One week out of the market?

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eurobogle
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One week out of the market?

Post by eurobogle » Sun Sep 15, 2019 5:57 am

I am expecting to be out of the market for one week. I will be moving internationally, liquidating equities in country A buying equivalent equities in country B. I am worried that "something might happen" and this week outside of the market could have a large unwanted effect on my long term returns. The types of account and specific funds available will be different in the new country and is why I foresee the switch taking so long.

Is this a rational fear? Should I be trying hard to reduce this time to only days or hours? How should I think about this?

For context I don't believe in Dollar Cost Averaging because I accept that it's only a placebo that costs me likely-valuable time in the market.

Many thanks for any advice!

EDIT: These equities are 100% VWRL i.e. world diversified equities by market weight.
Last edited by eurobogle on Sun Sep 15, 2019 7:03 am, edited 1 time in total.

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Re: One week out of the market?

Post by RickBoglehead » Sun Sep 15, 2019 6:04 am

It is an irrational fear. Noting happens in 5 days that impacts a long term investor.
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Re: One week out of the market?

Post by livesoft » Sun Sep 15, 2019 6:15 am

It is not an irrational fear. Things happen in a few days. Did you see that IJS (a small-cap value ETF) went UP over 8% last week in a few days?

Pick a week with no news, no FOMC meetings, no earnings reports, not end of quarter, no Brexit news, etc and maybe do some other things, too, if you are worried.

For instance, one might move 25% of portfolio per week. That's not DCA since 75% of the portfolio remains invested while 25% is being moved. Plus, you will have practice moving after the first tranche.
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Re: One week out of the market?

Post by RickBoglehead » Sun Sep 15, 2019 6:22 am

livesoft wrote:
Sun Sep 15, 2019 6:15 am
It is not an irrational fear. Things happen in a few days. Did you see that IJS (a small-cap value ETF) went UP over 8% last week in a few days?

Pick a week with no news, no FOMC meetings, no earnings reports, not end of quarter, no Brexit news, etc and maybe do some other things, too, if you are worried.

For instance, one might move 25% of portfolio per week. That's not DCA since 75% of the portfolio remains invested while 25% is being moved. Plus, you will have practice moving after the first tranche.
No. I did not see that. With a 3 fund portfolio, why would I look for it? :wink:

It is irrational to pick a week with no news, because news gets created out of a vacuum. Like a refinery being bombed... You can't control the news.

The 25% per week option is sound if possible.
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Re: One week out of the market?

Post by eurobogle » Sun Sep 15, 2019 7:00 am

livesoft wrote:
Sun Sep 15, 2019 6:15 am
For instance, one might move 25% of portfolio per week. That's not DCA since 75% of the portfolio remains invested while 25% is being moved. Plus, you will have practice moving after the first tranche.
I am not able to do this. I will need to liquidate everything while being tax resident in country A and then only buy after having been officially accepted as resident in country B.

Can't liquidate after the move due to much higher capital gains taxes in the new country. Can't buy before the move because the relevant investment accounts aren't available from the old country. Some risk (fear) that if I cut everything too fine then a transaction will be delayed and end up being taxed in the wrong country.

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eurobogle
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Re: One week out of the market?

Post by eurobogle » Sun Sep 15, 2019 7:01 am

Further detail: The relevant part of the portfolio is 100% VWRL i.e. world diversified equities by market cap.

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Re: One week out of the market?

Post by Tamarind » Sun Sep 15, 2019 7:12 am

If you can't avoid it, then stop worrying about it. This also happens to anyone doing a trustee-to-trustee transfer for a retirement account. My mother lost about $15k to tweet-induced volatility during her 401k to tIRA transfer. But she's investing for another 30 years +/-, so odds are low that particular bit of news will be memorable for long.

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Re: One week out of the market?

Post by firebirdparts » Sun Sep 15, 2019 7:18 am

By definition, wouldn’t an event on that scale have to be negative? If something that outrageous did happen, being out of the market would be a bonus. Still irrational.
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Re: One week out of the market?

Post by livesoft » Sun Sep 15, 2019 7:19 am

Don't forget there is a chance that being out of the market works in one's favor, too.
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Re: One week out of the market?

Post by bgf » Sun Sep 15, 2019 7:26 am

is there a difference statistically between being 95% equities 5% cash for all trading days in one year vs being 100% equities for 95% trading days and 100% cash for 5% trading days?

im wondering if all this does is effectively make his annual portfolio a couple percentage points more cash biased.

ive never really thought about this because its basically market timing.

if done randomly though, like OP, i wonder what the effect is.
Last edited by bgf on Sun Sep 15, 2019 7:27 am, edited 1 time in total.
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Re: One week out of the market?

Post by bck63 » Sun Sep 15, 2019 7:27 am

livesoft wrote:
Sun Sep 15, 2019 6:15 am
Pick a week with no news, no FOMC meetings, no earnings reports, not end of quarter, no Brexit news, etc and maybe do some other things, too, if you are worried.
This makes no sense, since news might positively or negatively affect the market and there's no way to know. News that sent the market downward would benefit the OP. There's also no way to control world developments, which can happen on a moment's notice, without warning.

If it weren't that way, it wouldn't be called news.

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Re: One week out of the market?

Post by eurobogle » Sun Sep 15, 2019 7:41 am

Thanks for the tip about the news, livesoft. If Brexit happens then I bet there will be high volatility that week!

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Re: One week out of the market?

Post by jeffyscott » Sun Sep 15, 2019 7:52 am

eurobogle wrote:
Sun Sep 15, 2019 7:00 am
livesoft wrote:
Sun Sep 15, 2019 6:15 am
For instance, one might move 25% of portfolio per week. That's not DCA since 75% of the portfolio remains invested while 25% is being moved. Plus, you will have practice moving after the first tranche.
I am not able to do this. I will need to liquidate everything while being tax resident in country A and then only buy after having been officially accepted as resident in country B.

Can't liquidate after the move due to much higher capital gains taxes in the new country. Can't buy before the move because the relevant investment accounts aren't available from the old country. Some risk (fear) that if I cut everything too fine then a transaction will be delayed and end up being taxed in the wrong country.
That sounds like your bigger risk, then. Also that risk can only affect you negatively, while the risk of being out of the market could go either way.

If the market moves against you after you sell out, you could delay buying back in and hope that it goes the other way in a short while. Or get back in gradually.

You say that you can not liquidate after the move due to taxes, but what if you sell and buy something similar just before the move, so that the gains are recognized in the old country? For example, say you own Vanguard total world index fund, sell that and buy total stock market index and world ex-US funds and pay the taxes on the gains from the sale shortly before the move. Then you would have a minimal gain/loss when you sell the new funds after moving. (And actually, I think you can buy the same funds since you are harvesting a gain not a loss?)
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Re: One week out of the market?

Post by LadyGeek » Sun Sep 15, 2019 7:58 am

This thread is now in the Non-US Investing forum (non-US investing).
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Re: One week out of the market?

Post by typical.investor » Sun Sep 15, 2019 8:11 am

jeffyscott wrote:
Sun Sep 15, 2019 7:52 am
You say that you can not liquidate after the move due to taxes, but what if you sell and buy something similar just before the move, so that the gains are recognized in the old country? For example, say you own Vanguard total world index fund, sell that and buy total stock market index and world ex-US funds and pay the taxes on the gains from the sale shortly before the move. Then you would have a minimal gain/loss when you sell the new funds after moving. (And actually, I think you can buy the same funds since you are harvesting a gain not a loss?)
I agree. Why not realize the gains in the favorable country, immediately rebuy, and transfer in-kind?

You'd be out of the market for what 10 seconds.

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eurobogle
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Re: One week out of the market?

Post by eurobogle » Sun Sep 15, 2019 10:20 am

typical.investor wrote:
Sun Sep 15, 2019 8:11 am
I agree. Why not realize the gains in the favorable country, immediately rebuy, and transfer in-kind?
Thanks for the suggestion. If it is possible to transfer the shares in-kind then that would be good. I had imagined having to make two sell-and-buy steps for this method and that the transaction costs would be prohibitive. I have to talk to my broker and check my assumptions.

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Re: One week out of the market?

Post by tibbitts » Sun Sep 15, 2019 10:27 am

I think this is a very significant problem but don't know enough to say if there is a way to work around it.

I guess you could take the approach of taking your money out and waiting for a lower or equal entry point to buy back in. Of course you could profit if markets fall. If markets over never revert to the level they were at, maybe find any component parts that did, and invest only the portion of the funds you had invested directly in them.

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Re: One week out of the market?

Post by glorat » Sun Sep 15, 2019 10:40 am

It is in this situation I would definitely pay a good sum to get some professional tax advice

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Re: One week out of the market?

Post by CoastalWinds » Sun Sep 15, 2019 10:52 am

Use/request overnight mail to minimize time out. Then cross your fingers.

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Re: One week out of the market?

Post by JoMoney » Sun Sep 15, 2019 11:14 am

The situation you're in is not uncommon for people doing things like rolling a 401k over to an IRA. You'll find lots of threads on it if you search.
People often worry about it, but worrying doesn't change anything. The markets fluctuate daily. It's kind of funny/ironic how much people "worry" about missing out on that fluctuation for the couple weeks they're out of the market when they're in a risk-free situation with no volatility... kinda makes you wonder about the hoopla portfolio theorists make over wanting to minimize volatility.

My recommendation is just don't look at the market prices/levels when you're getting out/in and you'll likely never know if you missed some marginal loss or a gain.

FWIW, whether or not you "believe in Dollar Cost Averaging" it is an effective tool to spread the risk over time. You can guarantee the price you buy/sell at is the 'average' over some time period and lessen the impact of any particular day. But since most of us expect our investments to go up in value over time, you're right to expect that time out of the market will cost you.
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Re: One week out of the market?

Post by eurobogle » Sun Sep 15, 2019 11:25 am

I have consulted with international tax experts on both sides. The advice is to liquidate, then move, then purchase. Have not discussed more complex ideas like transfering recently repurchased shares.

Sounds potentially problematic because there are some blanket laws about transactions made purely for the purpose of tax minimisation that could conceivably apply.

Maybe I'll just roll the dice and see if I can confidently bring the time window down to a few days. Otherwise there's a sure loss on tax consulting, accounting, spreads, transactions, etc.

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Re: One week out of the market?

Post by Cycle » Sun Sep 15, 2019 11:29 am

You could get lucky, you could get unlucky. If you get unlucky, just be thankful you didn't get run over by a bus.

There are many worse things that chance can throw at you in life than a couple of numbers in an electronic brokerage account.

I would write down my plan, and then execute on it. this plan would include going all-in on the first available day regardless of the days prices.
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Re: One week out of the market?

Post by Goal33 » Sun Sep 15, 2019 11:35 am

This is out of your control sounds like. Just don’t worry about it.
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Re: One week out of the market?

Post by rkhusky » Sun Sep 15, 2019 7:51 pm

If you figure the market gains on average about 0.03%/day, then your expected loss for 5 days out of the market is 0.15%, which is pretty much in the noise of day to day stock movements.

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Re: One week out of the market?

Post by glorat » Sun Sep 15, 2019 10:20 pm

Then if it were me, I'd take the above earlier advice to find a "quiet" week where there is minimal upcoming news. Market timing is not possible but news timing is. Minimize the effect of good/bad luck

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Re: One week out of the market?

Post by Stinky » Mon Sep 16, 2019 9:51 am

Tamarind wrote:
Sun Sep 15, 2019 7:12 am
If you can't avoid it, then stop worrying about it.
This is excellent advice.

Do what you can to minimize time out of market. Execute your plan. Then go on with your life.
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Re: One week out of the market?

Post by hdas » Mon Sep 16, 2019 10:36 am

livesoft wrote:
Sun Sep 15, 2019 6:15 am
Did you see that IJS (a small-cap value ETF) went UP over 8% last week in a few days?
Let us avoid the hyperbole, just count....6.57%. :greedy
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Re: One week out of the market?

Post by livesoft » Mon Sep 16, 2019 10:51 am

hdas wrote:
Mon Sep 16, 2019 10:36 am
Let us avoid the hyperbole, just count....6.57%. :greedy:
And since mid-day 9/3 how much is IJS up?
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Re: One week out of the market?

Post by bgreat » Tue Sep 17, 2019 1:03 pm

Some things I'm confused by or are unclear:
- Does your new country charge capital gains relative to purchase price, or relative to date of taking up residency? (This varies by country, hence is important.)
- Are you likely to move out of your new country at some point in the future (and do they charge an exit capital-gains tax)?
- Why are you using separate accounts for each country? Have you considered using an international-capable broker such as Interactive Brokers? (They offer cheap access to almost all exchanges in the world.)

Some ideas:
- Simply avoid selling in the new country, and/or move to a country with no or lower capital gains before selling.
- Keep everything in a single account (e.g. IB) to minimise complications / minimise time out of market.
- Consider converting to a different ETF tracking a similar index to avoid the "blanket laws about transactions made purely for the purpose of tax minimisation" issue, this way you might be able to sell/repurchase all on one day, while still in country 1.
- Temporarily move to a country with no capital gains to cycle your gains, potentially also using the previous suggestion.

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Re: One week out of the market?

Post by barnaclebob » Tue Sep 17, 2019 3:51 pm

RickBoglehead wrote:
Sun Sep 15, 2019 6:04 am
It is an irrational fear. Noting happens in 5 days that impacts a long term investor.
Uhh, late Sept and early Oct 2008? If anyone was forced to be out of the market like the OP and had the fortitude to jump back in ASAP they would be pretty happy right now.

OP, that being said, if its really required for you to be out of the market for a week, just consider it an unmitigatible risk and hope you get lucky.
Last edited by barnaclebob on Tue Sep 17, 2019 3:54 pm, edited 1 time in total.

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Re: One week out of the market?

Post by 02nz » Tue Sep 17, 2019 3:53 pm

livesoft wrote:
Sun Sep 15, 2019 6:15 am
Pick a week with no news, no FOMC meetings, no earnings reports, not end of quarter, no Brexit news, etc and maybe do some other things, too, if you are worried.
Maybe you can shut down Twitter for that week? :twisted:

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Re: One week out of the market?

Post by eurobogle » Fri Oct 04, 2019 6:37 am

I have made one significant error in my planning: I underestimated the time it would take after moving to be able to invest again. I had expected to be back into the market already but I now expect several weeks of bureaucratic obstacles. This means I'll probably be buying back in at a time close to the current Brexit deadline.

I'm finding it hard to resist torturing myself by watching the market gyrations from day to day but at least my action plan is clear i.e. buy back into the market the minute I am able to.

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Re: One week out of the market?

Post by Stinky » Fri Oct 04, 2019 7:55 am

eurobogle wrote:
Fri Oct 04, 2019 6:37 am

I'm finding it hard to resist torturing myself by watching the market gyrations from day to day but at least my action plan is clear i.e. buy back into the market the minute I am able to.
Resist the urge! Nothing is gained by watching week to week, day to day, or minute to minute gyrations.

Glad that have a plan going forward. Good luck to you.
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