Capital Deployment During Stock Market Downturn

First of all, I did not come up with this concept. I learn it from Financial Samurai. I think it is a great concept to keep you on course when the stock market suddenly goes south.

We all say we will buy low and sell high, but when the market drops like a falling knife, there will be a flood of emotion that alters your decision.

Given the recent drop in the market and a new lower plateau that we have reached, I will plan my investment based on the correction from this plateau of S&P 500 - 2786. I have already deployed some investment during last months drop.

S&P 500 drop 2% from peak (2730) - Invest $25,000
S&P 500 drop 4% from peak (2674) - Invest $25,00

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

S&P 500 drop 6% from peak (2618) - Invest $25,000

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

S&P 500 drop 8% from peak (2563) - Invest $25,000
S&P 500 drop 10% from peak (2507) - Invest $25,000

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

Annual Family Expense

This is my estimate for annual cost of living for a family of 4. I currently have 4 properties that I am in the process of turning into cash flow positive. The hope is that I will have enough rental income so that I can live for free thereby eliminating housing as part of my expense.

Childcare 42000

Food 23000

Vacation 18000

Car 9600

Gas 5000

Car Insurance 2000

Life Insurance 2500

Clothes 9500

Children's Lessons 12000

Miscellaneous 10000

Total $133,600

This still require that I make $270,000 a year. I will put $40,000 in my SEP-IRA. With $230,000 left and assuming 40% tax which will leave me with $138,000. The plus side of this equation is that if I have a family of 4 by default I will have a wife with income all of which will be icing on the cake.