I sold all my mutual funds and stocks on December 20th

[athrone]

Glad it worked out for you, but be careful with your assumptions: cash is not always a safer place to be.

[umfundi]

You not only have to improve your market timing, your mental accounting could use some help also:

VTI:
Dec 20 $74.06
Jan 02 $75.14

Looks like 1.5% to me.

Keith

[parsi1]

It is possible that your asset allocation don’t match your risk tolerance and that is why you get tempted to pull money out of the market.
You may have to think about a more conservative asset allocation to make you more comfortable with your investment (you will also sleep better at night).
Good Luck

[Padlin]

I agree with the above, adjust your AA to something you can live/sleep with. I can certianly see why you pulled out but it seems you may be taking chances you don't need to.

[umfundi]

You not only have to improve your market timing, your mental accounting could use some help also:

VTI:
Dec 20 $74.06
Jan 02 $75.14

Looks like 1.5% to me.

Keith

Not to pile on, but you could annualize that for a 48% loss.

Keith

[hey-bay]

So what's your plan in 2 months?

Exactly, you got back in too soon... the real drama is to come.

[HomerJ]

You are comparing apples and rotted apples. You locked in a 0.5% loss. 5-10% market downturns (or stock sales as we sometimes call them) are not really losses till you lock them in. No need to lock them in unless you need the money for consumption. You are not thinking like a good investor.

5% to 10% downturns are pretty common. You will still have some even if you continue to trade in and out on hunches in advance of events.

This is a good point... Even if the market had dropped 10%, I wouldn't have really lost 10% because I wouldn't have sold anything, and it's pretty likely that in 20 years, the market will be higher than it was today.

You, on the other hand, absolutely lost some money. Trying to avoid a temporary 10% drop (which you would have gotten back sooner or later), you locked in a real 0.5% or 1.5% drop...

And since you have over $700,000 in stock mutual funds, that's a real $3,500 or $10,000 you threw away over the last 2 weeks. Ouch.

[umfundi]

So what's your plan in 2 months?

Exactly, you got back in too soon... the real drama is to come.

Yes, it is easy to lock yourself into never committing to an investment.

There is always a dark cloud on the horizon.

In the meantime, the opportunities are passing you by ...

Keith

[chipperd]

Thanks to the OP for posting a follow up. We don't get to see the outcomes here to often and I myself don't often post outcomes, but now realize that this is a valuable part of contributing to the board. Thanks. The information is both interesting and for many here including myself, reassuring.

[Random Musings]

I believe the major risk is that the OP may do this exercise in the future for other perceived "risky" times/events.

It's market timing based on perception.

RM

[ThirteenEleven]

OP, I appreciate the transparency. I would advise you to meet with a reasonable fee only advisor to consider your risk tolerance and subsequent asset allocation. You would also benefit from a written investment plan and philosophy. I advise you do this soon given that we are likely to face uncertain times that are highly publicized.

Best Wishes

[linguini]

A recommendation: it seems to me that what you really wanted was short term insurance against a big drop, not an investment in cash. If you feel compelled to do this again, use a put option to insure against a big drop instead of selling off all non cash assets. (Ideally, don't get so nervous about short term fluctuations in the stock market, but if you can't help yourself, insure yourself the right way.)

[Boglenaut]

Glad it worked out for you, but be careful with your assumptions: cash is not always a safer place to be.

Good point, athrone.

I'd go ever further and say cash is never a safe place to be because inflation will surely kill it over time. Unless you expect deflation, cash is not safe.

[RenoJay]

It's very hard not to have intuition about the market, or a certain event, and to want to act on it. I've realized that the desire to act is mostly emotional, and that to quell it, I only need to move a very small amount of money. For instance, like the original poster I had fears we'd go over the fiscal cliff and that there could be a 5% - 10% drop in the market. To quell those fears, I sold what amounted to just 3% of my equity holdings. Was this my written plan? No. But by selling just a small amount, it helped me sleep at night, and I was sure happy on Jan. 2nd to find that not only was I wrong, but that 97% of my equity holdings were still where I left them.

I understand the concept of having an AA and sticking to it. What I've realized is that some of us cannot help but prognosticate about short term market moves, even though we realize logically how feeble such attempts are. Therefore, keeping a tiny amount of play money to play hunches is a decent idea because it satisfies the emotional need while allowing the real portfolio to keep doing its thing.

[letsgobobby]

I'm much more concerned shot the prospects of the debt ceiling debate than I was about the fiscal cliff. This week, I rebalanced out of stocks. However, the action of rebalancing had nothing to do with my fear and everything to do with my IPS/AA. I was 65/35 and goal is 60/40 so rebalance I did.

[umfundi]

[Bump]
So, y'all, how's it going?

Did those who timed a market exit in late December yet figure out a re-entry?

Keith

[Mill]

[Bump]
So, y'all, how's it going?

Did those who timed a market exit in late December yet figure out a re-entry?

Keith

LOL! Thanks for resurrecting this.

Stay the course Bogleheads.

Best wishes.

[TravelforFun]

[Bump]
So, y'all, how's it going?

Did those who timed a market exit in late December yet figure out a re-entry?

Keith

Re-entry made on 1/2/2013. Thanks for asking.

[lindisfarne]

"The question remains, did you miss out on any dividends or interest as a result of your actions?"

OP lost 13 days worth of dividends, of course.

???

Assuming the fund paid its dividend after OP sold: (VTSAX "dividend record date" was 12/18 so if OP was in VTSAX, s/he got the dividend)
If the fund paid dividends quarterly, a quarter's worth of dividends were lost. (so just 1/4 of total annual dividend - which isn't a lot on my funds!).
If the fund paid dividends annually, the entire year's dividends were lost.

Or am I missing something?

[muddyglass]

"The question remains, did you miss out on any dividends or interest as a result of your actions?"

OP lost 13 days worth of dividends, of course.

???

Assuming the fund paid its dividend after OP sold: (VTSAX "dividend record date" was 12/18 so if OP was in VTSAX, s/he got the dividend)
If the fund paid dividends quarterly, a quarter's worth of dividends were lost. (so just 1/4 of total annual dividend - which isn't a lot on my funds!).
If the fund paid dividends annually, the entire year's dividends were lost.

Or am I missing something?

dividends are reflected in the fund's nav (net asset value, share price). the nav goes up as the dividends from the individual companies are received by the fund. the nav goes down when the quarterly dividends are paid out. if nothing else happens that would dramatically change stock prices, then the fund's nav drops an appropriate amount to reflect the amount of money paid out in dividends.

[bmelikia]

[Bump]
So, y'all, how's it going?

Did those who timed a market exit in late December yet figure out a re-entry?

Keith

Re-entry made on 1/2/2013. Thanks for asking.

Am I sensing someone getting a bit too prideful/cocky for something that the majority of those who frequent this board would agree is simply a matter of luck?

[umfundi]

Am I sensing someone getting a bit too prideful/cocky for something that the majority of those who frequent this board would agree is simply a matter of luck?

If that's directed at me, it's not what I meant.

My lesson learned is that short term tinkering is dangerous. The market can easily move 2% in a day, 10% in a month. Since there has not been a downtick in prices, it is not clear to me what signal there might have been for a market timer recently to re-enter the market.

Keith

[letsgobobby]

The OP posted that he bought on Jan 2 after the fiscal cliff deal was passed. There is some debate that he may have underestimated his losses, but they were in the 0.5-2.0% range.