Time to sell international funds in 401k

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collen
Posts: 1
Joined: Thu Oct 11, 2018 11:18 am

Time to sell international funds in 401k

Post by collen » Thu Oct 11, 2018 1:48 pm

Hi...my workplace Schwab 401k seems to be doing poorly this year with personal rate of return now at -1.66 (Modified Dietz) as of yesterday. My temperament is moderately conservative with plans to retire at the end of this year or at the end of Q1 2019; I'm 62. I have a couple of international funds that are doing bad and wondering if I should try to sell them, or what to do with them if anything, etc.

1. American Funds Europacific Growth R6 [ER 0.49]-- down ytd -9.54 (as of 10/10) == makes up 4.93% of my portfolio
2. American Beacon International Eq Instl [ER 0.73]-- down ytd -7.18 (as of 10/10) == makes up 4.74% of my portfolio

My 401k size is as of today -- 351k

Thanks...this forum has been a tremendous amount of help over the past couple of years.

Living Free
Posts: 97
Joined: Thu Jul 19, 2018 7:31 pm

Re: Time to sell international funds in 401k

Post by Living Free » Thu Oct 11, 2018 7:23 pm

Wouldn't this be selling low, which is the opposite of what you want to do?

You should come up with an asset allocation plan (percentage of stocks, percentage of international stocks, percentage of bonds, percentage of anything else like real estate or whatever) and then stick to it and rebalance at some reasonable threshold (like if your percentage of say international stocks drops 5% you then would buy more of it). The re-balancing will hopefully prevent you from selling low and buying high; instead it should encourage buying low and selling high.

wesgreen
Posts: 165
Joined: Fri Jan 07, 2011 9:14 am

Re: Time to sell international funds in 401k

Post by wesgreen » Thu Oct 11, 2018 7:50 pm

One year's returns don't mean much. If your total INTL allocation is under 10%, I wish I was in your situation (I'm still sitting on 22%). You might as well wait and see if it recovers someday and then sell. Selling when you're down is rarely a good idea. I wonder if you could transfer to something similar with lower ER in your account. You could stop rebalancing into it, or have dividends directed somewhere else.

MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: Time to sell international funds in 401k

Post by MotoTrojan » Thu Oct 11, 2018 8:23 pm

wesgreen wrote:
Thu Oct 11, 2018 7:50 pm
One year's returns don't mean much. If your total INTL allocation is under 10%, I wish I was in your situation (I'm still sitting on 22%). You might as well wait and see if it recovers someday and then sell. Selling when you're down is rarely a good idea. I wonder if you could transfer to something similar with lower ER in your account. You could stop rebalancing into it, or have dividends directed somewhere else.
I agree that a lower ER fund would be appropriate, but I'd personally want something with similar exposure to International.

Buy low sell high. -1% on the year is normal business. Make a plan, rebalance per the plan, and live your life.

Freefallin
Posts: 21
Joined: Thu Oct 04, 2018 1:12 pm

Re: Time to sell international funds in 401k

Post by Freefallin » Thu Oct 11, 2018 8:51 pm

It will be difficult, but hang tight! If I'm reading it right, you only have 9.67% in international? Give it time to recover and rebalance.
"Pain is the touchstone of all growth." - Bill W.

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whodidntante
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Joined: Thu Jan 21, 2016 11:11 pm

Re: Time to sell international funds in 401k

Post by whodidntante » Thu Oct 11, 2018 8:58 pm

Reducing your allocation to an asset based solely off recent underperformance does not sound like a winning strategy.

While American Funds are not the worst funds, but they are still more expensive than most passive funds. And AF tends to favor growth stocks, which is a fancy way of saying expensive stocks. Value stocks have tended to beat growth stocks over a long time horizon. I would keep the international, and buy more if needed to restore your desired asset allocation. But use cheaper funds that do not tilt to growth stocks if available.

Valuethinker
Posts: 36041
Joined: Fri May 11, 2007 11:07 am

Re: Time to sell international funds in 401k

Post by Valuethinker » Fri Oct 12, 2018 4:57 am

collen wrote:
Thu Oct 11, 2018 1:48 pm
Hi...my workplace Schwab 401k seems to be doing poorly this year with personal rate of return now at -1.66 (Modified Dietz) as of yesterday. My temperament is moderately conservative with plans to retire at the end of this year or at the end of Q1 2019; I'm 62. I have a couple of international funds that are doing bad and wondering if I should try to sell them, or what to do with them if anything, etc.

1. American Funds Europacific Growth R6 [ER 0.49]-- down ytd -9.54 (as of 10/10) == makes up 4.93% of my portfolio
2. American Beacon International Eq Instl [ER 0.73]-- down ytd -7.18 (as of 10/10) == makes up 4.74% of my portfolio

My 401k size is as of today -- 351k

Thanks...this forum has been a tremendous amount of help over the past couple of years.
10% international in your portfolio is neither here nor there.

You either cut to zero or go to 20%. Evidence shows 20% international (as a minimum) has, historically, reduced volatility. However in recent decades it has also led to lower returns.

The high expense ratios won't be helping. If low cost index funds are available (US domestic or international) you should switch to those.

KJVanguard
Posts: 61
Joined: Fri Oct 05, 2018 3:39 am

Re: Time to sell international funds in 401k

Post by KJVanguard » Fri Oct 12, 2018 5:36 am

Buy low, sell high. That is how you win at investing.

What you propose doing is the exact opposite of that. Unless you have a crystal ball that tells you international will go lower. Where were you going to move the proceeds of the sale? Into something "safe" like a MM that "safely" earns 2% or a highly-valued US stock fund?

3funder
Posts: 720
Joined: Sun Oct 15, 2017 9:35 pm

Re: Time to sell international funds in 401k

Post by 3funder » Fri Oct 12, 2018 7:46 am

KJVanguard wrote:
Fri Oct 12, 2018 5:36 am
Buy low, sell high. That is how you win at investing.

What you propose doing is the exact opposite of that. Unless you have a crystal ball that tells you international will go lower. Where were you going to move the proceeds of the sale? Into something "safe" like a MM that "safely" earns 2% or a highly-valued US stock fund?
+1. There is no point in selling your international funds unless you have completely lost confidence in the manager's process or ability to pick winners. Stay where you are; heck, if anything, maybe you should buy more (again, unless you have lost confidence in the individual(s) who manage the fund).

deltaneutral83
Posts: 847
Joined: Tue Mar 07, 2017 4:25 pm

Re: Time to sell international funds in 401k

Post by deltaneutral83 » Fri Oct 12, 2018 7:50 am

The time to sell international funds was Jan 22. If you don't have a time machine, suggest you stay the course.

UpperNwGuy
Posts: 1002
Joined: Sun Oct 08, 2017 7:16 pm

Re: Time to sell international funds in 401k

Post by UpperNwGuy » Fri Oct 12, 2018 8:12 am

Don't sell. You would be locking in losses. Hang onto those funds. Sooner or later they'll rise.

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