Moving more $ into cash - anybody else?

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ge1
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Moving more $ into cash - anybody else?

Post by ge1 »

It's great to see my portfolio increase basically every day the last few months, but I have to admit this low volatility environment makes me very nervous. I think I'm up 10% this year, which really makes no sense given that I already had a lot of cash to begin with and maybe 40% in stocks. Just looking at a few of my main asset classes:

- Emerging Market stocks up 15%
- Emerging Market bonds up 17%
- US Stocks up 8%
- US Small Cap Value up 13%
- High Yield Bonds up 11%
- Corp Bonds up 7%
- Total Bond Market up 6%
- Precious Metal Equities up 76% (not a typo)

The only laggard are developed market equities, which are up only 3%.

So I'm moving a lot of money into cash; in my 401k the cash option pays 1.7% which is basically the same as the total bond market fund. Not recommending this to others, but we have a 7 figure portfolio, a low need to take risk and if the market hands me a present I may as well take it.
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packet
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Re: Moving more $ into cash - anybody else?

Post by packet »

ge1 wrote:... I have to admit this low volatility environment makes me very nervous. ...
Really?
Not the market highs, not all the "there's a crash coming" talk, not "this time is different"?
Of all the things to make you nervous, it's the apparent stability of the current market?
:)

Sorry, just poking a little fun...

I happen to be staying the course. I will say tho, 40/60 sounds quite appropriate for a 7 figure portfolio.

:beerCheers,
packet
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Jack FFR1846
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Re: Moving more $ into cash - anybody else?

Post by Jack FFR1846 »

INTO cash? Nope. I actually just opened my first ever taxable account and am going all in with SCHB ETF. Cash will get you 1% at Ally. If you're happy with 1% then, <shrug> I guess that works for you. I've got 2 commas in tax advantaged accounts already and have made no changes in them, whatsoever.

Why are you watching the market? Are you retiring in the next year or so?
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gundlached
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Re: Moving more $ into cash - anybody else?

Post by gundlached »

I am staying the course. Equity allocation will not be changing.

However, I am using more discipline with "cash" (i.e. emergency fund). In the past, I have succumbed to weakness and put "cash" into intermediate and short term bonds. Now I am keeping "cash" in high yield online savings, ibonds, and CDs.
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Artsdoctor
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Re: Moving more $ into cash - anybody else?

Post by Artsdoctor »

Yes!

Because we're beginning home renovations . . .

Otherwise, no.
larklea
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Re: Moving more $ into cash - anybody else?

Post by larklea »

Yes, I took a bit of money off the table recently. Probably not enough to really make a lot of difference, but I felt better after locking in some gains. I just retired Sept 1, so I'm a bit nervous, which plays into it also.
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goingup
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Re: Moving more $ into cash - anybody else?

Post by goingup »

So your AA had 40% stocks? Do you plan to change that to 30-35% stocks?

It's fine to change your AA due to a decreased need to take risk. Paring back because you are nervous or have a gut feeling about something is essentially investing without a plan. Despite this year's gains our AA has only ticked a couple points out of whack. No actions required though year-end lump sums will likely go into bonds/cash.
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tludwig23
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Re: Moving more $ into cash - anybody else?

Post by tludwig23 »

I think there is plenty of research demonstrating that changing your AA based on your feelings about the markets leads to underperformance. I recommend following your IPS.
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sperry8
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Re: Moving more $ into cash - anybody else?

Post by sperry8 »

40% in stocks? Seems low to me. Not sure your age or asset base - but stocks return the most of long periods (30 years). If you plan to live 30 years... you may be light on equities. Why have more cash that is being deflated away that won't return anything? The key to more cash isn't just pulling it out. When will you put it back in? Are you doing that on emotion too? It'll never work. You need a plan thought out before markets move. Take the emotion out of it.
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Topic Author
ge1
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Re: Moving more $ into cash - anybody else?

Post by ge1 »

Thanks for the replies folks. On the bond side, it is completely rational to move to the money market option. I can earn 1.7% with no duration risk at all, or I can earn slightly more with a lot more duration risk. Risk / reward does not work for the bond funds.

On the stock side, my international allocation is in line with my target and my US stock allocation is much lower than target. I understand all the arguments why one should not time the markets - however every now and then the market overall makes little sense and this seems to be one of those times and I accept the risk of missing additional increases.

Again, I have the luxury of little need to take risk, so if I'm wrong and the market continues to go up from here with the S&P not dropping ever again below 2180 in the future (which seems very difficult to imagine), it doesn't have a real impact on me.
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Lemonaid56
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Re: Moving more $ into cash - anybody else?

Post by Lemonaid56 »

YEs.
Just sold a pile of Walmart stock to invest more in FSTVX over the next few months.
joebh
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Re: Moving more $ into cash - anybody else?

Post by joebh »

ge1 wrote:It's great to see my portfolio increase basically every day the last few months, but I have to admit this low volatility environment makes me very nervous.
In high-volatility markets, investors get nervous. In low-volatility markets, investors get nervous. When the market is at a high, investors are nervous. When the Fed is about to speak, investors get nervous. When it's an election year, investors get nervous. When a disease breaks out, investors get nervous, When oil is low, investors get nervous. When oil is high, investors get nervous.

To ease your nerves, it might be better if you don't look at your portfolio every day. Or revise your asset allocation plan to a level where you don't feel the need to watch and get nervous.

If that means moving a lot of your assets (or all of your assets) into cash and hoping for continued low inflation, then do it so you won't feel nervous. Being able to sleep at night is important.

I won't be joining you in that, but perhaps that's because I'm not the nervous type.
staythecourse
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Re: Moving more $ into cash - anybody else?

Post by staythecourse »

Actually volatility is when something goes up OR down. The dispersion from the mean and can be positive or negative. If there is upside dispersion it is called RETURN and everyone is happy. If it is down it is called LOSS and everyone mourns. In math it doesn't matter if there is a plus or negative sign in front of the number (just the dispersion).

So I hope your issue is not volatility, but upward trending markets as a harbinger of future downward trending markets? If so, I believe the data on Small cap, large cap, and bonds autocorrelation is a big, fat ZERO from one year to the next. That means what happens one year does not predict what will happen the next year. So who cares if the market is up or down in trying to predict if it will continue to be up or down.

So not sure what you are worried about??

Good luck.
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HomerJ
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Re: Moving more $ into cash - anybody else?

Post by HomerJ »

ge1 wrote:Thanks for the replies folks. On the bond side, it is completely rational to move to the money market option. I can earn 1.7% with no duration risk at all, or I can earn slightly more with a lot more duration risk. Risk / reward does not work for the bond funds.
Yep, that's a very good option that very few of us have. You sure it's guaranteed?
I understand all the arguments why one should not time the markets - however every now and then the market overall makes little sense and this seems to be one of those times and I accept the risk of missing additional increases.
There's no way to tell if "the market overall makes little sense right now". That is a very naïve statement. You cannot tell me the market made more sense one month ago, or 6 months ago, or 2 years ago.
Again, I have the luxury of little need to take risk, so if I'm wrong and the market continues to go up from here with the S&P not dropping ever again below 2180 in the future (which seems very difficult to imagine), it doesn't have a real impact on me.
This is a perfectly good reason to change one's AA. If you are close to retirement or in retirement, and have very little need to take risk, then cutting back on your stock allocation is a fine move. But this should be true regardless of how you "feel" about the market. Would it be smart to risk more if you "felt" the market was about to go up?

Recognize that you have no idea which way it's going to go... Cutting back to 35% stocks is fine... As long as it is a permanent change. Do not come back here in a year stating "Anyone else going all in on the market? I've got a good feeling!"
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grabiner
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Re: Moving more $ into cash - anybody else?

Post by grabiner »

ge1 wrote:So I'm moving a lot of money into cash; in my 401k the cash option pays 1.7% which is basically the same as the total bond market fund. Not recommending this to others, but we have a 7 figure portfolio, a low need to take risk and if the market hands me a present I may as well take it.
If your 401(k) pays a yield like that on a good stable value fund, it makes sense to use that as your bond allocation; using low-risk stable value funds rather than somewhat-risky bond funds is a good deal if the cost is near zero. You can decide how much risk you want to take in stock.
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