Sell now and start buying back in 3 months

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calisun
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Sell now and start buying back in 3 months

Post by calisun » Sat Feb 29, 2020 3:01 pm

Hello Wise ones,

We are novice investors in the high tax bracket about 33% (recently started investing since May 2019. We had $750K allocated towards investing and have an IDP to invest 70: 30 into the market.

We have been putting away $30K/month in Taxable (VTSAX and VFWAX) and about $22K/month (VTSAX and VSIAX) in our Roth accounts since then and are now about $490K invested in the market.

We have lost most of our gains since last year (YTD in the last 2 months about $60K) and since the last 9 months are about $9K in loss. My husband is realizing he does not have the risk appetite to lose all the gains in 6 days.

With the incubation period of CoronaVirus being 3-4 weeks, geometric progression of spread of the pandemic, along with huge impact on supply chain, manufacturing, his opinion is that we will see the market worsen further as this spreads across US, India and other economies.

He believes the government numbers coming out of China and the US are massively under reported. The fact that CA just announced 8400 suspected cases out of the blue on Thursday is a case in point. The fact that 50% of GDP in China is supported by SMB where 70% of these vendors have cash flow of less than 60 days will shrink 15-18% of China’s GDP is another evidence. The 10 year US market high, the current volatility in the market, along with over capacity, huge debt overhang is adding to his viewpoint.

He is the first to admit that he cannot see the future or can time the market but is basing his decision on a higher probability of economy deteriorating based on facts in front of us now.

He wants to preserve the capital that we had put in and do a Tax loss harvesting of the current loss. He wants to get back in cash by liquidating all the current positions and then start buying again after 90 days by dollar cost averaging with same schedule/portfolio as above (he is expecting the cases to peak in the next 90 days and hopefully the virus mutates by summer to reduce impact) as the market dips. He sees this as a buying opportunity of a lifetime, wants to lock on our base capital and invest later in the year.

Does that seem like a good idea? Please advise both the pros and cons of this approach?

Thanks in advance and appreciate your insight.

Hotshot035
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Re: Sell now and start buying back in 3 months

Post by Hotshot035 » Sat Feb 29, 2020 3:13 pm

I am sure most people are going to tell you to stay the course. I am beginning to think cash is king and to wait a quarter and put the money back in.

expat
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Re: Sell now and start buying back in 3 months

Post by expat » Sat Feb 29, 2020 3:14 pm

I am buying now.

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steadyeddy
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Re: Sell now and start buying back in 3 months

Post by steadyeddy » Sat Feb 29, 2020 3:16 pm

It sounds to me like your asset allocation is much too aggressive for your risk tolerance. It’s a shame you’ve only realized this after a market decline, but that is common due to the way fear and greed cloud judgment.

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David Jay
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Re: Sell now and start buying back in 3 months

Post by David Jay » Sat Feb 29, 2020 3:17 pm

calisun wrote:
Sat Feb 29, 2020 3:01 pm
The fact that CA just announced 8400 suspected cases out of the blue on Thursday is a case in point.
This is simply wrong. California is keeping an eye on 8400 individuals who have arrived from other countries, just in case they come down with the infection.

If the virus spreads there will be plenty of time for concern, but at this point the fear-mongering has gotten out of hand. So far, there are (3) likely community viral infections in the entire US. All the others (in the 60-some total) are people who have traveled in Asia or are spouses of those who have had the virus.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Dottie57
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Re: Sell now and start buying back in 3 months

Post by Dottie57 » Sat Feb 29, 2020 3:18 pm

No one knows what will happen. I will be working at staying the course. Maybe your asset allocation should be more conservative.

For the U.S., I believe The CDC is putting out the best info it can. Also watch your state and the states around you for preparedness.

Dottie57
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Re: Sell now and start buying back in 3 months

Post by Dottie57 » Sat Feb 29, 2020 3:22 pm

David Jay wrote:
Sat Feb 29, 2020 3:17 pm
calisun wrote:
Sat Feb 29, 2020 3:01 pm
The fact that CA just announced 8400 suspected cases out of the blue on Thursday is a case in point.
This is simply wrong. California is keeping an eye on 8400 individuals who have arrived from other countries, just in case they come down with the infection.

If the virus spreads there will be plenty of time for concern, but at this point the fear-mongering has gotten out of hand. So far, there are (3) likely community viral infections in the entire US. All the others (in the 60-some total) are people who have traveled in Asia or are spouses of those who have had the virus.
Thanks for a cool calm assessment. Too much angst around.

ChrisNYC19
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Re: Sell now and start buying back in 3 months

Post by ChrisNYC19 » Sat Feb 29, 2020 3:25 pm

A post like this makes me think we are near a bottom. Not to say it will be V shaped recovery, but I find it hard pressed to see another -10% from here.

What is the risk reward from selling now? You trigger cap gains and potentially save a couple of %, while you risk missing any recovery and Q1 dividends.

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Third Son
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Re: Sell now and start buying back in 3 months

Post by Third Son » Sat Feb 29, 2020 3:32 pm

Why are there so many of these threads in a forum based upon sound principles and historical data?
"A part of all you earn is yours to keep" | | -The Richest Man in Babylon

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DrPayItBack
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Re: Sell now and start buying back in 3 months

Post by DrPayItBack » Sat Feb 29, 2020 3:33 pm

Selling after a rapid decline is always the right answer.

TNWoods
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Re: Sell now and start buying back in 3 months

Post by TNWoods » Sat Feb 29, 2020 3:37 pm

OP,

You may be right in your decision, but you also need to have a clear idea about when and how to get back in, so make sure you are very clear in your mind about that. You don't want to get out, watch a big decline, feel good about having made the right decision, then get caught standing there when the market rebounds past your exit point.

You also need to have a very clear idea about how to know that you were actually wrong. What if the market declines only 1 or 2% over the next 2 weeks, then goes sideways for a month, then gradually rises by 1% per week. How long will you stay out, thinking that the 20% drop is still just about to happen? At some point you're going to have to decide to get back in and just accept that you made the wrong decision. So you need to have a very clear, very well defined set of circumstances or metrics to be able to make your decision.

Personally, I'm staying in, (and that's what I would recommend to anyone), and have already diverted money I had in place for something else to my taxable account to do some buying next week. The "something else" can wait.

Good luck.

TNWoods

VaR
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Re: Sell now and start buying back in 3 months

Post by VaR » Sat Feb 29, 2020 3:39 pm

What asset allocation (stocks vs bonds) is appropriate to your risk tolerance? There are a number of ways to determine this, but think:
If equities drop by 50%, how much of a portfolio drop could I tolerate? If your answer is "only 30%", then the asset allocation that matches your risk tolerance is 60/40.

Note: My asset allocation was 70/30 based on my risk tolerance (in my IPS). After this week, my asset allocation is 67/33. Another 8% down and I'll hit a mandatory rebalancing band at 65/35 and have to have the fortitude to move 5% from bonds to stocks.

Using this strategy is my advice and answer to the OPs question.

Note: Your asset allocation doesn't have to be 70/30, it could be 60/40 or even 50/50 or less. But it does have to be the asset allocation that you feel comfortable with while the market is crashing, and ideally the allocation that you are willing to maintain on the way down if you choose to have rebalancing bands.

nigel_ht
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Re: Sell now and start buying back in 3 months

Post by nigel_ht » Sat Feb 29, 2020 3:40 pm

Other than being lucky and being out of the market in Jan I'm looking at the same path to getting into the market vs lump sum. DCAing back in.

Folks will tell you to stay the course but if you've discovered that your risk appetite isn't 70/30 then changing it to the correct ratio is good. Folks don't know what their true risk tolerance is until they're staring a black swan in the face and losses in their portfolio.

I remember there were threads in 2008 where long time bogleheads threw in the towel late in the game. Of all the options that's probably the most sub-optimal...to bail after staying the course too long and suffering the majority of the losses.

So stay in for the entire ride after moving to an asset allocation that lets you sleep at night (say 50/50) or get out now and DCA back in back to the new ratio...but don't waffle. Just understand that there's no crystal ball and the market may recover in 60 days and you miss the recovery, you get back in and then the market plunges again later because we go into a recession. Then if you pull out again you're trapped in that buy high sell low cycle which leads to ruin. That's why folks say don't try to time the market.

Xrayman69
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Re: Sell now and start buying back in 3 months

Post by Xrayman69 » Sat Feb 29, 2020 3:42 pm

DrPayItBack wrote:
Sat Feb 29, 2020 3:33 pm
Selling after a rapid decline is always the right answer.
Filtering out the weak hands....

When the tide goes our we see who is naked ....

Buy high and sell low.....

OP what was the purpose of your IDP if it’s not the plan

nigel_ht
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Re: Sell now and start buying back in 3 months

Post by nigel_ht » Sat Feb 29, 2020 3:48 pm

David Jay wrote:
Sat Feb 29, 2020 3:17 pm
calisun wrote:
Sat Feb 29, 2020 3:01 pm
The fact that CA just announced 8400 suspected cases out of the blue on Thursday is a case in point.
This is simply wrong. California is keeping an eye on 8400 individuals who have arrived from other countries, just in case they come down with the infection.

If the virus spreads there will be plenty of time for concern, but at this point the fear-mongering has gotten out of hand. So far, there are (3) likely community viral infections in the entire US. All the others (in the 60-some total) are people who have traveled in Asia or are spouses of those who have had the virus.
We haven't been looking for cases, hence we haven't found any. I know someone who came back from China, had flu symptoms and they wouldn't test her. Fortunately we don't live in the same state. :)

The real problem is that CA has only 200 test kits...and the CDC guidelines didn't allow for testing the community transfer patient. I haven't looked up why/how CA tested her anyway but I am less sanguine regarding official numbers. The virus is circulating and we haven't been testing for it unlike other countries.

sambb
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Re: Sell now and start buying back in 3 months

Post by sambb » Sat Feb 29, 2020 4:14 pm

no one knows if it would be good to buy or sell now. but i prefer to buy low and sell hi.

manatee2005
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Re: Sell now and start buying back in 3 months

Post by manatee2005 » Sat Feb 29, 2020 4:17 pm

Too late to sell now.

Don’t lock in your losses because of a little virus

Carol88888
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Re: Sell now and start buying back in 3 months

Post by Carol88888 » Sat Feb 29, 2020 4:23 pm

Your husband sounds very smart. That's unfortunate. Smart people can analyze everything and come up with reasons for doing something.

I say, "Stick to your plan." To do otherwise means you are essentially trading off of headlines and will be whipsawed constantly. Every thing your husband is worrying about may be true but guess what - the market knows it all already.

For what is is worth, I bought Friday.

GrowthSeeker
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Re: Sell now and start buying back in 3 months

Post by GrowthSeeker » Sat Feb 29, 2020 4:42 pm

I have my own guesses as to how this will play out - but that is irrelevant.
"It's tough to make predictions, especially about the future"

The one thing I know for certain is that the media has been and will be spinning everything related to this virus and its effect on the stock market and economy to make it seem as disastrous as possible. So apply that filter when you read or listen to the news.

But selling right after a 12% sharp decline would rarely be the right move.
Just because you're paranoid doesn't mean they're NOT out to get you.

yohac
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Re: Sell now and start buying back in 3 months

Post by yohac » Sat Feb 29, 2020 4:47 pm

HHS declared coronavirus to be a US public health emergency on Jan 31. The market yawned and continued to make new highs. Until this past week.

Your husband may turn out to be right, but it's incredibly easy to rationalize bailing out after a sudden drop.

hulburt1
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Re: Sell now and start buying back in 3 months

Post by hulburt1 » Sat Feb 29, 2020 5:01 pm

Have 1.2m I have sold 1/2 of it it's in MM. I have been thinking of sale all but my Roth. I will start dollar cost in about 2 week. I might miss out I might not but at 67 I can live the rest of my life on 1.2m and SS that I will take at 70. I will move it to S&P and face book. I live on 36000 a year. could live on more but do not need to. At 36000 I will run out of money at 100. at 52000 or 1000 a week I'll be 90. When I add SS, and IRA I'll be ok. DCA would be about 10000 a month. Hit some highs and lows. Will stop when I hit 600000. I was 95/5 for most of my life, Now I need to get a life so I'll see you all later.

Mr_Alex
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Re: Sell now and start buying back in 3 months

Post by Mr_Alex » Sat Feb 29, 2020 5:16 pm

My advice is don’t panic and stay the course. Keep buying equity same as you planned or perhaps more while they are cheap. You are collecting stocks for the Long run, and a loss is only locked in once you sell. If you’re freaking out consider boosting bond allocation or other diversification, but going back to cash, thereby locking in a loss, and assuming the market will crash, and that you’ll be able to time right moment to get back in, sounds like the most risky move to me.
Mr. Alex | | “Prediction is difficult, especially when dealing with the future”

Hockey10
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Re: Sell now and start buying back in 3 months

Post by Hockey10 » Sat Feb 29, 2020 5:16 pm

David Jay wrote:
Sat Feb 29, 2020 3:17 pm
calisun wrote:
Sat Feb 29, 2020 3:01 pm
The fact that CA just announced 8400 suspected cases out of the blue on Thursday is a case in point.
This is simply wrong. California is keeping an eye on 8400 individuals who have arrived from other countries, just in case they come down with the infection.

If the virus spreads there will be plenty of time for concern, but at this point the fear-mongering has gotten out of hand. So far, there are (3) likely community viral infections in the entire US. All the others (in the 60-some total) are people who have traveled in Asia or are spouses of those who have had the virus.
Thanks for being the voice of reason David.

retiredjg
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Re: Sell now and start buying back in 3 months

Post by retiredjg » Sat Feb 29, 2020 5:23 pm

calisun wrote:
Sat Feb 29, 2020 3:01 pm
Does that seem like a good idea? Please advise both the pros and cons of this approach?
Your husband is one of many people who are realizing their risk tolerance is not what they thought it was.

This is unfortunate, but to a certain extent we all have to learn through experience. Listening to the old farts and wise ones will help some in setting up an initial asset allocation, but feeling the burn of the hot stove is what really teaches the lessen. He seems to be feeling the burn now and what has happened so far is not even particularly significant.

Of course, what he is worried about is what is going to happen. Well, it might happen real soon or it may happen a few years hence....but what is going to happen is the market is going to take a deep and long dive and one must be always invested in such a way that the long deep dive is tolerable.

At this point, we are not even near what I'd call a "deep dive".

Judging from your description of his response, the 70/30 asset allocation chosen is too aggressive for his temperament. He should be at a more conservative level - at least for awhile. After getting accustomed to the ups and downs of the market, moving back up to 70/30 might be possible.

As for what to do right now....his plan is not a good one. Yes, it makes sense in a logical world, but the stock market and the world are not logical and using a logical approach to the stock market simply does not work. It frequently leads to bad decisions.

If possible, you need to stay the course at 70% stocks (even if that means buying stocks) until this mess is over. If that is not possible, just not selling now is a better choice than selling now.

"Stay the course" really does mean stay with your plan.

When things stabilize, consider that a more conservative asset allocation is probably a good idea until he gets accustomed to what the market actually does.

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BolderBoy
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Re: Sell now and start buying back in 3 months

Post by BolderBoy » Sat Feb 29, 2020 6:24 pm

calisun wrote:
Sat Feb 29, 2020 3:01 pm
We have been putting away $30K/month in Taxable (VTSAX and VFWAX) and about $22K/month (VTSAX and VSIAX) in our Roth accounts since then and are now about $490K invested in the market.

We have lost most of our gains since last year (YTD in the last 2 months about $60K) and since the last 9 months are about $9K in loss. My husband is realizing he does not have the risk appetite to lose all the gains in 6 days.
The best, free advice you are going to get is to do nothing - don't panic sell. Sit tight and ride this out.

While you are doing that, please tell us all how you are [legally] putting $22k/month into your Roth accounts.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

tesuzuki2002
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Re: Sell now and start buying back in 3 months

Post by tesuzuki2002 » Sat Feb 29, 2020 6:34 pm

Why not just keep buying on the way down??

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anon_investor
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Re: Sell now and start buying back in 3 months

Post by anon_investor » Sat Feb 29, 2020 7:18 pm

tesuzuki2002 wrote:
Sat Feb 29, 2020 6:34 pm
Why not just keep buying on the way down??
+1

APX32
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Re: Sell now and start buying back in 3 months

Post by APX32 » Sat Feb 29, 2020 7:22 pm

tesuzuki2002 wrote:
Sat Feb 29, 2020 6:34 pm
Why not just keep buying on the way down??
Sometimes it’s a good idea not to catch a falling knife. Crises such as this are a good opportunity to really find one’s own risk tolerance, which may not be accurately reflected during an uninterrupted bull run where every dip is bought. This dip may not get bought and the markets may fall further. Not only that, but we may enter a long term bear market, much longer than the average of about 2 years.

It would be best to just keep making regular contributions according to one’s AA and stick with that instead of taking out HELOCs and liquidating EFs to “back up the truck” because “stocks are on sale”.
8% SPY | 5% GLD | 87% Cash

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FIREchief
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Re: Sell now and start buying back in 3 months

Post by FIREchief » Sat Feb 29, 2020 7:27 pm

There are several reasons that the typical retail investor underperforms the market by about 50%. This is certainly among them...
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

delamer
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Re: Sell now and start buying back in 3 months

Post by delamer » Sat Feb 29, 2020 7:33 pm

What if — instead of 90 days — the number of cases peaks in 9 days or 9 months? Then what does he want to do?

Don’t underestimate the difficulty of following a preconceived plan in an evolving situation. He’s already shown that it isn’t a strength of his, given that he’s bailing from your plan that just went into effect 9 months ago.

Stock investing should be done with the long-run goal of building wealth; reacting to short-run financial challenges will compromise your ability to reach that goal.

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Cheez-It Guy
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Re: Sell now and start buying back in 3 months

Post by Cheez-It Guy » Sat Feb 29, 2020 7:42 pm

How are you putting $22,000 per month into Roth accounts?

Also, if you have this kind of income, you don't really NEED to take any risk with your investments.

TheDDC
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Re: Sell now and start buying back in 3 months

Post by TheDDC » Sat Feb 29, 2020 7:46 pm

Based on my research, the hype is being *OVERREPORTED*. I have upgraded VTSAX to STRONG BUY. That’s a STRONG BUY due to mass stupidity and foolishness fueling a sell off.

We are buy and hold investors. You are doing a poor job of “research” as I guarantee someone else has already done a better job, and that person still can’t tell you when to buy back in.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth... | Rules to wealth building: 100% VTSAX piled high and deep, 0% given away to banks, minimize amount given to health care industrial complex

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anon_investor
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Re: Sell now and start buying back in 3 months

Post by anon_investor » Sat Feb 29, 2020 7:49 pm

Cheez-It Guy wrote:
Sat Feb 29, 2020 7:42 pm
How are you putting $22,000 per month into Roth accounts?

Also, if you have this kind of income, you don't really NEED to take any risk with your investments.
Sounds like the OP+spouse has access to the full mega backdoor roth and likely the regular backdoor roth.

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cchrissyy
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Re: Sell now and start buying back in 3 months

Post by cchrissyy » Sat Feb 29, 2020 7:49 pm

his rationalizations sound, well, rational, but don't you think they are already priced into the market?
honestly it's not very insightful to assert there are more infections at the moment than what has been detected/tested/reported so far. that's common sense and the market accounts for it.
follow the plan you made when you were calm.

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Brianmcg321
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Re: Sell now and start buying back in 3 months

Post by Brianmcg321 » Sat Feb 29, 2020 7:52 pm

You should have sold two weeks ago and started buying back on Friday.
Last edited by Brianmcg321 on Sat Feb 29, 2020 7:54 pm, edited 1 time in total.
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retiredjg
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Re: Sell now and start buying back in 3 months

Post by retiredjg » Sat Feb 29, 2020 7:53 pm

anon_investor wrote:
Sat Feb 29, 2020 7:49 pm
Cheez-It Guy wrote:
Sat Feb 29, 2020 7:42 pm
How are you putting $22,000 per month into Roth accounts?

Also, if you have this kind of income, you don't really NEED to take any risk with your investments.
Sounds like the OP+spouse has access to the full mega backdoor roth and likely the regular backdoor roth.
At $22k a month, even all that space would not last more than a few months. I think there must be some misunderstanding, but we'll have to wait to see.

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anon_investor
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Re: Sell now and start buying back in 3 months

Post by anon_investor » Sat Feb 29, 2020 7:55 pm

retiredjg wrote:
Sat Feb 29, 2020 7:53 pm
anon_investor wrote:
Sat Feb 29, 2020 7:49 pm
Cheez-It Guy wrote:
Sat Feb 29, 2020 7:42 pm
How are you putting $22,000 per month into Roth accounts?

Also, if you have this kind of income, you don't really NEED to take any risk with your investments.
Sounds like the OP+spouse has access to the full mega backdoor roth and likely the regular backdoor roth.
At $22k a month, even all that space would not last more than a few months. I think there must be some misunderstanding, but we'll have to wait to see.
True. Anyway OP's plan seems bad regardless.

Alchemist
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Re: Sell now and start buying back in 3 months

Post by Alchemist » Sat Feb 29, 2020 8:02 pm

No. This is a terrible idea. Stay the Course.

The virus may not peak for 6 months, or maybe it already has and everyone is over reacting. The Market may have already gone down further and recovered again within 3 months. We simply are ignorant of the future. There are many unknowable variables, that is why when you decide on your investing plan you must stay committed through scary times. If it was easy then everyone would do it.

I have to say that when I read so many statistics of individual investors underperforming the market by huge amounts I usually have a hard time imagining so many people behaving so irrationally with their investments. However, sooo many posts like this one all over Bogleheads lately has shown that this behavior really is widespread among retail investors.

Don't be a statistic. Just stand there, don't do anything. 12 months from now the panic apparent in the market will just be one more cautionary tail about why it is so important not to panic.....

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Cheez-It Guy
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Re: Sell now and start buying back in 3 months

Post by Cheez-It Guy » Sun Mar 01, 2020 12:58 am

This underlying thought process is the real virus around Coronaheads.org lately.

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Noobvestor
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Re: Sell now and start buying back in 3 months

Post by Noobvestor » Sun Mar 01, 2020 1:08 am

Cheez-It Guy wrote:
Sun Mar 01, 2020 12:58 am
This underlying thought process is the real virus around Coronaheads.org lately.
Was disappointed to discover no one has actually made that into a parody site yet.

Op: You need to write an investment policy for yourself. I would suggest that until you do, you stay the course with your current allocation. The market retracing to a high from a year ago is not uncommon. No one knows if it will go up or down from here. But what I do know is that if you buy high and sell low you'll lock in losses. Maybe the market goes lower and you get back in at the right time, or maybe it bounces and you don't.

Better if you can cultivate an attitude of 'stocks being on sale, I get new shares cheaper!' Even better: take emotion out of the equation entirely, and don't make quick decisions like: we're going to sell for X period then start buying back in. For one thing, it's a emotional decision, but it's also one that isn't backed up by any philosophy of investing I'm familiar with (there is nothing magical about 90 days). /2 cents
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Cheez-It Guy
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Re: Sell now and start buying back in 3 months

Post by Cheez-It Guy » Sun Mar 01, 2020 1:15 am

Noobvestor wrote:
Sun Mar 01, 2020 1:08 am
Cheez-It Guy wrote:
Sun Mar 01, 2020 12:58 am
This underlying thought process is the real virus around Coronaheads.org lately.
Was disappointed to discover no one has actually made that into a parody site yet.
Registering a domain and hosting a site costs real money. That's a long way to go for a Bogleheads joke. Funny, but it goes against philosophy. As a Boglehead, I can't justify!

SDLinguist
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Re: Sell now and start buying back in 3 months

Post by SDLinguist » Sun Mar 01, 2020 1:20 am

Third Son wrote:
Sat Feb 29, 2020 3:32 pm
Why are there so many of these threads in a forum based upon sound principles and historical data?
10 years of growth means a large number of people have money to invest, and most of them probably don't care or want to think about investing more than being told 'do this'. Which has worked well for the last 10 years since practically everybody made money to some extent following some advice or another. When we have a drop those same people see a loss and panic. I would assume less than half the people on this forum have actually thought deeply about what the bogleheads' philosophy means.

We saw the same thing in December of 2018.

BoggledHead2
Posts: 546
Joined: Tue Jun 12, 2018 6:50 pm

Re: Sell now and start buying back in 3 months

Post by BoggledHead2 » Sun Mar 01, 2020 6:06 am

You pick an asset allocation*

You invest when you can

You welcome downturns as buying opportunities

You go on with life. It is this simple, despite a lot of people on here making it more complicated for themselves.

*Asset allocation should be individualized for you (as in, what is an appropriate US/INT/Bond allocation you can set and forget ...

(everyone wants to be in equities when things are going well, when in reality the best time to buy them is actually during downturns like this ... especially ones fueled by clickbait hysteria over a “pandemic” that leaves 80% of its “victims” feeling such mild symptoms they don’t even know they have it... but I’m sure the hysteria will ensue now that 1 person died in US - who had other health complications and would’ve been similarly at risk for a bad flu virus, which also kills people ... carry on and wash your hands ... and buy the cheaper equity)

onourway
Posts: 2322
Joined: Thu Dec 08, 2016 3:39 pm

Re: Sell now and start buying back in 3 months

Post by onourway » Sun Mar 01, 2020 6:39 am

How can this be both “a buying opportunity of a lifetime” and the correct time to sell it all and get out? You can’t have it both ways.

In any case, this is an opportunity to re-assess your risk tolerance. At a 70/30 asset allocation, you should be down only about 8% from earlier highs. If you can’t take that kind of volatility, you should not be pulling out of the market, but rather adjusting this AA down until you can sleep comfortably and forget about the market entirely in your day to day business. Perhaps 50/50 is better for you, or even 40/60. A conservative fund like Vanguard Wellesley at ~40/60 is down less than 4% from earlier highs. Yawn...

The difficulty is that when you are at these more conservative asset allocations, one also must be ok with their assets growing much more slowly than the market as a whole when the market is moving rapidly upwards. My concern is that if your husband was in a 50/50 allocation for the past 10 years he would have been jealous of all the gains he felt he was missing out on, and been constantly chasing the best performing sector. This is typical investor - especially new investor - behavior - and it’s the primary reason the Boglehead method of standing still works. When you chase performance and jump in and out of funds, you are nearly always doing it AFTER a major change has occurred either up or down - you are reacting after the fact, buying high and selling low and it costs investors a tremendous amount of money vs. simply doing nothing!

Look, presumably the money you have invested and are investing is not money you need today, tomorrow, next year or ever 5-10 years from now (if not, that needs to be sorted out first). The market is volatile. That’s just the way it works. It goes up and it comes down. Often moving rapidly in either direction. Investments are not a bank account and you should never count on having exactly the number of dollars your account balance says today, tomorrow. However, waiting out these events pays off dramatically in the long run. So what if your “gains” have been mostly erased in a few days? Would he be upset if the market had remained completely flat since you’d made that initial investment, and instead of going from $750k up to $810k, back down to $750k, it had simply remained at $750k for the last year and a half?

Further, the $750k you have invested is relatively inconsequential if you are continuing to invest tens of thousands of additional money every month. Forget about it. This is money you will need in presumably 20, 30, 40 years from now. Continue to make those monthly investments and you will sometimes buy high, sometimes buy low, but overall you will buy in at, and receive as a return on the total invested amount, the average of what the market gives, which, it turns out, is better than what the vast majority of even professional money managers can do over the long term.

Time to find something else to do with your time and let the market do its thing.

BoggledHead2
Posts: 546
Joined: Tue Jun 12, 2018 6:50 pm

Re: Sell now and start buying back in 3 months

Post by BoggledHead2 » Sun Mar 01, 2020 6:44 am

onourway wrote:
Sun Mar 01, 2020 6:39 am
How can this be both “a buying opportunity of a lifetime” and the correct time to sell it all and get out? You can’t have it both ways.

In any case, this is an opportunity to re-assess your risk tolerance. At a 70/30 asset allocation, you should be down only about 8% from earlier highs. If you can’t take that kind of volatility, you should not be pulling out of the market, but rather adjusting this AA down until you can sleep comfortably and forget about the market entirely in your day to day business. Perhaps 50/50 is better for you, or even 40/60. A conservative fund like Vanguard Wellesley at ~40/60 is down less than 4% from earlier highs. Yawn...

The difficulty is that when you are at these more conservative asset allocations, one also must be ok with their assets growing much more slowly than the market as a whole when the market is moving rapidly upwards. My concern is that if your husband was in a 50/50 allocation for the past 10 years he would have been jealous of all the gains he felt he was missing out on, and been constantly chasing the best performing sector. This is typical investor - especially new investor - behavior - and it’s the primary reason the Boglehead method of standing still works. When you chase performance and jump in and out of funds, you are nearly always doing it AFTER a major change has occurred either up or down - you are reacting after the fact, buying high and selling low and it costs investors a tremendous amount of money vs. simply doing nothing!

Look, presumably the money you have invested and are investing is not money you need today, tomorrow, next year or ever 5-10 years from now (if not, that needs to be sorted out first). The market is volatile. That’s just the way it works. It goes up and it comes down. Often moving rapidly in either direction. Investments are not a bank account and you should never count on having exactly the number of dollars your account balance says today, tomorrow. However, waiting out these events pays off dramatically in the long run. So what if your “gains” have been mostly erased in a few days? Would he be upset if the market had remained completely flat since you’d made that initial investment, and instead of going from $750k up to $810k, back down to $750k, it had simply remained at $750k for the last year and a half?

Further, the $750k you have invested is relatively inconsequential if you are continuing to invest tens of thousands of additional money every month. Forget about it. This is money you will need in presumably 20, 30, 40 years from now. Continue to make those monthly investments and you will sometimes buy high, sometimes buy low, but overall you will buy in at, and receive as a return on the total invested amount, the average of what the market gives, which, it turns out, is better than what the vast majority of even professional money managers can do over the long term.

Time to find something else to do with your time and let the market do its thing.
Well said!

Jgardner
Posts: 9
Joined: Fri Jul 05, 2019 8:12 am

Re: Sell now and start buying back in 3 months

Post by Jgardner » Sun Mar 01, 2020 7:07 am

I've been reading all these threads people asking about this pandemic and the market drop. What to do?

Why is no one saying sell your Bonds and buy index funds with that money. Isn't that the age old principal, the asset reallocation. Buy low and sell high? Indexes are down and my bonds are up. Isn't that where we are right now? That's my plan next week. Until I hear otherwise.

User avatar
welderwannabe
Posts: 1185
Joined: Fri Jun 16, 2017 8:32 am

Re: Sell now and start buying back in 3 months

Post by welderwannabe » Sun Mar 01, 2020 7:19 am

Jgardner wrote:
Sun Mar 01, 2020 7:07 am
I've been reading all these threads people asking about this pandemic and the market drop. What to do?

Why is no one saying sell your Bonds and buy index funds with that money. Isn't that the age old principal, the asset reallocation. Buy low and sell high? Indexes are down and my bonds are up. Isn't that where we are right now? That's my plan next week. Until I hear otherwise.
No one knows how bad COVID-19 will be, but flus have been ravaging the planet for thousands of years. CDC estimates between 18,000 and 46,000 deaths from influenza in the US just for this flu season and it barely gets a new story. One death in Washington and its wall to wall coverage.

I am optimistic we will all look back at this like a little bump in the road as we all do with the Dec2018 correction.

Ive been rebalancing into stocks and will continue to do so. Just like I rebalance into bonds when the market is high.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

Jgardner
Posts: 9
Joined: Fri Jul 05, 2019 8:12 am

Re: Sell now and start buying back in 3 months

Post by Jgardner » Sun Mar 01, 2020 7:25 am

welderwannabe wrote:
Sun Mar 01, 2020 7:19 am
Jgardner wrote:
Sun Mar 01, 2020 7:07 am
I've been reading all these threads people asking about this pandemic and the market drop. What to do?

Why is no one saying sell your Bonds and buy index funds with that money. Isn't that the age old principal, the asset reallocation. Buy low and sell high? Indexes are down and my bonds are up. Isn't that where we are right now? That's my plan next week. Until I hear otherwise.
No one knows how bad COVID-19 will be, but flus have been ravaging the planet for thousands of years. CDC estimates between 18,000 and 46,000 deaths from influenza in the US just for this flu season and it barely gets a new story. One death in Washington and its wall to wall coverage.

I am optimistic we will all look back at this like a little bump in the road as we all do with the Dec2018 correction.

Ive been rebalancing into stocks and will continue to do so. Just like I rebalance into bonds when the market is high.
I totally agree with you👍...

aristotelian
Posts: 6992
Joined: Wed Jan 11, 2017 8:05 pm

Re: Sell now and start buying back in 3 months

Post by aristotelian » Sun Mar 01, 2020 7:34 am

OP, what is your age and timeframe?

As novice investor I am guessing you may be in your 30s and didn't really go through the 2008 crisis so you are learning about your risk tolerance now. (What about Dec 2018 though, which also happened quickly and was almost a full bear market?) If that is the case, you have many years of investing ahead of you and I would suggest adjusting your risk exposure with new money, I.e. buy bonds until you reach 50/50 or 30/70. Write down your target allocation and once you reach it, stick to it. 10 or 20 years from now, you won't remember the price of the S&P back in 2020 except to the extent that it turned out to be a buying opportunity.

Tougher call if you are in your 50s or 60s.

onourway
Posts: 2322
Joined: Thu Dec 08, 2016 3:39 pm

Re: Sell now and start buying back in 3 months

Post by onourway » Sun Mar 01, 2020 7:41 am

Jgardner wrote:
Sun Mar 01, 2020 7:07 am
I've been reading all these threads people asking about this pandemic and the market drop. What to do?

Why is no one saying sell your Bonds and buy index funds with that money. Isn't that the age old principal, the asset reallocation. Buy low and sell high? Indexes are down and my bonds are up. Isn't that where we are right now? That's my plan next week. Until I hear otherwise.
Most people haven’t even reached a 5% re-balancing band yet, so there is really nothing to do.

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