Chickened out... Now unsure where to start.

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johnfromtexas
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Chickened out... Now unsure where to start.

Post by johnfromtexas » Tue Oct 03, 2017 12:36 pm

Good afternoon, let me preface all of this by saying that I am well-aware of the ridicule that I am about to receive and am happy to take my lumps. Long story short, a few months ago I made an emotional decision out of fear and liquidated just about everything into cash in each respective account I listed below (aside from 401k and wife's DB plan). I'm a relatively hands-off type of investor historically, and am trying to decide the best way to proceed. I'm somewhat conservative, and don't have a huge risk appetite. I've been researching all kinds of solutions for managing my accounts like Betterment, Fidelity Go, etc. but feel very weird about putting a computer in the driver's seat. I'm loyal to Fidelity, but the 12-year-old I met with in my local Fidelity office didn't really inspire too much confidence. (Hard to take advice from someone who calls you "Bro".)

So yes, I know that I have made some "sad choices" (in the words of my wife the Kindergarten teacher), but would greatly appreciate any/all advice. I am very attracted to the three-fund portfolio concept, and have read a lot of the materials on the site about that and tax-efficient placement, etc.

Background Info:
Emergency funds: Fully funded
Debt: Fixed Mortgage @ 3.125%. Vehicles are wholly owned.
Tax Filing Status: MFJ
Tax Rate: 28% Federal, 0% State (TX)
State of Residence: TX
Age: 38
Desired Asset allocation: 50-60% stocks / 40-50% bonds (as I mentioned, I'm somewhat conservative)
Desired International allocation: 10-20% of stocks

Current portfolio: (note all 100% cash, aside from 401k and DB plan)
Taxable Joint Brokerage: mid five-figures. 10% of total retirement assets
2 Individual Roth IRA accounts: mid-to-high five-figures (total) 15% of total retirement assets.
2 Trad/Rollover IRA accounts: low-to-mid six figures (total) 60% of total retirement assets.
401k: mid to-high five-figures. All VTIVX Vanguard Target Retirement 2045 Fund. 15% of total retirement assets.
Wife has a DB pension.

Annual Contributions:
401k annual contribution is maxed at IRS limit.
Wife's DB plan is not modifiable.
Both mine and my wife's annual Traditional IRA contributions maxed at IRS limit. (we're not Roth-eligible)

Available funds in my 401k plan (listed only those which are not target retirement funds):

Fidelity Mngd Inc Port
Vanguard Prime Money Mkt Fund
Vanguard Retire Savings Trust III
Metropolitan West Total Return Bd Plan
Vanguard Total Bond Mkt Index Inst
T. Rowe Price Growth Stock I
Vanguard Inst Index Fund Inst
Vanguard Mid-Cap Index Fund Inst
Vanguard Russell 2000 Index Inst
Vanguard Total Stock Mkt Idx Inst
Vanguard Windsor II Fund Adm
Vanguard International Growth Adm

Questions:
1. I'm attracted to the three-fund concept (being a Fidelity guy, noted funds below), not sure of allocation yet. Would love to hear input from others. Again, I'm somewhat conservative:
Fidelity Total Market Index Fund Premium Class (FSTVX)
Fidelity Total International Index Fund Premium Class (FTIPX)
Fidelity U. S. Bond Index Fund Premium Class (FSITX)

2. Any other input on best way to proceed, lessons learned or other questions I might not have asked or answered would be appreciated.

mhalley
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Re: Chickened out... Now unsure where to start.

Post by mhalley » Tue Oct 03, 2017 2:18 pm

When you market time, not only do you have to decide when to get out, but when to get back in. Since you got out, the market has reached new highs. So now you are thinking you made a mistake, and want to get back in and not miss out on any further new highs. If you jump back in now, and the market takes a 20% hit next month, you will be overcome with remorse. So what to do? The boglehead response is to be invested at your desired aa at all times. The fact that you exited the market means that your asset allocation was not one that let you sleep at night. If you were 50/50 before you got out, I am not sure what to tell you, as that would be about the lowest someone your age should be (unless you have an extremely high savings rate or are willing to work till 70. Switch to a 50/50 portfolio in your 401k, and keep reading to help alleviate your fears.
I would say that you should dca back to an aa of 50/50 over the next year, and remember what happened to the worst market timer in history.

https://www.cnbc.com/2015/08/27/the-ins ... -ever.html

thangngo
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Re: Chickened out... Now unsure where to start.

Post by thangngo » Tue Oct 03, 2017 2:35 pm

How do you feel investing everything in stock right now? 80/20 US and ex-US equity.

No? Then how do you feel investing 60 stock / 40 bond now?

If you still don't know the answer or feel so emotionally attached to your investment, get a financial advisor and be done with. When it comes to make bad decision financially, the worst enemy is yourself.

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ruralavalon
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Re: Chickened out... Now unsure where to start.

Post by ruralavalon » Tue Oct 03, 2017 2:35 pm

Welcome to the forum :) .

What was you asset allocation just before you moved to cash a few months ago?

Are there any balanced funds offered in your 401k, in addition to the target retirement funds?
Last edited by ruralavalon on Tue Oct 03, 2017 2:36 pm, edited 1 time in total.
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asif408
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Re: Chickened out... Now unsure where to start.

Post by asif408 » Tue Oct 03, 2017 2:36 pm

OP,

I'll preface by saying that I don't have as much in assets as you do, but I do have a much higher risk tolerance. I started out more conservative and have gotten more aggressive over time, and my suggestion to anyone in your shoes would be to do the same. Going to 100% cash is an extreme move and indicates that you dramatically over estimated your risk tolerance. So my suggestion would be to start with a plan that you can stick with if another 1929 or 2008 hits.

I think the only way you can successfully determine your risk tolerance is to start at a point well below what you think it is. Even if it is just 5 or 10% in stocks and the rest in short term Treasuries. When the next downturn hits, see how you react. If you do ok maybe bump up your stock allocation 5 or 10%, and repeat this process over time if needed until you start to get a little uncomfortable. Then dial it back slightly from that point and stay there. This is not the ideal way in a perfect world to do things but we don't live in a perfect world, so in your case this will probably give you the best long-term return, as it will prevent you from missing out on large gains over time.

Just my 2 cents.

RadAudit
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Re: Chickened out... Now unsure where to start.

Post by RadAudit » Tue Oct 03, 2017 2:41 pm

Welcome to the forum

I wouldn't call it chickening out. I prefer the observation that discretion is the better part of valor.

But as to where to start - start from where you are. Here's some reading that matches up - roughly - with the funds that are available to you. https://www.bogleheads.org/wiki/Three-fund_portfolio and the first post in this thread viewtopic.php?t=88005

Best of luck.
"Everything will be all right in the end. If everything is not all right, then it is not the end." - The Best Exotic Marigold Hotel

delamer
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Re: Chickened out... Now unsure where to start.

Post by delamer » Tue Oct 03, 2017 2:45 pm

It isn't clear what the fear was that caused you to cash out. It might mean, as another poster said, that your allocation was too aggressive for you -- which is solvable. If it was something else, then you need to figure that out before you make any decisions about getting back in the market.

You might find this of interest: https://personal.vanguard.com/us/insigh ... llocations

Mike Scott
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Re: Chickened out... Now unsure where to start.

Post by Mike Scott » Tue Oct 03, 2017 2:48 pm

Take another look at the balanced funds. If you pick one, there are no more decisions to make other than to keep contributing to it with no need to pay for an advisor.

JBTX
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Re: Chickened out... Now unsure where to start.

Post by JBTX » Tue Oct 03, 2017 2:59 pm

Welcome!

I guess you have to be honest with yourself. Do you feel you will behave differently in the future? What makes you think you won't chicken out again?

I would recommend:

1. Read some books by Bogle, Burton Makiel, Buffett and others on the stock market. You have to get to the point to where
- You are convinced that investing some portion in stocks is worthwhile over the long term
- You fully understand that you can't time the market, and pretty much nobody can. As long as you think you can, you will make the same mistakes.
- Understand, and fully accept, that the market could go down 50% at any point in time, and that is a risk you are willing to take, because this is retirement money and it doesn't matter what it does now. In fact, if it goes down now it is actually better because you get to buy more for your money as you dollar cost average in.

If I were you I wouldn't put any money in the stock market that I may need over the next 10 years.

As a general rule a simple portfolio of a few index funds is your best bet. However, if even those scare you, perhaps look into this fund

Vanguard Wellesley Income

- http://beta.morningstar.com/funds/XNAS/VWIAX/quote.html

It is about 1/3 stocks, 2/3 bonds, is very conservative, very low fees, and has performed well for such a conservative fund.

rkhusky
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Re: Chickened out... Now unsure where to start.

Post by rkhusky » Tue Oct 03, 2017 3:04 pm

I recommend putting all your tax advantaged accounts into target date index funds. And your taxable account into the tax managed balanced fund (AA is 50/50). Perhaps you should look at a target date 2025 fund (Vanguard's is 65/35, Fidelity about the same) or Vanguards Lifestrategy Moderate (AA=60/40).

Did you really liquidate your taxable stock holdings and incur the resulting cap gains?

johnfromtexas
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Re: Chickened out... Now unsure where to start.

Post by johnfromtexas » Tue Oct 03, 2017 3:10 pm

ruralavalon wrote:
Tue Oct 03, 2017 2:35 pm
Welcome to the forum :) .

What was you asset allocation just before you moved to cash a few months ago?

Are there any balanced funds offered in your 401k, in addition to the target retirement funds?
Holy cow, I didn't expect so many responses so quickly. Thanks to everyone, will try and respond as well as I can.

Thanks also for the links, several of them I haven't had a chance to visit quite yet. My fears which led to the liquidation were mostly around that I wasn't sure that that level of market performance was real/sustainable, concern about world events, and bailed in a moment of weakness. Definitely not looking to repeat that mistake, or at least to make a better decision next time.

To answer ruralavalon:
My prior AA was about 40% bonds / 60% stock (10-20% int'l).
I haven't dug into the details of those Vanguard funds in my 401k very deeply. The target fund I'm in now in my 401k contains 90% stock / 10% bonds. There are a number of "total" market funds in the categories mentioned above.

To answer rhsuky, yes I did liquidate it. Luckily (or not) I had a carry-forward loss which helped take the sting out of that.

Thanks again mhalley, thangngo, ruralavalon, asif40, radaudit, delamer, mike scott, rhusky and JBTX (and anyone else I missed) for your near-instantaneous feedback. I am looking through everything everyone has said as quickly as I can, a lot of information to absorb.

retiredjg
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Re: Chickened out... Now unsure where to start.

Post by retiredjg » Tue Oct 03, 2017 3:24 pm

If you were 60% stock before, I'd go no higher than 50% stock/50% bonds now. Yes, that is very conservative for your age. But what you had before was too aggressive and you already know the result of that.

I agree with rkhusky - put every account into a target fund that has about 50% stocks and 50% bonds (not the 90/10 you are invested in now). If the taxable account is for retirement, put that in the Tax Managed Balanced fund.

The trick is to pick a stock to bond ratio that you are comfortable with in all environments - bull, bear, whatever. It is not always an easy choice because people don't know what their risk tolerance is until it fails. You know what has not worked for you. Back up and try again with a little less in stock. Also, changing to the target funds will make the volatility of certain funds less noticeable.

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Sandtrap
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Re: Chickened out... Now unsure where to start.

Post by Sandtrap » Tue Oct 03, 2017 3:55 pm

Perhaps you might want to consider maximizing your "sleep factor" with "all in one" or balanced funds such as, Vanguard Balanced Index Fund VBIAX, Vanguard Wellesley Income Fund VWIAX, Vanguard Wellington Fund VWENX, and other equiv. funds, where market fluctuations are not so easily visible/felt. This includes target "all in one" funds. Add equity and/or bond funds to tilt to taste if needed. This type of portfolio simplification is easier to get back into the game, whether lump sum or DCA, and also easier and less stressful to maintain over time. It's not an approach for everyone.
Lot's of options.
Some thoughts to consider.
Good luck. :D
j
Shared experiences to benefit all -- not an exspurt -- per forum guidelines :) Golf score allocation 50/50 swings vs putts.

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welderwannabe
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Re: Chickened out... Now unsure where to start.

Post by welderwannabe » Tue Oct 03, 2017 4:15 pm

johnfromtexas wrote:
Tue Oct 03, 2017 12:36 pm
Fidelity Total Market Index Fund Premium Class (FSTVX)
Fidelity Total International Index Fund Premium Class (FTIPX)
Fidelity U. S. Bond Index Fund Premium Class (FSITX)
Three great funds. Hard to go wrong with these.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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F150HD
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Re: Chickened out... Now unsure where to start.

Post by F150HD » Tue Oct 03, 2017 4:38 pm

Some also like FIBAX

staythecourse
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Re: Chickened out... Now unsure where to start.

Post by staythecourse » Tue Oct 03, 2017 4:39 pm

Apologize if I am repeating, but why did you bail out in the first place? Did you need the money for x reason or did you just think the market was due an correction? I am more of a systems issue type of person so think there is NO POINT to continue anything until we (meaning you) understand WHY AND figure out a systematic way to prevent making the same mistake again. As I teach my 5 year old, "If you do it once it is a mistake/ accident, but if you do it a second time it is because you didn't learn the first time which is much worse then the mistake".

As I have said on here numerous times this is the issue I have with behavioral finance. We spend too much time coming up with the "why", but not the "how to stop oneself from making the mistake".

My advice, before going any further figure that otherwise you are going to be posting again with a different version of the same story in 1 year.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

pkcrafter
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Re: Chickened out... Now unsure where to start.

Post by pkcrafter » Tue Oct 03, 2017 5:49 pm

johnfromtexas wrote:
Tue Oct 03, 2017 12:36 pm
Good afternoon, let me preface all of this by saying that I am well-aware of the ridicule that I am about to receive and am happy to take my lumps. Long story short, a few months ago I made an emotional decision out of fear and liquidated just about everything into cash in each respective account I listed below (aside from 401k and wife's DB plan). I'm a relatively hands-off type of investor historically, and am trying to decide the best way to proceed. I'm somewhat conservative, and don't have a huge risk appetite. I've been researching all kinds of solutions for managing my accounts like Betterment, Fidelity Go, etc. but feel very weird about putting a computer in the driver's seat. I'm loyal to Fidelity, but the 12-year-old I met with in my local Fidelity office didn't really inspire too much confidence. (Hard to take advice from someone who calls you "Bro".)

John, I will also recommend 50/50, and consider it in the form of a target retirement fund or balanced fund. Tax-managed (50/50) in taxable. Also, read a good book on behavioral finance. Jason Zweig's "Your Money and Your brain" is a good one.

So yes, I know that I have made some "sad choices" (in the words of my wife the Kindergarten teacher), but would greatly appreciate any/all advice. I am very attracted to the three-fund portfolio concept, and have read a lot of the materials on the site about that and tax-efficient placement, etc.

Do not listen to the noise. Everyone of us here knows the market is overvalued and some kind of reset will occur, and none of us are looking forward to it, but we are holding. Maybe by selling you will miss the downturn, but then you might get back in just in time to get a pie in the face, and that means getting back in now or waiting a year and then getting in. Ms Market loves to play pranks. What you need to remember is the market has always come back, but sometimes it takes quite a awhile. And don't forget, a lot of the noise is manufactured with the intention of getting investors scared out of the market. When they sell low, the insiders are buying.

The point is if you are investing correctly, you are going to get a pie in the face once in a while. Keep a respectable allocation in equities which allows for hard and prolonged falls, and diversify in other countries.

Here is some information on the market ride.


viewtopic.php?p=3553997

Another option is to dollar cost back in. You would do that by starting out now with maybe 25-30% equity and then over some set number of months you would ratchet up to your target--50% equity. But again, no guarantees you won't get the pie in the face once you hit 50% equity. Your savings rate seems good, so accumulation and moderate growth appear good. You can hold your chosen AA up until about 5-6 years from retirement, and then if you are a bit anxious, you can lower it for the safe slide into retirement.

Annual Contributions:
401k annual contribution is maxed at IRS limit.
Wife's DB plan is not modifiable.
Both mine and my wife's annual Traditional IRA contributions maxed at IRS limit. (we're not Roth-eligible)

I'm assuming you are not eligible for tax-deduction for the IRAs. Have you considered Backdoor Roth?

https://www.bogleheads.org/wiki/Backdoor_Roth_IRA



Questions:
1. I'm attracted to the three-fund concept (being a Fidelity guy, noted funds below), not sure of allocation yet. Would love to hear input from others. Again, I'm somewhat conservative:

The 3-fund is a very good choice using these funds. You might also consider Fidelity Freedom Index funds, which tend to hide the fall of the equity side.

Fidelity Total Market Index Fund Premium Class (FSTVX)
Fidelity Total International Index Fund Premium Class (FTIPX)
Fidelity U. S. Bond Index Fund Premium Class (FSITX)


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

retiredjg
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Re: Chickened out... Now unsure where to start.

Post by retiredjg » Tue Oct 03, 2017 6:17 pm

pkcrafter wrote:
Tue Oct 03, 2017 5:49 pm
Ms Market loves to play pranks.....
Ms Market? How dare you!

pkcrafter
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Re: Chickened out... Now unsure where to start.

Post by pkcrafter » Tue Oct 03, 2017 6:22 pm

retiredjg wrote:
Tue Oct 03, 2017 6:17 pm
pkcrafter wrote:
Tue Oct 03, 2017 5:49 pm
Ms Market loves to play pranks.....
Ms Market? How dare you!
Ha-ha, just seeing if you were paying attention. I expected a kick, so good you didn't let me down. :happy

Paul
Last edited by pkcrafter on Wed Oct 04, 2017 1:22 pm, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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bottlecap
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Re: Chickened out... Now unsure where to start.

Post by bottlecap » Tue Oct 03, 2017 6:29 pm

Why in the world are you not considering a target retirement type fund?

If you don't, you will only have yourself to blame.

JT

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ruralavalon
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Re: Chickened out... Now unsure where to start.

Post by ruralavalon » Tue Oct 03, 2017 6:32 pm

What investment firms are the IRAs with?

Are there any balanced funds (investing in both stocks and bonds) offered in your 401k, in addition to the target retirement funds? Please give fund names, tickers and expense ratios.

Since you had a 60/40 asset allocation when you cashed out, perhaps a more conservative allocation might be suitable. Perhaps 50/50.

Also using balanced funds in all accounts might suit you, investors using balanced funds historically have been less susceptible to selling off their holdings during scary times.

As others have already suggested Vanguard Tax-Managed Balanced Fund (VTMFX) ER 0.09% might be good for the taxable account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

John Laurens
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Re: Chickened out... Now unsure where to start.

Post by John Laurens » Tue Oct 03, 2017 7:01 pm

My fears which led to the liquidation were mostly around that I wasn't sure that that level of market performance was real/sustainable, concern about world events, and bailed in a moment of weakness. Definitely not looking to repeat that mistake, or at least to make a better decision next time.


Why do you think it was a mistake? Maybe by the end of the week it will be one of the best market timing moves of all time? It is definitely possible.

I think assessing WHY you think it is was a mistake is the most important thing you can do right now.

If you think it was a mistake because you missed out on market gains between your liquidation date and today, then I believe you should NOT invest in any equities or bonds now.

If you think it was a mistake because you have realized that you, me, and anyone else for that matter could be wrong about anything, then you should start developing an AA and a written IPS.

Regards,
John

Oh, and don’t beat yourself up. I’ve made terrible mistakes in my life. I only wish they were ALL financial.

David Scubadiver
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Re: Chickened out... Now unsure where to start.

Post by David Scubadiver » Tue Oct 03, 2017 7:32 pm

Selling at a perceived top is much less troubling than selling at the actual bottom. So no worries. Nobody ever was made poor by taking a gain.

That said, you fell victim to the very common disease of market timing, thinking you can do better than the market by deciding when you should be in and when you should be out. With a long time horizon you should always be in the market and always be adding to your investments (unless you already have so much money that you don't need to be invested).

I'm around 50 years old. When I started investing in my 20's it was with the "certainty" that any dollar I invested in equities would be worth more than it would be than if I kept it in savings. And so, I invested every dollar I had, knowing that in the long run, my money would pay me back even though I expected, and did, suffer numerous market drops. I had it easy because I had no kids, and nothing to worry about except my own future for more than two decades. And, I earned a lot of money from a job I perceived as stable, so I had a very high ability to take risk. When added with my certainty that equities would always rise given enough time, and the fact that I had enough time to make that certain in my mind.... it was a perfect storm.

Everybody's risk tolerance is different, but to the extent you are "afraid" that is something that will likely stick with you. I was never afraid because everything I read told me that with longer than 15 years before I needed the money, I was best invested in stocks. Maybe the advice was wrong, but it was the advice of the day and it served me well.

Olemiss540
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Re: Chickened out... Now unsure where to start.

Post by Olemiss540 » Tue Oct 03, 2017 7:51 pm

Bro,

When I start to have market concerns I wrap my head back around a few concepts and it puts my mind at ease a bit:

1.) My target date funds are heavily invested in foreign markets that are not as highly valued
2.) The "value" of the market is only what goes on inside the head of the person buying and selling a particular share on any given day, thus there is no way to predict what news may drive things up or down a given year.

Best to get reinvested and don't peek at the markets AGAIN. EVER. AGAIN. Just let it ride and do what is in your power to prepare for your retirement (SAVE).

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randomizer
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Re: Chickened out... Now unsure where to start.

Post by randomizer » Tue Oct 03, 2017 8:09 pm

I'd put everything in target date retirement funds, put my login credentials in an envelope with a wax seal inside a plastic bag inside a bowl of frozen water in the freezer, cancel my newspaper subscriptions, and find a hobby that does not involve looking at what the market is doing.

billfromct
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Re: Chickened out... Now unsure where to start.

Post by billfromct » Tue Oct 03, 2017 8:48 pm

johnfromtexas,

Under "Annual Contributions", you say: "Both mine and my wife's annual Traditional IRA contributions maxed at IRS limit. (we're not Roth-eligible)"

Is this a non-deductible traditional IRA contribution, since you're "not Roth-eligible" due to income limits & the fact that you have retirement plans at work and large rollover IRAs? (You wouldn't be eligible for a tax deductible IRA either if you aren't eligible for normal Roth IRA contributions.)

Contributing to a non-deductible traditional IRA (not for a back door Roth IRA) is like contributing to a low cost variable annuity where you turn long term capital gains into ordinary income.

Why wouldn't you just invest this money into a total stock market index & earmark it for retirement? Then when you take money out for retirement, you will be taxed at the long term capital gains rate, probably 15% in your tax bracket. (I realize you will pay tax on some long term capital gains & dividend income over the years, probably at the 15% Federal tax rate.)

bill

Bfwolf
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Re: Chickened out... Now unsure where to start.

Post by Bfwolf » Tue Oct 03, 2017 9:23 pm

1) Ironically, I'd say you're lucky that your emotional decision didn't work out. It's like putting $100 on the roulette table. If you win, you think you can beat a loser's game and the next thing you know you're betting $1,000. Better to take your $100 loss and quit playing roulette entirely. In this case, you need to quit playing market timer.

2) I agree with all the recommendations that you should be in nothing but balanced funds that automatically rebalance. A 3 fund portfolio is just begging for you to get tactical and start overweighting one thing vs the other and ignoring your AA. You need set it and forget it stuff where automatic contributions go in and you don't even THINK about your investments.

3) I am skeptical of the advice recommending 50/50 allocations for you. You couldn't handle a 60/40 AA during a bull market....do you really think you can handle just 10% less stocks when the market eventually goes bear? What if you bought back in tomorrow and the following year the market drops 50%? I think it's worth contemplating how extreme your reaction was. You didn't scale back from 60/40 to 50/50 or 40/60. You dropped almost all your stocks. You incurred capital gains to do so. This is a violent emotional reaction, and again it was during a BULL market. What was your plan for getting back in? Obviously you didn't really have a good one. I'm not trying to make you feel bad...I'm just trying to point out that if you made such a horrible decision when thing were going well, can you really trust yourself at a slightly lower stock allocation when the crap really hits the fan? Maybe you are confident you learned your lesson. But I'd be inclined to try something more like 30/70 if I were you. No, it's not really an effective allocation for building long-term wealth, and yes you're going to have to save like crazy to overcome that, but it's better than chickening out and dumping stocks during bear markets.

mhalley
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Re: Chickened out... Now unsure where to start.

Post by mhalley » Tue Oct 03, 2017 9:50 pm

When worried about world events, remember that we have weathered the Great Depression, two world wars, the Cold War, Korea and Vietnam, 9/11, the war on terror, the real estate bust, the dot com bust, etc, etc. aside from ww3, I don’t know how things could get much worse.

johnfromtexas
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Re: Chickened out... Now unsure where to start.

Post by johnfromtexas » Wed Oct 04, 2017 10:10 am

ruralavalon wrote:
Tue Oct 03, 2017 6:32 pm
What investment firms are the IRAs with?

Are there any balanced funds (investing in both stocks and bonds) offered in your 401k, in addition to the target retirement funds? Please give fund names, tickers and expense ratios.

Since you had a 60/40 asset allocation when you cashed out, perhaps a more conservative allocation might be suitable. Perhaps 50/50.

Also using balanced funds in all accounts might suit you, investors using balanced funds historically have been less susceptible to selling off their holdings during scary times.

As others have already suggested Vanguard Tax-Managed Balanced Fund (VTMFX) ER 0.09% might be good for the taxable account.

Thanks to everyone who took the time to provide constructive and valuable feedback. Looking forward, I think I have a clear understanding of what I did wrong and have very much internalized a lot of the feedback I received here. Also, have added several books to my reading list. I'm also having someone follow me around for a few days ringing a bell, repeatedly chanting "Shame!"

From randomizer, who I think nicely summarized the majority of the comments: "I'd put everything in target date retirement funds, put my login credentials in an envelope with a wax seal inside a plastic bag inside a bowl of frozen water in the freezer, cancel my newspaper subscriptions, and find a hobby that does not involve looking at what the market is doing." This seems like a very good approach for me.

For ruralavalon, in my 401k it appears the only balanced funds are the target funds.

Based on the feedback here, I think what would be a good idea is a DCA reinvestment approach over the next year or so as many have pointed out. With targeted date funds in tax advantaged accounts and a tax-managed balanced fund (i.e. VTMFX) in taxable accounts.

Last few things, then I'll stop bothering everyone.

1) VTMFX seems to be very much what I'm looking for in my taxable account. Being a Fidelity guy, VTMFX is not easily tradeable without fees. I checked out the tax-managed fund comparison and did some preliminary research, but it appears Fidelity closed its equivalent of this fund awhile back. Some have suggested a combo of FTABX and FSTMX would be close, but wanted to see what the opinions were. I can open a Vanguard brokerage account easily, but wanted to avoid this if possible.

2) For tax advantaged accounts, the Fidelity Freedom 2025 seems reasonable, but isn't quite the 50/50 I'm looking for. Or alternatively making my own blend via FSTVX, FTIPX and FSITX. However - I will say there were excellent points made for the target funds being attractive to those of us with weak stomachs.

Thanks again for all of the valuable feedback. I am really blown away by the thought put into a lot of the responses. Only wish I had found this community earlier this summer.

deltaneutral83
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Re: Chickened out... Now unsure where to start.

Post by deltaneutral83 » Wed Oct 04, 2017 1:46 pm

johnfromtexas wrote:
Wed Oct 04, 2017 10:10 am


Thanks again for all of the valuable feedback. I am really blown away by the thought put into a lot of the responses. Only wish I had found this community earlier this summer.
Don't know if it will ease your mind but timing the market at an all time high is better than a free fall like 2008. If this is the biggest mistake of your investing career at age 38, you will have a high probability of success in the coming decades. As others mentioned, diagnose the behavior that led you to do this to prevent it going forward. And spend some time on it. Jumping out and jumping back in and missing out on 5% is not the end of the world as long as the behavior is changed going forward.

gowest
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Re: Chickened out... Now unsure where to start.

Post by gowest » Wed Oct 04, 2017 2:21 pm

johnfromtexas wrote:
Wed Oct 04, 2017 10:10 am
From randomizer, who I think nicely summarized the majority of the comments: "I'd put everything in target date retirement funds, put my login credentials in an envelope with a wax seal inside a plastic bag inside a bowl of frozen water in the freezer, cancel my newspaper subscriptions, and find a hobby that does not involve looking at what the market is doing." This seems like a very good approach for me.
I think this is a very nice approach actually. Some people like steps to follow. If you're one of those, try this:

(1) Pick an asset allocation that you feel comfortable with, such as the 50% stocks (mostly U.S., but some in international) and 50% bonds that several have suggested. Your comfort could come from multiple sources, including: (i) your own comfort, and (ii) the comfort that you asked a bunch of people on this good forum that only want the best for you.

(2) Pick the low-cost, highly diversified index funds that meet this asset allocation. The three you mentioned sound good. (I use a 3-fund portfolio as well, and love it.) A target date retirement fund can also be an excellent choice.

(3) Make regular, periodic, consistent contributions to satisfy that allocation.

(4) Look at it once per year to make sure your asset allocation is still 50/50 (or whatever you choose). If it is not, then reallocate (in tax-advantaged accounts) to get you back to your asset allocation. If you chose a target date retirement fund, you don't even have to do this step, because it's done for you.

(5) Keep doing (3) and (4).

(6) Keep doing (5).

(7) Sleep well knowing you've done a solid job.

By the way, speaking from experience, your market timing "mistake" may turn out to be the best thing that ever happened to you (financially), because it (hopefully) will set you on a solid course going forward. One of the best things that happened to me was when I was in college and came to have about $10,000, which I earmarked for a house down payment. I didn't understand investing, so I hired a financial advisor who promptly lost a lot of that money for me. I was furious at the time, but that "mistake" led me to learn about investing, eventually leading me to places like this forum, setting me on a solid path for the future. I hope the same for you.

Good luck.

best2u
Posts: 78
Joined: Tue Jul 28, 2015 12:51 pm

Re: Chickened out... Now unsure where to start.

Post by best2u » Wed Oct 04, 2017 3:15 pm

Johnfromtexas, I will only add that for some of us the "nervous Nelly" feeling never goes away. It is part of our makeup. I blame mine on my upbringing in that I grew up under the guidance of parents that experienced the depression in early childhood. They knew firsthand how tough things could get, and felt it was their duty to forewarn me and my siblings. Something good could happen but it always came with the parental warning not to get too comfortable, as things could be a whole lot worse. My father earned his livelihood from farming. That only added to the whole uncertainty thing. Weather, prices, interest rates, government edicts....just a whole gamut of uncertainty. When one adds that it is human nature to feel a loss more acutely than a gain, I think I know why you could have been skeptical of this market.

I am 62 years experienced now. What I have found which aids me is the following:
1 Asset Allocation. I have an asset allocation that I know no matter what happens, I will not lose everything in a stock market decline.
2 I subscribe to a newsletter written by a positive individual. It forces me to look at things as they are and why the market may improve more.
3 I have a rebalance strategy that looks to profit from a decline in the market. So instead of a market decline being negative I look to it as a tool to improve my future.
4 Some day the market will decline. It is a given. I don't know when it will, and I have never met anyone that can tell you when that will be. It's the nature of the beast. What you can do is have a plan to deal with that event when it happens.

Best of luck

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Jimbo9911
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Location: Mississippi

Re: Chickened out... Now unsure where to start.

Post by Jimbo9911 » Wed Oct 04, 2017 4:18 pm

randomizer wrote:
Tue Oct 03, 2017 8:09 pm
I'd put everything in target date retirement funds, put my login credentials in an envelope with a wax seal inside a plastic bag inside a bowl of frozen water in the freezer, cancel my newspaper subscriptions, and find a hobby that does not involve looking at what the market is doing.
+1
Jim

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randomizer
Posts: 560
Joined: Sun Jul 06, 2014 3:46 pm

Re: Chickened out... Now unsure where to start.

Post by randomizer » Wed Oct 04, 2017 4:48 pm

johnfromtexas wrote:
Wed Oct 04, 2017 10:10 am
From randomizer, who I think nicely summarized the majority of the comments: "I'd put everything in target date retirement funds, put my login credentials in an envelope with a wax seal inside a plastic bag inside a bowl of frozen water in the freezer, cancel my newspaper subscriptions, and find a hobby that does not involve looking at what the market is doing." This seems like a very good approach for me.
Disclaimer: I do not wish to be held liable when the power goes out, the ice melts, the plastic bag leaks, the envelope falls to pieces, and your sole copy of your login credentials is destroyed, leading to a total inability to access your funds. 😂

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