Thinking about selling stocks near all time highs

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mathguy3021
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Thinking about selling stocks near all time highs

Post by mathguy3021 » Thu Apr 18, 2019 10:48 pm

I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen. I know it looks like timing the market, but sometimes you need to be realistic. When has the market continued this pace for 6 months or a year. I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have. Since many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years, is it not a good time to rebalance and reduce the stock portion of my asset allocation? I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.

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Re: Thinking about selling stocks near all time highs

Post by soundwave » Thu Apr 18, 2019 10:54 pm

I've done the same thing myself recently albeit in a few steps. This mid 60's Boglehead decided that continuing on the path of an 80/20 AA was beginning (ha!) to look like foolishness. Took some nice gains & am very happy to go forward with my 65/35 AA 8-)
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Re: Thinking about selling stocks near all time highs

Post by Thegame14 » Thu Apr 18, 2019 11:00 pm

If you are ahead of the game, it never hurts to take some winnings off the table....

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Re: Thinking about selling stocks near all time highs

Post by targetconfusion » Thu Apr 18, 2019 11:06 pm

mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen.
mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
When has the market continued this pace for 6 months or a year.
mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years
mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.
Without criticism of your decision, you basically alighted on every market-timing rationalization under the sun before declaring you were not, in fact, market timing. If you weren't, wouldn't the allocation switch have happened based on the calendar and agnostic of any trends?

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Dialectical Investor
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Re: Thinking about selling stocks near all time highs

Post by Dialectical Investor » Thu Apr 18, 2019 11:19 pm

I read your post a few times. Doesn't seem like market timing to me. People have a short "market timing fuse" around here. You're reacting to something that already has happened. If you're okay with the possible outcomes (e.g., market goes up another 30%), it doesn't really matter what anyone else calls it.

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Re: Thinking about selling stocks near all time highs

Post by stocknoob4111 » Thu Apr 18, 2019 11:23 pm

Dialectical Investor wrote:
Thu Apr 18, 2019 11:19 pm
I read your post a few times. Doesn't seem like market timing to me. People have a short "market timing fuse" around here. You're reacting to something that already has happened.
It's market timing if one plans their exit out of and subsequent entry into the market purely based on valuations. Reading the above fits this definition I think. Just my opinion of course ;)

OP, do you intend to rebalance to bonds?

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Dialectical Investor
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Re: Thinking about selling stocks near all time highs

Post by Dialectical Investor » Thu Apr 18, 2019 11:32 pm

stocknoob4111 wrote:
Thu Apr 18, 2019 11:23 pm
Dialectical Investor wrote:
Thu Apr 18, 2019 11:19 pm
I read your post a few times. Doesn't seem like market timing to me. People have a short "market timing fuse" around here. You're reacting to something that already has happened.
It's market timing if one plans their exit out of and subsequent entry into the market purely based on valuations. Reading the above fits this definition I think. Just my opinion of course ;)

OP, do you intend to rebalance to bonds?
I would agree, but OP does not indicate he is acting purely on valuations, and more importantly, he says nothing about a subsequent entry.

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Re: Thinking about selling stocks near all time highs

Post by Fallible » Thu Apr 18, 2019 11:42 pm

mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen. I know it looks like timing the market, but sometimes you need to be realistic. When has the market continued this pace for 6 months or a year. I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have. Since many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years, is it not a good time to rebalance and reduce the stock portion of my asset allocation? I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.
As you say, you are reducing risk to better reflect your changing risk tolerance, a smart and justifiable move.
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

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unclescrooge
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Re: Thinking about selling stocks near all time highs

Post by unclescrooge » Fri Apr 19, 2019 12:22 am

Why wouldn't you just rebalance, just like you should have done in December?

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Re: Thinking about selling stocks near all time highs

Post by lynneny » Fri Apr 19, 2019 12:31 am

I planned to get my asset allocation down to 50/50 at retirement, but then I got laid off a year ago at 61, a couple years before I would have chosen to retire. My asset allocation was still about 58/42. I don't think it's market timing for me to sell highly appreciated stock, and take advantage of several years of very low income before my small pension starts to do tax gain harvesting. That way I can avoid a chunk of capital gains tax while getting closer to my planned 50/50 allocation.

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Re: Thinking about selling stocks near all time highs

Post by The Wizard » Fri Apr 19, 2019 12:42 am

We haven't recovered to new all-time high yet on any of the three major US indices...
Attempted new signature...

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Re: Thinking about selling stocks near all time highs

Post by baconavocado » Fri Apr 19, 2019 12:44 am

I don't get it. The S&P 500 is up about 13 or 14% so far this year. It was down over 4% for all of 2018. None of this sounds extraordinary to me. I checked my AA about a week ago and it was within 5% of my targets so I'm not even going to bother rebalancing even though I was scheduled to do it in the first quarter.

Ho-hum.

SweetAeromotion
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Re: Thinking about selling stocks near all time highs

Post by SweetAeromotion » Fri Apr 19, 2019 1:24 am

Would OP's mindset be different if we started our new years in late September and markets were ~-1% or so YTD?

Another way to ask this: Why now, but not when we were slightly higher in latter 09-2018?

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Re: Thinking about selling stocks near all time highs

Post by Thesaints » Fri Apr 19, 2019 1:27 am

Thegame14 wrote:
Thu Apr 18, 2019 11:00 pm
If you are ahead of the game, it never hurts to take some winnings off the table....
That's easy. The hard part is getting back in.

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Re: Thinking about selling stocks near all time highs

Post by willthrill81 » Fri Apr 19, 2019 1:49 am

mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen. I know it looks like timing the market, but sometimes you need to be realistic. When has the market continued this pace for 6 months or a year. I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have. Since many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years, is it not a good time to rebalance and reduce the stock portion of my asset allocation? I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.
If you're making temporary changes to your AA on the basis of market conditions, that's straight up market timing.

If you're making lasting changes to your AA on the basis of personal factors (e.g. declining risk tolerance, meeting your goals), that's not market timing.

You're definitely referring to market conditions, but you're also referring to personal factors, so it's hard to disentangle your real motives.
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Re: Thinking about selling stocks near all time highs

Post by mega317 » Fri Apr 19, 2019 2:34 am

I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have.
a strategy of reducing risk as you age and accumulate wealth
.
This is totally reasonable.



So why did you say all this stuff that has nothing to do with your age, risk tolerance, or wealth?
one of the strongest gains in the stock market since christmas 2018
cannot continue and has never historically continued at this rate, so a correction is inevitable
We're on pace
When has the market continued this pace for 6 months or a year
Since many economists are forecasting
Vanguard is forecasting

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Re: Thinking about selling stocks near all time highs

Post by heyyou » Fri Apr 19, 2019 2:44 am

Pick a stock/bond allocation that suits you, and stay with it through growing markets (you have to rebalance even when you think stocks are going higher) and through falling markets (buying more stock index shares just after they have lost value). Neither is comfortable, but that discomfort is exactly why long term stock index investors are rewarded with higher returns than from other, safer investments.

If you choose to invest on your feelings about the future levels of the market, the worst case is to be right several times in a row, then to be wrong, very wrong. I've been there, but now it is someone else's turn to learn that lesson.

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Re: Thinking about selling stocks near all time highs

Post by HEDGEFUNDIE » Fri Apr 19, 2019 3:26 am

Fallible wrote:
Thu Apr 18, 2019 11:42 pm
mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen. I know it looks like timing the market, but sometimes you need to be realistic. When has the market continued this pace for 6 months or a year. I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have. Since many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years, is it not a good time to rebalance and reduce the stock portion of my asset allocation? I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.
As you say, you are reducing risk to better reflect your changing risk tolerance, a smart and justifiable move.
Will the OP’s “risk tolerance” change again after another few years of this bull market?

snowox
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Re: Thinking about selling stocks near all time highs

Post by snowox » Fri Apr 19, 2019 4:57 am

I'm retired and usually take a monthly withdrawal BUT with the market run up I have been taking it out more now and if it drops will withdraw less later. If you need the money or want to build up a little dry powder for a sell off why not. Just have a well thought out plan and stick with it

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Re: Thinking about selling stocks near all time highs

Post by inbox788 » Fri Apr 19, 2019 5:07 am

Great idea, but we’ve passed dozens of all time highs already, so why didn’t you already sell out yet? Why is this one the one that’s going to reverse significantly? And when do you get back in? You might be right, but more than likely there will be a dozen more before a bigger dip occurs, and it could go either way from there.

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Re: Thinking about selling stocks near all time highs

Post by livesoft » Fri Apr 19, 2019 5:45 am

mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable.
The first sentence mentions December 2018 and the second sentence mentions a correction.

The most amusing thing to me is that there was a correction in December 2018. The "strongest gains" mean almost nothing since they just happened to happen after about a 20% drop into Christmas.

I agree that the market is very unlikely to continue at this slope, but what about a different slope or even fluctuations?

There was a thread asking about intermediate Treasury fund. Here is a Morningstar.com growth of chart comparing VFIUX (interm-T) and VTSAX (US Total Stock) over the past 8 months:
Image

Those of us who rebalanced in December 2018 may have already rebalanced again in 2019.

If the thread title was "Thinking about rebalancing" then the responses would most likely have encouraged you to do so ... but probably only if your asset allocation was now out of whack because of buying stock funds in late December.
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Re: Thinking about selling stocks near all time highs

Post by Fallible » Fri Apr 19, 2019 6:47 am

HEDGEFUNDIE wrote:
Fri Apr 19, 2019 3:26 am
Fallible wrote:
Thu Apr 18, 2019 11:42 pm
mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen. I know it looks like timing the market, but sometimes you need to be realistic. When has the market continued this pace for 6 months or a year. I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have. Since many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years, is it not a good time to rebalance and reduce the stock portion of my asset allocation? I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.
As you say, you are reducing risk to better reflect your changing risk tolerance, a smart and justifiable move.
Will the OP’s “risk tolerance” change again after another few years of this bull market?
Based on what I have read (including Rick Ferri, Larry Swedroe, Bill Bernstein, Ben Carlson, Jason Zweig), personal risk tolerance can change for all of us and often and for many reasons. It's less about what the market has done, is doing, or might do, than how we react to it, how we perceive the risks, how well we know our own situations so that we can determine how much of that risk we can and want to handle.

To add: If the OP were market timing, he would not be thinking about lowering risk to match his changing tolerance, but increasing risk by investing based on an unknowable - what he thinks the market will do. He has clearly said his concern is better matching tolerance.
Last edited by Fallible on Fri Apr 19, 2019 7:51 am, edited 1 time in total.
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Re: Thinking about selling stocks near all time highs

Post by Call_Me_Op » Fri Apr 19, 2019 6:50 am

OP,

What does your IPS say you should do?
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TaxingAccount
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Re: Thinking about selling stocks near all time highs

Post by TaxingAccount » Fri Apr 19, 2019 7:12 am

My IPS says don't invest a lump sum when the market is up 14% because when it falls back to zero everyone will be saying we're flat for the year while you're in a bear market/financial crisis.

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Re: Thinking about selling stocks near all time highs

Post by TheTimeLord » Fri Apr 19, 2019 7:26 am

mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable.
I guess it is all a matter of the timeframe you choose but here is a different way of looking at the same data. The market is flat/slightly down since late September 2018 and in the 16 months since the beginning of 2018 the market is up just under 8.7%.
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Re: Thinking about selling stocks near all time highs

Post by markcoop » Fri Apr 19, 2019 7:42 am

If the change is permanent because of your age and changing risk tolerance, I can't think of a better time to make the change then after a decade of gains and very close to the all-time highs.

Otherwise, I have two feelings. If someone one wants to pull back a little because of a decade of gains and very close to the all-time highs, say change their allocation from 60% to 50%, I personally don't have such an issue with it. You have to be ok with the market growing from here (I think still a win since you are still heavily in stocks and the market will bring you back to that 60%) or the market going down (you can then rebalance back). Of course this is market timing, but I view it as a conservative version of it. On the other hand, other forms of going in and out of the market, with greater percentages of money or with increasing percentages greater than your target (say going from 60% to 70% in a down market), I personally frown upon and feel are much riskier.
Last edited by markcoop on Fri Apr 19, 2019 9:26 am, edited 1 time in total.
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Re: Thinking about selling stocks near all time highs

Post by CyclingDuo » Fri Apr 19, 2019 7:44 am

mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable. We're on pace for nearly a 60% return for the year. I doubt that will happen. I know it looks like timing the market, but sometimes you need to be realistic. When has the market continued this pace for 6 months or a year. I need to lighten up on stocks since I am getting older and I don't have the risk tolerance that I used to have. Since many economists are forecasting a recession within the next couple of years, and even Vanguard is forecasting lower returns over the next 10 years, is it not a good time to rebalance and reduce the stock portion of my asset allocation? I don't think that this is timing the market. It's following a strategy of reducing risk as you age and accumulate wealth.
Follow your IPS and if your AA percentages have you out of your desired bands enough to warrant a rebalance, so be it.

Notice the "V" shape at the right side of the Yardeni Research, Inc. chart (the market move you are speaking of) from the correction we had in Q4 last year and the recovery in Q1 of 2019...

Image
https://www.yardeni.com/pub/sp500corrbear.pdf

The market has and will spend time consolidating after a "V" shaped recovery such as Q4 2018 and Q1 2019. This is because many who bought near the highs before the Q4 drop are now back to their purchase price and due to the fear of what they went through, now want out. Also, many who bought at or near the lows of the "V" will want to take profits from their shorter term trade. So although you think we are on pace for 60% return for the year - there is a lot of consolidation going on and that will most likely continue as we sideways for a while and correct the previously mentioned "stuck" investors/traders. So expect to hear the word volatility for a few weeks/months as a result.

Moving beyond that and smaller corrections, it's always good to put the economic cycle, bear markets, recessions, recoveries into context regarding new highs.

The 11 major drops since 1950 (the one in Q4 last year was not a major drop)...

Image
https://fourpillarfreedom.com/heres-how ... rom-drops/

Time to recover to previous all time highs since 1950...

Image
https://fourpillarfreedom.com/heres-how ... rom-drops/

Data for the S&P 500 from 1950 - 2017....

Since 1950 to 2017, roughly 1 out of every 15 days the market was open, it has closed at a new high level (roughly 6.7% of all trading days).

The S&P 500 has spent roughly 32% of its life (up to 2017) within 5% of its all time high and 24% of its life within 2% of its (up to 2017) all time high. That’s often!

https://tubofcash.com/how-often-is-the- ... ime-highs/

In other words, you hear the phrase and fear of "all time highs" enough to be conscious of it.

Same type of data for the Dow presented by Ben Carlson, CFA...

https://awealthofcommonsense.com/2017/0 ... ime-highs/

Image
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Re: Thinking about selling stocks near all time highs

Post by KlangFool » Fri Apr 19, 2019 7:51 am

OP,

I am totally confused. So, please help me out here.

A) If you have a fixed AA and a rebalancing rule, you would have sold stock and buy fixed income when it triggered your rebalancing band.

B) If you have a fixed AA, you would be buying the bond while the stock market is going up.

C) If you have a glide path AA adjustment strategy, you would adjust your AA as your portfolio gets bigger.

So, why do you need to adjust your AA because of the stock market near all-time high? What do you miss in term of (A) to (C)? What are you IPS?

KlangFool

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Re: Thinking about selling stocks near all time highs

Post by -ryan- » Fri Apr 19, 2019 7:57 am

The market reaches all-time highs routinely. In fact, it reaches a new all-time high more years than not. That's why we invest in the stock market, because we anticipate that that trend will continue regardless of all the noise.

Your IPS and AA is supposed to protect you from acting on the thoughts you are having right now. You need to have the courage to stick to your plan, or else it is worth the money to pay someone else to do it for you. Even though that's an unpopular opinion 'round these parts, every time I see one of these threads about changing your plan to accomodate what the market is doing, I tell myself 'here's a person who should be paying someone else to manage their money.'

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Re: Thinking about selling stocks near all time highs

Post by TNWoods » Fri Apr 19, 2019 8:33 am

All current "all-time-highs" have been preceded by previous "all-time-highs", and there's no reason to think they won't be followed by future "all-time-highs".

You seem to be betting(!) that there won't be any more "all-time-highs" for a while.

Long enough for you to jump off the train, run alongside it faster than it is going, then hop back onto it closer to the engine than you were before, even though you know that at some point the train is going to speed up faster than you can possibly run, leaving you no choice but to hop back on closer to the caboose than you were before.

The back of the train is crowded with people who thought they could run faster than the train and hop back on when they thought it was going to speed up, only to be surprised at the train's acceleration.

If you do decide to do this, please let us know what you sold and the price you sold at, so we can add the specific data points to the cumulative Boglehead knowledge base for future reference.

TN Woods

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Re: Thinking about selling stocks near all time highs

Post by livesoft » Fri Apr 19, 2019 8:34 am

^I love that train analogy. Thanks for posting it!
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Re: Thinking about selling stocks near all time highs

Post by aristotelian » Fri Apr 19, 2019 8:39 am

If you are trying to time the market with the thought of buying back in after some future crash, I would repeat the mantra that nobody knows the future and you are better off with a set allocation through thick and thin.

If you have made enough gains that you have hit a threshold where your risk tolerance has changed, then certainly now is not a bad time to move to a more conservative allocation.

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Re: Thinking about selling stocks near all time highs

Post by barnaclebob » Fri Apr 19, 2019 8:43 am

Your fundamental flaw is cherry picking yours starting pint and then extrapolating. The market doesnt care about Jan. 1. What if you started at Dec 15?

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Re: Thinking about selling stocks near all time highs

Post by UpperNwGuy » Fri Apr 19, 2019 9:44 am

livesoft wrote:
Fri Apr 19, 2019 8:34 am
^I love that train analogy. Thanks for posting it!
+2

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Re: Thinking about selling stocks near all time highs

Post by sailaway » Fri Apr 19, 2019 9:50 am

Between this and the individual stocks thread, I did go in and sell any individual stocks that were down purchase to date. However, once the sales go through, I will be putting the funds into an ETF. I just figured that if I had long term losers in the current market, now was as good a time as any for tax loss harvesting.

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Re: Thinking about selling stocks near all time highs

Post by quantAndHold » Fri Apr 19, 2019 9:56 am

The market closes at an all time high about 7% of the time, or 1 in every 13 days.

Historically, if you look at where the market is 1 year after those all time highs, about 70% of the time, it’s gone up further.

If you look at 3 and 5 years after, it’s gone up roughly 70% of the time then, too.

In other words, your odds are pretty good if you just stay the course.

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Re: Thinking about selling stocks near all time highs

Post by Seasonal » Fri Apr 19, 2019 10:08 am

It can make sense to rebalance when your allocation gets out of whack. This can happen if stocks rise much more than bonds (although Bill Sharpe argues changes which just mirror the market shouldn't be rebalanced).

It can make sense to change your allocation if your net worth rises or you get older, but you should have a plan for doing this rather than just make things up as you go along.

It is usually a bad idea to react emotionally to market movements, or to trade because you think you can predict future movements, although selling at a high is probably better than selling into a falling market.

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Re: Thinking about selling stocks near all time highs

Post by Darth Xanadu » Fri Apr 19, 2019 10:11 am

Seasonal wrote:
Fri Apr 19, 2019 10:08 am

It can make sense to change your allocation if your net worth rises or you get older, but you should have a plan for doing this rather than just make things up as you go along.
+1

OP if you don't have an IPS you should strongly consider creating one. I wrote one last year after reading this forum. My rebalance metrics have not triggered, and my next AA change is in 2.5 years, so I do nothing for now.
"A courageous teacher, failure is."

jcar
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Re: Thinking about selling stocks near all time highs

Post by jcar » Fri Apr 19, 2019 10:16 am

If it helps you sleep better I say go for it. I would not be concerned about cap gains, just allow the money to cover them. I've done the same in lesser quantities in past with no regrets. I'm mid 60s and right at 50-50 allocation now. Enjoy your gains and spend them on something, don't just sock it away.

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mathguy3021
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Re: Thinking about selling stocks near all time highs

Post by mathguy3021 » Fri Apr 19, 2019 11:14 am

livesoft wrote:
Fri Apr 19, 2019 5:45 am
mathguy3021 wrote:
Thu Apr 18, 2019 10:48 pm
I am thinking about selling some stock ETFs after one of the strongest gains in the stock market since christmas 2018. I know that this slope that we're on cannot continue and has never historically continued at this rate, so a correction is inevitable.
The first sentence mentions December 2018 and the second sentence mentions a correction.

The most amusing thing to me is that there was a correction in December 2018. The "strongest gains" mean almost nothing since they just happened to happen after about a 20% drop into Christmas.

I agree that the market is very unlikely to continue at this slope, but what about a different slope or even fluctuations?

There was a thread asking about intermediate Treasury fund. Here is a Morningstar.com growth of chart comparing VFIUX (interm-T) and VTSAX (US Total Stock) over the past 8 months:
Image

Those of us who rebalanced in December 2018 may have already rebalanced again in 2019.

If the thread title was "Thinking about rebalancing" then the responses would most likely have encouraged you to do so ... but probably only if your asset allocation was now out of whack because of buying stock funds in late December.
I need to clarify a few things after reading all of these responses. I did sell some stocks (about 5%) going from a near 100% stock allocation to a 95/5 asset allocation in late August of last year to reduce risk just as I'm thinking about doing now. Then in December of 2018 when I saw the market corrected 20% I bought some stocks to rebalance back to 95/5. Now in 2019 I see a strong gain in a short period of time so I am considering rebalancing again, but this time I may reduce risk to a 90/10 asset allocation as I've aged and accumulated wealth. I totally expect the markets to be higher long term, and I am ok with missed gains since I've made a fortune over the last 10 plus years investing in stocks. I simply don't have the risk tolerance today as I did 5 years ago. A 50% crash today would be far more difficult to recover from than a 50% crash 5 years ago.

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mathguy3021
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Re: Thinking about selling stocks near all time highs

Post by mathguy3021 » Fri Apr 19, 2019 11:23 am

SweetAeromotion wrote:
Fri Apr 19, 2019 1:24 am
Would OP's mindset be different if we started our new years in late September and markets were ~-1% or so YTD?

Another way to ask this: Why now, but not when we were slightly higher in latter 09-2018?
No my mind set would not be different. It isn't about how well the market has done on a yearly basis. If the year ended in september of 2018 and we have a negative return for 2019, I would still consider reducing risk, just as I've done in late August of last year. My rebalancing rules are a little different than just looking at asset allocation. My rules also take into account market conditions. If the stock market goes straight up in a short period of time, I am more likely to rebalance. If markets go straight down in a short period of time I am more likely to rebalance.

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Re: Thinking about selling stocks near all time highs

Post by KyleAAA » Fri Apr 19, 2019 11:26 am

Stocks are usually at or near all time highs. If you sold every time that happened you'd never be in the market and never make any money. If your risk tolerance has decreased and you are uncomfortable with your current asset allocation, you should adjust, but that has nothing to do with the current market level.

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mathguy3021
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Re: Thinking about selling stocks near all time highs

Post by mathguy3021 » Fri Apr 19, 2019 11:33 am

KyleAAA wrote:
Fri Apr 19, 2019 11:26 am
Stocks are usually at or near all time highs. If you sold every time that happened you'd never be in the market and never make any money. If your risk tolerance has decreased and you are uncomfortable with your current asset allocation, you should adjust, but that has nothing to do with the current market level.
I think I misled a lot of readers with my title, "thinking about selling near all time highs". I am not selling because the market is near all time highs. I am selling because my asset allocation has changed due to a large move up in stocks over a short period of time. I rebalance when there are strong moves in stocks going up or stocks going down. I want to clarify to all readers. I AM NOT THINKING ABOUT SELLING BECAUSE STOCKS ARE NEAR HIGHS. I AM THINKING ABOUT SELLING DUE TO REBALANCING RULES AND A CHANGE IN RISK TOLERANCE AFTER MANY YEARS OF INVESTING. STOCKS IN A BULL MARKET ARE NEAR ALL TIME HIGHS A LARGE PERCENTAGE OF THE TIME, BUT I'VE BEEN 100% STOCK INVESTED FOR MOST OF THE BULL MARKET UNTIL I REDUCED RISK SLIGHTLY LAST YEAR. I HAVEN'T SOLD STOCKS EVERY TIME IT GOT NEAR ALL TIME HIGHS, BUT I AM NOW CONSIDERING REDUCING RISK AND HAVE STARTED TO FOLLOW REBALANCING RULES THAT HAVE NOTHING TO DO WITH WHETHER MARKETS ARE NEAR HIGHS.
Last edited by mathguy3021 on Fri Apr 19, 2019 11:41 am, edited 2 times in total.

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Darth Xanadu
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Re: Thinking about selling stocks near all time highs

Post by Darth Xanadu » Fri Apr 19, 2019 11:36 am

mathguy3021 wrote:
Fri Apr 19, 2019 11:33 am
KyleAAA wrote:
Fri Apr 19, 2019 11:26 am
Stocks are usually at or near all time highs. If you sold every time that happened you'd never be in the market and never make any money. If your risk tolerance has decreased and you are uncomfortable with your current asset allocation, you should adjust, but that has nothing to do with the current market level.
I think I misled a lot of readers with my title, "thinking about selling near all time highs". I am not selling because the market is near all time highs. I am selling because my asset allocation has changed due to a large move up in stocks over a short period of time. I rebalance when there are strong moves in stocks going up or stocks going down. I want to clarify to all readers. I AM NOT THINKING ABOUT SELLING BECAUSE STOCKS ARE NEAR HIGHS. I AM THINKING ABOUT SELLING DUE TO REBALANCING RULES AND A CHANGE IN RISK TOLERANCE AFTER MANY YEARS OF INVESTING.
Nothing wrong with that, but as I mentioned previously, it might be beneficial to write down your rebalancing rules, and also test how those rules would have performed in various scenarios/time periods.
"A courageous teacher, failure is."

Yooper16
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Re: Thinking about selling stocks near all time highs

Post by Yooper16 » Fri Apr 19, 2019 11:59 am

I have never understood the "ire" that this action seems to raise.

Been doing a similar thing, as we are mid 60s and 3 years into the retiree mode. Part of the reason for doing so, is that we now have three years of spending, reflecting and overall just understanding our budget an income levels better.

Experience is knowledge. :sharebeer

mega317
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Re: Thinking about selling stocks near all time highs

Post by mega317 » Fri Apr 19, 2019 12:10 pm

What was the purpose of your post then? It wasn't just the title. You had a long preamble to ask if, in light of specific forecasts, you should change your allocation according to previously defined criteria?

pward
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Re: Thinking about selling stocks near all time highs

Post by pward » Fri Apr 19, 2019 12:17 pm

I mean, if you strategically and permanently move to a more conservative asset allocation (which it sounds like you were alluding to), when we are testing new highs 10 years into a bull market is probably about as good of a time as any to pull the trigger.

heyyou
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Re: Thinking about selling stocks near all time highs

Post by heyyou » Fri Apr 19, 2019 12:18 pm

So far, the first index shares that I bought in my new 401k, are doing well since I haven't sold them. They were purchased in 1981, hence my suggestion to buy then hold, through thick and thin.

OP, consider just buying more bonds with future savings until your portfolio has the stock/bond proportions that you desire. See how that avoids buying more stocks at their current high valuations, but protects from some of the missed opportunity if the stock market continues to rise.

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greg24
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Re: Thinking about selling stocks near all time highs

Post by greg24 » Fri Apr 19, 2019 12:19 pm

You can sell stocks now if you like. There isn't a law against market timing.

But you are market timing. You are considering selling stocks, at least in part, due to their valuations.

You don't need to justify it to the board. You don't even need to reply to this thread.

Do what you like.

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Toons
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Re: Thinking about selling stocks near all time highs

Post by Toons » Fri Apr 19, 2019 12:44 pm

I recall considering selling Mcdonalds,
When the Dow crossed 7k.
Decided to hold
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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