing. And it never goes away in any period, because if it did go away, then the stock market would be under-valued and would be bought up to the price such that this feeling would return.

The US equities market has been on a non-stop tear (Covid dip excluded) since 2008. It’s up 300%.

If you’ve been in the whole time the returns have been some of the best since the 1990’s.

A bird flu case found in a US prison might be more than just a bad feeling. Although, statistically it's very unlikely to have two pandemics in such short period of time.

Stay the course.

HODL

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