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It's ok to do nothing

Posted: Sat Mar 21, 2020 10:41 pm
by JustinR
Can't figure out if you should be rebalancing, TLHing, or buying? Unsure how much further the market will drop? Can't bring yourself to follow your IPS?

It's ok to do nothing.
  • Bolster your emergency fund by collecting your paychecks
  • Continue automatically investing with your 401k (traditional, after-tax, Roth) and HSA
  • Don't look at your investments at all until we're out of the woods

When the market recovers, you'll profit because you have been investing the whole time without having to make any choices.


Although, if you can't bring yourself to follow your IPS, I suggest writing a new version which will be binding one year from now. Don't be too hard on yourself as this is the first time some of us are experiencing such a massive downturn.

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 10:48 pm
by CoastalWinds
Great post!

I wrote an IPS but will admit I have a hard time following it with respect to re-balancing during times like this. It’s easy for me to say/write that “I will re-balance if it exceeds 5%”, but when catastrophe actually happens, it sure is hard. It’s also a little inconsistent with the approach of not looking at statements during such times, as one is “flying blind” with respect to what their ratio is.

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 10:48 pm
by Blue456
But don’t you feel kind of useless? You know, just standing here and doing nothing...
I did just start investing. And I did change my 403b into 100% stocks. I keep a small taxable account in 50% Wellesley and 50% Cash. Surprisingly limited losses.

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 10:50 pm
by siamond
Do nothing should be the starting point. Anything else should be carefully thought about, preferably as part of a pre-defined plan that was put in writing (e.g. rebalancing policy) before the crisis. In case of doubt, back to the starting point, which is indeed ok. Easy to say, much harder to do in practice though. Sometimes, it might not be a bad thing to have less active brain cells... :shock:

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 10:54 pm
by steve roy
I estimate I'll be doing nothing for the next eight to eighteen months.

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 11:09 pm
by Silence Dogood
JustinR wrote: Sat Mar 21, 2020 10:41 pm It's ok to do nothing.
I've been doing a good job with this!
JustinR wrote: Sat Mar 21, 2020 10:41 pm
  • Don't look at your investments at all until we're out of the woods
I haven't checked since my last statement. I will check my quarterly statement, as per usual, when it's generated in early April.

Should be... fun... :shock:

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 11:14 pm
by PaddyMac
We were going to do nothing, but then someone on Bogleheads mentioned tax loss harvesting (which we normally don't think about until December). So we did something.

We're on the edge of retirement (withdrawing a little and have stopped saving). But we sold a bunch of VTI (that used to have 100% cap gains) from our taxable and will stuff our Roth 401k accounts for 2019 and max out our Roth IRAs for 2020. Will have some left over for HSA.

Goal is to keep moving money sideways to HSA and Roth space when we can.

We've already filed our 2019 taxes, but I think it's okay to still put money into our Roth 401k for 2019? I can't imagine the IRS cares since we don't have to declare it afaik.

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 11:25 pm
by Cubicle
[sarcasm]But I just know the market is going to drop more! I'll pull out not to stop the hemorrhaging, & I'll know when to get back in.

Open your eyes people!!!![/sarcasm]

Re: It's ok to do nothing

Posted: Sat Mar 21, 2020 11:51 pm
by btq96r
I'm gonna do the same thing I do in any situation...keep throwing my after expense income into my funds along the standard allocation mix. I did it while the stocks were on their way up, I'll do it as they go down, and I'll do it as they eventually go up again. As I get older, I'll shift a little bit more to bonds with each passing year. At some point, I'll retire and let my investments (at that point in low risk form) be my income.

I'm sure that just sounds too sexy for a family friendly site like Bogleheads, so I'll just stop there. Also because that's all there is to it.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 12:30 am
by Lee_WSP
JustinR wrote: Sat Mar 21, 2020 10:41 pm
It's ok to do nothing.
Sure, but you need a plan to do something again.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 1:13 am
by smectym
siamond wrote: Sat Mar 21, 2020 10:50 pm Do nothing should be the starting point. Anything else should be carefully thought about, preferably as part of a pre-defined plan that was put in writing (e.g. rebalancing policy) before the crisis. In case of doubt, back to the starting point, which is indeed ok. Easy to say, much harder to do in practice though. Sometimes, it might not be a bad thing to have less active brain cells... :shock:
A fair comment. I’m ok with “Stay the course” etc. as a default, since most of the time, for most investors, it works well. In rare periods of crisis, however, some investors may have an obligation to pull back and preserve capital. For example, some investors have others depending on them, or have fiduciary responsibilities, whether legal or moral. It may not be tenable in some cases to explain ones inaction and inertia at a time of wholesale destruction of principal, during what is generally recognized as a massive market crisis, by saying you were paralyzed under the spell of the mantra “Stay the Course!” propagated on some Internet forum .

In short, for some, there are critical junctures in which preservation of capital is the imperative before which everything else gives way. If you’re a solitaire who invests only to please yourself, and can afford any given level of capital destruction, then for you, that critical juncture may never arrive.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 3:59 am
by heyyou
On doing nothing, so far, so good.
I've seen enough crashes now, that I forgot to feel any emotions about this one. It is just smaller numbers on the stock side of the portfolio. The 40% of portfolio in bonds is plenty for the next decade of retirement spending.

By using the RMD portfolio spending method (based on each previous year's portfolio value), I will adapt my future spending to a reduced amount that boosts portfolio longevity, plus my age 70 SS payment starts next month. If you allocate as suggested here, when the crashes do occur, you will be just fine, whether it feels that way or not.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 4:33 am
by snowox
I have been doing what I said I would do. I dont have a written plan but a mental one that I have adhered to. I'm retired 5 years so know going into it win or lose what I was going to do. I had a heavy cash position so I am balancing on the way down around 5% points and adding cash and living off cash until we have some stability at what looks to be a bottom in which I will add 50% of my cash on live on the rest till things get better. Thats how I sleep at night so thats what works for me. I think with this pandemic all the charts , history etc.. are not going to matter and its going to be interesting how people value things let along how many will survive. I believe in America and that things will be roaring again and the markets will be higher in 5 Years then they were so I am just staying the course. I do think there is going to be more pain and things will be volatile and sideways at best for awhile but thats ok as I would rather get good footing under us to build on.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 5:25 am
by dboeger1
This is such a refreshing topic to see. I know tax loss harvesting is pretty popular among Bogleheads, and I get that it's a sensible thing to do from a tax law perspective. However, in times of such volatility, even a few days out of the market can have a substantial impact on returns, and I don't want to miss any potential recovery. I was also planning to do an IRA to 401k reverse rollover so I could start making backdoor Roth IRA contributions this year, but with the market downturn, I'm thinking I might just forego that and put those contributions into my taxable account to save for a house. I'm pretty young and have already saved up what I consider to be a substantial amount in retirement accounts, so I'm just coming around to the idea that I don't necessarily need to fully utilize every dollar of tax-advantaged space the near term. I don't feel rushed to do any crazy tax magic in response to this particular crash considering I want to start prioritizing house savings, so I'm mostly just staying put.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 6:19 am
by jello_nailer
CoastalWinds wrote: Sat Mar 21, 2020 10:48 pm Great post!
It’s easy for me to say/write that “I will re-balance if it exceeds 5%”, but when catastrophe actually happens, it sure is hard.
"Everyone has a plan until they get punched in the mouth" Mike Tyson

The trick is - what do you do when THAT happens.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 7:16 am
by tennisplyr
Try to stay positive and believe that all will be OK! Lots and lots of negativity and misinformation going around: "your thoughts become your life"..,every cloud has a silver lining.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 7:18 am
by Explorer
I am not doing anything to my AA in a big way - but I am nibbling a share here or a share there almost on a daily basis to take advantage of the "sale" market is offering now.

Good Luck.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 7:49 am
by fundseeker
dboeger1 wrote: Sun Mar 22, 2020 5:25 am This is such a refreshing topic to see. I know tax loss harvesting is pretty popular among Bogleheads, and I get that it's a sensible thing to do from a tax law perspective. However, in times of such volatility, even a few days out of the market can have a substantial impact on returns, and I don't want to miss any potential recovery.
IIRC from 2009 when I last did tax loss harvesting, it does not require you to be out of the market at all. Don't you just exchange one fund for a similar fund in one transaction?

One negative to TLH is that you may save some on taxes initially, but then you may have huge gains later upon which taxes are required. It's like pay me now or pay me later.

Anyway, with our huge gain after TLH, we gave the appreciated shares to our Donor Advised Fund (DAF) for charity so we avoided the taxes AND the capital gains. Of course, for tax purposes, we just contribute to the DAF every other year and take the standard deduction in the other years.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 9:53 am
by siamond
smectym wrote: Sun Mar 22, 2020 1:13 am
siamond wrote: Sat Mar 21, 2020 10:50 pm Do nothing should be the starting point. Anything else should be carefully thought about, preferably as part of a pre-defined plan that was put in writing (e.g. rebalancing policy) before the crisis. In case of doubt, back to the starting point, which is indeed ok. Easy to say, much harder to do in practice though. Sometimes, it might not be a bad thing to have less active brain cells... :shock:
A fair comment. I’m ok with “Stay the course” etc. as a default, since most of the time, for most investors, it works well. In rare periods of crisis, however, some investors may have an obligation to pull back and preserve capital. For example, some investors have others depending on them, or have fiduciary responsibilities, whether legal or moral. It may not be tenable in some cases to explain ones inaction and inertia at a time of wholesale destruction of principal, during what is generally recognized as a massive market crisis, by saying you were paralyzed under the spell of the mantra “Stay the Course!” propagated on some Internet forum .

In short, for some, there are critical junctures in which preservation of capital is the imperative before which everything else gives way. If you’re a solitaire who invests only to please yourself, and can afford any given level of capital destruction, then for you, that critical juncture may never arrive.
Two of my sons came back home in a hurry (empty nest? what empty nest?), we have a couple of 'near family' close friends in a somewhat unstable situation, so... I'm with you with the fiduciary duty... Short-term AND long-term.

I actually didn't mean to promote 'do nothing' per se. I am deeply uncomfortable to see many people on this forum throwing away their financial policies by the window. A solid plan established in a quiet reflective time is 10,000 times better than a new plan established under emotional pressure. In absence of such solid plan though, I'd rather not see people improvise in a knee-jerk manner... Now if you're the cold-headed analytical kind of guy, you may be able to deal with a new situation on the fly and do the right thing, but there are few people like that, and those people probably planned ahead with care. This being said, I don't disagree with you that being blindly stubborn can become a problem. I don't think we're yet in such situation though. A 30% stock decline is hardly unprecedented. Let's sit tight and see what happens...

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 10:04 am
by Doc
JustinR wrote: Sat Mar 21, 2020 10:41 pm Can't figure out if you should be rebalancing, TLHing, or buying? Unsure how much further the market will drop? Can't bring yourself to follow your IPS?

It's ok to do nothing.
Alternatively just follow your existing plan. I've been rebalncing and TLH each time I reach the existing action point target.

Having a plan that you choose not to use because you're scared is an oxymoron. The reason you have a plan in the first place is so that you won't act on emotion in times of stress instead of using rational thinking.

Re: It's ok to do nothing

Posted: Sun Mar 22, 2020 10:50 am
by Scooter57
If you are old, the basis your heirs will pay tax on is the value of your holdings the day you died. Tax loss harvesting now will not be an issue for their basis in inherited taxable stock. Unless, of course the tax laws change.