Should I Sell Energy Index (VDE) and take loss?

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coupleofcents
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Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

Before I became a Boglehead, I bought Vanguards Energy Index ETF back in 2015 thinking this was a good sector bet because it was down.

I have 33 shares (around $2800 now) that not have a long term loss of $705.00 and short term loss of $6.00. This is in a taxable brokerage. The only other funds I have in taxable are VTSAX and VTIAX. Age 32, marginal tax 25%, effective tax rate less than 15%.

Should I sell these shares and take the loss now to redeploy to Total Stock/Total International Stock or just hold on. I almost sold when I was only $200 down but since then the energy sector is taking a beating this year. This represents only about 1.1% of my total portfolio. Here is my breakdown.

50% Total Stock (VTSAX)
21% Total Int'l Stock (VTIAX)
15% Total Bond/Intermediate Corp Bond
10% Other (6.5% Vanguard REIT, 2.5 Lending Club, 1% Fundrise)
3% Cash
1% VDE

I realize my Other category is not Boglehead philosophy but I mostly am asking about the Energy Index VDE. I'm thinking to just stay put and wait until VDE rebounds before rebalancing to Total Stock Market but not sure if the Energy sector will recover anytime soon.
lowndes
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by lowndes »

I would definitely not sell energy.
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saltycaper
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by saltycaper »

Whether you have a loss or gain doesn't matter, IMO. What matters is whether or not you want to hold 1% of your portfolio in VDE. If yes, then keep it. If not, sell it. I would not want to own any funds that represent just 1% of my portfolio, so I would sell.
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carguyny
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by carguyny »

What's going to cause it to rebound? I struggle to see any near-term catalyst that significantly improves the environment.

You took it as either a speculative bet and need to decide if you cut your losses or not or you're in it very long-term. I'm seeing pretty weak fundamentals long-term but that's just my view.
Vanguard Fan 1367
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Vanguard Fan 1367 »

I bought Vanguard's energy fund at a bad time and took a pretty good bath with it. Before that I decided to buy Occidental Petroleum, OXY and it was one of my 10 bagger stocks. So I have swung both ways with the energy.

I appreciate being a Boglehead and going with something like the S & P 500 fund or the Total Stock Market Fund these days. But of course energy could come back and both of those index funds could go down.

So I would sell the energy fund and go with Bogle's simple approach to own the market, but you have to make your choice.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
asif408
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by asif408 »

lowndes wrote:I would definitely not sell energy.
+1. If anything now is a good time to buy more while performance has been poor and sentiment is low. It's down almost 20% since mid December.

But if can't get yourself to do that you might not be cut out to hold it. In that case, I'd sell it, cut your losses, and stick with a more basic portfolio. The truth is, though, it's only 1% of your portfolio, so you could buy lottery tickets or beer with that 1% and it wouldn't have much effect on your overall returns.
Last edited by asif408 on Wed Jun 28, 2017 10:29 am, edited 2 times in total.
alex_686
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by alex_686 »

Why did you buy VDE? Does that logic still hold? If yes, hold. Heck, maybe buy even more. If no or unsure, then sell and move back to the market neutral position of Total Stock.

I think it is fine to buy individual stocks. Maybe even individual sectors. But it should be based on logic and reason and that logic and reason must be periodically reviewed. Having a gut feeling that a sector is low is not sufficient.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
delamer
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by delamer »

alex_686 wrote:Why did you buy VDE? Does that logic still hold? If yes, hold. Heck, maybe buy even more. If no or unsure, then sell and move back to the market neutral position of Total Stock.

I think it is fine to buy individual stocks. Maybe even individual sectors. But it should be based on logic and reason and that logic and reason must be periodically reviewed. Having a gut feeling that a sector is low is not sufficient.
Agreed. I hold about 5% in Energy and REIT funds because they are part of my investing plan for the long run. If they aren't part of yours, then sell.
rkhusky
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by rkhusky »

Tax Loss Harvest. Sell Energy. Buy Total Stock. Wait 30 days. Decide whether or not to buy Energy.
WhiteMaxima
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by WhiteMaxima »

total stock has energy around 10%. So sell VDE and by VT
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

Thanks everyone for your responses.

In reality this is a very small portion (1%) of my portfolio so in the long run it doesn't matter. I agree with many posters who say that if this is not a part of my long term portfolio then just sell. Honestly, I like the idea of cleaning up my portfolio.

However, I also agree with other commentators who asked whether I believe my original reasons for buying VDE are still valid. I do and I think long term energy will come back up.

I think I will be patient for another year or two and and see if I can cut my cake and eat it too. I don't see a reason to take a loss now when if I just hold I can just rebalance when the energy sector is back up. I know long term I will sell this small position and balance to Total Stock or Total Int'l.

This has been a good lesson that sector betting is tricky business and will not try this again. Thankfully, I only made a very small bet to begin with.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Valuethinker »

coupleofcents wrote:Thanks everyone for your responses.

In reality this is a very small portion (1%) of my portfolio so in the long run it doesn't matter. I agree with many posters who say that if this is not a part of my long term portfolio then just sell. Honestly, I like the idea of cleaning up my portfolio.

However, I also agree with other commentators who asked whether I believe my original reasons for buying VDE are still valid. I do and I think long term energy will come back up.

I think I will be patient for another year or two and and see if I can cut my cake and eat it too. I don't see a reason to take a loss now when if I just hold I can just rebalance when the energy sector is back up. I know long term I will sell this small position and balance to Total Stock or Total Int'l.

This has been a good lesson that sector betting is tricky business and will not try this again. Thankfully, I only made a very small bet to begin with.
You basically can never call these things. There's always some factor you have not thought about.

If you have other, taxable, gains I would say sell, take the loss and use it to offset taxes. Turns a loss into a (smaller) asset.
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Phineas J. Whoopee
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Phineas J. Whoopee »

coupleofcents wrote:...
I realize my Other category is not Boglehead philosophy but I mostly am asking about the Energy Index VDE. I'm thinking to just stay put and wait until VDE rebounds before rebalancing to Total Stock Market but not sure if the Energy sector will recover anytime soon.
What I've underlined is a textbook case of the behavioral investing error loss aversion.

The reduction in value already occurred. Best to accept the fact. If you want a simpler portfolio, and we have no evidence one sector will outperform another over time, sell now and book the tax loss so you can claim it for this year, then use the proceeds to invest in total stock.

PJW
mortfree
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by mortfree »

why not figure out a price where you are comfortable selling and should be easy to attain - something in the range of $88- $9x... don't get too greedy or optimistic...

Initiate a sell order with that price.

then sit and wait; hopefully it will hit it.
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

Phineas J. Whoopee wrote:
coupleofcents wrote:...
I realize my Other category is not Boglehead philosophy but I mostly am asking about the Energy Index VDE. I'm thinking to just stay put and wait until VDE rebounds before rebalancing to Total Stock Market but not sure if the Energy sector will recover anytime soon.
What I've underlined is a textbook case of the behavioral investing error loss aversion.

The reduction in value already occurred. Best to accept the fact. If you want a simpler portfolio, and we have no evidence one sector will outperform another over time, sell now and book the tax loss so you can claim it for this year, then use the proceeds to invest in total stock.

PJW
You're right. I am averse to this "loss." I'm glad this is a small amount of my portfolio and is a low cost ETF. I would argue that it only becomes a loss if I actually sell it. You got me thinking about this more.
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

mortfree wrote:why not figure out a price where you are comfortable selling and should be easy to attain - something in the range of $88- $9x... don't get too greedy or optimistic...

Initiate a sell order with that price.

then sit and wait; hopefully it will hit it.
Good idea. I check from time to time but didn't think to execute a sell order. Should have done that when it hit $108 last year :( Of course I'd love to sell when it actually rebounds above $116 about where I bought it!
best2u
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by best2u »

Reminds me of one of my neighbors that used to speculate from time to time. He would get in a predicament similar to yours and say to me,
"I never stay with my winners long enough and I always ride every dead horse until it smells." :sharebeer
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ray.james
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by ray.james »

rkhusky wrote:Tax Loss Harvest. Sell Energy. Buy Total Stock. Wait 30 days. Decide whether or not to buy Energy.
+1. I am surprised no one mentioned this!

Of course the risk is an middle east war where oil price goes up 3x in between. Else enjoy the 175$ off taxes.(assuming you pay LTCG)
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
Valuethinker
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Valuethinker »

coupleofcents wrote:
Phineas J. Whoopee wrote:
coupleofcents wrote:...
I realize my Other category is not Boglehead philosophy but I mostly am asking about the Energy Index VDE. I'm thinking to just stay put and wait until VDE rebounds before rebalancing to Total Stock Market but not sure if the Energy sector will recover anytime soon.
What I've underlined is a textbook case of the behavioral investing error loss aversion.

The reduction in value already occurred. Best to accept the fact. If you want a simpler portfolio, and we have no evidence one sector will outperform another over time, sell now and book the tax loss so you can claim it for this year, then use the proceeds to invest in total stock.

PJW
You're right. I am averse to this "loss." I'm glad this is a small amount of my portfolio and is a low cost ETF. I would argue that it only becomes a loss if I actually sell it. You got me thinking about this more.
From a tax perspective you are correct. Only realized losses count. In fact, they become assets (by the amount of tax you save on profitable investments at realization).

However in terms of investing you are incorrect. You have lost money, and more importantly you have lost the future compounding of that money. Losses I made on dot com era investments can never be made up-- I have lost all the compound investment returns from investing in an index fund, since then.

From a decision making point of view as to what to do next, past performance is irrelevant. It is a Sunk Cost. All that matters now is future returns vs. other funds that you could put it in.

Hopefully the experience shows you how hard sector investing is. It is not a given that the oil price will recover, nor that the sector will recover. I have many posts on this Forum on the oil market and energy generally and I can give you pretty good reasons why the oil price is unlikely to be as high as it was in the recent past, in the long run (i.e. excepting geopolitical ructions of the type which oil inevitably throws off). Both from the demand side (peak oil demand as a real thing) and the supply side (fracking). On the other hand, maybe the sector is cheap.

It *does* interest me that the world's biggest oil producer, Saudi Arabia, is preparing to bring forward future profits by IPO'ing Saudi Aramco, which will be the largest listed company in the world (albeit only 5% of it free float) post IPO-- probably c. $1 trillion. They are trading money from production in the future for money now. In other words, the ultimate insider is selling (a bit).

But don't take my word for it. Read Dieter Helm's thought provoking new book Burn Out: the end game for fossil fuels

https://www.youtube.com/watch?v=c-fhjg9bAjg

https://www.amazon.com/Burn-Out-Endgame ... alrevol-20

It was one of the things that got me to sell some CNQ (Canadian Natural Resources, a major oil sands play).
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Valuethinker »

There is a case for holding onto this thing.

It's not a great case. But it's to hedge an oil price spike.

If the oil price goes up, US gasoline prices will rise (a lot: the US doesn't tax gasoline much compared to other developed countries, so when the price of crude goes up so does the price of gasoline, pretty much in synch, in other countries the percentage change is more muted because the price of gasoline is higher anyways) and so will heating oil prices (and to some extent, anything made of plastic or delivered by truck or plane within the economy).

So personally you will suffer, particularly if your driving is high compared to the average American, you heat with oil, you have a particularly low fuel economy vehicle, etc. etc.

The main problem is the price of the quoted stocks of commodity producers, don't tend to track the price of the commodity well.

But it is a reasonable argument.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Avo »

I was in a similar situation a couple years ago. I held another energy ETF, IXC, and watched it go down & down. It was about 3% of my portfolio.

At the end of 2015, I finally took the tax loss & sold.

I haven't looked back until now. I see I sold near the bottom! :shock:

I put the proceeds equally into VT and VXUS.

As of today, I'm ahead!

And I'm done with sector investing. I certainly don't have knowledge that the market doesn't have. And I'm terrible at timing!
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Gadget »

carguyny wrote:What's going to cause it to rebound? I struggle to see any near-term catalyst that significantly improves the environment.

You took it as either a speculative bet and need to decide if you cut your losses or not or you're in it very long-term. I'm seeing pretty weak fundamentals long-term but that's just my view.
A war in the middle east, or a war in any major oil producing country will likely send oil prices skyrocketing. I sort of think if you're in to speculating, now might actually be the time to buy in the energy sector. Perception is way down, oil companies are very lean (tons of layoffs), and oil extraction methods have been forced to improve significantly in this down market.

That said, if it were me I'd tax loss harvest and buy total stock market or something more boggleheadish instead.
livesoft
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by livesoft »

This is exactly why tax-loss harvesting is such a win. Sell this loser as already mentioned. You can buy replacement shares right away or buy the identical shares back in 31 days. Don't waste any time worrying about keeping this dog. Get a new dog.
Last edited by livesoft on Thu Jun 29, 2017 4:48 pm, edited 1 time in total.
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Valuethinker
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Valuethinker »

Gadget wrote:
carguyny wrote:What's going to cause it to rebound? I struggle to see any near-term catalyst that significantly improves the environment.

You took it as either a speculative bet and need to decide if you cut your losses or not or you're in it very long-term. I'm seeing pretty weak fundamentals long-term but that's just my view.
A war in the middle east, or a war in any major oil producing country will likely send oil prices skyrocketing. I sort of think if you're in to speculating, now might actually be the time to buy in the energy sector. Perception is way down, oil companies are very lean (tons of layoffs), and oil extraction methods have been forced to improve significantly in this down market.

That said, if it were me I'd tax loss harvest and buy total stock market or something more boggleheadish instead.
If one wants to hold onto the Energy fund as a kind of hedge against an oil price spike, then it's not a bad argument for so doing.

I agree the oil companies have engineered themselves to a much lower cost base. And world anxiety about disruption to oil supplies seems to be at something of a low.
tesuzuki2002
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by tesuzuki2002 »

If you want to hold energy separately.. buy more.... I was a BIG VDE holder thru much of 2016.. I sold all mind before Christmas... I'm still looking for $82 before I start buying again...

cheers!!
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by carguyny »

I've been a professional energy investor for 15+ years. Everyone likes to think they're an energy expert.

I would say the trick to investing in the sector is being smart enough to invest in companies that can survive downturn and smart enough to exit when you've been lucky on the cycle. A passive index is a tough way to overweight it.
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nedsaid
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by nedsaid »

coupleofcents wrote:Before I became a Boglehead, I bought Vanguards Energy Index ETF back in 2015 thinking this was a good sector bet because it was down.

I have 33 shares (around $2800 now) that not have a long term loss of $705.00 and short term loss of $6.00. This is in a taxable brokerage. The only other funds I have in taxable are VTSAX and VTIAX. Age 32, marginal tax 25%, effective tax rate less than 15%.

Should I sell these shares and take the loss now to redeploy to Total Stock/Total International Stock or just hold on. I almost sold when I was only $200 down but since then the energy sector is taking a beating this year. This represents only about 1.1% of my total portfolio. Here is my breakdown.

50% Total Stock (VTSAX)
21% Total Int'l Stock (VTIAX)
15% Total Bond/Intermediate Corp Bond
10% Other (6.5% Vanguard REIT, 2.5 Lending Club, 1% Fundrise)
3% Cash
1% VDE

I realize my Other category is not Boglehead philosophy but I mostly am asking about the Energy Index VDE. I'm thinking to just stay put and wait until VDE rebounds before rebalancing to Total Stock Market but not sure if the Energy sector will recover anytime soon.
I suppose it doesn't matter what you do here, as the Vanguard Energy Index is such a small part of your portfolio. The thing is, you bought this in 2015. You have held this two years. What you have experienced is the investor's equivalent of a night in a bad hotel. If it were me, I would continue to hold this. Historically, this would have been a no brainer. Energy prices have always rebounded in the past. I think this is still a pretty good bet but I do wonder if hydraulic fracking and horizontal drilling have put a permanent ceiling on oil prices. Pretty much, whenever the prices go up, the frackers start drilling again, and then prices go right back down. It could be that this and other things out there like alternative energy have changed the energy markets forever. We don't know yet. My thinking is that a bet on energy when it is down is a good bet. But I don't know for sure.
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sapphire96
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by sapphire96 »

If the fund goes down 5%, it's at a 5% discount.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by gus1961 »

VDE is still making money for you, about 2.5% annually in distributions. Are you reinvesting in same or putting those distributions elsewhere?
Yes, your money could have done better elsewhere. Tough to say what the future will bring, but if oil goes up, the S&P is likely to go up too.
As a long term investment, it's probably ok. We'll be needing oil for a long time. Oil via fracking is expensive so there is a floor to the price.
I generally only sell losers to offset gains elsewhere. Things average out, hopefully for the better.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by carguyny »

There is a story on Bloomberg this morning of Goldman admitting how wrong they've been on commodities. I recall in Q1 and Q2 2014 Goldman had a $200/bbl forecast.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by carguyny »

gus1961 wrote:VDE is still making money for you, about 2.5% annually in distributions. Are you reinvesting in same or putting those distributions elsewhere?
Yes, your money could have done better elsewhere. Tough to say what the future will bring, but if oil goes up, the S&P is likely to go up too.
As a long term investment, it's probably ok. We'll be needing oil for a long time. Oil via fracking is expensive so there is a floor to the price.
I generally only sell losers to offset gains elsewhere. Things average out, hopefully for the better.
Break-evens keep coming down - driven by improvements of completion techniques, recompleting gen 1 wells and significantly reduced service costs. The speed to market of new wells has also never been faster, which is compounded further by pretty significant DUC inventory. Gas fundamentals have looked much more constructive for the last 18 months, but it's become a crowded trade now.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by danaht »

I would keep it if you like energy as a long term investment. A lot of people seem to think electric cars will replace ICE cars soon (in 10 years). The same group of people also believe that renewable energy will mostly replace carbon energy in the same time frame. If this happens - then everyone should sell their Vanguard energy funds now - since it mostly contains carbon based companies. I don't think either of these will be happening in my lifetime - so I continue to hold my energy ETFs / stocks (including VDE).
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

livesoft wrote:This is exactly why tax-loss harvesting is such a win. Sell this loser as already mentioned. You can buy replacement shares right away or buy the identical shares back in 31 days. Don't waste any time worrying about keeping this dog. Get a new dog.
Haha. I love how this post has generated both responses. Now I'm back to considering selling again! However, If I do sell, I won't buy back into VDE, even though valuations seems low. I'm planning on either Total Stock (which includes energy sector of about 10% I think) or Total Int'l, which have lower CAPE ratios than Total Stock at this point.
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

gus1961 wrote:VDE is still making money for you, about 2.5% annually in distributions. Are you reinvesting in same or putting those distributions elsewhere?
Yes, your money could have done better elsewhere. Tough to say what the future will bring, but if oil goes up, the S&P is likely to go up too.
As a long term investment, it's probably ok. We'll be needing oil for a long time. Oil via fracking is expensive so there is a floor to the price.
I generally only sell losers to offset gains elsewhere. Things average out, hopefully for the better.
Yeah, I am reinvesting dividends, back into VDE, and in fact I bought 25 shares at $116, and 8 shares in the low $80's in 2015. Current price is high 80s. In terms of offsetting gains, most are in tax advantaged accounts. I have Total Stock and Total Int'l in taxable which will have mostly qualified dividends.
Last edited by coupleofcents on Fri Jun 30, 2017 8:48 am, edited 2 times in total.
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

nedsaid wrote:
coupleofcents wrote:Before I became a Boglehead, I bought Vanguards Energy Index ETF back in 2015 thinking this was a good sector bet because it was down.

I suppose it doesn't matter what you do here, as the Vanguard Energy Index is such a small part of your portfolio. The thing is, you bought this in 2015. You have held this two years. What you have experienced is the investor's equivalent of a night in a bad hotel. If it were me, I would continue to hold this. Historically, this would have been a no brainer. Energy prices have always rebounded in the past. I think this is still a pretty good bet but I do wonder if hydraulic fracking and horizontal drilling have put a permanent ceiling on oil prices. Pretty much, whenever the prices go up, the frackers start drilling again, and then prices go right back down. It could be that this and other things out there like alternative energy have changed the energy markets forever. We don't know yet. My thinking is that a bet on energy when it is down is a good bet. But I don't know for sure.
My sentiments exactly. Back in 2015 I knew energy has always rebounded so I figured long term it's coming back up. But I didn't anticipate how much more it would drop. After 2 years, I'm beginning to see see that energy prices may depressed for quite awhile (at least petroleum based products). This very slight weighting to energy really doesn't make a big difference on my portfolio in the long run. I didn't realize more people would post so I'm back to thinking on this one. Honestly, it's kind of fun to see different people's responses. This keeps me engaged during down time at work.
frankmorris
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by frankmorris »

The idea of selling energy now and buying TSM is pretty much a "sell low" and "buy high" scenario. Unless you believe oil won't ever come back up, or you're anticipating needing to sell before it does, you're only baking in your losses over the past 2 years if you sell now.

On the other hand, there will be likely be a better "exchange rate" between VDE and TSM at some point in the next 12-24 months, meaning that energy will be more valuable relative to the overall market. That may be a better time to swap out.

That being said, there is the broader conversation about the effectiveness of stock/sector-picking and market timing, all of which are valid. Still, since you're already in the game, it may make less sense to exit the game at the least possibly advantageous time to do so.
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BL
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by BL »

coupleofcents wrote:
livesoft wrote:This is exactly why tax-loss harvesting is such a win. Sell this loser as already mentioned. You can buy replacement shares right away or buy the identical shares back in 31 days. Don't waste any time worrying about keeping this dog. Get a new dog.
Haha. I love how this post has generated both responses. Now I'm back to considering selling again! However, If I do sell, I won't buy back into VDE, even though valuations seems low. I'm planning on either Total Stock (which includes energy sector of about 10% I think) or Total Int'l, which have lower CAPE ratios than Total Stock at this point.
If you won't buy it back, then I definitely think you should sell (and not buy it back!) If you really wanted it, you would TLH and buy back after 30 days.
livesoft
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by livesoft »

Lots of behavioral errors being suggested in this thread. I suppose that's to be expected. :)
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dbr
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by dbr »

When 1.1% of your portfolio is in an at-a-loss investment it is an opportunity to get rid of the thing. You already said it was an ill considered investment to start with.
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

My final OP response:

I sold just a few minutes ago and redeployed to Total Stock. Here are my reasons.

1. VDE has no place in my IPS. I will not make any sector bets. I plan to only have Total Stock/Total Int'l in taxable accounts going forward.
2. By holding on longer, I'm further letting my behavior dictate my investments, not my overall allocation strategy.
3. Sunk cost. No point to let this take up anymore time. KISS.
4. The $692.00 loss will offset my cash interest gains in my taxable accounts as well as any ordinary dividends.

This is a small loss from original value but an invaluable lesson. Whether or not energy sector does come back is moot. I'm holding my investments for the next several decades.

Thanks everyone, Valuethinker, dbr, livesoft, phineas, carguyny... and others. I learned things I didn't know before I made this post about behavior, sunk cost, tax loss harvesting, overthinking.
Last edited by coupleofcents on Fri Jun 30, 2017 3:26 pm, edited 1 time in total.
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Phineas J. Whoopee
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Phineas J. Whoopee »

danaht wrote:I would keep it if you like energy as a long term investment. A lot of people seem to think electric cars will replace ICE cars soon (in 10 years). The same group of people also believe that renewable energy will mostly replace carbon energy in the same time frame. If this happens - then everyone should sell their Vanguard energy funds now - since it mostly contains carbon based companies. I don't think either of these will be happening in my lifetime - so I continue to hold my energy ETFs / stocks (including VDE).
But, wouldn't any new, less-carbon energy companies also be part of the energy sector, and therefore enter its sector index fund?
PJW
danaht
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by danaht »

Phineas J. Whoopee wrote:
danaht wrote:I would keep it if you like energy as a long term investment. A lot of people seem to think electric cars will replace ICE cars soon (in 10 years). The same group of people also believe that renewable energy will mostly replace carbon energy in the same time frame. If this happens - then everyone should sell their Vanguard energy funds now - since it mostly contains carbon based companies. I don't think either of these will be happening in my lifetime - so I continue to hold my energy ETFs / stocks (including VDE).
But, wouldn't any new, less-carbon energy companies also be part of the energy sector, and therefore enter its sector index fund?
PJW
I'm sure the energy funds would survive and would transition to renewable companies - but I think huge losses would probably happen in the funds as most of the carbon companies go out of business. I would only worry about this if you think these people are correct about this relatively short time frame where most carbon gets replaced. Since I don't think it's feasible for this to happen - I'm still accumulating VDE via dividend reinvestment.
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tainted-meat
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by tainted-meat »

I think you would be selling at a low point if you sold VDE now. I would keep it.
Valuethinker
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by Valuethinker »

danaht wrote:I would keep it if you like energy as a long term investment. A lot of people seem to think electric cars will replace ICE cars soon (in 10 years). The same group of people also believe that renewable energy will mostly replace carbon energy in the same time frame. If this happens - then everyone should sell their Vanguard energy funds now - since it mostly contains carbon based companies. I don't think either of these will be happening in my lifetime - so I continue to hold my energy ETFs / stocks (including VDE).
That is a Straw Man argument. Quite a gross mischaracterization.

I have never heard a serious expert predict the replacement of Ice vehicles in 10 years. There is no "a lot of people". What seems increasingly clear is that EVs are catching up the range and performance gaps very quickly. And that EVs will actually have a noticeable impact on oil demand by 2030.

As to your second contention. There's actually a huge row going on about whether renewable energy can replace 100 per cent. Of US consumption. Whether it is physically possible or not. Arraigned are some serious academic heavy hitters:people like Ken Caldeira (for the no). It's Been running around this past week.

No one is arguing it is doable in 10 years.

But, and I would not have written this 5 years ago, peak oil demand might be in sight. And in the 2030s.

Read Dieter Helm, a leading energy economist. He is careful not to forecast a date but his vision is provocative and well thought out.

Some serious energy economists and scenario planners at Big Oil multinationals seem to be leaning that way too.

Things are changing, and amazingly fast.

My own view is the external environment will force the pace on this.
peddler12
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by peddler12 »

I've been cursed. When this thread came out at the end of June I said to myself that this ETF is out of favor and could be a great buy. So over the next month I bought 62 shares. Recently a week or so ago after dividends posted I sold all my shares. I made $350.54. Now I want to keep looking to replicate this success again which I know was totally just a stroke of luck and just plain good fortune. I guess I have to come back down to earth and take a good look at my IPS and see that in it there is no fun money. I broke the rules, but I must say the quick reward has brought a certain amount of euphoria to the trades. Any one want to comment?
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by lack_ey »

peddler12 wrote: Tue Oct 31, 2017 8:30 pm I've been cursed. When this thread came out at the end of June I said to myself that this ETF is out of favor and could be a great buy. So over the next month I bought 62 shares. Recently a week or so ago after dividends posted I sold all my shares. I made $350.54. Now I want to keep looking to replicate this success again which I know was totally just a stroke of luck and just plain good fortune. I guess I have to come back down to earth and take a good look at my IPS and see that in it there is no fun money. I broke the rules, but I must say the quick reward has brought a certain amount of euphoria to the trades. Any one want to comment?
What even were the trade dates? I'm seeing about an equivalent return for the energy index and the total market over June 29 to October 24.
peddler12
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by peddler12 »

lack_ey wrote: Tue Oct 31, 2017 9:01 pm
peddler12 wrote: Tue Oct 31, 2017 8:30 pm I've been cursed. When this thread came out at the end of June I said to myself that this ETF is out of favor and could be a great buy. So over the next month I bought 62 shares. Recently a week or so ago after dividends posted I sold all my shares. I made $350.54. Now I want to keep looking to replicate this success again which I know was totally just a stroke of luck and just plain good fortune. I guess I have to come back down to earth and take a good look at my IPS and see that in it there is no fun money. I broke the rules, but I must say the quick reward has brought a certain amount of euphoria to the trades. Any one want to comment?
What even were the trade dates? I'm seeing about an equivalent return for the energy index and the total market over June 29 to October 24.
I don't have the dates with me, but I bought at about 89.00 and some close to 90. I didn't purchase at 85. I didn't have any money left. Thanks for writing.
lack_ey
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by lack_ey »

peddler12 wrote: Tue Oct 31, 2017 9:13 pm I don't have the dates with me, but I bought at about 89.00 and some close to 90. I didn't purchase at 85. I didn't have any money left. Thanks for writing.
If you bought around June 30th or July 3rd, the price would have been in the $89-90 range or close to it, and the return to now or some point in the last week would be slightly less than that of the stock market as a whole.

So that's not really a great buy.
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by JBTX »

coupleofcents wrote: Wed Jun 28, 2017 11:28 am Thanks everyone for your responses.

In reality this is a very small portion (1%) of my portfolio so in the long run it doesn't matter. I agree with many posters who say that if this is not a part of my long term portfolio then just sell. Honestly, I like the idea of cleaning up my portfolio.

However, I also agree with other commentators who asked whether I believe my original reasons for buying VDE are still valid. I do and I think long term energy will come back up.

I think I will be patient for another year or two and and see if I can cut my cake and eat it too. I don't see a reason to take a loss now when if I just hold I can just rebalance when the energy sector is back up. I know long term I will sell this small position and balance to Total Stock or Total Int'l.

This has been a good lesson that sector betting is tricky business and will not try this again. Thankfully, I only made a very small bet to begin with.

A few years ago I bought a bit of a vanguard energy fund. In spite of my general philosophy of either use index funds or a few relatively low fee broadly based active, I just thought with the world growing for decades to come energy investments were a slam dunk. After a couple of years and a major energy pull back I asked myself what the heck was I thinking and sold it. Like you, maybe it represented 1% of my portfolio, at most.

I'm not sure what changes the dynamics of energy any time soon - it is so easy now to ramp up fracking up and down demand increases and decreases are fairly easily accommodated. I expect if oil went up $20 a barrel output would surge in fairly short order and push it back down. But given my failed predictions a few years ago, there is no reason to believe my current prediction is any better.
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coupleofcents
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Re: Should I Sell Energy Index (VDE) and take loss?

Post by coupleofcents »

Yeah, I realized I'm not good at predictions. In the end I have sold the energy fund and just dumped it into an index fund. Now my only last non index stock is in Ali Baba. Bought it around the IPO price. It's actually doubled since but I only put $1000.00 down so it's not like I'm raining in money. I'm keeping my small position in Alibaba just to keep my Scottstrade account open. I guess I'm giving myself a door to try to make market predictions in case I ever want to:)
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