I Did a Horrible Thing (in Hindsight) [went to cash]

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RTR2006
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I Did a Horrible Thing (in Hindsight) [went to cash]

Post by RTR2006 »

So... a while ago when I thought the world was coming to an end (leaving the politics out of it), I sold much of our holdings. Yes, I have probably lost a runup of $200,000 or more. Now I am sitting on about $250,000 in cash doing nothing. We own a bit of AT&T, a bit of GE, and a bit of Chevron (totaling about $75,000), but mostly bonds and fixed assets in my IRA account (adding up to about another $575,000).

I retired four years ago but have not had to withdraw cash from anything other than from a cash account, which is winnowing down, and we started collecting SS earlier this year (I am 67, wife is 68). With the 5.9% increase scheduled for 2022 we'll be netting around $4600/month, and can for the most part live off of that. (Home is paid off, no car loans or credit card debt).

Question: now that the Dow is at an all-time high, do I try and put some or all of that cash back into the market, or just move it into a safer investment (such as Vanguard Admiral class intermediate and long-term bond funds), or something different?

Your thoughts are welcome.

Please don't beat me up... I've been doing that to myself for the last two years.

Thanks,

RTR
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arcticpineapplecorp.
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Re: I Did a Horrible Thing (in Hindsight)

Post by arcticpineapplecorp. »

Only you can determine your need, ability, and willingness to take risk. Figure that, then write an IPS and invest accordingly. You Dig?

read more here:

https://www.cbsnews.com/news/asset-allo ... -you-take/

https://www.cbsnews.com/news/asset-allo ... tolerance/

https://www.cbsnews.com/news/asset-allo ... -you-need/

https://www.cbsnews.com/news/asset-allo ... ing-goals/

also you should look at prior bear markets, like in the example below from the Great Recession, how different allocations fared:

Image

you can also use this as a guide (note past returns are not indicative of future returns) from Vanguard:
https://investor.vanguard.com/investing ... allocation

IPS:
https://www.bogleheads.org/wiki/Investm ... _statement
Last edited by arcticpineapplecorp. on Mon Dec 06, 2021 6:56 pm, edited 3 times in total.
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minimalistmarc
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Re: I Did a Horrible Thing (in Hindsight)

Post by minimalistmarc »

Seems that you have “won the game” so don’t really need to play. I would put it all back in now at 60:40 or whatever you feel comfortable with.
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sergeant
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Re: I Did a Horrible Thing (in Hindsight)

Post by sergeant »

You've been here a long time. You probably know the answer is to go to an AA you are comfortable with. Since you don't seem to need the portfolio to meet expenses I wouldn't stress about the mistake.
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bloom2708
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Re: I Did a Horrible Thing (in Hindsight)

Post by bloom2708 »

I would try to get to 25 to 30% stock index funds over the next 3-6 months.

It will help you keep up with inflation over the longer term.

My parents are at 35% stocks. when stocks are zooming up they want 90% stocks. When they are zooming down, they want 0% stocks.

If you are very risk intolerant (stock risk at least), then you can stay put. But then you introduce inflation risk.
robphoto
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Re: I Did a Horrible Thing (in Hindsight)

Post by robphoto »

I don't think you need to characterize what you did as "a horrible thing." Seemed reasonable at the time, less so in retrospect.

You're relatively young, I'd recommend a plain vanilla 50/50 portfolio, do it now, don't check it very often.

But that assumes you've somehow changed and won't panic again.

I think you should get a financial advisor and leave it to them to manage this; you've got to find a mechanism to make you feel more detached from this.
delamer
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Re: I Did a Horrible Thing (in Hindsight)

Post by delamer »

The Dow/S&P500/NASDAQ are going to hit lots of all-time highs during the remaining 20+ years (hopefully) of your life.

And not only are you missing out on price appreciation by staying out of stocks, you are missing out on dividends too.

If you put 30% of your portfolio in stocks, that will be sufficient for growth but limit your downside.

In another Great Recession with a 50% drop in stocks, you’d have a (temporary) decline of 15% in your portfolio.

You might consider the LifeStrategy Conservative Growth Fund to decrease your temptation to fiddle.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
exodusNH
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Re: I Did a Horrible Thing (in Hindsight)

Post by exodusNH »

RTR2006 wrote: Fri Oct 22, 2021 3:54 pm So... a while ago when I thought the world was coming to an end (leaving the politics out of it), I sold much of our holdings. Yes, I have probably lost a runup of $200,000 or more. Now I am sitting on about $250,000 in cash doing nothing. We own a bit of AT&T, a bit of GE, and a bit of Chevron (totaling about $75,000), but mostly bonds and fixed assets in my IRA account (adding up to about another $575,000).

I retired four years ago but have not had to withdraw cash from anything other than from a cash account, which is winnowing down, and we started collecting SS earlier this year (I am 67, wife is 68). With the 5.9% increase scheduled for 2022 we'll be netting around $4600/month, and can for the most part live off of that. (Home is paid off, no car loans or credit card debt).

Question: now that the Dow is at an all-time high, do I try and put some or all of that cash back into the market, or just move it into a safer investment (such as Vanguard Admiral class intermediate and long-term bond funds), or something different?

Your thoughts are welcome.

Please don't beat me up... I've been doing that to myself for the last two years.

Thanks,

RTR
$20K in I Bonds this year, $20K in I Bonds Jan 3. That gives you $40K of inflation-protected (0% real) money. You can't touch that for 12 months. If you cash them in after that, you will sacrifice 3 months interest until you've held them for 5 years.

I'd put the rest in a balanced or a 2020 target date fund and do not think about or look it. You have enough FI to not have to worry about stocks crashing. Since the stock market, over time, goes up, you're always going to be hitting new highs.
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BolderBoy
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Re: I Did a Horrible Thing (in Hindsight)

Post by BolderBoy »

Step #1 = decide upon an asset allocation with which you are comfy.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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retiredjg
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Re: I Did a Horrible Thing (in Hindsight)

Post by retiredjg »

Ok, you made a mistake. No sense in continuing it.

A 100% bond/cash/fixed income portfolio returns less but has more risk than a portfolio with a small amount of stocks. I suggest that you invest all that cash in something that has between 20% and 30% stocks. This will reduce your risk and increase your return. Win - win.

It does not matter that the stock market is high - the stock market is almost always at or near an all time high. Just invest the money. If you just cannot do it, try to get it all invested within 6 months.
Marseille07
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Re: I Did a Horrible Thing (in Hindsight)

Post by Marseille07 »

BolderBoy wrote: Fri Oct 22, 2021 4:19 pm Step #1 = decide upon an asset allocation with which you are comfy.
Yes, this is the answer. It's not so much about 250K of cash sitting or 200K lost, it's about deciding the AA you want to get to and making it happen.
aristotelian
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Re: I Did a Horrible Thing (in Hindsight)

Post by aristotelian »

You didn't lose anything, you just didn't put money at risk. I question whether it was really a mistake. It sounds like you may have been invested in an allocation you were not comfortable with. Probably the correct solution is to pick an allocation between your former one and your current one but you must be willing to stick with it, even if there is a correction starting tomorrow
Normchad
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Re: I Did a Horrible Thing (in Hindsight)

Post by Normchad »

You didn’t do a horrible thing. Lots of people are in a similar boat.

Here’s what you’ve done really well. You’ve had a long career and have lived within your means. You’ve planned well. And now you’re at a point where your SS etc cover all your necessities. That’s outstanding! You have won the game!

As for your investments. You don’t really need them to support you, so you can bear some risk there. On the other hand, you don’t need them to support you, so you don’t need to take any risk at all.

Would you be comfortable with something like the VG Lifestrategy Fund? It’s an all in one fund, bonds and stock, foreign and domestic. You could just set it and forget it. Never need to worry about it.
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David Jay
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Re: I Did a Horrible Thing (in Hindsight)

Post by David Jay »

delamer wrote: Fri Oct 22, 2021 4:05 pmYou might consider the LifeStrategy Conservative Growth Fund to decrease your temptation to fiddle.
This is an excellent recommendation.
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retiredjg
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Re: I Did a Horrible Thing (in Hindsight)

Post by retiredjg »

David Jay wrote: Fri Oct 22, 2021 5:13 pm
delamer wrote: Fri Oct 22, 2021 4:05 pmYou might consider the LifeStrategy Conservative Growth Fund to decrease your temptation to fiddle.
This is an excellent recommendation.
I like this recommendation as well.
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AnnetteLouisan
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by AnnetteLouisan »

Maybe you were right. Maybe you were just right early.

How many 14 year raging bull markets have we experienced? 16 year?
Boatguy
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Boatguy »

I know that you both started receiving SS earlier this year, but it might be worth a few minutes to look at opensocialsecurity.com and enter your data as if you haven’t started collecting yet. A person born in 1953 or earlier still has a chance to file and suspend, meaning that one can collect spousal benefits while still deferring his or her own until a later date. Depending on who was the higher wage earner, you might have a chance to better maximize your lifetime SS benefits. I believe your claiming date is recent enough that you can reverse things with SSA if you choose to.

Not saying that this is a slam dunk, but could be interesting (unless you’ve already done your due diligence, of course).
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by whodidntante »

You lament your previous market timing and then ask if you should market time. I don't believe stocks are safer now. Stocks are always risky. I would suggest not investing more in stocks than you can stand to hold in a severe drawdown.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Wiggums »

Now that the money is not in equities, I would DCA back in. Schedule the transfer of x dollars per week (or whatever timeframe that you like). I schedule our purchases and that allows me to ignore the market noise. We purchases weekly, however, you end up with many more lots.

For tax deferred, I do like the recommendation to use a life strategy fund. Again, it puts that part of the portfolio on autopilot.

When market went down 35%, you never know if the market will bounce and then drop even further. Hindsight is always 2020. We reduced our AA after a few years in retirement. The market will always go up and down and that’s ok. We are protecting against a significant drop in the market with a five or 10 year recovery.
"I started with nothing and I still have most of it left."
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Alto Astral
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Alto Astral »

RTR2006 wrote: Fri Oct 22, 2021 3:54 pm $250,000 in cash ...bonds and fixed assets in my IRA account (adding up to about another $575,000).
Before you sold, your AA was 30/70, assuming 250k was in stock and 575k was in bonds. I don't believe you did anything horrible, you just recognized your risk tolerance. Since you are able to live mostly off of SS, it doesn't matter as much where the $250k goes. I believe it should NOT all go in stocks, since you will likely stress out when (not if) another event like this happens. How would you feel 10% of you AA in stock? This would be ~85k. Put 15k every month and you will be done in 6 months.
Beehave
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Beehave »

You're not alone. I have a close friend who is a seasoned investor who is retired and told me his 401k has been all cash for months now.

I think the safest bet is diversification that anticipates possibilities of growth, contraction, and inflation. A fund that may speak to your concerns about market risk vs. missing out and also has inflation protection not just from stocks is the Vanguard Target Retirement Income Fund.

It is 30% stock and 70% bond.
Stocks are 17.3% Total US Idx, 11.91% Total Int'l Idx.
Bonds are 37.43% Total Bond Ids, 16.1% Total In'l Bond, and 17.11% Short Term Inflation Protected Bond.

The fund rebalances for you. I'm not suggesting tossong all your cash into this fund, but would suggest that its diversification, inclusion of TIPS, and conservative allocation to stocks may be a nice re-entry vehicle for re-entering the fray even when the market is at record heights. If you get comfortable once again through a vehicle such as this one, you may be able to reevaluate your overall asset allocation based on this very broadly diversified, conservative holding.

And don't beat your self up! You are debt free. You and your spouse have worked careers together such that your intellectual capital has created an inflation-protected Social Security annuity and full-ownership of assets that cover a significant chunk of your ongoing needs and expenses. You have done very well!!!!!

My advice is to dip your feet back in the market without making sudden moves, get a feel for your "sleep well at night allocation and rebalancing method. Consider using a balanced fund or mix of balanced funds to achieve diversification and automate at least some of the rebalancing.

A mix of funds is not ordinarily what's suggested in these threads, but maybe for you some combo of Cash (you already have it) + Target Retirement Income (conservative highly diversified, auto rebalance, but maybe heavier into foreign holdings than you'd like), + Vanguard Balanced Index (60/40 stock to bond, all US Index holdings) would be a trifecta that hits the spot for you and whose overall allocation ratios you can fiddle with.

For example, a 1/3, 1/3, 1/3 even split among the 3 would give you roughly:

6% foreign bonds, 6% TIPS, 23% US bonds, 33% cash, 6% foreign stock, and 25% US stock.

If the fund mix is appealing, you can obviously play with the ratio possibilities to arrive at an allocation that you like.

Hope this is helps you think things through to arrive at what will work for you as an allocation with which you are comfortable and helps protect you and your family from the various potential future conditions. The all-cash position is not sufficiently diversified for all the unknowns and my feeling is that it will be prudent for you to find a way of diversifiying into an allocation that is more "all weather."

Best wishes.

(edited for clarity right after posting)
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arcticpineapplecorp.
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Re: I Did a Horrible Thing (in Hindsight)

Post by arcticpineapplecorp. »

aristotelian wrote: Fri Oct 22, 2021 4:51 pm You didn't lose anything, you just didn't put money at risk. I question whether it was really a mistake. It sounds like you may have been invested in an allocation you were not comfortable with. Probably the correct solution is to pick an allocation between your former one and your current one but you must be willing to stick with it, even if there is a correction starting tomorrow
it may not be a "mistake" but he's lamenting the opportunity cost.

people don't like taking the risk but they also don't like missing out on gains.

curiously when one's in the market and it goes down people think they made a mistake and when they're out of the market and it goes up they think they made a mistake. Humans are funny, aren't they?

once the OP understand's it's a double edged sword (if you want the return you really do have to take the risk) the OP can determine what portion s/he wants to place at risk and what portion you do not.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
marcopolo
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Re: I Did a Horrible Thing (in Hindsight)

Post by marcopolo »

arcticpineapplecorp. wrote: Fri Oct 22, 2021 8:42 pm
aristotelian wrote: Fri Oct 22, 2021 4:51 pm You didn't lose anything, you just didn't put money at risk. I question whether it was really a mistake. It sounds like you may have been invested in an allocation you were not comfortable with. Probably the correct solution is to pick an allocation between your former one and your current one but you must be willing to stick with it, even if there is a correction starting tomorrow
it may not be a "mistake" but he's lamenting the opportunity cost.

people don't like taking the risk but they also don't like missing out on gains.

curiously when one's in the market and it goes down people think they made a mistake and when they're out of the market and it goes up they think they made a mistake. Humans are funny, aren't they?

once the OP understand's it's a double edged sword (if you want the return you really do have to take the risk) the OP can determine what portion s/he wants to place at risk and what portion you do not.
This is a good answer.

I am surprised so many people have simply suggested the OP jump into the market at 60/40 or 50/50, or whatever AA.
That seems like a poor recommendation until we understand the OPs comfort level with the trade-off you describe. If OP followed that advice, it is just as likely they will make this same "mistake" during the next downturn.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Copernicus
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Copernicus »

RTR2006 wrote: Fri Oct 22, 2021 3:54 pm
Please don't beat me up... I've been doing that to myself for the last two years.

Thanks,

RTR
Two years. So, maybe you sold before the March 2020 turmoil. In that case, you might have felt good about being our of the market. Now you are feeling bad.
That is how the market can be - a roller coaster of emotions.
- Go for a lifestrategy fund matching your tolerance to volatility, and never look at it.
tesuzuki2002
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tesuzuki2002 »

Be happy you sold that AT&T!!
vested1
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by vested1 »

I will be the exception and admit that I too made the same mistake, but possibly for different reasons. I manage my own and my wife's retirement savings. Our portfolio was doing very well. I considered myself a good Boglehead, and a strict buy and hold investor using a 3 fund portfolio with a 60/40 AA. My mistake was not based on politics, but on the sudden 33% drop in GDP, and the exploding unemployment rate of over 20%. I foolishly tied that to the performance of our investments, so what did I do? I liquidated everything on March 12th 2020, being down 140k from our balance on 12/31/19. I watched the market soar to new heights for the rest of the year, waiting for an event that never happened.

My exit wasn't at the very bottom of the market, but it was pretty close. I kept telling myself that the reason I sold was to protect our children's inheritance, because we didn't need income from our retirement savings, with my wife having a 30k pension, and us having a combined SS of 37k (myself on a restricted application for 1/2 of my wife's PIA and her filing simultaneously at age 65). We had been retired for over four years at that point.

We reinvested in January of this year, again at 60/40 and are nearing what we had at year end of 2019. If we had used DCA instead of lump sum our balances would be far less right now. Once you admit your mistake you are free to correct it. If you stay in cash you will lose to inflation. In retrospect I should have done nothing in March of 2020, but that's the nature of mistakes. You recognize them and make a commitment not to repeat them. Ever, no matter what.

What helped me was putting things into perspective. Our current balances are still much higher than I had predicted they would be at our retirement date in 2016, and they also were when I sold everything in March of last year.

When I file for my own SS next year at 70 our fixed income will exceed 100k. It's ironic that the very thing that I was trying to avoid (less of a legacy) was negatively affected by my actions. Lesson learned, move on.
rossington
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by rossington »

RTR2006 wrote: Fri Oct 22, 2021 3:54 pm So... a while ago when I thought the world was coming to an end (leaving the politics out of it), I sold much of our holdings. Yes, I have probably lost a runup of $200,000 or more. Now I am sitting on about $250,000 in cash doing nothing. We own a bit of AT&T, a bit of GE, and a bit of Chevron (totaling about $75,000), but mostly bonds and fixed assets in my IRA account (adding up to about another $575,000).

I retired four years ago but have not had to withdraw cash from anything other than from a cash account, which is winnowing down, and we started collecting SS earlier this year (I am 67, wife is 68). With the 5.9% increase scheduled for 2022 we'll be netting around $4600/month, and can for the most part live off of that. (Home is paid off, no car loans or credit card debt).

Question: now that the Dow is at an all-time high, do I try and put some or all of that cash back into the market, or just move it into a safer investment (such as Vanguard Admiral class intermediate and long-term bond funds), or something different?

Your thoughts are welcome.

Please don't beat me up... I've been doing that to myself for the last two years.

Thanks,

RTR
All the above advice I agree with.
Your concern about what is happening in D.C. is valid, therefore I would keep a comfortable amount in cash/equivalents too.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
UpperNwGuy
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by UpperNwGuy »

rossington wrote: Sat Oct 23, 2021 4:21 am Your concern about what is happening in D.C. is valid, therefore I would keep a comfortable amount in cash/equivalents too.
I disagree.
minimalistmarc
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by minimalistmarc »

AnnetteLouisan wrote: Fri Oct 22, 2021 5:57 pm Maybe you were right. Maybe you were just right early.

How many 14 year raging bull markets have we experienced? 16 year?
This bull market is only 1.5 years old (started March 2021), so it is very young.
smectym
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Re: I Did a Horrible Thing (in Hindsight)

Post by smectym »

Normchad wrote: Fri Oct 22, 2021 4:54 pm You didn’t do a horrible thing. Lots of people are in a similar boat.

Here’s what you’ve done really well. You’ve had a long career and have lived within your means. You’ve planned well. And now you’re at a point where your SS etc cover all your necessities. That’s outstanding! You have won the game!

As for your investments. You don’t really need them to support you, so you can bear some risk there. On the other hand, you don’t need them to support you, so you don’t need to take any risk at all.

Would you be comfortable with something like the VG Lifestrategy Fund? It’s an all in one fund, bonds and stock, foreign and domestic. You could just set it and forget it. Never need to worry about it.
Very sensible answer. We can’t always be doing mental accounting on the innumerable what-ifs in our lives, financial or otherwise.

The current state of play is your now-existing assets and asset allocation. As others have suggested, press the button on a sustainable, and presumably conservative, going-forward allocation and stick with it.

The one-fund suggestions seem ideal.

We use Wellesley (VWIAX). That fund is so boring we’re practically catatonic, “Losing sleep at night” is the least of our worries. But the returns are decent through thick and thin.

LifeStrategy Conservative will also get you there, and some might prefer it: lower ER, more international exposure, all-index. . (We have reasons to favor VWIAX but that would drift off-topic). Good luck. Not only will no one else beat you up, but please don’t beat yourself up either; you haven’t done anything “wrong”
namajones
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by namajones »

So the key to not doing what you did is to have a diversified portfolio with an asset allocation that allows you not to look. That's it in a nutshell. (Also, what's with the individual stocks? Dump them and quit messing around with bets on individual companies.)

You shouldn't beat yourself up about selling. You should take it as a sign that you were in too far on the equity side. Retired? There's nothing wrong with an asset allocation that includes just 20 to 30 percent equities. I was about 28 percent equities during the Covid swoon of 2020, and I was comfortable as a clam while my friends, overexposed to equities, were freaking out. In fact, I was buying every time the market went down 600 to 800 points.

And yes, as the previous poster said, look at the VG Lifestrategy funds. Looks like one of the conservative ones is what you need.
EdNorton
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by EdNorton »

Stay the course. You've stayed the course this long, if you put the cash back into the market, you know we'll have a major correction, and then you'll really be depressed.

:sharebeer
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delamer
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by delamer »

vested1 wrote: Sat Oct 23, 2021 3:22 am I will be the exception and admit that I too made the same mistake, but possibly for different reasons. I manage my own and my wife's retirement savings. Our portfolio was doing very well. I considered myself a good Boglehead, and a strict buy and hold investor using a 3 fund portfolio with a 60/40 AA. My mistake was not based on politics, but on the sudden 33% drop in GDP, and the exploding unemployment rate of over 20%. I foolishly tied that to the performance of our investments, so what did I do? I liquidated everything on March 12th 2020, being down 140k from our balance on 12/31/19. I watched the market soar to new heights for the rest of the year, waiting for an event that never happened.

My exit wasn't at the very bottom of the market, but it was pretty close. I kept telling myself that the reason I sold was to protect our children's inheritance, because we didn't need income from our retirement savings, with my wife having a 30k pension, and us having a combined SS of 37k (myself on a restricted application for 1/2 of my wife's PIA and her filing simultaneously at age 65). We had been retired for over four years at that point.

We reinvested in January of this year, again at 60/40 and are nearing what we had at year end of 2019. If we had used DCA instead of lump sum our balances would be far less right now. Once you admit your mistake you are free to correct it. If you stay in cash you will lose to inflation. In retrospect I should have done nothing in March of 2020, but that's the nature of mistakes. You recognize them and make a commitment not to repeat them. Ever, no matter what.

What helped me was putting things into perspective. Our current balances are still much higher than I had predicted they would be at our retirement date in 2016, and they also were when I sold everything in March of last year.

When I file for my own SS next year at 70 our fixed income will exceed 100k. It's ironic that the very thing that I was trying to avoid (less of a legacy) was negatively affected by my actions. Lesson learned, move on.
It seems that if you were truly concerned about your children’s inheritance then you would have stayed in equities. They have a much longer investment timeframe than you do, so there’s no reason to react to short-term economic conditions when a long-term legacy is your main concern.

I know this may sound like I’m piling on, but I don’t mean to that. What we all do at some time or another — whether in regards to finance or other areas of life — is make an emotion-based decision and then rationalize it. So you got a bit freaked out about the impact of Covid and rationalized taking money out of stocks in order to protect the inheritance.
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NabSh
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by NabSh »

Split your cash of $250K into 5 buckets of 50k each.
Buy Vanguard Wellsley (VWINX) in monthly batches. During the last 2 downturn Wellsley has very well max loss was less than 10%.
Retired Bill
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Retired Bill »

I can't tell you what to do next, that's your decision. Would suggest you start with what was you intended AA, and where was the AA at when you made the decision to go to all cash. How often did you re-balance in the 5 years before you went to all cash? We are all risk takers when markets going our way! It takes a lot of discipline to stay the course, and follow the plan. If the AA was close to intended at time you went to all cash, then appears to me your AA allocation was too heavy on equities. If equities were well above what intended, then didn't follow the plan to re-balance and keep on course, but rather over-reacted by going to cash and likely the AA was higher that could be comfortable with. It is tough to control the emotional side of money. Make an adjustment to the AA first, before anything else. Try to learn from the experience and determine what needs to change to prevent a repeat. Remember the AA can be a changing target as we age as well as having enough, but should be changed only in measured steps and not with a leap off the cliff. Take a look at what you have now, and ask how much could that decrease in value and cause you to want to change you AA in the future, rather than rebalance and staying with the AA. As an example, if today you believe the risk of a 50/50 AA can be handled on a 250,000 portfolio, and in a couple of weeks or months equities decrease 50% and bonds decrease 0% resulting in a portfolio valued at 182,500, would you then sell bonds and buy equities? If answer is no, then still too high equity % in the AA. Hope this gives you some ideas going forward.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tarheel91 »

OP, I wanted to share my experience.

You're not alone. I did exactly the same thing. Liquidated everything on Mar 21, including bond funds. I was composed until the week of mar 9. Then I started seeing index going down 12-13% a day and triggering circuit breakers going off twice within the same day. And watching bond index fund going down by 5-6% at the same time broke my back. With the pandemic at its height and the political heads talking nonsense ... I literally thought its just a matter of days before I got infected and possibly die with my preexisting conditions. It was an extra ordinary situation, at least for me.

I wouldn't call my decision a mistake. It felt so certain at the time. I got to go by my instinct. I'm ok with my decision.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by rossington »

tarheel91 wrote: Sun Oct 24, 2021 12:54 am OP, I wanted to share my experience.

You're not alone. I did exactly the same thing. Liquidated everything on Mar 21, including bond funds. I was composed until the week of mar 9. Then I started seeing index going down 12-13% a day and triggering circuit breakers going off twice within the same day. And watching bond index fund going down by 5-6% at the same time broke my back. With the pandemic at its height and the political heads talking nonsense ... I literally thought its just a matter of days before I got infected and possibly die with my preexisting conditions. It was an extra ordinary situation, at least for me.

I wouldn't call my decision a mistake. It felt so certain at the time. I got to go by my instinct. I'm ok with my decision.
In reality it was a mistake. Hopefully you are no longer paying attention to the sources of information that caused you to panic at the time.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tarheel91 »

rossington wrote: Sun Oct 24, 2021 4:14 am In reality it was a mistake. Hopefully you are no longer paying attention to the sources of information that caused you to panic at the time.
Perhaps you're right. I guess I'm trying to justify myself.

It amazes me how some of you can remain so calm in a storm like that. I have much to learn.

I did get back in early this year with lumpsum 60/40 vtsax/vbtlx. Market going down 20% doesn't phase me but I have no doubt I'll react the same way I did if the circumstances repeat. I don't think I can change that behavior. My only hope is that the circumstances I faced in 3/2020 are unique and don't happen too often. Maybe I'm being naive.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by malligator »

tarheel91 wrote: Sun Oct 24, 2021 11:07 am
rossington wrote: Sun Oct 24, 2021 4:14 am In reality it was a mistake. Hopefully you are no longer paying attention to the sources of information that caused you to panic at the time.
Perhaps you're right. I guess I'm trying to justify myself.

It amazes me how some of you can remain so calm in a storm like that. I have much to learn.

I did get back in early this year with lumpsum 60/40 vtsax/vbtlx. Market going down 20% doesn't phase me but I have no doubt I'll react the same way I did if the circumstances repeat. I don't think I can change that behavior. My only hope is that the circumstances I faced in 3/2020 are unique and don't happen too often. Maybe I'm being naive.
If you don't think you'll be able to withstand the urge to sell again then you've got the wrong AA. It's better to buy and hold a more conservative AA than it is to run in a down market from having more risk than you're comfortable with.
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JoeRetire
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by JoeRetire »

RTR2006 wrote: Fri Oct 22, 2021 3:54 pm I retired four years ago but have not had to withdraw cash from anything other than from a cash account, which is winnowing down, and we started collecting SS earlier this year (I am 67, wife is 68). With the 5.9% increase scheduled for 2022 we'll be netting around $4600/month, and can for the most part live off of that. (Home is paid off, no car loans or credit card debt).

Question: now that the Dow is at an all-time high, do I try and put some or all of that cash back into the market, or just move it into a safer investment (such as Vanguard Admiral class intermediate and long-term bond funds), or something different?
Only you can decide what to do with your cash, so that you won't panic and bail again. For most, the best course would be to lump sum invest in index funds (not individual stocks) with something on the order of a 60/40 or 50/50 asset allocation. But you could also choose to stay in cash if that comforts you or if you are still concerned about the end of the world.

(I would have suggested consulting https://opensocialsecurity.com/ before choosing your social security claiming strategy as a way to maximize your inflation-protected, tax-beneficial, spouse and survivor beneficial guaranteed income stream, but apparently it's too late for that.)

Since you can live off of your social security benefits, you are basically handling your other assets on behalf of your heirs. Nothing you can do would be horrible for you.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by JoeRetire »

tarheel91 wrote: Sun Oct 24, 2021 12:54 amI literally thought its just a matter of days before I got infected and possibly die with my preexisting conditions.

I wouldn't call my decision a mistake. It felt so certain at the time. I got to go by my instinct. I'm ok with my decision.
Was your financial decision related to your expected impending death? Otherwise, I don't think I understand what you mean here.

If certainty and following your instinct helps you define "not a mistake", then you will probably never make any mistakes and you will clearly be okay with your decisions.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tarheel91 »

My wife is a better boglehead than I am. She trusted me with financial decisions. She never looks at her statements. In a way, I feel that I betrayed that trust when I asked her to liquidate her holdings last year. I'm going to recommend her to approach Vanguard PAS. I think she'll be better off with them.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tarheel91 »

JoeRetire wrote: Sun Oct 24, 2021 12:04 pm Was your financial decision related to your expected impending death?
For the large part, yes.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tarheel91 »

malligator wrote: Sun Oct 24, 2021 11:16 am If you don't think you'll be able to withstand the urge to sell again then you've got the wrong AA. It's better to buy and hold a more conservative AA than it is to run in a down market from having more risk than you're comfortable with.
You're absolutely right. I need to take a closer look at my AA. I think I'm beginning to get comfortable with the idea that losing 50-90% of my stock portfolio is a real possibility and never coming back in my lifetime. I watched nasdaq languish for 15 years (2000-2015). Japan example gives enough to think about.

Here's my reasoning. At 60/40, if it stinks for the next few decades. I still have nearly about ~50% to live on ... that's what I'm going to plan on ... 50% of my current assets. Adjusting lifestyle and expenses seem much easier.
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Re: I Did a Horrible Thing (in Hindsight)

Post by Investor1986 »

arcticpineapplecorp. wrote: Fri Oct 22, 2021 3:57 pm
Image
Please, can you help me understand how there numbers are calculated or direct me in any article on the web?
Taylor Larimore says for a bad bear market the rule of thumb is you should expect to loose half of your stock allocation. The image attached is similar but not quite really. For example, the table shows 100% stocks - 50% loss, but 70% stock - 30% loss and not 35%..
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by tarheel91 »

I see 50% being referenced comes from the (relatively) recent memory ... 2008. Great Depression tells us a different story, 90% loss.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by JoeRetire »

tarheel91 wrote: Sun Oct 24, 2021 12:24 pm
JoeRetire wrote: Sun Oct 24, 2021 12:04 pm Was your financial decision related to your expected impending death?
For the large part, yes.
So you went to cash because you thought you were going to die soon.
I guess I don't understand that reaction.

But don't beat yourself up over something in the past.
Figure out what you want for your future and work toward that.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Dottie57 »

My rule for investing ( especially in difficult times ) is to never go all or nothing.

Moderation is a key word for me. 70/30 stocks is my highest stock allocation. 30/70 is the lowest.

Also I try to slow down making and acting on any decisions. What sounds good on Wednesday May not sound good on Thursday.

Right now I am in my most risky period - early retirement. I am using portfolio to pay my expenses. When I start SS, I can add more risk (stocks). I don’t plan any big allocation changes during this time.


Good luck OP.
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Re: I Did a Horrible Thing (in Hindsight) [went to cash]

Post by Alto Astral »

tarheel91 wrote: Sun Oct 24, 2021 11:07 am
rossington wrote: Sun Oct 24, 2021 4:14 am ...Hopefully you are no longer paying attention to the sources of information that caused you to panic at the time.
...It amazes me how some of you can remain so calm in a storm like that. I have much to learn.
tarheel91 wrote: Sun Oct 24, 2021 12:24 pm
JoeRetire wrote: Sun Oct 24, 2021 12:04 pm Was your financial decision related to your expected impending death?
For the large part, yes.
tarheel91, I can empathize with your reaction. I thought doomsday was upon us and started stacking toilet paper and supplies like many. However, it never occurred to me to change my AA. Over the past 15 years, this forum has drilled down "stay the course" into my head and I did not budge. I was mentally preparing to die more than thinking of AA. But like JoeRetire put very well below:
JoeRetire wrote: Sun Oct 24, 2021 1:37 pm But don't beat yourself up over something in the past.
Figure out what you want for your future and work toward that.
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Re: I Did a Horrible Thing (in Hindsight)

Post by arcticpineapplecorp. »

Investor1986 wrote: Sun Oct 24, 2021 12:47 pm
arcticpineapplecorp. wrote: Fri Oct 22, 2021 3:57 pm
Image
Please, can you help me understand how there numbers are calculated or direct me in any article on the web?
Taylor Larimore says for a bad bear market the rule of thumb is you should expect to loose half of your stock allocation. The image attached is similar but not quite really. For example, the table shows 100% stocks - 50% loss, but 70% stock - 30% loss and not 35%..
if you have no bonds (i.e., you're 100% in stocks) then you lose whatever the stock market loses.

but if you have bonds, not only do those bonds not lose what the stock market loses, they might actually go up, which may lower your losses somewhat.

for instance in 2008 (Jan-Dec) US stocks fell 38% but US bonds (total bond market) gained 5%.

So you'd have lost 38% in 2008 if you had 100% of your money in US stocks.

But say you had 50/50 in 2008.

you would have lost:

(-.38 X .50) + (+.05 X .50)
( -.19 ) + ( +.025 )
-19% (loss) + 2.5% (gain) =
-.16.5
or
-16.5% for the year 2008 for a 50/50 portfolio.

you lost 38% but only on half of your money.
the other half of your money MADE 5%.

So the stocks contributed a 19% loss overall for your portfolio and the bonds contributed a 2.5% gain on the portfolio.

Add the 2 together and you're left with -16.5%

your 50/50 would have lost 16.5%, not 19%.

So even though you took half the risk, you had LESS than half the loss.

make sense?
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