How to re-enter market in 2023

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Topic Author
mruizesparza
Posts: 11
Joined: Sat Mar 12, 2022 4:04 pm

How to re-enter market in 2023

Post by mruizesparza »

Currently retired as of 5/1/2021.
Household income: Withdrawing $6000/month,$72k annually, withdrawals coming from brokerage account
Emergency funds: $15k cash
Debt: $166K Mortgage
Tax filing status: Married filing jointly
Tax rate: 15% federal, 5% state
State of residence: NC
Age: 61; wife: 59
Social Security: we will both apply at age 67
Our Current assets $1,308MM: 10% stocks / 30% bonds and 60% cash. Self-Managed at Fidelity

Fidelity Monte Carlo with returns significantly below avg returns show ending balance of $254 at age 90 for my wife and I

My IRA
Bonds $579K, 36%, Par $614K (65/35 Treasuries/Corp), YTM 4.5%
52 individual bonds, $190K current value, $210K YTM 4.12% (For example: WASTE MANAGEMENT INC COMPANY GUARNT GLB 02.000% JUN 01 2029 Market Value includes $23.77 of accrued interest)and Treasuries are in a 2 year ladder

ETFs & Stocks, 8%
Vanguard Health Care ETF, $10K, 0.10%
Vanguard High Yield ETF, $54K, 0.06%
Salesforce, $4.3,
Honeywell, $5.2K
JnJ, $3K
TJX, $5K

CASH $381K, 56% Fidelity Premium Money Market 4.27% 7 day Yield
Total $977K

My Roth
ETF & Stocks $7K, 53%
Vanguard High Yield, $4K. 0.06%
Halliburton, $3.5K
Morgan Stanley, $2.4K
Constellation Brands, $3.5

CASH $11.5K, 47% Fidelity Money Market 4.15% 7 day Yield
Total $25K

Her IRA
Bonds $74K, 45%, Par $74K (Treasuries), YTM 4.5%
Treasuries are in a 2 year ladder
Total $74K

ETFs & Stocks, $16K 10%
Vanguard Health Care ETF, $2K, 0.10%
Vanguard High Yield ETF, $10K, 0.06%
JnJ, $3.9K

New Annual Contributions
none

CASH $73K, 45% Fidelity Premium Money Market 4.27% 7 day Yield
Total $163K


Our Brokerage Account Taxable Funds
Stocks $11K, 15%
ALPHABET INC SHS $11,762 16%

Cash $72K, 86%

Total $85K

Deferred Income $28K
Blackrock 2030 Target fund

HSA $30K
100% Blackrock target date 2030


On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market. I am withdrawing cash from brokerage account for living expenses. Our goal is to be fully invested at a 50/50 allocation to equities and bonds by year end. As the bonds, mature I plan on moving them into iShares 1-3 Year Treasury Bond ETF.
My main concern is earnings risk that is not priced into the market and I do not want to buy at high.

Questions:
1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
2. Do the following allocations and investments make sense for my wife and my IRA? Here are the allocations and investments:
- 50% iShares 1-3 Year Treasury Bond ETF, SHY, 0.15%
- 43.5% Vanguard Value Trust, VTV, 0.06%
- 2% iShares S & P small cap, IJR, 0.06%
- 2% iShares S & P mid cap, IJH, .05%
- 2% iShares Core MSCI Emerging Mkts, IEMG, 0.09%
.5% Vanguard Materials, VAW, 0.10%
3. Does the standard Boglehead 3 fund portfolio (42/18 /40 approach; US/International/Bonds) still work and is it a better option?
4. Is my retirement plan compromised?

I greatly appreciate any feedback and insights from this community on anything regarding the plan.
123
Posts: 9308
Joined: Fri Oct 12, 2012 3:55 pm

Re: How to re-enter market in 2023

Post by 123 »

I would lump sum immediately back into the market. I would favor the standard 3-fund approach. I don't have the time or knowledge to micromanage small slice-and-dice positions to make sure they are in agreement with a 3-fund allocation approach.
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm ...I do not want to buy at high...
Whenever you buy the market is at a "high", might be for the moment, day, week, month, year, or all-time. Or maybe not.

Time to simplify and get the knots out of your portfolio.
Last edited by 123 on Sat Jan 21, 2023 7:49 pm, edited 2 times in total.
The closest helping hand is at the end of your own arm.
User avatar
galawdawg
Posts: 5107
Joined: Thu Dec 14, 2017 11:59 am
Location: Georgia

Re: How to re-enter market in 2023

Post by galawdawg »

Why wait until year end to invest in a 50/50 allocation?? You acknowledge you made an error pulling out of the market in September. Is your market timing ability sufficiently improved that you can discern when to get in and when to get out? And if you get in now at 50/50 and the market does decline in 2023, are you going to sleep well at night?

1. If your ability to time the market is no better now than it was in September, just lump sum it all back in ASAP.
2. If you will have heartburn and anxiety if you go with a 50/50 allocation and the market declines further, then 50/50 is probably not the right asset allocation for you. In that case, perhaps consider something even more conservative, such as 30/70.
3. I'd dump the junk...individual bonds (other than treasuries), individual stocks, and the sector funds and just go with a simple two or three low-cost index fund portfolio. Three if you want international equity holdings and two if you do not. Total stock index fund, total bond index fund and (if desired) total international stock index fund. For the cash portion of your allocation, stick with treasuries, CDs, and (for immediate liquidity) a money market fund.

That will give you a simple portfolio that is easy to manage and (if you pick the right asset allocation for your ability, willingness and need to take risk) is well-suited for any buy and hold investor. Once you have done those things, enjoy your retirement Boglehead-style, which means you ignore the noise and stay the course! :beer
simplextableau
Posts: 282
Joined: Wed Oct 05, 2016 9:20 pm

Re: How to re-enter market in 2023

Post by simplextableau »

123 wrote: Sat Jan 21, 2023 7:29 pm I would lump sum immediately back into the market. I would favor the standard 3-fund approach. I don't have the time or knowledge to micromanage small slice-and-dice positions to make sure they are in agreement with a 3-fund allocation approach.
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm ...I do not want to buy at high...
Whenever you buy the market is at a "high", might be for the moment, day, week, month, year, or all-time. Or maybe not.

Time to simplify and get the knots out of your portfolio.
This is the only correct answer. The questions posed in this thread are logical, but OP really has a emotional issue. The original plan was fine, but emotions derailed it. Suggest some sort of meditation or zen class to calm the emotions.
er999
Posts: 635
Joined: Wed Nov 05, 2008 10:00 am

Re: How to re-enter market in 2023

Post by er999 »

I’d give serious consideration to hiring a financial advisor. The us total stock market (VTi) is up about 7% during that time period; even if you pay 1% yearly you would have been ahead if you had an advisor who convinced you not to go to all cash during the last few months.
User avatar
arcticpineapplecorp.
Posts: 12036
Joined: Tue Mar 06, 2012 8:22 pm

Re: How to re-enter market in 2023

Post by arcticpineapplecorp. »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market. I am withdrawing cash from brokerage account for living expenses. Our goal is to be fully invested at a 50/50 allocation to equities and bonds by year end. As the bonds, mature I plan on moving them into iShares 1-3 Year Treasury Bond ETF.
My main concern is earnings risk that is not priced into the market and I do not want to buy at high.

Questions:
1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
2. Do the following allocations and investments make sense for my wife and my IRA? Here are the allocations and investments:
- 50% iShares 1-3 Year Treasury Bond ETF, SHY, 0.15%
- 43.5% Vanguard Value Trust, VTV, 0.06%
- 2% iShares S & P small cap, IJR, 0.06%
- 2% iShares S & P mid cap, IJH, .05%
- 2% iShares Core MSCI Emerging Mkts, IEMG, 0.09%
.5% Vanguard Materials, VAW, 0.10%
3. Does the standard Boglehead 3 fund portfolio (42/18 /40 approach; US/International/Bonds) still work and is it a better option?
4. Is my retirement plan compromised?

I greatly appreciate any feedback and insights from this community on anything regarding the plan.
these numbers below do not correspond with your numbered questions above.

1. how did you settle on 50/50 instead of 60/40? Do you think you won't panic again with 50/50 like you did with 60/40? If so, why do you think that exactly?

If you look at the following post you see that the difference in performance in 2022 between 60/40 and 50/50 would have been just 1% less worst drawdown. So instead of losing 21.02% (with 60/40) last year, you would have "only" lost 20.02% (with 50/50). Would you seriously have had a different reaction?

look at that info on that post above where i listed the worst drawdowns during the Great Recession. 60/40 lost 30.66% whereas 50/50 "only" lost 25.10%. If you panic sold last year with 60/40 when the market fell 21.02% would you not have had the same (or worse) reaction in March 2009?

2. holding such small percentages in funds is not likely to make much difference either way, so most would say why bother? It's complicating the portfolio for no real benefit.

3. The standard boglehead portfolio will always work in the sense that you're guaranteed to never underperfom the indexes (except by the expense ratio). That doesn't mean you'll always like the returns you get from those indexes, but you don't get to choose what the markets (stock and/or bond) give you. You take what you get. It also means that you'll get the returns commensurate with the risk you take. 60/40 will earn one return over the next x number of years. And 50/50 probably will earn slightly less because it's less risk. Generally if you take less risk, you get lower returns. That's the tradeoff.

You're asking at the end (in reference to the "boglehead portfolio) if the 60/40 still works. Compared to what?
What were you expecting it to do?
Are you expecting the 50/50 to outperform the 60/40 or do something the 60/40 won't?

4. no your retirement plan is not compromised. You just need to get back on course and STAY THE COURSE. Getting in and out of the market is why most people never get the return of the market (because you can't get the return if you're not in it to receive it. Or in it to win it as Randy Jackson says).

the chart below (and highlighted link) shows two things: 1. if you miss some of the best days, you could lose out on a lot of money and 2. some of the best days occurred soon after some of the worst days so stay in the market or you'll miss out. Here's another good article that explains that it's Better to face the correction because "More money has been lost in anticipation of corrections than in the corrections themselves"--Peter Lynch

You also have hopefully learned that a portfolio is like a wet bar of soap; the more you handle it, the smaller it gets.

Image

5. Not sure what is meant by "earnings risk is not priced in". The market is smarter than you. In aggregate all information is priced in, so you need not worry. That doesn't mean something bad won't happen in the market. But if it does, it's because of new information that will come out in the future, not what we already know today. That's priced in already.

6. regarding buying at an all time high the market was higher than it is now back in Nov 2021. So you're not buying at a high, the market hasn't gotten back to its previous high. So you're buying today at a discount.

Also, in 2021 the market reached 70 All TIME HIGHS. Do you know how many posts there were on bogleheads that year from people saying exactly the same thing: "I can't buy now. The market's at an ALL TIME HIGH!!" Guess they missed out on making money every time the market went on to create, yet, another ALL TIME HIGH.

Even if the market was at an all time high right now (it's not), do you really think the market won't ever create another all time high in the future? If you believe there will never ever ever be a new all time high then why would you invest in the first place?

7. I think you should review a couple things:
a. An Investment Policy Statement
b. make sure your allocation matches your need, ability and willingess to take risk:
How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

what do you think?
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
steadyosmosis
Posts: 89
Joined: Mon Dec 26, 2022 11:45 am

Re: How to re-enter market in 2023

Post by steadyosmosis »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm Currently retired as of 5/1/2021.
Household income: Withdrawing $6000/month,$72k annually, withdrawals coming from brokerage account
Emergency funds: $15k cash
Debt: $166K Mortgage
Tax filing status: Married filing jointly
Tax rate: 15% federal, 5% state
State of residence: NC
Age: 61; wife: 59
Social Security: we will both apply at age 67
Our Current assets $1,308MM: 10% stocks / 30% bonds and 60% cash. Self-Managed at Fidelity

Fidelity Monte Carlo with returns significantly below avg returns show ending balance of $254 at age 90 for my wife and I

My IRA
Bonds $579K, 36%, Par $614K (65/35 Treasuries/Corp), YTM 4.5%
52 individual bonds, $190K current value, $210K YTM 4.12% (For example: WASTE MANAGEMENT INC COMPANY GUARNT GLB 02.000% JUN 01 2029 Market Value includes $23.77 of accrued interest)and Treasuries are in a 2 year ladder

ETFs & Stocks, 8%
Vanguard Health Care ETF, $10K, 0.10%
Vanguard High Yield ETF, $54K, 0.06%
Salesforce, $4.3,
Honeywell, $5.2K
JnJ, $3K
TJX, $5K

CASH $381K, 56% Fidelity Premium Money Market 4.27% 7 day Yield
Total $977K

My Roth
ETF & Stocks $7K, 53%
Vanguard High Yield, $4K. 0.06%
Halliburton, $3.5K
Morgan Stanley, $2.4K
Constellation Brands, $3.5

CASH $11.5K, 47% Fidelity Money Market 4.15% 7 day Yield
Total $25K

Her IRA
Bonds $74K, 45%, Par $74K (Treasuries), YTM 4.5%
Treasuries are in a 2 year ladder
Total $74K

ETFs & Stocks, $16K 10%
Vanguard Health Care ETF, $2K, 0.10%
Vanguard High Yield ETF, $10K, 0.06%
JnJ, $3.9K

New Annual Contributions
none

CASH $73K, 45% Fidelity Premium Money Market 4.27% 7 day Yield
Total $163K


Our Brokerage Account Taxable Funds
Stocks $11K, 15%
ALPHABET INC SHS $11,762 16%

Cash $72K, 86%

Total $85K

Deferred Income $28K
Blackrock 2030 Target fund

HSA $30K
100% Blackrock target date 2030


On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market. I am withdrawing cash from brokerage account for living expenses. Our goal is to be fully invested at a 50/50 allocation to equities and bonds by year end. As the bonds, mature I plan on moving them into iShares 1-3 Year Treasury Bond ETF.
My main concern is earnings risk that is not priced into the market and I do not want to buy at high.

Questions:
1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
2. Do the following allocations and investments make sense for my wife and my IRA? Here are the allocations and investments:
- 50% iShares 1-3 Year Treasury Bond ETF, SHY, 0.15%
- 43.5% Vanguard Value Trust, VTV, 0.06%
- 2% iShares S & P small cap, IJR, 0.06%
- 2% iShares S & P mid cap, IJH, .05%
- 2% iShares Core MSCI Emerging Mkts, IEMG, 0.09%
.5% Vanguard Materials, VAW, 0.10%
3. Does the standard Boglehead 3 fund portfolio (42/18 /40 approach; US/International/Bonds) still work and is it a better option?
4. Is my retirement plan compromised?

I greatly appreciate any feedback and insights from this community on anything regarding the plan.
Spend rate of 5.5% (72k/1310k) looks risky to me, but I suppose it will come down when Social Security starts.
123
Posts: 9308
Joined: Fri Oct 12, 2012 3:55 pm

Re: How to re-enter market in 2023

Post by 123 »

Many or most of us have been in positions similar to the OP. Our portfolios were full of individual security positions (stocks or bonds) that could create daily anxiety about each holding (Was it a good buy, Should I dump it, Should I hold on). The funds/ETFs we had acquired seemed like they were great when we bought them (But the leader of the pack is often eclipsed) or even if they perform okay their component in our portfolio isn't enough to "move the needle" on our overall returns.

The conclusion we generally come to is that we have faith in the broad market but not in the securities of individual companies. So we use broad market index funds, like the Vanguard Total Stock Market Index, to capture the power of the stock market.

The stock market turmoil gave many of us the opportunity to harvest big paper losses for tax savings. We may have sold large positions in Vanguard Total Stock Market for tax loss but immediately replaced them with equal positions in the S&P500 index. We understand that being out of the market may represent a bigger risk than being in the market.

The turmoil in the bond market in the last year has been a new experience for many of us. Some of us left the fold of bond funds and ETFs to find security in CDs, Treasuries, MMFs, and HYSA. We've found that holding individual fixed income securities is a lot of work, effort, and uncertainty. For my own portfolio I've gone back to a small position in BND but much of my fixed-income portfolio is currently 26 week or 52 week treasury bills.
The closest helping hand is at the end of your own arm.
02nz
Posts: 9097
Joined: Wed Feb 21, 2018 2:17 pm

Re: How to re-enter market in 2023

Post by 02nz »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market.
Next time I see a "I'm going to sell all my equities for cash" I'm going to link to this thread. You were lucky/clairvoyant EDIT: unlucky enough to have sold basically at the bottom (for calendar year 2022), yet, as we like to point out on this forum, for market timing to work well you have to be lucky/clairvoyant TWICE. That's way harder than most people realize.
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm 1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
Translation: I regret trying to time the market, should I keep trying to time the market?
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm I do not want to buy at high.
Meet Bob, the world's worst market timer, who keeps buying at highs. He's doing quite well - probably better than you are, because he holds on through the market ups and downs.
Last edited by 02nz on Sat Jan 21, 2023 10:30 pm, edited 1 time in total.
02nz
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Re: How to re-enter market in 2023

Post by 02nz »

steadyosmosis wrote: Sat Jan 21, 2023 8:22 pm Spend rate of 5.5% (72k/1310k) looks risky to me, but I suppose it will come down when Social Security starts.
Social Security aside, a 5.5% withdrawal rate at age 61/59 is not just risky but quite likely to fail, esp. with a 10% allocation to stocks and/or market-timing.
JasonHutt
Posts: 439
Joined: Wed Oct 26, 2022 1:47 pm

Re: How to re-enter market in 2023

Post by JasonHutt »

You did well coming here. Here's what I focused on:

"On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation.".

I think the most sensible immediate course of action is to contact Vanguard Personal Advisors Services. Its price is a very reasonable 0.30% per year, and you will not be stuck in slimy investments. Until your situation has been stabilized by Vanguard, you should do nothing else yourself.
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whodidntante
Posts: 12032
Joined: Thu Jan 21, 2016 10:11 pm
Location: outside the echo chamber

Re: How to re-enter market in 2023

Post by whodidntante »

It's probably pretty difficult to come on here and admit you went to cash. Once you figure out what you want to own, I would lump sum into it immediately. But that's me. Dollar cost averaging is better than sitting out.

A few thoughts:
- I think some people may have been caught off guard by their bond fund. They thought it was for safety and it didn't seem very safe after dropping 15% or more. But that drop in value was accompanied by higher yields, so expected returns are much higher now, although there can still be further losses. But I see you are thinking of staying short duration. That might be reasonable for you.
- Inflation also has people spooked. TIPS are also more attractively priced now, with positive real yields.
- I like the value tilt, but don't see a need for such fine slice and dice. Is that driven by fear of missing out?
- There can still be significant further losses in even a great and situation-appropriate portfolio. Can you hang on? Higher expected returns require taking good risks. You can't have the returns without the risk, and it might help you to think about it that way. Sitting in cash will reduce expected returns. Also, cutting spending during lean times is a reasonable thing to do, and you'll probably do it instinctively.
- At a glance, you might not have enough money if your spending is not flexible. You might consider finding a fee-only financial planner to review your situation and temperament, and make recommendations. There was a thread on here recently where a few affordable options were discussed.

Anyway, good luck, my friend!
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arcticpineapplecorp.
Posts: 12036
Joined: Tue Mar 06, 2012 8:22 pm

Re: How to re-enter market in 2023

Post by arcticpineapplecorp. »

02nz wrote: Sat Jan 21, 2023 9:25 pm You were lucky/clairvoyant enough to have sold basically at the bottom (for calendar year 2022), yet, as we like to point out on this forum, for market timing to work well you have to be lucky/clairvoyant TWICE. That's way harder than most people realize.
wouldn't it have been lucky to have sold at the top?

what's lucky about selling at the bottom? You want to buy at the bottom (that makes you lucky) and sell at the top (that's being lucky twice. The OP wasn't even lucky once! which is why the OP should stop market timing and just stay the course because market timing is hard, if not impossible to get right long term):
“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently.”
— John C. Bogle

source: https://financinglife.org/bogle-quotes/
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
02nz
Posts: 9097
Joined: Wed Feb 21, 2018 2:17 pm

Re: How to re-enter market in 2023

Post by 02nz »

arcticpineapplecorp. wrote: Sat Jan 21, 2023 10:00 pm
02nz wrote: Sat Jan 21, 2023 9:25 pm You were lucky/clairvoyant enough to have sold basically at the bottom (for calendar year 2022), yet, as we like to point out on this forum, for market timing to work well you have to be lucky/clairvoyant TWICE. That's way harder than most people realize.
wouldn't it have been lucky to have sold at the top?
:oops: :oops: :oops:
strummer6969
Posts: 611
Joined: Tue Dec 15, 2020 10:59 am

Re: How to re-enter market in 2023

Post by strummer6969 »

02nz wrote: Sat Jan 21, 2023 9:25 pm
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market.
Next time I see a "I'm going to sell all my equities for cash" I'm going to link to this thread. You were lucky/clairvoyant EDIT: unlucky enough to have sold basically at the bottom (for calendar year 2022), yet, as we like to point out on this forum, for market timing to work well you have to be lucky/clairvoyant TWICE. That's way harder than most people realize.
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm 1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
Translation: I regret trying to time the market, should I keep trying to time the market?
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm I do not want to buy at high.
Meet Bob, the world's worst market timer, who keeps buying at highs. He's doing quite well - probably better than you are, because he holds on through the market ups and downs.
I hear that a lot about how you have to get lucky twice but that's not true. To come out ahead, you just have to buy back in at a price that's lower than what you sold it for. It doesn't have to be the bottom. I'm not advocating market timing but just correcting that statement.
strummer6969
Posts: 611
Joined: Tue Dec 15, 2020 10:59 am

Re: How to re-enter market in 2023

Post by strummer6969 »

OP, you sold at the bottom and are now trying to time your way back in. You're setting yourself up for disaster. Get a financial advisor.
CorgiGoneCycling
Posts: 42
Joined: Sun Jul 24, 2022 2:22 pm

Re: How to re-enter market in 2023

Post by CorgiGoneCycling »

02nz wrote: Sat Jan 21, 2023 9:37 pm
steadyosmosis wrote: Sat Jan 21, 2023 8:22 pm Spend rate of 5.5% (72k/1310k) looks risky to me, but I suppose it will come down when Social Security starts.
Social Security aside, a 5.5% withdrawal rate at age 61/59 is not just risky but quite likely to fail, esp. with a 10% allocation to stocks and/or market-timing.
strummer6969 wrote: Sat Jan 21, 2023 11:10 pm OP, you sold at the bottom and are now trying to time your way back in. You're setting yourself up for disaster. Get a financial advisor.
JasonHutt wrote: Sat Jan 21, 2023 9:46 pm You did well coming here. Here's what I focused on:

"On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation.".

I think the most sensible immediate course of action is to contact Vanguard Personal Advisors Services. Its price is a very reasonable 0.30% per year, and you will not be stuck in slimy investments. Until your situation has been stabilized by Vanguard, you should do nothing else yourself.
Agree with all of the above. I will be less nice than some posters since you might need to hear it. Yes, your retirement plan is compromised. Did your Fido Monte Carlos include panic selling? What is your plan past 90 (median age of death for your couple is probably around 95)? Why would you not delay SS until 72? You might consider spending less or going back to work.

More importantly, your actions lead me to believe your risk tolerance is not close to where it needs to be to execute your risky plan. Why are you concerned at all with Q1 earnings? That is the definition of noise for a long-term investor. This downturn has not been noteworthy. You might be well served by talking with a financial advisor. My guess is that they will recommend you simplify, which might help with tuning out noise/risk tolerance.

Good news is that you are faced with the reality of your risk tolerance now, rather than 15 years from now. There is still time to revise your plan, hopefully with the help of a good financial advisor.
CZjc1330
Posts: 213
Joined: Sat Feb 11, 2017 11:15 pm
Location: Palm Beach , FL

Re: How to re-enter market in 2023

Post by CZjc1330 »

Short and easy!
Sorry you sold :oops: -- hope you learned lesson and heed it for the REST of your life.
Seems like you have a lot of stocks. Move towards 2 or 3 low cost Index fund strategy. Or in your case just invest in VTI to catch up.
Divide your projected reinvestment dollars into six equal segments. Invest every month for next 6 months. Then set up monthly invests in the 2 or 3 low cost total market funds. Start now. Don't change -- no matter what -- you'll be ahead long term. :moneybag :greedy :moneybag
HomeStretch
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Re: How to re-enter market in 2023

Post by HomeStretch »

Are you managing your portfolio yourself or are you using an advisor? Your March 2022 post said you were using a Merrill Lynch advisor and regretted it. In the thread you discussed possibly managing your portfolio yourself but you also contacted a Vanguard advisor to get portfolio recommendations.

If you are currently self-managing your portfolio, consider using an advisor.

I personally would not correct the September 2022 sell-off error by DCA-ing back into the market over a period longer than 1-2 months.
02nz
Posts: 9097
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Re: How to re-enter market in 2023

Post by 02nz »

strummer6969 wrote: Sat Jan 21, 2023 10:54 pm
02nz wrote: Sat Jan 21, 2023 9:25 pm
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market.
Next time I see a "I'm going to sell all my equities for cash" I'm going to link to this thread. You were lucky/clairvoyant EDIT: unlucky enough to have sold basically at the bottom (for calendar year 2022), yet, as we like to point out on this forum, for market timing to work well you have to be lucky/clairvoyant TWICE. That's way harder than most people realize.
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm 1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
Translation: I regret trying to time the market, should I keep trying to time the market?
mruizesparza wrote: Sat Jan 21, 2023 7:23 pm I do not want to buy at high.
Meet Bob, the world's worst market timer, who keeps buying at highs. He's doing quite well - probably better than you are, because he holds on through the market ups and downs.
I hear that a lot about how you have to get lucky twice but that's not true. To come out ahead, you just have to buy back in at a price that's lower than what you sold it for. It doesn't have to be the bottom. I'm not advocating market timing but just correcting that statement.
Purely mathematically, yes. But for one there's no certainty that there will ever be a lower price than when you sold, esp. because panic-selling tends to happen at lows, as in OP's case. And human nature makes it difficult to get back in when the market has dropped further - many investors would either be seized with fear (what if the market keeps dropping?) or holding out for an "even bigger discount" that may not materialize.
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HMSVictory
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Re: How to re-enter market in 2023

Post by HMSVictory »

Nothing we can advise you to invest in will help you protect you from - yourself.

You have to honestly after action your panic sell that you did in 2022. What caused that?

TV shows, internet browsing, gossiping with "expert" friends, iPhone, iPad reading? Whatever caused you to panic has to be eliminated!

Then and only then can you construct a portfolio you will set and forget. I think your a great candidate for the balanced index fund.

Side note I do think your draw rate is too high - 5.5% would scare me a bit unless you are going to dial it way back when SS kicks in.
Stay the course!
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HMSVictory
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Re: How to re-enter market in 2023

Post by HMSVictory »

er999 wrote: Sat Jan 21, 2023 7:53 pm I’d give serious consideration to hiring a financial advisor. The us total stock market (VTi) is up about 7% during that time period; even if you pay 1% yearly you would have been ahead if you had an advisor who convinced you not to go to all cash during the last few months.
+1 I call this being penny wise but pound foolish
Stay the course!
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GMCZ71
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Re: How to re-enter market in 2023

Post by GMCZ71 »

Great advice so far. Welcome to the forum.
You are not the first, your post reminds me of Sheepdogs story.
viewtopic.php?t=25126
John | * Friends and family and money | * What you recommend will have periods of underperformance. You will be blamed. | * You avoid the suspicion of "self-serving." by Taylor Larimore
aristotelian
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Re: How to re-enter market in 2023

Post by aristotelian »

It sounds like you have a lower risk tolerance than you thought. You need an allocation that you can stick with permanently. You have proven that you cannot stick with 50/50. Your new allocation needs to be lower than that.

Remember that an extreme conservative portfolio is more subject to inflation risk and more likely to run out of money in the long term. So the minimum recommended equity allocation is something like 30%. I would propose 30/70 as your new long term allocation.

The problem is, 30/70 has lower expected return than 50/50. You have already permanent cost yourself a lot of money by selling low and missing out on returns. You may need to change your withdrawal rate ensure you don't run out of money. Your best move at this point is to spend less money. You might consider VPW to ensure you don't run out.
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Does the Fidelity simulation include Social Security? If not, you are probably fine. If it does, you are cutting it close and there is no way I would be spending 72k this year (>5% withdrawal).

I would also caution strongly against individual stocks and sector funds. You have a portfolio that requires a lot of active management. This is weird for someone who has a low risk tolerance There will be periods where you underperform the market, perhaps even in bear markets. I don't think you can take that risk.
Outer Marker
Posts: 3130
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Re: How to re-enter market in 2023

Post by Outer Marker »

You have a lot of holdings across many accounts. I would try to simplify this immediately using "all in one" funds across your portfolio at our about your desired AA. e.g. Vanguard Balanced fund is 60/40 and Tax Managed Balanced fund is 50/50. By using blended funds, you'll be less inclined to tinker with them and market time, since the ups and downs of the individual components are dampened.

You don't mention the interest rate on your mortgage, but if it's above 3%, I'd consider using some of your cash to pay that off.

Ibonds are still a good place to park extra cash. Consider buying $10,000 each now and at the start of each year.

Taking SS at 67 is likely a mistake, as it appears you have sufficient assets to cover your expenses until age 70. By deferring benefits to 70, you'll gain 8% per year, inflation-indexed for life. You can't get that deal anywhere else in the marketplace.
SevenBridgesRoad
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Re: How to re-enter market in 2023

Post by SevenBridgesRoad »

HMSVictory wrote: Sun Jan 22, 2023 8:17 am
You have to honestly after action your panic sell that you did in 2022. What caused that?
Some OPs need prescriptions. You are getting plenty.

Some OPs need to be asked questions, like a physician trying to get you to open up and talk about the real problem, before prescribing.

You asked 4 questions, three of which show you don't understand your problem. Bright red flags.

So, would you answer HMSVictory's question? Sharing your reflections (probably) will help.
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Wiggums
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Re: How to re-enter market in 2023

Post by Wiggums »

whodidntante wrote: Sat Jan 21, 2023 9:57 pm Once you figure out what you want to own, I would lump sum into it immediately. But that's me. Dollar cost averaging is better than sitting out.
+1

I don’t watch those market coverage shows. We don’t logon often to check balances. Stay invested. You are thinking that poor earnings ahead, but it’s completely possible that the market will reverse a lot of losses in a short time. You need to be invested to ride the wave.

Remember that your 4.0% safe withdrawal rate assumes that you are invested in a 60/40 portfolio at all times. Pick an AA that you can stay the course. 40/60 or 50/50 if you must.

We don’t hold individual stocks. We are going to have the higher wage earner delay SS to 70.
"I started with nothing and I still have most of it left."
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arcticpineapplecorp.
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Re: How to re-enter market in 2023

Post by arcticpineapplecorp. »

strummer6969 wrote: Sat Jan 21, 2023 10:54 pm I hear that a lot about how you have to get lucky twice but that's not true. To come out ahead, you just have to buy back in at a price that's lower than what you sold it for. It doesn't have to be the bottom. I'm not advocating market timing but just correcting that statement.
this may be technically true but there are also times when the market might not get back to a lower period and then what?

If someone sold at the bottom in March 2009 there would not have been a period of time since that the market would have ever been below that amount...all these years later. Even now, the market would have to fall 83% to get back to the level someone sold out at the bottom in 2009. What's the probability of that happening?

Early on when I joined bogleheads someone posted about a period of time in the 70s where the market went up to a certain level, then down to a certain level, then back up again and so on for several times. Some people seeing this pattern thought it was easy to sell at the high point then buy in at the low point and rinse and repeat. Until the one time when they sold at the high point and the market didn't ever fall back down to that level again.

These are the real life examples that show how waiting on the sidelines for markets to get back to some lower point may be a mistake.
Last edited by arcticpineapplecorp. on Sun Jan 22, 2023 1:08 pm, edited 1 time in total.
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
JasonHutt
Posts: 439
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Re: How to re-enter market in 2023

Post by JasonHutt »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm Currently retired as of 5/1/2021.
Household income: Withdrawing $6000/month,$72k annually, withdrawals coming from brokerage account
Emergency funds: $15k cash
Debt: $166K Mortgage
Tax filing status: Married filing jointly
Tax rate: 15% federal, 5% state
State of residence: NC
Age: 61; wife: 59
Social Security: we will both apply at age 67
Our Current assets $1,308MM: 10% stocks / 30% bonds and 60% cash. Self-Managed at Fidelity

Fidelity Monte Carlo with returns significantly below avg returns show ending balance of $254 at age 90 for my wife and I

My IRA
Bonds $579K, 36%, Par $614K (65/35 Treasuries/Corp), YTM 4.5%
52 individual bonds, $190K current value, $210K YTM 4.12% (For example: WASTE MANAGEMENT INC COMPANY GUARNT GLB 02.000% JUN 01 2029 Market Value includes $23.77 of accrued interest)and Treasuries are in a 2 year ladder

ETFs & Stocks, 8%
Vanguard Health Care ETF, $10K, 0.10%
Vanguard High Yield ETF, $54K, 0.06%
Salesforce, $4.3,
Honeywell, $5.2K
JnJ, $3K
TJX, $5K

CASH $381K, 56% Fidelity Premium Money Market 4.27% 7 day Yield
Total $977K

My Roth
ETF & Stocks $7K, 53%
Vanguard High Yield, $4K. 0.06%
Halliburton, $3.5K
Morgan Stanley, $2.4K
Constellation Brands, $3.5

CASH $11.5K, 47% Fidelity Money Market 4.15% 7 day Yield
Total $25K

Her IRA
Bonds $74K, 45%, Par $74K (Treasuries), YTM 4.5%
Treasuries are in a 2 year ladder
Total $74K

ETFs & Stocks, $16K 10%
Vanguard Health Care ETF, $2K, 0.10%
Vanguard High Yield ETF, $10K, 0.06%
JnJ, $3.9K

New Annual Contributions
none

CASH $73K, 45% Fidelity Premium Money Market 4.27% 7 day Yield
Total $163K


Our Brokerage Account Taxable Funds
Stocks $11K, 15%
ALPHABET INC SHS $11,762 16%

Cash $72K, 86%

Total $85K

Deferred Income $28K
Blackrock 2030 Target fund

HSA $30K
100% Blackrock target date 2030


On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market. I am withdrawing cash from brokerage account for living expenses. Our goal is to be fully invested at a 50/50 allocation to equities and bonds by year end. As the bonds, mature I plan on moving them into iShares 1-3 Year Treasury Bond ETF.
My main concern is earnings risk that is not priced into the market and I do not want to buy at high.

Questions:
1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
2. Do the following allocations and investments make sense for my wife and my IRA? Here are the allocations and investments:
- 50% iShares 1-3 Year Treasury Bond ETF, SHY, 0.15%
- 43.5% Vanguard Value Trust, VTV, 0.06%
- 2% iShares S & P small cap, IJR, 0.06%
- 2% iShares S & P mid cap, IJH, .05%
- 2% iShares Core MSCI Emerging Mkts, IEMG, 0.09%
.5% Vanguard Materials, VAW, 0.10%
3. Does the standard Boglehead 3 fund portfolio (42/18 /40 approach; US/International/Bonds) still work and is it a better option?
4. Is my retirement plan compromised?

I greatly appreciate any feedback and insights from this community on anything regarding the plan.
I have reviewed your last thread in March of 2022. You came here early last year, after decades in banking. You got some of the same advice then that you have gotten now. Your old portfolio had (unless I missed something) very little cash. Unless you have a cash buffer somewhere, you got slammed with no protection. Then you panicked. You had an interview with Vanguard but evidently didn't like the advice to use broad based, low-cost index funds.

Now you're back but seemed not to have learned anything. You continue to believe you can time the market. You continue to favor complexity over simplicity. You will not let the very respectable Vanguard PAS, which charges 1/3 or less what you paid previously, work with you. Your fundamental error is in believing that your banking knowledge translates to retirement investing when it's obvious that you spent your life in a different area of banking.

As Bogle and Bernstein have said, the biggest enemy of your financial future is you. If you continue with your gyrations, you will fritter away your earnings. I don't know what else to say. I recommend Bernstein's Four Pillars of Investing so you can learn in particular the psychology of investing. But you'll get tons of additional actionable information from this source. NONE of it will be consistent with what you have done or are thinking of doing.

Proverbs 16:18: "Pride goeth before destruction, and an haughty spirit before a fall."
dh
Posts: 598
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Re: How to re-enter market in 2023

Post by dh »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm
My main concern is earnings risk that is not priced into the market and I do not want to buy at high.
How would you, or anyone, know you are buying at high? If I could be so bold, I think a bigger concern for you is to find the asset allocation that you are comfortable so that you can stick with it. Best to you!
Marseille07
Posts: 12872
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Re: How to re-enter market in 2023

Post by Marseille07 »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market. I am withdrawing cash from brokerage account for living expenses. Our goal is to be fully invested at a 50/50 allocation to equities and bonds by year end. As the bonds, mature I plan on moving them into iShares 1-3 Year Treasury Bond ETF.
I'd move to 50/50 as soon as you can and stay there. If you don't want to lump sum then craft a DCA schedule and stick with that over the course of 2023.
94% US & FM (5% seed) | 6% CCE
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whodidntante
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Re: How to re-enter market in 2023

Post by whodidntante »

aristotelian wrote: Sun Jan 22, 2023 8:37 am It sounds like you have a lower risk tolerance than you thought. You need an allocation that you can stick with permanently. You have proven that you cannot stick with 50/50. Your new allocation needs to be lower than that.

Remember that an extreme conservative portfolio is more subject to inflation risk and more likely to run out of money in the long term. So the minimum recommended equity allocation is something like 30%. I would propose 30/70 as your new long term allocation.

The problem is, 30/70 has lower expected return than 50/50. You have already permanent cost yourself a lot of money by selling low and missing out on returns. You may need to change your withdrawal rate ensure you don't run out of money. Your best move at this point is to spend less money. You might consider VPW to ensure you don't run out.
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Does the Fidelity simulation include Social Security? If not, you are probably fine. If it does, you are cutting it close and there is no way I would be spending 72k this year (>5% withdrawal).

I would also caution strongly against individual stocks and sector funds. You have a portfolio that requires a lot of active management. This is weird for someone who has a low risk tolerance There will be periods where you underperform the market, perhaps even in bear markets. I don't think you can take that risk.
I'll file a dissenting opinion on this one. I'm not sure OP would have felt any better with 70% bonds in 2022. Bonds were down about as much as stocks were. It's possible though unlikely that 2023 could be similar and scare the OP out again.

Many Bogleheads prefer to equate risk with volatility. While this makes risk simple to think about, volatility is not a useful definition of risk for a long-term investor. So I'll submit what I think is a better definition of risk. It's that you won't have enough money to meet future spending needs.

60/40 might be just fine for OP if they learn how to think about volatility, risk, expected returns, and portfolio construction. By proposing 30/70, you've proposed a riskier portfolio by my definition of risk.
JasonHutt
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Re: How to re-enter market in 2023

Post by JasonHutt »

whodidntante wrote: Sun Jan 22, 2023 3:03 pm
aristotelian wrote: Sun Jan 22, 2023 8:37 am It sounds like you have a lower risk tolerance than you thought. You need an allocation that you can stick with permanently. You have proven that you cannot stick with 50/50. Your new allocation needs to be lower than that.

Remember that an extreme conservative portfolio is more subject to inflation risk and more likely to run out of money in the long term. So the minimum recommended equity allocation is something like 30%. I would propose 30/70 as your new long term allocation.

The problem is, 30/70 has lower expected return than 50/50. You have already permanent cost yourself a lot of money by selling low and missing out on returns. You may need to change your withdrawal rate ensure you don't run out of money. Your best move at this point is to spend less money. You might consider VPW to ensure you don't run out.
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Does the Fidelity simulation include Social Security? If not, you are probably fine. If it does, you are cutting it close and there is no way I would be spending 72k this year (>5% withdrawal).

I would also caution strongly against individual stocks and sector funds. You have a portfolio that requires a lot of active management. This is weird for someone who has a low risk tolerance There will be periods where you underperform the market, perhaps even in bear markets. I don't think you can take that risk.
I'll file a dissenting opinion on this one. I'm not sure OP would have felt any better with 70% bonds in 2022. Bonds were down about as much as stocks were. It's possible though unlikely that 2023 could be similar and scare the OP out again.

Many Bogleheads prefer to equate risk with volatility. While this makes risk simple to think about, volatility is not a useful definition of risk for a long-term investor. So I'll submit what I think is a better definition of risk. It's that you won't have enough money to meet future spending needs.

60/40 might be just fine for OP if they learn how to think about volatility, risk, expected returns, and portfolio construction. By proposing 30/70, you've proposed a riskier portfolio by my definition of risk.
Your definition of risk is well taken. In various simulations I've been astounded at how "risky" big bond allocations are.
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calmaniac
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Re: How to re-enter market in 2023

Post by calmaniac »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm
Age: 61; wife: 59
Social Security: we will both apply at age 67
You don't mention your estimated relative PIAs (primary insurance amounts, amount you will receive at age 67). It will likely be better for the higher earner to wait until 70 and burn a bit more cash during those 3 years. Check out Open Social Security for example.
https://opensocialsecurity.com

Also, if you have not done so already, register with mysocialsecurity.gov That will give you a better idea of your benefit options.
≈64yo. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Fed pensions now ≈60% of expenses. Taking SS @age 70--> pension+SS ≈100% of expenses. What me worry?
WillRetire
Posts: 503
Joined: Mon Jun 05, 2017 10:01 am

Re: How to re-enter market in 2023

Post by WillRetire »

OP: First, figure out what asset allocation you can live with. There's no law that says you have to be 50/50 or 60/40. In fact, if I remember correctly, some very smart folks like Rick Ferri propose 30/70 for most retirees.

The truth is, most people cannot stomach market crashes and they panic sell. In theory, we shouldn't sell. In practice, theory goes out the window when the $!#* hits the fan. Being at 30/70 or 40/60 might be more palatable and easier to stay-the-course. Not as much fun during boom times, though.

2022 did give us a new data point in modern history: bonds can decline by a lot! Ours declined by 12.7% despite, or because of(?), periodic rebalancing during the pain. Ouch! But bonds still did better than stocks, so there's that. Before 2022, the worst bond year for us was 2008: -5.8%.

It's a new year. Congratulations on your willingness to learn and reassess!
investor_power
Posts: 36
Joined: Fri Dec 16, 2022 9:37 am

Re: How to re-enter market in 2023

Post by investor_power »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm Currently retired as of 5/1/2021.
Household income: Withdrawing $6000/month,$72k annually, withdrawals coming from brokerage account
Emergency funds: $15k cash
Debt: $166K Mortgage
Tax filing status: Married filing jointly
Tax rate: 15% federal, 5% state
State of residence: NC
Age: 61; wife: 59
Social Security: we will both apply at age 67
Our Current assets $1,308MM: 10% stocks / 30% bonds and 60% cash. Self-Managed at Fidelity

Fidelity Monte Carlo with returns significantly below avg returns show ending balance of $254 at age 90 for my wife and I

My IRA
Bonds $579K, 36%, Par $614K (65/35 Treasuries/Corp), YTM 4.5%
52 individual bonds, $190K current value, $210K YTM 4.12% (For example: WASTE MANAGEMENT INC COMPANY GUARNT GLB 02.000% JUN 01 2029 Market Value includes $23.77 of accrued interest)and Treasuries are in a 2 year ladder

ETFs & Stocks, 8%
Vanguard Health Care ETF, $10K, 0.10%
Vanguard High Yield ETF, $54K, 0.06%
Salesforce, $4.3,
Honeywell, $5.2K
JnJ, $3K
TJX, $5K

CASH $381K, 56% Fidelity Premium Money Market 4.27% 7 day Yield
Total $977K

My Roth
ETF & Stocks $7K, 53%
Vanguard High Yield, $4K. 0.06%
Halliburton, $3.5K
Morgan Stanley, $2.4K
Constellation Brands, $3.5

CASH $11.5K, 47% Fidelity Money Market 4.15% 7 day Yield
Total $25K

Her IRA
Bonds $74K, 45%, Par $74K (Treasuries), YTM 4.5%
Treasuries are in a 2 year ladder
Total $74K

ETFs & Stocks, $16K 10%
Vanguard Health Care ETF, $2K, 0.10%
Vanguard High Yield ETF, $10K, 0.06%
JnJ, $3.9K

New Annual Contributions
none

CASH $73K, 45% Fidelity Premium Money Market 4.27% 7 day Yield
Total $163K


Our Brokerage Account Taxable Funds
Stocks $11K, 15%
ALPHABET INC SHS $11,762 16%

Cash $72K, 86%

Total $85K

Deferred Income $28K
Blackrock 2030 Target fund

HSA $30K
100% Blackrock target date 2030


On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation. I regret it now. I missed the Q4 run in the market. I am withdrawing cash from brokerage account for living expenses. Our goal is to be fully invested at a 50/50 allocation to equities and bonds by year end. As the bonds, mature I plan on moving them into iShares 1-3 Year Treasury Bond ETF.
My main concern is earnings risk that is not priced into the market and I do not want to buy at high.

Questions:
1. Should begin dollar cost averaging in April as Q1 earnings season report out or wait till June?
2. Do the following allocations and investments make sense for my wife and my IRA? Here are the allocations and investments:
- 50% iShares 1-3 Year Treasury Bond ETF, SHY, 0.15%
- 43.5% Vanguard Value Trust, VTV, 0.06%
- 2% iShares S & P small cap, IJR, 0.06%
- 2% iShares S & P mid cap, IJH, .05%
- 2% iShares Core MSCI Emerging Mkts, IEMG, 0.09%
.5% Vanguard Materials, VAW, 0.10%
3. Does the standard Boglehead 3 fund portfolio (42/18 /40 approach; US/International/Bonds) still work and is it a better option?
4. Is my retirement plan compromised?

I greatly appreciate any feedback and insights from this community on anything regarding the plan.
I would find another job. You have a high risk of running out of money.
rationalactor
Posts: 19
Joined: Sat Oct 31, 2020 8:48 am

Re: How to re-enter market in 2023

Post by rationalactor »

I think OP was being sarcastically self-deprecating in using the words luck/clairvoyance to describe selling at market bottom!
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Nate79
Posts: 8789
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Location: Delaware

Re: How to re-enter market in 2023

Post by Nate79 »

Step one is to admit you have no clue what you are doing. Maybe buy a target date fund and set and forget especially since the portfolio is a mess. Your feelings and ability to time the market has failed you.
Katietsu
Posts: 6766
Joined: Sun Sep 22, 2013 1:48 am

Re: How to re-enter market in 2023

Post by Katietsu »

Your proposed allocation and investments could turn out to be just fine but it is an unusual selection. It does have the appearance of someone who is making pretty non standard choices.

I would not intentionally buy only 2% of anything. I would not put 50% in SHY. Is the Vanguard Materials just a hunch aka gamble? Going hard on value another hunch?

Have you thought about using a low cost service like VPAS to get you out of this mess. You could fire them after everything was on auto pilot. Or hire an hourly adviser to give you a plan that you implement? You have enough to retire (assuming sufficient SS) but not enough to make too many mistakes.

Speaking of social security, most scenarios would not favor both of you claiming at 67. How did you decide on this? Best SS claiming is something the right retirement planner should be able to help you with.

I have been putting new money in AVGE lately. Single ETF to make things easy which may have the added benefit of reducing the chance that you start tinkering. And you get a small value tilt. Right now, I have more slices on the fixed income side. Some cash, CDs and short term treasuries. The rest is split evenly between a TIPS fund and BND.
CorgiGoneCycling
Posts: 42
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Re: How to re-enter market in 2023

Post by CorgiGoneCycling »

whodidntante wrote: Sun Jan 22, 2023 3:03 pm
aristotelian wrote: Sun Jan 22, 2023 8:37 am It sounds like you have a lower risk tolerance than you thought. You need an allocation that you can stick with permanently. You have proven that you cannot stick with 50/50. Your new allocation needs to be lower than that.

Remember that an extreme conservative portfolio is more subject to inflation risk and more likely to run out of money in the long term. So the minimum recommended equity allocation is something like 30%. I would propose 30/70 as your new long term allocation.

The problem is, 30/70 has lower expected return than 50/50. You have already permanent cost yourself a lot of money by selling low and missing out on returns. You may need to change your withdrawal rate ensure you don't run out of money. Your best move at this point is to spend less money. You might consider VPW to ensure you don't run out.
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Does the Fidelity simulation include Social Security? If not, you are probably fine. If it does, you are cutting it close and there is no way I would be spending 72k this year (>5% withdrawal).

I would also caution strongly against individual stocks and sector funds. You have a portfolio that requires a lot of active management. This is weird for someone who has a low risk tolerance There will be periods where you underperform the market, perhaps even in bear markets. I don't think you can take that risk.
I'll file a dissenting opinion on this one. I'm not sure OP would have felt any better with 70% bonds in 2022. Bonds were down about as much as stocks were. It's possible though unlikely that 2023 could be similar and scare the OP out again.

Many Bogleheads prefer to equate risk with volatility. While this makes risk simple to think about, volatility is not a useful definition of risk for a long-term investor. So I'll submit what I think is a better definition of risk. It's that you won't have enough money to meet future spending needs.

60/40 might be just fine for OP if they learn how to think about volatility, risk, expected returns, and portfolio construction. By proposing 30/70, you've proposed a riskier portfolio by my definition of risk.
Ah, but it is impossible to tell, a priori, if a drop is volatility or the start of real loss of capital (e.g defined by W. Bernstein as a negative real rate of return over a 30-year period). If you knew it was volatility, there would be no reason to worry! While I very much agree that good investors take a more wholistic view of risk, one has to be able to stomach volatility, which OP has proven unable to do with his current portfolio. The reason a reduced equity exposure is recommended is because it will reduce volatility and thus the likelihood that OP will capitulate. In other (Boglehead) words, one must be able to stay the course for most any plan to work.

Unfortunately, by your reasonable definition of risk, OP's plan likely needs to incorporate a healthy dose of equity. An amount that is likely outside of OP's risk tolerance. Therein lies the paradox that leads me (and others in the thread) to declare that this is not a good plan.
JasonHutt
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Re: How to re-enter market in 2023

Post by JasonHutt »

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WillRetire
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Re: How to re-enter market in 2023

Post by WillRetire »

OP: After looking at your previous thread from less than 1 year ago,
viewtopic.php?t=373209
I agree with the other posters who advised then, and others who advise now, that you work with Vanguard PAS to get your retirement plan back on track and to simplify your portfolio. Once things are back on track and you are comfortable with simplicity and its benefits, then you can consider taking back the reins at either Vanguard or Fidelity.
bmcgin
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Re: How to re-enter market in 2023

Post by bmcgin »

When you went to cash, did you buy low-risk money market funds, treasuries or CDs? If not, consider getting that while working through a plan.

Now that rates are over 4%, $1,308,000 would be earning around $4,643.40 per month in a money market fund. Hopefully, you got some returns over this timeframe.

To me, the markets today look off as last year's losers are this month's winners. It will be interesting to see how the market reacts to the February Fed meeting.
aristotelian
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Re: How to re-enter market in 2023

Post by aristotelian »

whodidntante wrote: Sun Jan 22, 2023 3:03 pm
aristotelian wrote: Sun Jan 22, 2023 8:37 am It sounds like you have a lower risk tolerance than you thought. You need an allocation that you can stick with permanently. You have proven that you cannot stick with 50/50. Your new allocation needs to be lower than that.

Remember that an extreme conservative portfolio is more subject to inflation risk and more likely to run out of money in the long term. So the minimum recommended equity allocation is something like 30%. I would propose 30/70 as your new long term allocation.

The problem is, 30/70 has lower expected return than 50/50. You have already permanent cost yourself a lot of money by selling low and missing out on returns. You may need to change your withdrawal rate ensure you don't run out of money. Your best move at this point is to spend less money. You might consider VPW to ensure you don't run out.
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Does the Fidelity simulation include Social Security? If not, you are probably fine. If it does, you are cutting it close and there is no way I would be spending 72k this year (>5% withdrawal).

I would also caution strongly against individual stocks and sector funds. You have a portfolio that requires a lot of active management. This is weird for someone who has a low risk tolerance There will be periods where you underperform the market, perhaps even in bear markets. I don't think you can take that risk.
I'll file a dissenting opinion on this one. I'm not sure OP would have felt any better with 70% bonds in 2022. Bonds were down about as much as stocks were. It's possible though unlikely that 2023 could be similar and scare the OP out again.

Many Bogleheads prefer to equate risk with volatility. While this makes risk simple to think about, volatility is not a useful definition of risk for a long-term investor. So I'll submit what I think is a better definition of risk. It's that you won't have enough money to meet future spending needs.

60/40 might be just fine for OP if they learn how to think about volatility, risk, expected returns, and portfolio construction. By proposing 30/70, you've proposed a riskier portfolio by my definition of risk.
Unfortunately OP has shown to be incapable of maintaining 50/50, let alone 60/40. 30/70 is an improvement over 10/90. You are absolutely right, the price of a less volatile allocation is long term inflation risk. I don't think asset allocation is the solution here. Rather, OP needs a lower withdrawal rate that is sustainable with their target allocation.

Yes, bonds got hit hard in this market but they can shorten duration and allocate portions to cash and TIPS.
JasonHutt
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Re: How to re-enter market in 2023

Post by JasonHutt »

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faanger101
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Re: How to re-enter market in 2023

Post by faanger101 »

mruizesparza wrote: Sat Jan 21, 2023 7:23 pm Currently retired as of 5/1/2021.

Fidelity Monte Carlo with returns significantly below avg returns show ending balance of $254 at age 90 for my wife and I

On 9/27/22, I panicked and sold most of our holdings. We were in 60/40 equity to bond allocation.
1) Figure out your desired AA and re-enter tomorrow.
2) Return back to workforce and start saving until Fidelity tool (or any tool you prefer) shows that you'll be meeting your criteria
3) Double check that your new AA allows you to avoid panic even if the market drops 50% tomorrow

Good luck :sharebeer
gavinsiu
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Re: How to re-enter market in 2023

Post by gavinsiu »

Hi,

First I like you to commend you that did not double-down on your mistake. A lot of people I know only seems to see their victory but not their failure.

I like to first address the elephant in the room, what made you sold out in the first place. You must have experience several downturns in the past. Did you act like this each time or this is something unique to this time around. The reason I asked is that it is important that this mistake won't happen again.

My other concern is that you are drawning a fairly large amount like 5% out of your portfolio. Was the portfolio bigger originally? Can you reduce the amount for a time until the portfolio recovers?

As to putting all of the funds in or do it all in once. I am in favor of doing it all at once. This is because market returns are often due to a few days of the year and missing those days can reduce your return. However, if you feel that it would make you less likely to be spook go ahead and DCA.

You portfolio seems a bit complicated. Have you considered simplifying it to a few funds?
Topic Author
mruizesparza
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Joined: Sat Mar 12, 2022 4:04 pm

Re: How to re-enter market in 2023

Post by mruizesparza »

Thank you to everyone for taking the time to share your advice, information, and thoughts...and truth. I needed to hear it.

Yes, I have listened to a lot of investment shows (all of them). With all that I heard, I thought maybe the this whole thing of declining company earnings given the rapid rise in rates made this a unique time for the market.

I did receive last week two FA proposals: one from Fidelity and another from Zachs. They both are charging about 0.85% - 0.90%. Both have me at a 40/60 (to start) and showing about a 6% - 7% return. So the allocation and investments I shared was very close to what Fidelity was proposing. Fidelity actually had about 9 different funds and ZACHs is suggesting individual holdings of Stock and bonds (about 100).

So I went back to looking at the three fund portfolio strategy and postings because the overall approach makes a lot of sense. I am sorry I did not follow through on it when we left Merrill. I used VG funds to

Regarding Fidelity's Monte Carlo results, they show 3 cases for balances at age 90 if we move to a balance allocation
Significantly Below Avg Market performance $345K, withdrawal rate stays at 5.2%
Below Avg Market performance $754K. withdrawal rate drops to 3.5% at 67
Avg performance $1.8MM, withdrawal rate drops to 2.7%

I am looking into supplementing income for a couple of years. I have enjoyed the extra time being at home with my wife and volunteering. Its been great.
gavinsiu
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Re: How to re-enter market in 2023

Post by gavinsiu »

If you do the 3 fund portfolio, I fail to see why you would need to pay an advisor to managed it. You just need to avoid investment shows. I do agree with your plan to go back and work a bit until the portfolio recover.
jfave33
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Re: How to re-enter market in 2023

Post by jfave33 »

Nate79 wrote: Sun Jan 22, 2023 4:52 pm Step one is to admit you have no clue what you are doing. Maybe buy a target date fund and set and forget especially since the portfolio is a mess. Your feelings and ability to time the market has failed you.
Yes this nails it for me. The simplicty the OP lacks. Getting to the root of the problem ie the OP thinks they know how to beat the market at every turn and fails. Set and let it run. Everytime the you think you can make it better give yourself a slap on the wrist and leave it alone. By the time social security kicks in they will be fine.
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