Is it stupid for me to be considering removing all of my money from my Vanguard mutual funds?

[jz68]

I'm in my 50's and currently have around 600k between a Traditional and Roth Ira on Vanguard. I've been a bit worried lately about the economy collapsing [unnecessary comment removed by admin LadyGeek]. My thinking is that I could simply sell all of my holdings and let the cash sit there in the settlement account. According to what I see on Vanguard, doing so would not count as a distribution so there would be no tax implications or penalties. The current interest rate of the settlement account is 2.75% so while it's not anything great, it's better than losing a bunch of money if my fears are realized. Once I felt good about things, I'd buy back into the funds I currently hold.

So, am I just being dramatic or is this something that sounds reasonable to be considering? Please don't make your replies political, I'm not here to debate politics or try to start a fight.

Thanks!

[jimmo]

So, am I just being dramatic or is this something that sounds reasonable to be considering?

Yes, you are being dramatic.

[QBoy]

It sounds rash to me. Whatever risks there are have been priced into the market. Unless you have better insight than the average investor (e.g., inside information), buy-and-hold is the right approach.

[bernoulli]

Stay the course.

[Silk McCue]

…

Please don't make your replies political, I'm not here to debate politics or try to start a fight.

Thanks!

You can’t make it political and then pretend it isn’t.

Cheers

[123]

...The current interest rate of the settlement account is 2.75% so while it's not anything great, it's better than losing a bunch of money if my fears are realized....

If you invested the account in 3 and 6 month treasury bills the current rates are more than 4% and the securities are secured by the US Treasury. Many investors who choose to exit the market for various reasons are more hesitant to return to the market generally compounding their loss.

[RudyS]

Most Bogleheads are adverse to "market timing," for good reasons. But I would need to know how much other assets you have besides the VG IRAs to make any sort of judgement on your proposal. But knowing nothing else, I'd suggest you consider just removing half the amount.

[steadyosmosis]

I will not lose sleep if you retreat to all cash.
I would lose sleep if I retreated to all cash.

[ScubaHogg]

So, am I just being dramatic or is this something that sounds reasonable to be considering?

Yes, you are being dramatic.

Yes

My advice is to stop watching “the news”

[dukeblue219]

If you wish to do this, at least pick something better than the default settlement. A money market will yield much more than that today and a short or intermediate bond fund will generally do much better in a recession than any cash-like investment.

But I think you're letting very real and understandable emotions drive your investments.

[2pedals]

"My rule -- and it's good only about 99% of the time, so I have to be careful here -- when these crises come along, the best rule you can possible follow is not "Don't stand there, do something," but "Don't do something, stand there!" said Bogle.

Reference:
https://www.forbes.com/sites/chrisbarth ... 4642262b47

[delamer]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

[Beensabu]

is this something that sounds reasonable to be considering?

It's usually not reasonable to consider liquidating all your holdings to have them sit in a settlement account making 2.75% nominal until who knows when, especially if your stated worry is realized (which would mean a whole lotta of inflation).

There are situations in which it might be reasonable, like if you need all that money pretty soon. To buy a house or something.

[jz68]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

It's a settlement account, the worst that can happen is earning 0% interest.

[Feldman]

The current interest rate of the settlement account is 2.75%

It is? I'm seeing 4.32% 7-day SEC Yield for VMFXX and even 3.90% for the FDIC-insured option it Cash Plus. Where are you getting 2.75%?

[ScubaHogg]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

It's a settlement account, the worst that can happen is earning 0% interest.

And if inflation hit 20% annually?

How about this, if you can quickly, and without googling, rattle off the entire existing US tariff schedule, how it’s varied over time, and how it would compare to the proposed, you can go all cash.

If you can’t just realize the point if “the news” is to sell ads. The best way to sell ads is to be dramatic and scary.

[jz68]

The current interest rate of the settlement account is 2.75%

It is? I'm seeing 4.32% 7-day SEC Yield for VMFXX and even 3.90% for the FDIC-insured option it Cash Plus. Where are you getting 2.75%?

This isn't a fund, it's simply a holding account that you have so that money you're moving into Vanguard or out of Vanguard has somewhere to go until you decide what to do with it.

[delamer]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

It's a settlement account, the worst that can happen is earning 0% interest.

True. I was pointing out that the 2.75% is in no way guaranteed.

[CAsage]

"All" is a pretty dramatic step. "Some" might be reasonable. You need to think about how you would handle a market crash (like 2000, 2008, 2020) and keep enough cash/bonds on hand to live through ... whatever. How much do you rely on those funds, they are not likely to vanish, even if the market crashes.

[jec1ny]

Getting out of the market entirely is almost always unwise. Being diversified across multiple asset classes as a hedge against the unexpected is prudent. For those who are either by choice or necessity conservative investors, take a look at the Harry Browne Permanent Portfolio... https://www.investopedia.com/terms/p/pe ... tfolio.asp

[LadyGeek]

I removed an off-topic comment and post. As a reminder, see: Politics and Religion

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:

• Common religious expressions such as sending your prayers to an ailing member.
• Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
• Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
• Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.

[Da5id]

I'm in my 50's and currently have around 600k between a Traditional and Roth Ira on Vanguard. I've been a bit worried lately about the economy collapsing [unnecessary comment removed by admin LadyGeek]. My thinking is that I could simply sell all of my holdings and let the cash sit there in the settlement account. According to what I see on Vanguard, doing so would not count as a distribution so there would be no tax implications or penalties. The current interest rate of the settlement account is 2.75% so while it's not anything great, it's better than losing a bunch of money if my fears are realized. Once I felt good about things, I'd buy back into the funds I currently hold.

So, am I just being dramatic or is this something that sounds reasonable to be considering? Please don't make your replies political, I'm not here to debate politics or try to start a fight.

Thanks!

The belief you can market time is historically inaccurate. If current circumstance, political or otherwise, carry risks, no reason to think you can evaluate them better than the market price.

You are in your 50s, it might be time to evaluate whether your investments are appropriate for your age and assets. But I'd not try and spend time out of the market looking for a nebulously timed re-entry point.

[arcticpineapplecorp.]

I'm in my 50's and currently have around 600k between a Traditional and Roth Ira on Vanguard. I've been a bit worried lately about the economy collapsing due to a certain someone threatening tariffs against the rest of the world. My thinking is that I could simply sell all of my holdings and let the cash sit there in the settlement account. According to what I see on Vanguard, doing so would not count as a distribution so there would be no tax implications or penalties. Once I felt good about things, I'd buy back into the funds I currently hold.

ah the ol' 100% in or 100% out again. Should you be IN the market or OUT of the market? As if these are the only two options available. Black and white thinking, all or nothing rarely works. Yet that type of thinking never goes out of style.

we don't know how your money is allocated. I assume it's not 100% in stocks but you want to go 100% to cash. Whatever your allocation to stocks are, might I simply suggest you obviously are taking an amount of risk you're not really willing to take? That doesn't mean you have to take NO risk. You can reduce risk. Like if you're 80/20, you can decrease to something else. 70/30, 60/40, 50/50 or 40/60 or 30/70 or anything in between. But not 0/100. You'd only do that if you had so much money you didn't have a NEED to take risk.

But you're planning on getting back INTO the market at some future date, once you "feel good about things" whatever that means. So I guess you do NEED to take some amount of risk. But you're not WILLING to do so right now. But maybe later.

If you haven't read Swedroe's Better to Face the Correction I'd strongly recommend it. You'll see that for most investors who get out of the market:

“Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”--Peter Lynch

Might I also suggest you read up on NEED, ABILITY and WILLINGNESS 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/

You're right that if you switch from stocks to money market as long as the money stays in the Trad IRA and/or Roth IRA (i.e., no DISTRIBUTIONS are made) there's no taxable event. But that doesn't make it a good reason to do so. When you "feel good about things" it's likely the market will have gone up and you'll be buying in at a higher price (perhaps even higher than you sold out). So sure you might miss a downturn, but you're still buying higher later on (and missing out picking up dividends along the way and the chance that things might not go as you think they do). Oftentimes things are not as bad in reality as they are in our fantasies. Often our fears don't materialize.

And don't forget, you don't know anything the market doesn't already know. Don't you think the market has already priced in the very fears you have? So are you really outrunning something or someone? If you don't know anything anyone else doesn't, then what makes you think you should do something different than what the market will?

[tetractys]

…I've been a bit worried lately about the economy collapsing…am I just being dramatic…?

[loadba:lanced]

My thinking is that I could simply sell all of my holdings and let the cash sit there in the settlement account. ... Once I felt good about things, I'd buy back into the funds I currently hold.

What I clipped above highlights the problem: To achieve what you want, you have to guess right (or close to right) at two critical points in time.

Even if I knew information right before the Great Recession, would I have been able to guess a good time to get out and, just as important, a good time to get back in? Likely not. So like a simpleton, I held fast and kept contributing to my retirement all throughout. Luckily I didn't lose my job. And I did just fine.

My advice is to hold fast, and resist temptation.

[rkhusky]

It is? I'm seeing 4.32% 7-day SEC Yield for VMFXX and even 3.90% for the FDIC-insured option it Cash Plus. Where are you getting 2.75%?

This isn't a fund, it's simply a holding account that you have so that money you're moving into Vanguard or out of Vanguard has somewhere to go until you decide what to do with it.

VMFXX is the standard settlement fund at Vanguard.

[arcticpineapplecorp.]

what's on the ol' fear and greed index:



Now what did Buffett say about fear and greed? Be greedy when others are fearful. So you should be buying now, not selling, right?

And saying "once I feel good about things" is a problem. Investing has nothing to do with feelings. Your feelings will get you in trouble everytime. What you need to do is have a mechanical approach to investing. Choose an asset allocation that matches your need, ability and willingness to take risk and then simply STAY THE COURSE.

I suggest you post according to asking portfolio questions (just edit this post, don't start a new one) and maybe you'll get more useful answers and/or we'll see what the problem might be and can make suggestions to fine tune (use a scalpel) rather than make drastic moves (don't use a chainsaw).

[WeakOldGuy]

If you are too uncomfortable to stay in the market right now, then go ahead and pull out. In 10 years you can come back and either tell us how smart and inciteful you were, or use the experience as a cautionary tale for new BHs such as myself. I figure it is about 50/50 chance it could go either way.

[KlangFool]

OP,

If you believe that the economy will collapse, how does keeping the everything in cash (settlement account) really helps you? You will need to keep a few weeks of food and water in your pantry plus some physical gold and silver.

[Unnecessary comment removed - moderator ClaycordJCA] .

If you are really worried,

A) Keep some physical silver and gold

B) At least 2 weeks of food and water in your pantry

C) Some physical cash.

D) 12 to 24 months of expense in cash equivalent.

E) The rest in a 60/40 portfolio.

If you are not doing (A) to (C), how does keep 600K in cash really helps you?

KlangFool

[tibbitts]

So, am I just being dramatic or is this something that sounds reasonable to be considering?

I would just suggest that if you do this, develop an algorithm and stick to that, without exception, accepting that you might be exiting the market permanently. The worst thing to do is base moves in or out of the market on feelings.

[Point]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

It's a settlement account, the worst that can happen is earning 0% interest.

If your fears come to fruition, the worst that can happen is hyper inflation…. Where would you want to be before that? Physical gold?

Most everything is priced into the market.

[rob]

Last Oct (for other reasons) I stopped watching ALL "news". Incredibly relaxing. You need to do this for investment reasons.

[PottedPlant]

OP,
If you believe that the economy will collapse…
KlangFool

You forgot guns and ammo.

[itnetpro]

I'm in my 50's and currently have around 600k between a Traditional and Roth Ira on Vanguard. I've been a bit worried lately about the economy collapsing [unnecessary comment removed by admin LadyGeek]. My thinking is that I could simply sell all of my holdings and let the cash sit there in the settlement account. According to what I see on Vanguard, doing so would not count as a distribution so there would be no tax implications or penalties. The current interest rate of the settlement account is 2.75% so while it's not anything great, it's better than losing a bunch of money if my fears are realized. Once I felt good about things, I'd buy back into the funds I currently hold.

So, am I just being dramatic or is this something that sounds reasonable to be considering? Please don't make your replies political, I'm not here to debate politics or try to start a fight.

Thanks!

Don't panic!

I invested aggressively living through the .com and downturn of 2008 all on mid-large cap growth/blended. In 2008, I lost over 50% of my portfolio and have second guessed my decisions more than I can count. It took over 3 years to get it back. I got it back plus many multiples more.

What I have never done is sold because of headwinds or in down markets, ever, just continued to buy and stay the course. Now, I'm not saying don't diversify based on your retirement expectations but what I am saying is, I retired 2 years ago when I was 52 and my wife 55.

So many times, so many people over the years, telling me the sky was falling since 1990. We are still here and the world has not come to an end.

Perhaps, the better question might be how to diversify your portfolio based on when you are planning to retire and your tolerance of risk.

Anxiety is normal, panic is counterproductive...

John

[Rocinante Rider]

OP: do you have a chosen asset allocation based upon your own financial and psychological needs? If not, you need to develop one. If yes, stop paying attention to everything else lest you begin making risky mistakes like the one you're considering.

Unless, of course, you're the one person with a working crystal ball. If you are that one person, by all means move everything to cash just before the crash, move everything back to equities just before the recovery, and rinse and repeat. No need to ask the opinion of the rest of us who are only muddling along blindly with nothing better than our personalized AAs to guide us.

[notjackbogle]

we don't know how your money is allocated. I assume it's not 100% in stocks but you want to go 100% to cash. Whatever your allocation to stocks are, might I simply suggest you obviously are taking an amount of risk you're not really willing to take? That doesn't mean you have to take NO risk. You can reduce risk. Like if you're 80/20, you can decrease to something else. 70/30, 60/40, 50/50 or 40/60 or 30/70 or anything in between. But not 0/100. You'd only do that if you had so much money you didn't have a NEED to take risk.

This is the right answer. It's easy to dismiss this as market timing (which it partially is) but it's also a question of asset allocation based on risk. I did a reallocation after the election due to risk and my age. I had close to 100% in equities, and a large correction could cause me to postpone retirement for several years. However, even after reallocation, I still have more than 60% equities.

Suppose you have a 30/70 portfolio with the 70 in 20-year Treasuries, currently paying 4.625%. If the market falls 50% in 2025, you lose about 12% of your portfolio. Anyone withdrawing a sustainable amount from their portfolio could ride that out.

[beyou]

I can't remember a time when people thought everything was fine and the world was safe.


A practical way to look at things, if things go well, you'll be sorry you sold.
If things go to hell, it may not matter how much money you have.
It's the scenarios in-between where we usually end up.

[Cletus Davenport]

Yep, that would be stupid.

[vriguy1]

It isn't stupid to consider any option. If you don't consider an option, you cannot reject it. I would say that totally getting out of the stock market (i.e. zero stocks) has historically been a bad move. By all means dial down your risk, but selling all your stocks/stock funds and going to 100% cash will almost certainly be a move you'll come to regret in 10 years. Good luck.

[enad]

There are no shortage of opinions on what you should or should not do. In the end, you should do what makes you sleep well at night.

[VanGar+Goyle]

Please don't make your replies political, I'm not here to debate politics or try to start a fight.

You can’t make it political and then pretend it isn’t.

There are plenty of possible reasons for the market to crash that are not political:
war, pestilence, a plague of frogs and locusts, meteors, aliens ( from outer space ), Species GS54, or an earthquake in Valley Forge.
Don't think only of elephants and burros and fathers of mules,
and invest in a higher yielding money market fund if you are that afraid.

[FEA]

I would not make serious financial or investment decisions based off my political beliefs.

[Doctor Rhythm]

Obviously, you need to do what it takes to sleep well at night, and if $600k is enough to make you financially independent, then being totally wrong wouldn't be a disaster. That said, why would you trust your feelings? Do you have expertise in macroeconomics (ie, people pay for your opinions)? Do you have a documented track record of successfully timing the market?

Or have you been listening to people who benefit from fear?

I do think you made a good decision to ask the forum. We each live in our own bubble, and it's good to step out of it once in a while to reality test one's beliefs.

[Feldman]

It is? I'm seeing 4.32% 7-day SEC Yield for VMFXX and even 3.90% for the FDIC-insured option it Cash Plus. Where are you getting 2.75%?

This isn't a fund, it's simply a holding account that you have so that money you're moving into Vanguard or out of Vanguard has somewhere to go until you decide what to do with it.

Why did you choose Vanguard Cash Deposit over VMFXX / standard settlement fund?

[Parkinglotracer]

I believe in the long run we are better off holding a diversified portfolio of stocks and bonds. I have 50% in total index vti and 15% in international index vxus and 35% in a 5 year treasury ladder. I have rebalanced 3 times in the last two years as the equity market has been strong. If you sell everything now you will be selling high but when you look back a decade or two from now you will likely have missed out on future gains.

If you are not sleeping well at night with the current economic situation I’d maintain at least say 30% equities and buy a treasury ladder with the rest.

You might take some new classes or skill training if your worry is economy and your job future related.

Good luck and stay confident our capitalist system will adjust to any future turbulence.

[dogagility]

Moving to cash is a very poor idea.

Select an asset allocation that you can hold for a very long time.

Stay the course. https://www.bogleheads.org/wiki/Boglehe ... the_course

[thedaybeforetoday]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

It's a settlement account, the worst that can happen is earning 0% interest.

Actually, money market funds have "broken the buck" before, in 1994 and 2008. So while interest may theoretically go to %0, the value of each share in the money market fund has gone below $1/share in the past, thus interest isn't the only factor that determines the value of the funds in VMFXX.

So will you lose less in a money market fund if the economy crashes. Maybe. Probably.

That said, as others have pointed out, the inflationary risks of such a move as going to all cash seem more probable and realistic, than the scenario one could imagine that would be behind a move to all cash.

[UpperNwGuy]

Don’t you think if the economy collapses that it would affect rates on the settlement fund and other cash equivalents?

It's a settlement account, the worst that can happen is earning 0% interest.

No, something worse that could happen would be double digit inflation that would quickly erode the value of your cash in the settlement account.

[ScubaHogg]

Last Oct (for other reasons) I stopped watching ALL "news". Incredibly relaxing. You need to do this for investment reasons.

.

I can’t emphasize how good this advice is. It’s like a cheat code for life.

[thedaybeforetoday]

Last Oct (for other reasons) I stopped watching ALL "news". Incredibly relaxing. You need to do this for investment reasons.

.

I can’t emphasize how good this advice is. It’s like a cheat code for life.

+1
The media has figured out how to monetize the amygdala.