Losing Money with Index Funds

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BogleFan510
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Re: Losing Money with Index Funds

Post by BogleFan510 »

Past performance may not be indicative of future performance. We all need to read and really understand this.

I held Japanese equities in 1990. I had a closed end national fund for a mid sized country go bankrupt. Saw up close two top US market cap companies fail with fraud involved (and ESPP shares go to zero). We've seen the Soviet Union collapse, China go from a third world economy to global economic powerhouse, Venezuela from the success model for Latin America, riding high in oil reserves, to a mess we may not see recovery from in our lifetime.

Stuff happens. Its hard to say what indexed stocks will be worth, but it does seem the best play to make. We all should understand it could be +/-70% some day. Unlikely, but possible (though the 'strategic' moves of national leadership seem to be aimed at making it more possible, isolationism, reduced justice system and public safety nets, etc).
Last edited by BogleFan510 on Sat Sep 19, 2020 12:25 pm, edited 2 times in total.
livesoft
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Re: Losing Money with Index Funds

Post by livesoft »

MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
The executors of their estate may cash out ALL of their investments in order to divide it up and distribute it. Otherwise, there does not appear to 'be a "good" time to cash out' nor is it even necessary.
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inbox788
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Re: Losing Money with Index Funds

Post by inbox788 »

Kenkat wrote: Sat Sep 19, 2020 10:55 amYes, they will be in a better situation. And rather than reinvest all that money again, they should have bet it all on the Pittsburgh Steelers to win the Super Bowl in 2009. Easy money.

...

What was that you said? How were you supposed to know the Steelers would win the Super Bowl that year? Why, you just need to be able to predict what happens in the future. Easy money, right?
It was easy money, they were favored, no? Yet even with the win, they didn't beat the spread. Constant bet on beating the spread was/has been a winning strategy. Didn't find odds data to see if betting the favorite, despite 2:1 win record would have come out ahead. But like investing, past performance is no guarantee of future results.
favorites are 28-23 (55%) in the game against the spread, and it is worth noting that favorites are now 36-17 straight up in these matchups.
https://www.betfirm.com/point-spreads-f ... uper-bowl/
https://fivethirtyeight.com/features/th ... e-history/

Now that sports betting is returning, all the Robinhood bettors are leaving and the market might get back to normal again.

Trading Sportsbooks for Brokerages, Bored Bettors Wager on Stocks [paywall]
https://www.nytimes.com/2020/06/14/busi ... virus.html
Even with modest investments, these newcomers can move stock prices, which are typically set by just a sliver of shareholders. On most days, the overwhelming majority of stock investors do nothing, while the buyers and sellers establish the prices. So even a small influx of hyperactive speculators can have a significant effect.
...
The short-term swings make betting on stocks no different from betting on a game: “Same rush,” he said
For those that like win/lose bets, there's always Binary Options now.
https://www.nadex.com/products/binary-options/
Topic Author
MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

livesoft wrote: Sat Sep 19, 2020 12:23 pm
MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
The executors of their estate may cash out ALL of their investments in order to divide it up and distribute it. Otherwise, there does not appear to 'be a "good" time to cash out' nor is it even necessary.
Never a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to?
RyeBourbon
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Re: Losing Money with Index Funds

Post by RyeBourbon »

MissOptimist wrote: Sat Sep 19, 2020 12:11 pm
livesoft wrote: Sat Sep 19, 2020 12:01 pm
MissOptimist wrote: Sat Sep 19, 2020 10:11 amWhat if BEFORE 2008, they sell their shares or cash out, and after the economy recovers, they reinvest all that money again, will they be in a better situation??
Clearly, hindsight is wonderful and I can claim that my hindsight is better than 20/20. But instead of reinvesting "after the economy recovers" they would have to reinvest BEFORE the economy recovers, say in early March 2009.

And in a similar way, the economy has not recovered in 2020, but if they reinvested in late March 2020, then they would be in a better situation.
So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
There should never be a need to cash out all your investments. In retirement, you might have an asset allocation of 40% stock, 40% bonds and 20% cash. Use the cash for expenses and periodically rebalance to 40/40/20.
Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

MissOptimist wrote: Sat Sep 19, 2020 10:11 am
Ed 2 wrote: Sat Sep 19, 2020 9:10 am
MissOptimist wrote: Sat Sep 19, 2020 9:03 am
nisiprius wrote: Sat Sep 19, 2020 8:54 am Between the start of 2008 and March of 2009, despite having a very conservative, timid stock allocation, the grand total of all our retirement savings decreased by an amount roughly equal to all of the contributions we had made for five years.

Five years of patient savings, five years of having a big bite out of the paycheck that could have made a real difference on buying cars, taking the kids on vacations, or maintaining the house. Five years. Shot to hell, just shot to hell.

Not so scary as a percentage.

As the time scale of charts contracts, the global financial crisis starts to look like nothing much, bad while it lasted but over quickly. People even have the impression that 2009-to-2020 was one long, smooth uninterrupted climb.

It did not feel that way while it was happening.

Image
:shock: :shock: Would you say you have gotten all your retirement amount back at a desirable level??
Look closer at the right corner if that chart. Most everyone had similar performance back in 2008-2012,those who invested in “3 fund portfolio”. His investment portfolio quadrupled probably since.
What if BEFORE 2008, they sell their shares or cash out, and after the economy recovers, they reinvest all that money again, will they be in a better situation??
If someone had a magic 8 ball and could know when the market was going to rise and fall, then yes, they could make a lot more money than people who just invest and leave their money in the market.

No one has that 8 ball though.

Also, the best time to buy would be when the market is at its lowest. However, when the market is at its lowest is also when most people are most afraid to dump money in since, again, no 8 ball to tell them if it's not going to drop further.
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Abe
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Re: Losing Money with Index Funds

Post by Abe »

MissOptimist wrote: Sat Sep 19, 2020 7:33 am I am curious, what was the biggest amount of money you ever lost with investing in index funds? And how did you get through it? :shock:
I think maybe you may be asking, assuming you are talking about a total market index fund, is how much could I reasonably expect the value of that fund to go down in a severe market downturn. It's hard to say, but I think it's generally accepted that the total market could lose 50% of its value or more. It has lost that much in the past a few times, but it has always come back. During the great depression, I think the market lost around 80% of its value. To answer your question as to how to get through it, you need to have an asset allocation that will allow you to get through a severe market downturn without panicking and selling out at the low.
Slow and steady wins the race.
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
livesoft
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Re: Losing Money with Index Funds

Post by livesoft »

Why would you cash out to enjoy your money? Instead, you would enjoy your money by selling assets every year and leaving the rest invested. If you wanted to, you could reduce the perceived risk of your portfolio by reducing the percentage allocated to equities. But going 100% cash? That leaves you open to the risk of not keeping up with inflation and the inability to enjoy some of your money more in the future. Or perhaps there is something new that you want to spend money on and you don't have enough because you cashed out earlier. I'm thinking a heart transplant or a new body.

But if you want to cash out, I guess there is no one stopping you. :beer
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arcticpineapplecorp.
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Re: Losing Money with Index Funds

Post by arcticpineapplecorp. »

MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
Q: When do I buy?
A: When you have the money.

Q: When do I sell?
A: When you need the money.

of course this doesn't mean it's all or nothing.

you set an allocation of stocks and bonds.

then you stay the course unless there's been some type of need for a change to the plan you originally set for yourself. (but that doesn't mean you change due to short term events, or you'll be changing all the time and really don't have a long term plan).

see my signature below.

https://www.bogleheads.org/wiki/Investm ... _statement
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
heyyou
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Re: Losing Money with Index Funds

Post by heyyou »

heyyou wrote: ↑Sat Sep 19, 2020 11:04 am
Your car's value, changes over time, but the reduction is not realized until you do sell it.

We all own shares of stock index funds, and each day the value of those shares changes, but we try to only sell them as we need the money in retirement since we have seen how progressively higher inflation can decimate fixed rate savings accounts that do not have a buffer for that problem. We try to learn to live with stock market price fluctuations, and we have some savings allocated to bond funds from which to spend when stock fund prices have fallen. We have some cash in savings accounts, plus shares in bond index funds, and shares in stock index funds, all to diversify our assets as a buffer for various future risks, since each one of those is imperfect for some specific situations that could occur in the future.
Ok, so you will sell them if you need them for retirement even if there is a pandemic or an economic downturn?
I sell from my bond funds when stock funds are down. Note that previously purchased bond fund shares are now worth more because future bond payouts are at a smaller percentage. Having retired with about 25 multiples of annual spending, we had about 10 years of spending in bond funds and 15 years of spending in stock funds, but the stock portion has grown since then, and having delayed my inflation buffered Social Security until age 70, that alone covers a bare bones lifestyle with a paid off residence in our low cost area. See the multiple adaptations to possible future events. Live and spend a reasonable amount now, while expecting to adapt/spend less if those events do occur. If you are currently spending about 4% of your assets annually, and your stock funds fall by a big fraction, spend from the bond side and try to reduce your spending to 4% of the new value of your portfolio. The 4% (1/25th of the portfolio) is from retiring with 25 multiples of annual spending with the expectation of some portfolio growth before the end of 25 years, but knowing that most people do not live for 30 years beyond retirement day, and many retirees spend less, later in life than when they are in their sixties. So far, the US stock market has eventually recovered from every stock market crash, we know that we cannot guess when, so we invest with the expectation of leaving the money in the stock funds until they do recover. Perhaps a 50/50 ratio of stock index funds to bond index funds would be more appropriate for new retirees with less confidence about the future.
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warner25
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Re: Losing Money with Index Funds

Post by warner25 »

livesoft wrote: Sat Sep 19, 2020 8:39 am In March 2020, our portfolio dropped 7-figures. We got through it by rebalancing and thus the portfolio gained back 7-figures and more since.
flaccidsteele wrote: Sat Sep 19, 2020 10:43 am...How does one lose money with US index funds? It’s almost impossible...
These answers, especially to someone who is clearly just getting started, are irresponsible. It was no sure thing that stocks would come roaring back after 2008-2009, and again after March of 2020. For most stock markets outside of the US, it hasn't happened that way.

MissOptimist, I got started much like you: I heard the case for index funds, in a nutshell, from a college professor and that became my whole plan. I started pouring equal amounts into the three (overlapping :oops:) index funds that my provider offered and waited for my 10% annual return: It was April of 2008, and the next twelve months broke my faith. It took a year of reading about market history and theory, during and after that experience, to really understand what I was doing and why.

When I started reading this forum in 2009, it was common advice to not invest more than 2x your maximum tolerable loss in stocks. So if you can't bear to see your accounts drop by $100k, don't invest more than $200k in stocks. Over the past decade, it seems like the consensus has shifted to "invest in 100% stocks until age X" where X is somewhere between 30 and 50. I don't like that. Think hard about what these guys are saying.
HomerJ wrote: Sat Sep 19, 2020 11:42 am If you have $500,000 in a stock index fund, and it drops 50%, you have actually lost $250,000. And it's hard.
nisiprius wrote: Sat Sep 19, 2020 8:54 am Five years of patient savings, five years of having a big bite out of the paycheck that could have made a real difference on buying cars, taking the kids on vacations, or maintaining the house. Five years. Shot to hell, just shot to hell.
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Re: Losing Money with Index Funds

Post by Kelrex »

MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
Some people cash out a little bit every year of their retirement and some don't. While you are saving it's called "accumulation phase", and how you think of the ups and downs of the market is different from when you are retired and starting to spend.

Some plan to draw down their investments, some don't. Many die with more wealth than when they started.

I would recommend that you do a whole bunch of reading and asking questions here until it becomes intuitive to you what your options are.

How you choose to handle your investments is 100% personal, and every single option comes with risks and rewards, which may or may not be relevant to your personal situation.

There is no "one-size-fits-all" approach to handling personal finance, it is entirely personal. What's ideal for me might be a disaster for you and vice versa.

Have you read JL Collins stock series yet? It's a really really easy introduction to index investing, and I think it will clarify a lot of what you are trying to wrap your mind around.

Once you get that, you might want to look into some Early Retirement Now articles to better understand what we call "Sequence of Returns Risk" or SORR, as that's the next logical thing to worry about, and will help you understand withdrawal rates better. Then after that, you can start researching draw-down strategies if you aren't looking at preserving wealth.

Overall, if you are early in your savings journey, don't worry too much about all of this right now. Start at the beginning, learn the basics, and over time, the things you need to learn for your own case will become self evident.

First things first though, get a really thorough understanding of how passive investing works, and the purpose of different asset allocations (AA) and what they mean to you personally.

None of us got here over night, we all have pretty much read the same stuff and asked the same questions over time. You'll get there, just start from the beginning.
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HomerJ
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Re: Losing Money with Index Funds

Post by HomerJ »

MissOptimist wrote: Sat Sep 19, 2020 10:11 am
Ed 2 wrote: Sat Sep 19, 2020 9:10 am
MissOptimist wrote: Sat Sep 19, 2020 9:03 am
nisiprius wrote: Sat Sep 19, 2020 8:54 am Between the start of 2008 and March of 2009, despite having a very conservative, timid stock allocation, the grand total of all our retirement savings decreased by an amount roughly equal to all of the contributions we had made for five years.

Five years of patient savings, five years of having a big bite out of the paycheck that could have made a real difference on buying cars, taking the kids on vacations, or maintaining the house. Five years. Shot to hell, just shot to hell.

Not so scary as a percentage.

As the time scale of charts contracts, the global financial crisis starts to look like nothing much, bad while it lasted but over quickly. People even have the impression that 2009-to-2020 was one long, smooth uninterrupted climb.

It did not feel that way while it was happening.

Image
:shock: :shock: Would you say you have gotten all your retirement amount back at a desirable level??
Look closer at the right corner if that chart. Most everyone had similar performance back in 2008-2012,those who invested in “3 fund portfolio”. His investment portfolio quadrupled probably since.
What if BEFORE 2008, they sell their shares or cash out, and after the economy recovers, they reinvest all that money again, will they be in a better situation??
It's hard to predict the future.

No one really knows when the economy has recovered. Look at that chart again. In 2011, it looked like it was going to crash again (In fact look for the thread called "Stocks in free fall" that was started around that time).

What if you got out in 2008, got back in 2010, and then in 2011 it started to crash again, and you got out again to avoid the next crash, but then the market turned right around and went up 200% instead.

Timing the market is hard. Sure, if you could get out near the top in 2008, and back in near the bottom at 2009, and ignore the head-fake in 2011, sure you would have MORE money.

But this is nearly impossible to do in real time. Very hard. But buying and holding is easy (maybe hard psychologically, but easy to implement).

Just buying in 2007, and holding through 2008-2020, you got rich.

Again, if you could have timed the market well, you could have gotten MORE, but if you timed the market poorly, you would have gotten LESS.

And most people time the market poorly, because it's hard to predict the future. So you are more likely to get LESS by moving in and out of the market thinking you know what will happen next.

Just buy and hold and hold the money in stocks long-term, so far, has made one rich. And there's no skill involved.
Last edited by HomerJ on Sat Sep 19, 2020 1:57 pm, edited 1 time in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
livesoft
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Re: Losing Money with Index Funds

Post by livesoft »

warner25 wrote: Sat Sep 19, 2020 1:39 pmOver the past decade, it seems like the consensus has shifted to "invest in 100% stocks until age X" where X is somewhere between 30 and 50. I don't like that. Think hard about what these guys are saying.
Let me just state for the record that our portfolio is not 100% stocks and has a significant fraction in bond index funds which are used to rebalance into stock index funds when necessary.
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HomerJ
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Re: Losing Money with Index Funds

Post by HomerJ »

MissOptimist wrote: Sat Sep 19, 2020 11:37 am
cheese_breath wrote: Sat Sep 19, 2020 11:28 am I'm curious as to why the question is specific to index funds. Are you implying you might have lost less in active funds?
I only have index funds. VTSAX, VBTLX and VFIAX...I just recently opened my Vanguard account and am a complete beginner. :o
Read some of the books on the wiki.

https://www.bogleheads.org/RecommendedReading.php

Those are three very good funds. If you have mostly reached your financial goals, pick a conservative Asset Allocation to protect your money.

Maybe 40% VTSAX, 20% VFIAX, 40% VBTLX. That's 60/40 stocks/bonds. Or maybe 40/60 stocks/bonds with 30% VTSAX, 10% VFIAX, 60% VBTLX.

Read the books, then choose what works for your individual situation.

You asked when to pull money? Well, if the market is up, pull from the stock index funds since they will have grown... If the market is down, pull from the bond index funds, since they will have kept their value.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Northern Flicker
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Re: Losing Money with Index Funds

Post by Northern Flicker »

UpperNwGuy wrote: Sat Sep 19, 2020 7:43 am The only way to lose money with index funds to sell them at a loss soon after you buy them. The longer you hold them, the less likely that is to happen.
Those two sentences are inconsistent. The second sentence is correct, but there are no guarantees that you will avoid monetary loss over any length holding period.
Risk is not a guarantor of return.
alex_686
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Re: Losing Money with Index Funds

Post by alex_686 »

whereskyle wrote: Sat Sep 19, 2020 10:23 am
alex_686 wrote: Sat Sep 19, 2020 8:49 am This is a false statement based in a cognitive error. If the statement was true then nobody had lost any money investing in Pets.com or WeWork.

You mark your positions to the market. That is your gain or loss. Or at least how I do it as a professional in portfolio metrics.
I understand your point, but the beauty of total-market index funds is that they never go to zero, unlike individual stocks. So even when an index fund purchase puts 1% on Pets.com, and pets.com fails, all the index investor needs to do is wait for the index to go back up before selling.

I agree with you entirely that a lower balance shows a loss in that the investor cannot go to the broker and get the money that she invested back. But I disagree that it shows that you lost money permanently because we both know that, if you can afford to wait, you will have more money than you put in eventually.
I will counter with a post from the OP:
MissOptimist wrote: Sat Sep 19, 2020 12:35 pm Never a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to?
One could make the assumption that one has a unlimited time line and unlimited risk. However, this is not the case. People do have cash flow needs that need to be meet.

However, even this falls apart under closer examination, specifically the random walk of the market. Yes, the market vaguely heads upwards. However, the market does not mean revert. If the market falls off a cliff it does not mean revert eventually to its old level. It meanders up for it new position.

I am not sure which cognitive bias you are falling into. Probably Loss Aversion. But closing your eyes does not effect where you portfolio is today and how it will meet your future goals.

I should note that while on cannot 'lock in losses', one also cannot 'lock in gains'. Past performance has almost zero effect on future movements. This is true if one has a large unrealized loss or gain. This is true for first order items. Maybe not true for second order items like after-tax returns.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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LilyFleur
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Re: Losing Money with Index Funds

Post by LilyFleur »

For now, keep saving. Good job on getting started!

Coming to the best strategy for withdrawing from your savings in retirement is a process of examining complex factors. I'm 60, and retired, and read this forum a lot for more information on how to make my money last while still enjoying life in retirement.

Withdrawal strategies will no doubt change before you are 85.

With savings, you have options when you are old.

"cash out ALL of their investments" in retirement --this isn't generally a strategy that is well supported on this forum. It's simplistic thinking, and people here realize that spending from savings in retirement is complicated. I don't even know what you mean by "cashing out." Do you mean you sell your bond and index funds from tax-deferred and put it in cash in your tax-deferred account, or do you sell everything in tax-deferred and put it into a taxable account, which would unnecessarily put you into a very high tax bracket, and you would lose the protections against creditors that are legally assured in a 401k? Are you "cashing out" only tax-deferred? Maybe it would be better to convert some of the tax-deferred in early retirement to a Roth. If you withdraw $150,000 one year in retirement to do a lot of travel, what will that do to your Medicare bill the following year? Would it be better to live one year in early retirement from a taxable account in order to accomplish a particular strategy, ie, receiving generous ACA subsidies? When would you want to take a tax hit to convert to Roth, if ever?

It's complicated. Read the Wiki.
SimplicityNow
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Re: Losing Money with Index Funds

Post by SimplicityNow »

MissOptimist wrote: Sat Sep 19, 2020 12:11 pm
livesoft wrote: Sat Sep 19, 2020 12:01 pm
MissOptimist wrote: Sat Sep 19, 2020 10:11 amWhat if BEFORE 2008, they sell their shares or cash out, and after the economy recovers, they reinvest all that money again, will they be in a better situation??
Clearly, hindsight is wonderful and I can claim that my hindsight is better than 20/20. But instead of reinvesting "after the economy recovers" they would have to reinvest BEFORE the economy recovers, say in early March 2009.

And in a similar way, the economy has not recovered in 2020, but if they reinvested in late March 2020, then they would be in a better situation.
So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
A good time to sell is when you need the money. If you don't need the money the general philosophy is leave it alone until you need the money.
If you are looking for the optimum time to sell, no one here can tell you that. Hindsight is 20/20.
If you are uncomfortable with the percentage of stocks index funds you own relative to your entire portfolio then you should consider changing it to something more conservative. That would require selling stocks and buying fixed income assets like bonds, CDs. The best time to do that is when you decide you want to change your asset allocation ( %of stocks vs fixed income).
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Re: Losing Money with Index Funds

Post by tibbitts »

MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
The problem with cashing out all investments is that all the SWR strategies assume a reasonable mix of stocks and bonds. So that might mean that $3M is not really "enough", depending on the amount. So for most people the plan is to gradually move your allocation to make sure you have enough assets in short term or near-short-term assets (cash, conservative bonds, etc) to support your spending needs for at least several years, some would say maybe a decade, to weather any downturns. You might end up selling when equity markets aren't doing too well, but hopefully not a large percentage of your funds at the worst possible time.
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Re: Losing Money with Index Funds

Post by dogagility »

MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
In simple terms, you take money out of your portfolio when you need to spend it. Otherwise, Bogleheads remain fully invested at all times (at their chosen asset allocation).
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Re: Losing Money with Index Funds

Post by mrspock »

MissOptimist wrote: Sat Sep 19, 2020 7:33 am I am curious, what was the biggest amount of money you ever lost with investing in index funds? And how did you get through it? :shock:
Maybe $600k? I got through it by buying another $200k of index funds via rebalancing, after the smoke cleared, Mr. Market donated another $100k into my retirement fund.

Honestly, the fluctuations in my portfolio matters not a bit to me. The day I hit a given high watermark on my portfolio, is the day I could retire with near perfect confidence at a 3.5% SWR. What the market does after that, is only pure opportunity to make more money. The sheer beauty of being an index investor in the accumulation phase, is if you are patient, you win no matter what -- the only questions are when & by how much. If the market continues to go up, you buy a bit less equities, and buy more bonds, you make money. If the market goes down, you buy a bit..potentially a lot more equities, wait....and make a lot of money.

This isn't hard or complicated, people just like to make it so.

Edit: I should add... if what OP meant was permanently losing capital (vs. portfolio value fluctuation), then my answer is $0 dollars. I’ve never actually sold a dime of my portfolio other than to TLH within minutes.
Last edited by mrspock on Sat Sep 19, 2020 9:29 pm, edited 2 times in total.
flaccidsteele
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Re: Losing Money with Index Funds

Post by flaccidsteele »

As long as an investor has the correct temperament, the only thing that they need to know is that the US market always recovers. Always. It’s never different this time

That’s the only thing I knew when I started reading about investing during Black Monday/S&L crisis

At that point, it’s very hard to lose when investing in a US index
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Toons
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Re: Losing Money with Index Funds

Post by Toons »

It is Money
It can be Replaced.
Don't look back
Wasted Time And
Energy
:mrgreen:
Last edited by Toons on Sat Sep 19, 2020 5:35 pm, edited 1 time in total.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

LilyFleur wrote: Sat Sep 19, 2020 3:52 pm For now, keep saving. Good job on getting started!

Coming to the best strategy for withdrawing from your savings in retirement is a process of examining complex factors. I'm 60, and retired, and read this forum a lot for more information on how to make my money last while still enjoying life in retirement.

Withdrawal strategies will no doubt change before you are 85.

With savings, you have options when you are old.

"cash out ALL of their investments" in retirement --this isn't generally a strategy that is well supported on this forum. It's simplistic thinking, and people here realize that spending from savings in retirement is complicated. I don't even know what you mean by "cashing out." Do you mean you sell your bond and index funds from tax-deferred and put it in cash in your tax-deferred account, or do you sell everything in tax-deferred and put it into a taxable account, which would unnecessarily put you into a very high tax bracket, and you would lose the protections against creditors that are legally assured in a 401k? Are you "cashing out" only tax-deferred? Maybe it would be better to convert some of the tax-deferred in early retirement to a Roth. If you withdraw $150,000 one year in retirement to do a lot of travel, what will that do to your Medicare bill the following year? Would it be better to live one year in early retirement from a taxable account in order to accomplish a particular strategy, ie, receiving generous ACA subsidies? When would you want to take a tax hit to convert to Roth, if ever?

It's complicated. Read the Wiki.
+1

I've been learning this crap for years to the point that others have paid me well to advise them on it, and even then, I can't tell you exactly what my withdrawal strategy should be when the time comes.

I'm not there yet and won't really know until I better understand what life will look like at that time.

IMO, it's far more complicated to spend money than to save it.
Tattarrattat
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Re: Losing Money with Index Funds

Post by Tattarrattat »

Been buying SP500, Total Stock Market and Target funds in retirement and regular accounts since the 1990s. Have never sold any shares, so never lost. Yes, there are drawdowns here and there. That's not a loss unless you sell. Will start selling I suppose, when there is no longer a paycheck coming in, to fund post employment life.
MotoTrojan
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Re: Losing Money with Index Funds

Post by MotoTrojan »

MissOptimist wrote: Sat Sep 19, 2020 11:37 am
cheese_breath wrote: Sat Sep 19, 2020 11:28 am I'm curious as to why the question is specific to index funds. Are you implying you might have lost less in active funds?
I only have index funds. VTSAX, VBTLX and VFIAX...I just recently opened my Vanguard account and am a complete beginner. :o
VTSAX and VFIAX are nearly identical. VTIAX (international) would be a better 3rd fund here (3-fund portfolio).
tibbitts
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Re: Losing Money with Index Funds

Post by tibbitts »

MotoTrojan wrote: Sat Sep 19, 2020 5:38 pm
MissOptimist wrote: Sat Sep 19, 2020 11:37 am
cheese_breath wrote: Sat Sep 19, 2020 11:28 am I'm curious as to why the question is specific to index funds. Are you implying you might have lost less in active funds?
I only have index funds. VTSAX, VBTLX and VFIAX...I just recently opened my Vanguard account and am a complete beginner. :o
VTSAX and VFIAX are nearly identical. VTIAX (international) would be a better 3rd fund here (3-fund portfolio).
This is correct about those funds being very similar, but some of us have both for tax-loss-harvesting in taxable. There are probably more appropriate pairings available now but those two aren't far off.
000
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Re: Losing Money with Index Funds

Post by 000 »

Every investment, whether stocks, land, bonds, cash, precious metals, or anything else and whether indexed or actively managed can go to zero.

Accepting this and creating a diversified portfolio is what allows me to invest.

In fact, because I know that cash has risk too, I have decided that "invest I must".
bondsr4me
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Re: Losing Money with Index Funds

Post by bondsr4me »

BalancedJCB19 wrote: Sat Sep 19, 2020 8:03 am Don't confuse volatility with losing money.
You have said it very well...some people do confuse volatility with losing money.
Northern Flicker
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Re: Losing Money with Index Funds

Post by Northern Flicker »

Some stock investments are speculative. The intent is to try to buy low and sell high. The market is far too unpredictable for this approach to be reliable.

A diversified portfolio of stocks like an index fund has eliminated by diversification most of the risk of going to zero, or of falling and never recovering, or of falling and taking decades to recover. While these things can happen when holding index funds, they are extreme events like a meteor striking earth or hyperinflation or the collapse of the government and a revolution etc.

Thus, by holding a mix of stock and bonds, the stocks are a long-term/indefinite holding, and the bonds provide safety and stability when you need to take a withdrawal when stocks are down.

If your allocation in retirement were 50% stocks and 50% bonds, and you needed to make an income withdrawal, you would withdraw from the overweight asset, not sell all of your stock.
Risk is not a guarantor of return.
UpperNwGuy
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Re: Losing Money with Index Funds

Post by UpperNwGuy »

Northern Flicker wrote: Sat Sep 19, 2020 2:02 pm
UpperNwGuy wrote: Sat Sep 19, 2020 7:43 am The only way to lose money with index funds to sell them at a loss soon after you buy them. The longer you hold them, the less likely that is to happen.
Those two sentences are inconsistent. The second sentence is correct, but there are no guarantees that you will avoid monetary loss over any length holding period.
Thanks for posting a partial quote to make me look bad! I gave an example of what I was talking about in the part you didn't quote.
Silverado
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Re: Losing Money with Index Funds

Post by Silverado »

HomerJ wrote: Sat Sep 19, 2020 11:42 am
MissOptimist wrote: Sat Sep 19, 2020 7:33 am I am curious, what was the biggest amount of money you ever lost with investing in index funds? And how did you get through it? :shock:
Ignore the people who say you don't lose until you sell.

If you have $500,000 in a stock index fund, and it drops 50%, you have actually lost $250,000. And it's hard.
I get the sentiment, but curious about something. How do you do the mental accounting if you have invested a total of $200,000 over your investing career? Why wouldn’t you say ‘I’ve gained $50,000?' Because if you say 'lost $250,000’ that must mean you are reconciling every day. So a bunch of days you would have been claiming gains.

There’s some messing with the time variable that vastly changes how things are portrayed.
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Re: Losing Money with Index Funds

Post by DSBH »

MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
My AA was 100% stock when I was in my 30's, now (as a retiree in my early 60's) it's 60% stock / 40 % bond and likely to stay there for as long as I can manage my portfolio. In a way, I have been "cashing out" my stock holding over time in exchange for less volatile intermediate bond holdings.

When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.

I wish I knew when the economy is about to turn bad or when the economy is about to turn up before the market knows it, but I will never have such knowledge. Increasing bond holdings over time is the only way I know how to "cash out".
John C. Bogle: "Never confuse genius with luck and a bull market".
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familythriftmd
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Re: Losing Money with Index Funds

Post by familythriftmd »

whereskyle wrote: Sat Sep 19, 2020 8:36 am The smart thing to do when the balance goes down at every single market drop in US history is to buy more, not sell. And if your balance goes down before it goes up, you did not lose any money.
By smart, don't you mean lucky? You don't know you have a trough until it goes back up again. It would seem like dollar cost averaging would take all the guess-work out of it, right?
Thrift stores, outlets and market corrections have this in common: you're buying on sale.
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
Last edited by MissOptimist on Sat Sep 19, 2020 8:52 pm, edited 1 time in total.
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HomerJ
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Re: Losing Money with Index Funds

Post by HomerJ »

flaccidsteele wrote: Sat Sep 19, 2020 5:30 pm As long as an investor has the correct temperament, the only thing that they need to know is that the US market always recovers. Always. It’s never different this time
This could be false.

It always HAS recovered. Past tense. You cannot say with certainty what will happen in the future.

Also, even in the actual past, it took a long while to recover after the Great Depression. If one was 100% stocks in 1929, and you lost your job or were retired, you could have indeed gone broke before the market recovered.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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HomerJ
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Re: Losing Money with Index Funds

Post by HomerJ »

MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
Again, read the books in the suggested reading list. This is your life. It's worth taking a couple of hours to read a book or two right?

https://www.bogleheads.org/RecommendedReading.php

But yes, in retirement, when you are pulling money, sell stocks when they are up, and sell bonds when stocks are down.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Wiggums
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Re: Losing Money with Index Funds

Post by Wiggums »

RyeBourbon wrote: Sat Sep 19, 2020 12:37 pm
There should never be a need to cash out all your investments. In retirement, you might have an asset allocation of 40% stock, 40% bonds and 20% cash. Use the cash for expenses and periodically rebalance to 40/40/20.
I agree. I will always have some % in equities. Fixed income is just as important since we all have expenses and emergencies.
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Re: Losing Money with Index Funds

Post by RyeBourbon »

MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
The markets are a bit disconnected from the economy, so it's easier to think about the markets and where your balances are. If stocks out-perform bonds (a "good" economy perhaps), then at a periodic rebalance, you'll sell stocks to buy bonds, returning you to your desired asset allocation. If bonds are doing better, when you rebalance (annually perhaps) you'll sell bonds and buy stocks, presumably at a discount to where they'll be in a few years. See how it works?
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Re: Losing Money with Index Funds

Post by alex_686 »

MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
The logic behind DSBH statement is simple and intuitive, like the idea that heavy objects fall faster than light ones. Not based in any theory and breaks down at critical times. It is a example of either mental accounting or cognitive load.

To illustrate, consider person A with 1.25m in assets, 60/40 split. The year was a bad year and they ended up with 1m. So now they are 50/50.

Then person B walks into the room with 1m and asks for a asset allocation. Sane goals and risk tolerance as person A. What do you recommend?

Probably not 50/50 - person A got there by accident. You would recommend a AA most likely to maximize their chances of meeting their goals. Which, because it is optimal should then be A’s AA as well.

Unrealized losses don’t matter. You should start with a clean sheet of paper. Setting “market expectations” is important so you can determine the possibility of a shortfall towards you goals.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: Losing Money with Index Funds

Post by flaccidsteele »

HomerJ wrote: Sat Sep 19, 2020 8:52 pm
flaccidsteele wrote: Sat Sep 19, 2020 5:30 pm As long as an investor has the correct temperament, the only thing that they need to know is that the US market always recovers. Always. It’s never different this time
This could be false.

It always HAS recovered. Past tense. You cannot say with certainty what will happen in the future.

Also, even in the actual past, it took a long while to recover after the Great Depression. If one was 100% stocks in 1929, and you lost your job or were retired, you could have indeed gone broke before the market recovered.
I could be wrong

But by that time I’ll be long dead and anybody still alive from this forum won’t be able to tell me
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Losing Money with Index Funds

Post by DSBH »

MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
As others have mentioned, if stocks are not doing well (e.g. “downturn”) causing my 60/40 AA to deviate by at least 5% (say to 55/45) I will sell bonds to buy stocks to bring the AA back to 60/40 (earlier in the year), and vice versa (late last month) . I may also rebalance around the end of the year if I feel that the AA deviation is “large” enough, as tax efficient as I can.
John C. Bogle: "Never confuse genius with luck and a bull market".
Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
Yes, that is the point.

Whether you sell stocks or bonds has nothing to do with how much you enjoy your life, it's simply a strategy to manage your wealth in retirement.

If you save a lot, you will have a lot that you can afford to spend, whether it comes from your stocks or from your bonds.

I'm afraid you aren't going to be able to learn everything you need to know from our answers here though. You really do need to do some reading on your own in order to wrap your mind around it so that the answers here start making more sense.

Thankfully none of the recommended reading is very long or hard to understand. A lot of it is light, easy, and quite fun to read, so you will probably enjoy the process.
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dratkinson
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Re: Losing Money with Index Funds

Post by dratkinson »

MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
Inflation. If you "cash out", then inflation eats away at your retirement cash, 1-3%/yr. Between the double effects of inflation and your spending, your nest egg is eaten away sooner. What to do?

Solution: you must have some stocks to offset inflation... so you should never cash out. You just sell what you need, when you need it. Easy peasy.


40/60 AA. This AA is reported to last longest in retirement under withdrawal pressure. (Recall a newer report saying 30/70 is new 40/60.)

Example. Assume a $3M, 40/60 AA, going into retirement. This means you have:
--$1.2M in stocks.
--$1.8M in bonds.
--$3.0M retirement nest egg.

Assume 40% stock crash. This means you now have:
--$0.7M in stocks.
--$1.8M in bonds.
--$2.5M retirement nest egg.

So... withdraw your retirement living expenses from bonds, while you wait for stocks to recover (expected within ~4yrs).


Are there any methods that work better than full-time market index investing. (Can you sell before a crash and buy after a crash?) No.

Read Swedroe's book, Seeking Alpha, describing failure, after failure,... by those trying to beat the market.


You need a forum review. This is the fastest way to put you on the road to a better retirement and answer all of your questions.

Forum review. As a courtesy to all, the forum will review all of your investments and retirement planning. How? Simple.
--Copy the sticky "Asking Portfolio Questions" to your PC as a Word document.
--Edit sticky offline with all of your information. (ALL of your information.) Ask all of your questions. When done...
--Post it into a new topic requesting a forum review. (This topic is too long to change direction.)
--Post a link in this topic, to your new topic... so your followers here, can find you there.

And we'll resume from there. And since it's a new topic, you'll pick up some new followers to help with a forum review... not just us telling you that you can't time the market.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

Kelrex wrote: Sat Sep 19, 2020 9:34 pm
MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
Yes, that is the point.

Whether you sell stocks or bonds has nothing to do with how much you enjoy your life, it's simply a strategy to manage your wealth in retirement.

If you save a lot, you will have a lot that you can afford to spend, whether it comes from your stocks or from your bonds.

I'm afraid you aren't going to be able to learn everything you need to know from our answers here though. You really do need to do some reading on your own in order to wrap your mind around it so that the answers here start making more sense.

Thankfully none of the recommended reading is very long or hard to understand. A lot of it is light, easy, and quite fun to read, so you will probably enjoy the process.
I already read some of the links here but I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids :confused
000
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Re: Losing Money with Index Funds

Post by 000 »

MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I already read some of the links here but I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids :confused
You need a rebalancing strategy.

A portfolio invested in 100% cash has a lot of risk too, namely inflation and insufficient growth.
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

dratkinson wrote: Sat Sep 19, 2020 9:39 pm
MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
Inflation. If you "cash out", then inflation eats away at your retirement cash, 1-3%/yr. Between the double effects of inflation and your spending, your nest egg is eaten away sooner. What to do?

Solution: you must have some stocks to offset inflation... so you should never cash out. You just sell what you need, when you need it. Easy peasy.


40/60 AA. This AA is reported to last longest in retirement under withdrawal pressure. (Recall a newer report saying 30/70 is new 40/60.)

Example. Assume a $3M, 40/60 AA, going into retirement. This means you have:
--$1.2M in stocks.
--$1.8M in bonds.
--$3.0M retirement nest egg.

Assume 40% stock crash. This means you now have:
--$0.7M in stocks.
--$1.8M in bonds.
--$2.5M retirement nest egg.

So... withdraw your retirement living expenses from bonds, while you wait for stocks to recover (expected within ~4yrs).


Are there any methods that work better than full-time market index investing. (Can you sell before a crash and buy after a crash?) No.

Read Swedroe's book, Seeking Alpha, describing failure, after failure,... by those trying to beat the market.


You need a forum review. This is the fastest way to put you on the road to a better retirement and answer all of your questions.

Forum review. As a courtesy to all, the forum will review all of your investments and retirement planning. How? Simple.
--Copy the sticky "Asking Portfolio Questions" to your PC as a Word document.
--Edit sticky offline with all of your information. (ALL of your information.) Ask all of your questions. When done...
--Post it into a new topic requesting a forum review. (This topic is too long to change direction.)
--Post a link in this topic, to your new topic... so your followers here, can find you there.

And we'll resume from there. And since it's a new topic, you'll pick up some new followers to help with a forum review... not just us telling you that you can't time the market.
Great simplified detailed info!
I will come back here with the sticky portfolio questions answered
MotoTrojan
Posts: 10659
Joined: Wed Feb 01, 2017 8:39 pm

Re: Losing Money with Index Funds

Post by MotoTrojan »

tibbitts wrote: Sat Sep 19, 2020 5:46 pm
MotoTrojan wrote: Sat Sep 19, 2020 5:38 pm
MissOptimist wrote: Sat Sep 19, 2020 11:37 am
cheese_breath wrote: Sat Sep 19, 2020 11:28 am I'm curious as to why the question is specific to index funds. Are you implying you might have lost less in active funds?
I only have index funds. VTSAX, VBTLX and VFIAX...I just recently opened my Vanguard account and am a complete beginner. :o
VTSAX and VFIAX are nearly identical. VTIAX (international) would be a better 3rd fund here (3-fund portfolio).
This is correct about those funds being very similar, but some of us have both for tax-loss-harvesting in taxable. There are probably more appropriate pairings available now but those two aren't far off.
Agreed. I’m presuming the OP doesn’t hold them both for that reason (TLH), given the question.
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