Retirement account noob investor question

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Topic Author
jdpc94
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Joined: Mon Apr 08, 2019 12:10 pm

Retirement account noob investor question

Post by jdpc94 »

With the crazy market we are currently in what are all your expert opinions regarding selling off my 2035 target fund and moving into a 2020 target fund until we come out of this mess. Is there any downside to this? To me it seems like basically reallocating from 80/20 split to a more conservative split of like 60/40. This would pertain to a retirement account with approx 400k value. I also have another 200k in this account invested in an S&P500 index fund. Is it wise to move that into the same 2020 target fund? I don't know if this type of behavior is frowned upon and considered not staying the course or if its just a reallocation based on my appetite for risk and is generally ok. Thanks for any and all input.
mega317
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Re: Retirement account noob investor question

Post by mega317 »

The wisdom of decreasing your stock allocation depends on why you're doing it.
If you're doing it because "the crazy market we are currently in" then I think that's a mistake.
If you're doing it because your "appetite for risk" has actually changed then that's what you should do. Changing your allocation is not "staying the course" but you are allowed to decide your old course was wrong.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
dbr
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Re: Retirement account noob investor question

Post by dbr »

The phrase "moving into a 2020 target fund until we come out of this mess" means you are trying to time the market and doing a bad job of it by being behind the curve. You needed to move a couple of months ago and very possibly if you wait until "we are out of this mess" you will have missed a recovering market . . . or you may not.

This kind if behavior is plagued by selling low and buying high because people get out after things have fallen and get in again after they have risen. This is one of the classic really bad errors in investing. That doesn't mean I know what the market is going to do next.

Now, as the poster above points out, if you now know your asset allocation is (I say is, not was) too risky, then it is possible it should be changed. It is also possible nothing should be changed. You invested the way you did for a reason and a few months . . . . a year or two . . . . a decade is short on a timetable of lifelong accumulation of assets followed by spending in retirement.
retired@50
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Re: Retirement account noob investor question

Post by retired@50 »

When are you planning on retiring? If it's still around 2035, then I'd stay put.

Regards,
This is one person's opinion. Nothing more.
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David Jay
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Re: Retirement account noob investor question

Post by David Jay »

Moving from 80/20 to 60/40 "until we come out of this mess" means selling 20 percent of your portfolio now when the price is down with the intent to purchase that same 20% of your portfolio back after the prices have risen.

^ ^ ^ Please read this sentence repeatedly until you understand the behavioral error that you are making.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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steve roy
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Re: Retirement account noob investor question

Post by steve roy »

I don't know which way to jump with our current CONSERVATIVE AA. Our rule of thumb: when in doubt during a pandemic and Crazy Market? Do nothing.
alex_686
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Re: Retirement account noob investor question

Post by alex_686 »

jdpc94 wrote: Thu Apr 16, 2020 3:29 pm I don't know if this type of behavior is frowned upon and considered not staying the course or if its just a reallocation based on my appetite for risk and is generally ok.
I don't know how many crisis you have been in, but this is a natural reaction to the crisis. Willingness to take risk is subjective. You should let your emotions inform you on what your level to risk is important.

It is also important to not to panic or overreact during times of crisis.

I would stop looking at the market in 3 months. Then revisit your IPS. Then - maybe - adjust your level of willingness to take risk. Then - maybe - adjust your AA.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Topic Author
jdpc94
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Joined: Mon Apr 08, 2019 12:10 pm

Re: Retirement account noob investor question

Post by jdpc94 »

Thank you for the responses. Im ok with staying in the 2035 target fund as that is right around when I will retire. I just didn't know if there was a downside to switching to a 2020 fund right now to soften any blows but now that I sit back and read responses it is still timing the market. I was thinking my money was still in market just at different allocation. I wasn't pulling out low and then buying back in high.
Topic Author
jdpc94
Posts: 6
Joined: Mon Apr 08, 2019 12:10 pm

Re: Retirement account noob investor question

Post by jdpc94 »

Thank you for the responses. Im ok with staying in the 2035 target fund as that is right around when I will retire. I just didn't know if there was a downside to switching to a 2020 fund right now to soften any blows but now that I sit back and read responses it is still timing the market. I was thinking my money was still in market just at different allocation. I wasn't pulling out low and then buying back in high.
delamer
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Re: Retirement account noob investor question

Post by delamer »

jdpc94 wrote: Thu Apr 16, 2020 4:53 pm Thank you for the responses. Im ok with staying in the 2035 target fund as that is right around when I will retire. I just didn't know if there was a downside to switching to a 2020 fund right now to soften any blows but now that I sit back and read responses it is still timing the market. I was thinking my money was still in market just at different allocation. I wasn't pulling out low and then buying back in high.
Since you would be reducing your allocation to stocks after their prices have fallen, you would be “selling low” by definition.

Selling low does not mean that you’ve exited the stock market altogether, just that you sold some shares after a price drop.
smartinvestor2020
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Re: Retirement account noob investor question

Post by smartinvestor2020 »

delamer wrote: Thu Apr 16, 2020 5:37 pm
jdpc94 wrote: Thu Apr 16, 2020 4:53 pm Thank you for the responses. Im ok with staying in the 2035 target fund as that is right around when I will retire. I just didn't know if there was a downside to switching to a 2020 fund right now to soften any blows but now that I sit back and read responses it is still timing the market. I was thinking my money was still in market just at different allocation. I wasn't pulling out low and then buying back in high.
Since you would be reducing your allocation to stocks after their prices have fallen, you would be “selling low” by definition.

Selling low does not mean that you’ve exited the stock market altogether, just that you sold some shares after a price drop.
Stock prices have shot up at a record pace. If the OP's risk tolerance has changed, I would say it is ok to make a permanent change. The only time you can reduce stocks in your AA without timing the market isn't when stocks are near or at all time highs. In fact, I would argue that reducing stocks near all time highs is timing the market if the reason for the reduction in stocks is because of thinking the stock market will fall. Stocks are actually approaching all time highs at a rapid pace.
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