Worried about passive investing if we have a recession?

[bicyclist]

I am an especially great one to comment on this thread because I have been an investor with the Vanguard Group since 1981! Vanguard built its success on passive investing. There is no investing without risk but spreading assets between stock, bond, cash mutual funds and real estate has worked well for me and many other people. I haven't been drawn to annuities-you are going to pay a lot for what you get and there's evidence that gains in the markets will compensate more than sufficiently for periods of decline.

[SteveinMN]

I haven't been drawn to annuities-you are going to pay a lot for what you get and there's evidence that gains in the markets will compensate more than sufficiently for periods of decline.

Annuities are not good for many of the people who buy them. Depending on one's other sources of income, however, "pensionizing" a certain amount of retirement savings with a SPIA (if one doesn't know what it is, don't buy one ) is a reasonable choice. A person who retired in 2006 right when the economy cratered would have had to wait about ten years for the markets to return to where they were. If most of a person's retirement income was equity-based, they were scrambling.

Our annuities are designed to cover our must-haves: housing expenses; insurance; a certain level of groceries, clothing, etc.; and so on. Other more-variable income streams will supply the money for expenses we can readily control: travel, hobbies, and gifts. It works in our particular situation. Of course, as they say on the innertubes, YMMV.

[Molly]

Leonardo - I'm an amateur investor and have been investing for around 40 years. I'm a big believer in passive investing and dollar cost averaging. I have always had a diversified portfolio based on my age and had automatic withdrawals from my paycheck into my 401k every pay. I lived through many recessions and have always stayed the course. I actually made the most money during recessions because I bought the shares "on sale".

I did purchase an annuity when I retired. I know I probably would have been better off keeping the money in the 401k, but I just couldn't stomach any more downturns in the market. The returns may be lower, but the insurance company assumes the risk.