Three fund portfolio question

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cwdejavu
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Joined: Sun Oct 27, 2019 3:15 pm

Three fund portfolio question

Post by cwdejavu » Wed Mar 04, 2020 2:40 pm

Context:
I have been doing investment using the three stock portfolio(VTI, VWO, BND) for more than half a year now. Before March, I still have positive gains. But now I am at a point where my total gain is close to 0.

Questions :confused :
1. What should I do next?
a. Keep investing regardless of the volatile market.
b. Sell 50% of my funds and keep investing regardless of the volatile market.
2. Do you ever sell funds during crash or you just keep buying?

I learned a lot from this forum. Really appreciate if anyone can provide some suggestion. Thanks a lot!

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Quirkz
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Re: Three fund portfolio question

Post by Quirkz » Wed Mar 04, 2020 2:51 pm

Keep investing. The question isn't where are stocks today, tomorrow, or in six months. The question is where do you think stocks will be in 20, 30, 40, 50 years, when you're retired and need to live on them?

The standard/obvious answer should be, "Stocks will be higher than today, probably by a lot." So you invest now to have them later.

It's generally considered a poor idea to wait until stocks have crashed, then sell them, then wait for them to go up, then buy them again when they're expensive. That just loses you money. You want to do it the other way around. Buy now while they're relatively cheap, and hold as they get more expensive.

If you're not used to it, it can be a little rough at first. Try not to obsess over the ups and downs. Or if they're really eating at you then maybe your investments are too aggressive, and you need a better balance between stocks and bonds.

dbr
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Re: Three fund portfolio question

Post by dbr » Wed Mar 04, 2020 3:24 pm

You should learn more about how investments behave, specifically the fact that markets go up and down. Go look at some charts such as these: https://www.bing.com/images/search?view ... 3,4,6,8,10

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cwdejavu
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Re: Three fund portfolio question

Post by cwdejavu » Wed Mar 04, 2020 3:30 pm

Thank you! This is really helpful.
So the only time to sell stocks is near retirement?
Quirkz wrote:
Wed Mar 04, 2020 2:51 pm
Keep investing. The question isn't where are stocks today, tomorrow, or in six months. The question is where do you think stocks will be in 20, 30, 40, 50 years, when you're retired and need to live on them?

The standard/obvious answer should be, "Stocks will be higher than today, probably by a lot." So you invest now to have them later.

It's generally considered a poor idea to wait until stocks have crashed, then sell them, then wait for them to go up, then buy them again when they're expensive. That just loses you money. You want to do it the other way around. Buy now while they're relatively cheap, and hold as they get more expensive.

If you're not used to it, it can be a little rough at first. Try not to obsess over the ups and downs. Or if they're really eating at you then maybe your investments are too aggressive, and you need a better balance between stocks and bonds.

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David Jay
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Re: Three fund portfolio question

Post by David Jay » Wed Mar 04, 2020 3:42 pm

cwdejavu wrote:
Wed Mar 04, 2020 3:30 pm
So the only time to sell stocks is near retirement?
In general, this is the correct perspective. The market will go through up and down cycles many times over your investing lifetime and you need to tune out the noise.

The exception is “rebalancing”, where an individual sells the asset class that has outperformed (not dropped) in order to purchase underperforming asset classes for the explicit goal of maintaining your chosen amount of risk (i.e. asset allocation).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Dottie57
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Re: Three fund portfolio question

Post by Dottie57 » Wed Mar 04, 2020 5:28 pm

Correct. Don’t sell during downturn. Keep investing.

But rebalance when AA is out of whack.

Topic Author
cwdejavu
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Re: Three fund portfolio question

Post by cwdejavu » Wed Mar 04, 2020 5:57 pm

Thank you for the great suggestion! :D

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One Ping
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Re: Three fund portfolio question

Post by One Ping » Wed Mar 04, 2020 6:07 pm

cwdejavu wrote:
Wed Mar 04, 2020 3:30 pm
So the only time to sell stocks is near retirement?
What does your Investment Policy Statement say? You do have an Investment Policy Statement, right?

It's usually best to think things like this through in the calm times so you are not tempted to do rash things during the not so calm times.
"Re-verify our range to target ... one ping only."

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Ozonewanderer
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Re: Three fund portfolio question

Post by Ozonewanderer » Wed Mar 04, 2020 7:00 pm

You say you have been making money for the past half year. That's your problem: you are looking. After you have thoughtfully decided on an asset allocation that's suitable for your age, do not look at your portfolio except annually to rebalance.

I know this sounds crazy, but it is correct. Watching your investments is like trying to decide if global warming is real by looking at today's weather.

I imagine you are relatively young (under age 50) so you can take - and probably should - take all the risk you can stomach. Just don't look at it frequently and think about what Warren Buffett would do. :)

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