Thinking to switch bonds to stock

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Topic Author
Waro
Posts: 4
Joined: Sat Mar 29, 2008 12:27 am

Thinking to switch bonds to stock

Post by Waro »

Looking for you guys to talk me out of this. I had set 30% of my existing asset to bonds because I couldn't stomach the emotional pain of a market crash. Now that we are in a middle of one, I'm thinking to switch all of my bonds (in 401k) to stocks (VTI and VXUS). I'm not touching the 401k until I'm retired (20+ yrs away). I love a good bargain and I think the stock market is definitely one now. If the stocks don't go up in 20 years then I'm thinking that we are screwed anyway.

Emergency Funds: 2 years
No debt, paid off house
Tax Filing Status: Married
Tax Rate: Fed 22%, State 0%
Age: 36

Current Taxable Portfolio:
30% Total US (VTI)
30% Total Intl (VXUS)

Current 401k and Roth:
30% Bonds (BND)
10% REIT

Current Total Portfolio: $700k
annu
Posts: 965
Joined: Mon Nov 04, 2019 7:55 pm

Re: Thinking to switch bonds to stock

Post by annu »

So re balancing or market timing? :|
Rebalancing sure, I plan to after some tlh later this month...someone had a great example of trying to catch a falling knife....not good idea
perikleez
Posts: 132
Joined: Sun Jan 05, 2020 2:47 am

Re: Thinking to switch bonds to stock

Post by perikleez »

yes, please hold until thing settle a bit. market volatility looks like a pair of sheers just slicing away at equitie between circuit breakers
rossington
Posts: 815
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Thinking to switch bonds to stock

Post by rossington »

It's not up to us to talk you out of it but at 36 with no debt it's not unreasonable to do it.
But: How does your spouse feel about it? Any children imminent? Any major expenses looming?
Maybe go 85/15?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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celia
Posts: 12122
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Thinking to switch bonds to stock

Post by celia »

Waro wrote: Mon Mar 16, 2020 12:17 am Looking for you guys to talk me out of this.
Sounds like you really don’t want to do it, so don’t. But if you feel the need to make a change, make a small change instead, so you ‘feel’ you did something.
...I couldn't stomach the emotional pain of a market crash. Now that we are in a middle of one, ...
If you think we are in the middle, wouldn’t it make more sense to wait until we are out of it? But your sentiments here conflict with the rest of your post!
kareysue
Posts: 74
Joined: Fri Oct 10, 2008 10:07 pm

Re: Thinking to switch bonds to stock

Post by kareysue »

When did you switch to bonds? that was smart move if you did it before the crash
CarpeDiem22
Posts: 271
Joined: Tue May 22, 2018 11:20 pm

Re: Thinking to switch bonds to stock

Post by CarpeDiem22 »

My suggestion is to shift 15% of bonds now. Wait for some time as stocks may go down further. I assume you have your overall asset allocation figured out.
Peter G
Posts: 85
Joined: Sat Apr 30, 2016 8:14 pm

Re: Thinking to switch bonds to stock

Post by Peter G »

Karsten says the average time from peak to bottom of the last ten US bear markets is 23 months.
https://earlyretirementnow.com/2019/10/ ... ar-market/
You say:
Now that we are in a middle of one
You might have answered your own question.
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Orbuculum Nongata
Posts: 537
Joined: Thu Nov 06, 2014 1:58 pm

Re: Thinking to switch bonds to stock

Post by Orbuculum Nongata »

Waro wrote: Mon Mar 16, 2020 12:17 am Looking for you guys to talk me out of this. I had set 30% of my existing asset to bonds because I couldn't stomach the emotional pain of a market crash. Now that we are in a middle of one, I'm thinking to switch all of my bonds (in 401k) to stocks (VTI and VXUS). I'm not touching the 401k until I'm retired (20+ yrs away). I love a good bargain and I think the stock market is definitely one now. If the stocks don't go up in 20 years then I'm thinking that we are screwed anyway.

Emergency Funds: 2 years
No debt, paid off house
Tax Filing Status: Married
Tax Rate: Fed 22%, State 0%
Age: 36

Current Taxable Portfolio:
30% Total US (VTI)
30% Total Intl (VXUS)

Current 401k and Roth:
30% Bonds (BND)
10% REIT

Current Total Portfolio: $700k
No one here, or anywhere else, knows anything about the ultimate severity or duration of this “crash”. You are in a relatively decent financial position. You have an asset allocation you can hang your hat on. Stick to your long term plan. Re-balance accordingly.
Potential - distraction = performance.
retiredjg
Posts: 43153
Joined: Thu Jan 10, 2008 12:56 pm

Re: Thinking to switch bonds to stock

Post by retiredjg »

Waro wrote: Mon Mar 16, 2020 12:17 am Looking for you guys to talk me out of this. I had set 30% of my existing asset to bonds because I couldn't stomach the emotional pain of a market crash. Now that we are in a middle of one, I'm thinking to switch all of my bonds (in 401k) to stocks (VTI and VXUS).
Not a good idea.

What would be a good idea is to sell enough bonds and buy enough stocks in your 401k to bring your portfolio back to the 70/30 you originally set it at. This is called "rebalancing" and it is a tool people use to keep their portfolios at a chosen risk level.

This selling and buying assumes the market has moved enough to get your ratio out of whack. "Out of whack" means 5% off target for many people.

If the market continues to go down, you will have more opportunities to do this.
Nupey03
Posts: 37
Joined: Tue Dec 03, 2019 5:12 pm
Location: New York City

Re: Thinking to switch bonds to stock

Post by Nupey03 »

I am 34 and looking to do the exact same. I am currently 85 Equities / 15 Bonds... I plan to wait for the market to normalize a bit (IMO there will not be a positive catalyst anytime soon / no flattening of the infection curve and related impacts) and shift to an AA of 90-95% / 5-10%...
Topic Author
Waro
Posts: 4
Joined: Sat Mar 29, 2008 12:27 am

Re: Thinking to switch bonds to stock

Post by Waro »

Thanks everybody for your comments, really appreciate the counterpoints. What I have decided to do is convert the bonds to stocks little by little for the next year. When the stocks gets back to the previous high (how ever long in may take) I will switch it back to 70/30 AA.

Yes, this is extremely arbitrary. There was a comment about catching a falling knife but I dont think this is fair. We are talking about the world economy (by buying VTI and VXUS) and not one single stock. If it is all going down and never recover, my 401k balance in 20-30 years wouldnt matter anyway.
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