Goofed up; let it ride or sell at loss?

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Goofed up; let it ride or sell at loss?

Postby Nutaboutgolf » Fri Apr 19, 2013 8:00 am

I made a bad mistake and panicked from the sequestration. I changed my 401K allocation to the Gold Fund and have lost 20%. What have I learned? Not to react. What would you guys do if you were 34 years old? I have changed future contributions already.

This is all the data I have on the fund

FMT/First Eagle Gold fund which consists of:
Top 10 %
Gold Commodity In Ounces 16.60
Agnico Eagle Mines 7.50
Goldcorp, Inc. 5.49
Randgold Resources Ltd ADR 4.91
Anglogold Ashanti Limited ADR 4.66
Newcrest Mining Limited 4.55
Kinross Gold Corporation 4.47
Fresnillo PLC 4.22
Newmont Mining Corporation 4.13
Barrick Gold Corporation 3.91
Top 10 % Total 60.44
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Re: Goofed up; let it ride or sell at loss?

Postby Skinut » Fri Apr 19, 2013 8:07 am

At least you can admit you made a mistake, many folks will not :shock:

Do you have an IPS?

Yes, then rebalance accordingly (if you have hit criteria indicating to do so) with the drop in gold (unless you want to change your target AA/IPS, then revert to the "No" portion)

No, create an IPS and Asset Allocation including re-balancing criteria and stay the course, NO MATTER WHAT! When you create the IPS, seperate yourself from your current portfolio and imagine you are starting clean, then decide how you want things to look in the future. Once you have this, go back and figure out how you can move to your new AA, whether it is exchanging funds now, or with future contributions over the next year or two.
http://www.bogleheads.org/wiki/IPS
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Re: Goofed up; let it ride or sell at loss?

Postby bottlecap » Fri Apr 19, 2013 8:08 am

I'd sell and go back my proper allocation.

JT
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Re: Goofed up; let it ride or sell at loss?

Postby Higman » Fri Apr 19, 2013 8:12 am

Congratulations! Consider yourself lucky. You have learned a very valuable lesson at such a young age. When I was your age I was all invested in a handful of individual stocks recommended by my stock broker. Eventually I got religion and switched to Vanguard index funds. So my recommendation to you is to sell the Gold Fund and start off with a three fund portfolio as recommended by Taylor.

Good luck.
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Re: Goofed up; let it ride or sell at loss?

Postby livesoft » Fri Apr 19, 2013 8:45 am

I think one needs to understand why they might have done this and also how to avoid it in the future. One should read Gilovich & Belsky: "Why Smart People Make Big Money Mistakes". The book will also help one under the concept of Loss Aversion.

There is no rush to do anything until the book is read.

The positive thing is that you are not looking to double-down on gold at the moment.
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Re: Goofed up; let it ride or sell at loss?

Postby Grt2bOutdoors » Fri Apr 19, 2013 3:19 pm

If I was 34 or 24 or 14 or 44 years of age, I'd put 2/3's of my equities in a Total Stock Market Index, 1/3 of equities in Total International and 100% of my fixed income allocation in total bond market index. Rebalance annually or by bands - your choice. I would not waste my time trying to time "gold, silver,lead, platinum,oil, commodities". All companies which use those commodities or sell those commodities are included in those stock indexes - what do you know that they dont?
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Re: Goofed up; let it ride or sell at loss?

Postby OverTheHill » Fri Apr 19, 2013 3:52 pm

If you sell at a loss, then you'll get a cap loss on your tax returns, with carry forward until exhausted. This should help reduce the sting at least a little. Anyway, good luck, because you're the only one who can decide what to do based on the totality of your own circumstances.
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Re: Goofed up; let it ride or sell at loss?

Postby livesoft » Fri Apr 19, 2013 4:06 pm

OverTheHill wrote:If you sell at a loss, then you'll get a cap loss on your tax returns, with carry forward until exhausted. This should help reduce the sting at least a little. Anyway, good luck, because you're the only one who can decide what to do based on the totality of your own circumstances.

Not quite since the investment was in a 401(k). But you will not have to pay taxes on the lost value of your 401(k) ... since it was lost.
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Re: Goofed up; let it ride or sell at loss?

Postby OverTheHill » Fri Apr 19, 2013 4:11 pm

livesoft wrote:
OverTheHill wrote:If you sell at a loss, then you'll get a cap loss on your tax returns, with carry forward until exhausted. This should help reduce the sting at least a little. Anyway, good luck, because you're the only one who can decide what to do based on the totality of your own circumstances.

Not quite since the investment was in a 401(k). But you will not have to pay taxes on the lost value of your 401(k) ... since it was lost.

You're right. I just didn't pay attention to the 401k part of the question. Time for a glass of wine.
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The Three Fund Portfolio

Postby Taylor Larimore » Fri Apr 19, 2013 4:28 pm

Higman wrote:
So my recommendation to you is to sell the Gold Fund and start off with a three fund portfolio as recommended by Taylor.

This is a link to the Three Fund Portfolio:

viewtopic.php?f=10&t=88005

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Goofed up; let it ride or sell at loss?

Postby Jfet » Fri Apr 19, 2013 4:28 pm

If you were so scared of sequestration that you went heavy into gold, why would you change now?

It seems like running from one side of the boat to the other. If you sell the gold at a loss and put everything into the stock market, what are you going to do next year if gold is $2000 and the stock market is 20% lower than now?

I vote you form a plan and stick with it. If that plan has you with 30% gold, then go with 30% gold...rebalance each year to maintain that.
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Re: Goofed up; let it ride or sell at loss?

Postby stemikger » Fri Apr 19, 2013 4:40 pm

This was a blessing in disguise. You learned a lesson you will never forget and it made you a better investor. Sell and do the three fund portfolio and Stay the Course.

Look at it this way. Many folks pay large sums for investing seminars, you probably learned more from this mistake then many of those folks do at those seminars. In fact I know you did.
Stay the Course!
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Re: Goofed up; let it ride or sell at loss?

Postby MKP » Fri Apr 19, 2013 4:44 pm

Jfet wrote:If you were so scared of sequestration that you went heavy into gold, why would you change now?

It seems like running from one side of the boat to the other. If you sell the gold at a loss and put everything into the stock market, what are you going to do next year if gold is $2000 and the stock market is 20% lower than now?

I vote you form a plan and stick with it. If that plan has you with 30% gold, then go with 30% gold...rebalance each year to maintain that.



I bought a bunch of gold last year and have lost 30%. My plan says stick to 10% gold +/-5%. Well...I havent changed a thing-the 30% is what it is.
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Re: Goofed up; let it ride or sell at loss?

Postby Jfet » Fri Apr 19, 2013 4:48 pm

MKP wrote:
Jfet wrote:If you were so scared of sequestration that you went heavy into gold, why would you change now?

It seems like running from one side of the boat to the other. If you sell the gold at a loss and put everything into the stock market, what are you going to do next year if gold is $2000 and the stock market is 20% lower than now?

I vote you form a plan and stick with it. If that plan has you with 30% gold, then go with 30% gold...rebalance each year to maintain that.



I bought a bunch of gold last year and have lost 30%. My plan says stick to 10% gold +/-5%. Well...I havent changed a thing-the 30% is what it is.


If it is time for you to rebalance, then you should buy more gold to get back to 10%.
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Re: Goofed up; let it ride or sell at loss?

Postby bottomfisher » Fri Apr 19, 2013 7:09 pm

I recommend not reacting impulsively again and changing your strategy because of the loss right now. As mentioned above, take your time and determine your long term investment goals and strategy. Your gold fund appears to be mostly comprised of mining stocks. These stocks have taken a beaten along with the price of gold. This sector historically has had protracted periods of poor performance and excellent performance. This sector and its stocks will recover sooner or later. When is anybody's guess??? My guess is when the global economy and especially emerging markets pick up again. But I vote not to lock in your losses just yet. Get back to fundamentals with your future allocation and take your time getting out of the fund if it doesn't fit in your to be determined plan.
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Re: Goofed up; let it ride or sell at loss?

Postby leonard » Fri Apr 19, 2013 8:02 pm

Would you be wanting to change back if you made 20%? I think you need to be able to answer that thoughtfully before making another impulsive jump out of gold and in to silver or copper or REIT's or whatever.

I suspect that if you had made 20% on this strategic move to gold - that we wouldn't have seen a post.
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Re: Goofed up; let it ride or sell at loss?

Postby kwan2 » Sun Jun 30, 2013 1:05 pm

1) What does the rest of your portfolio look like, in % , read the pinned topic, on how to ask BH help ?

2) Are you saying you had one fund only in your IRA ? Is the value $1000 or is it about $100,000 ?

3) I barely know what sequestration is. Depending on how much you lost, and how much you value it, may I suggest the BH reading list. I like Bill Bernstein's book, so the knowledge sticks, better than the emotional loss.

4) At most you could keep 10-15% of a gold position, though Mr.Bogle doesn't like Bullion gold, as it has no return, you could keep Bullion, but hold it as coins instead, and call it "funny money" at most 10% of your Asset Allocation.
The best lack all conviction, while the worst | Are full of passionate intensity-Yeats 1919;Out of every fruition of success,no matter what, comes forth something to make a new effort necessary -Whitman
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Re: Goofed up; let it ride or sell at loss?

Postby VictoriaF » Sun Jun 30, 2013 2:20 pm

Nutaboutgolf wrote:I made a bad mistake and panicked from the sequestration. I changed my 401K allocation to the Gold Fund and have lost 20%.


I am not familiar with the sequestration effects on the 401(k) plans, but it does reduce matching contributions to the TSP. The only gold related consequence is that the golden handcuffs are getting looser.

Victoria
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Re: Goofed up; let it ride or sell at loss?

Postby Call_Me_Op » Sun Jun 30, 2013 4:58 pm

Nutaboutgolf wrote:I made a bad mistake and panicked from the sequestration. I changed my 401K allocation to the Gold Fund and have lost 20%. What have I learned? Not to react.


What you should have learned is that you need a plan. We call that an IPS.
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Re: Goofed up; let it ride or sell at loss?

Postby grabiner » Sun Jun 30, 2013 10:22 pm

Skinut wrote:create an IPS and Asset Allocation including re-balancing criteria and stay the course, NO MATTER WHAT! When you create the IPS, seperate yourself from your current portfolio and imagine you are starting clean, then decide how you want things to look in the future. Once you have this, go back and figure out how you can move to your new AA, whether it is exchanging funds now, or with future contributions over the next year or two.
http://www.bogleheads.org/wiki/IPS


And you apparently had too risky a portfolio for your own personal risk tolerance. Therefore, in your new IPS, you should have a higher bond allocation than you previously held.
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what is "funny money?" /allocate with or w/o gold ... :)

Postby kwan2 » Mon Jul 01, 2013 9:39 pm

I have 10% in gold mining myself, I'm thinking of either selling it, just got a notice that Barrick ABX is being sued as it lost 2/3 of its value in a year, and I would have to, if I had not inherited it, and have a sentimental attachment, as it's a small position my father had, paper stock, etc.
<br>
my question: should I remove the 10% from my stock/bond breakdown for allocation and call it "funny money" , keeping in mind what I said above ? pros/cons to this approach , or possibly sell so that the rest of my portfolio is 100% BH-ish ?
The best lack all conviction, while the worst | Are full of passionate intensity-Yeats 1919;Out of every fruition of success,no matter what, comes forth something to make a new effort necessary -Whitman
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Re: Goofed up; let it ride or sell at loss?

Postby RenoJay » Mon Jul 01, 2013 11:04 pm

I agree with those who suggest selling and going to an asset allocation you can live with for a long, long time. When I was in college, some broker's intern who was friendly with my roommate got me to part with a few thousand bucks (which was a decent chunk of change to me at the time) and put it into an individual stock. That stock went to zero. I learned so much more from that experience than from the numerous wins I've had since. Also, watching my foolishness prompted my dad to finally have a talk with me about investing and he put me into lots of good, diversified funds. The year was 1994 and it was right before a wonderful bull market.
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