Stay the course or change portfolio

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winter5
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Joined: Fri Dec 01, 2017 5:23 pm

Stay the course or change portfolio

Post by winter5 » Mon Dec 24, 2018 3:28 pm

Greetings,

Until recently, my portfolio was 40% stock and 60% bond/CD. A few months ago, I sold all bonds, closed my CDs and bought more stocks. My portfolio is now 100% stock. Since I started investing recently, I do not have that much accumulation and my net worth is down about 20%. My non-taxable investment is all in Roth and now planning to sell what I have in a Roth and buy a bond. Do you think this is a good move to avoid bankruptcy? Any other suggestion?

Thank you!

Silk McCue
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Re: Stay the course or change portfolio

Post by Silk McCue » Mon Dec 24, 2018 3:41 pm

Why are you talking about bankruptcy? In September you shared this.
Thank you all for your advise! I am in the military and have a retirement plan after 20 yrs of service. Also contributing to the TSP (Roth) and IRA (also Roth) in addition to taxable investment. My marginal tax rate is currently 25%.

Thank you again!

Cheers

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BL
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Re: Stay the course or change portfolio

Post by BL » Mon Dec 24, 2018 3:48 pm

Don't keep switching. That is a sure way to lose.

Do some studying and decide on something you can stick with through better or worse. Maybe gradually keep buying whatever you decide is best until you reach the balance that you can live with.

https://www.etf.com/docs/IfYouCan.pdf

catfish48084
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Re: Stay the course or change portfolio

Post by catfish48084 » Mon Dec 24, 2018 3:52 pm

Buy low sell high. Does now feel like one of those times?
Last edited by catfish48084 on Mon Dec 24, 2018 4:25 pm, edited 2 times in total.

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GerryL
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Re: Stay the course or change portfolio

Post by GerryL » Mon Dec 24, 2018 3:55 pm

winter5 wrote:
Mon Dec 24, 2018 3:28 pm
Greetings,

Until recently, my portfolio was 40% stock and 60% bond/CD. A few months ago, I sold all bonds, closed my CDs and bought more stocks. My portfolio is now 100% stock. Since I started investing recently, I do not have that much accumulation and my net worth is down about 20%. My non-taxable investment is all in Roth and now planning to sell what I have in a Roth and buy a bond. Do you think this is a good move to avoid bankruptcy? Any other suggestion?

Thank you!
Selling all your stock holdings when you are 20% down is a guaranteed way to lose 20%. And since it is all in a Roth, you wouldn't even be able to tax loss harvest.
When are you planning to need the money in your Roth? Ten years or more out, right? Otherwise, why would you have put it into stock in the first place?

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patrick013
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Re: Stay the course or change portfolio

Post by patrick013 » Mon Dec 24, 2018 5:36 pm

winter5 wrote:
Mon Dec 24, 2018 3:28 pm
Greetings,

Until recently, my portfolio was 40% stock and 60% bond/CD. A few months ago, I sold all bonds, closed my CDs and bought more stocks. My portfolio is now 100% stock. Since I started investing recently, I do not have that much accumulation and my net worth is down about 20%. My non-taxable investment is all in Roth and now planning to sell what I have in a Roth and buy a bond. Do you think this is a good move to avoid bankruptcy? Any other suggestion?

Thank you!
Which is why 25% bonds is a good minimum, a cash reserve, an emergency fund.
Or even somewhat higher. I don't think the market correction will last for more than
1 year but it could, have cash for that.

"stay the course" "don't touch anything" "go to sleep" Remember ?


For the year after next year this doesn't seem too irrational, plus they get paid
more than we do to guess. Will stocks rise in 2019? Maybe, but it'll be stressful
age in bonds, buy-and-hold, 10 year business cycle

Topic Author
winter5
Posts: 12
Joined: Fri Dec 01, 2017 5:23 pm

Re: Stay the course or change portfolio

Post by winter5 » Mon Dec 24, 2018 7:08 pm

Thank you all for your advice!

My big mistake was I closed my CDs before the maturity date with a penalty and invested in the stock. My investment had no significant accumulated gain and losing about 20% of my initial capital (principal) is too much. Everyone has a different risk of tolerance, but if the market keeps going down, how much loss is reasonable to take action? Also, when you get to your upper limit of tolerance, what would you do? Is switching the stock in Roth to bond is really a bad move? I know tax loss harvesting doesn't apply here. Again, I may lose some when I switch, but this loose may be lower than what I will be losing if the market keeps going down and that is why I planned the switch, but it doesn't seem a good strategy.

Thanks again!

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patrick013
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Re: Stay the course or change portfolio

Post by patrick013 » Mon Dec 24, 2018 8:45 pm

Your retirement plan should cover your expenses.

I wouldn't do anything fancy or anything at all otherwise.

Every business cycle runs it's course. Revaluations, market prices
resets, index replacements, etc.. Higher interest actually halts some
overproduction and excess growth and puts money in consumers hands
while adjusting market prices to more sane levels.

Hopefully you can stay solvent thru the year without selling stocks especially
in the ROTH. Sell stocks elsewhere if needed for next year only I'd say.

Prices will go back up, just stay solvent in the interim.
Last edited by patrick013 on Mon Dec 24, 2018 8:49 pm, edited 1 time in total.
age in bonds, buy-and-hold, 10 year business cycle

sambb
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Re: Stay the course or change portfolio

Post by sambb » Mon Dec 24, 2018 8:48 pm

I would stay the course, we've already gone down

letsgobobby
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Re: Stay the course or change portfolio

Post by letsgobobby » Mon Dec 24, 2018 8:52 pm

Deleted
Last edited by letsgobobby on Mon Apr 22, 2019 2:31 am, edited 1 time in total.

delamer
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Re: Stay the course or change portfolio

Post by delamer » Mon Dec 24, 2018 8:58 pm

So in all three investment accounts you are now 100% stocks?

It sounds like you bought stocks when they were high in price and now are thnking of selling when they are a lot lower in price.

Selling now is a bad idea.

Stocks are an investment that give superior returns over the long run. But in the short run they can be very volatile.

If you react to short run changes, you‘ll buy and sell at the wrong time. If you can’t keep yourself from reacting, then you need to greatly limit (or totally eliminate) stocks in your portfolio.

Flyer24
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Re: Stay the course or change portfolio

Post by Flyer24 » Mon Dec 24, 2018 9:04 pm

You need to slow down and read some boglehead books. You need an investment plan with allocations based on your age and risk tolerance. Seems like you have no plan. It was crazy to go from 40% to 100% stocks.

Grt2bOutdoors
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Location: New York

Re: Stay the course or change portfolio

Post by Grt2bOutdoors » Mon Dec 24, 2018 9:16 pm

Before starting a journey it first helps to have a map. You should write an IPS (investment Policy Statement). Search the wiki for examples of one. Next, switching plans based on hunches, feelings and emotions is a good way to lose money. The enemy of a good plan is the thought of a better plan. If 20% declines bother you, then you should not hold more than 40% in stock- the market could go down by 50%, if it does .5 * 40% equity is a 20% decline in portfolio value. Chances of declining 50% is lower than a 20% decline which is common. Clearly, a 100% position was the wrong move for you.

As for bankruptcy, how?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

vested1
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Joined: Wed Jan 04, 2012 4:20 pm

Re: Stay the course or change portfolio

Post by vested1 » Tue Dec 25, 2018 9:56 am

letsgobobby wrote:
Mon Dec 24, 2018 8:52 pm
You may need to reread the Market Timing wiki. I think you read it backwards.


LOL, thanks for the much needed Christmas morning laugh! My only advice to the OP: Don't read your IPS in the mirror.

radiowave
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Re: Stay the course or change portfolio

Post by radiowave » Tue Dec 25, 2018 10:23 am

Grt2bOutdoors wrote:
Mon Dec 24, 2018 9:16 pm
Before starting a journey it first helps to have a map. You should write an IPS (investment Policy Statement). Search the wiki for examples of one. Next, switching plans based on hunches, feelings and emotions is a good way to lose money. The enemy of a good plan is the thought of a better plan. If 20% declines bother you, then you should not hold more than 40% in stock- the market could go down by 50%, if it does .5 * 40% equity is a 20% decline in portfolio value. Chances of declining 50% is lower than a 20% decline which is common. Clearly, a 100% position was the wrong move for you.

As for bankruptcy, how?
+1

Here is the link to the Wiki page for the IPS: https://www.bogleheads.org/wiki/Investm ... tatement

Get a good plan in place then follow it.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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