Move my stock index funds to cash?

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Topic Author
sonoferu
Posts: 23
Joined: Wed Oct 14, 2015 9:46 am

Move my stock index funds to cash?

Post by sonoferu » Tue Mar 24, 2020 8:49 am

I bet this is a big topic these days --> YIKES what do I do???

Wife and I are 71, retired. Most of our retirement is at Vanguard, her IRA and mine, split 50/50 VTSAX and VBTLX. The rest of it is a chunk of cash that she got just recently from selling her half of an LLC she formed with her sister to rent their father's house that they inherited. After 5 years she wanted out so she got about $100,000. And so we have a large cash cushion that we can live on, to cover the gap between Social Security and our expenses. It would last several years without having to touch the IRA's

I like to think I'm smart but I've never been interested in getting into investment details, hence my simplistic allocations, set and forget -- up till now.

Bonds are about flat YTD, stocks are down about 30%. So I am really concerned about how bad it's going to get. I wonder if I should move the stock fund to money market.

I know it's already gone way down so I've already lost a lot. Question is of course, how much more will the loss be? And so, how much could I rescue before it turns around? I asked my sister, who is much more into investing, and she said for goodness sake, if you have that cash, just leave it all alone, the market will come back, don't try to time the market, the standard rules for market panics.

But, as someone who just knows from what I read these days, it looks to me like this is not like anything ever before. So I fear the rules don't apply this time. It's not a severe business downturn, or a financial freeze like 2008, it's a virus pandemic that is going to infect most of the people in the world, and as a side effect it is crashing the economy. Businesses will die right and left, they won't be there when the virus fades away, to start back up again and hire back their workers. Workers all over will be disaster-struck, so who will have money then to get up and brush themselves off and start spending again? Am I panicked? Yeah, I guess I am.

The thing is that the virus won't be done in just a couple of months. Even if we managed to flatten that curve, as soon as we relax the constraints, the spread will pick up again. UNTIL THERE'S A VACCINE the virus will be present and will attack any human host it can find that isn't already immune. We won't reach a level of "herd immunity" [gosh what a concept] that could cause it to fade in just a few months. So I fear we are in for at least a year of hard, hard economic disaster.

So if that did turn out true, and GDP fell by 25%, 50%, would not the stock market become a desert?

So anyway, anyone want to comfort me or scold me for thoughts like that?

What do I do?

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climber2020
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Re: Move my stock index funds to cash?

Post by climber2020 » Tue Mar 24, 2020 8:53 am


john0608
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Re: Move my stock index funds to cash?

Post by john0608 » Tue Mar 24, 2020 8:57 am

you didn't say how much you are talking about - best thing to do is hang tough and wait for it to rebound in my opinion - thats what i am doing

age 63 - was going to retire but will stay on till 65/66 now, 60/40 stocks to cash & Cds with 10% of fixed in the total bond index.

park your cash in savings or cd's for now.....i'm sure you can live on SS and the cash till things rebound....if they never rebound i guess we were all wrong but have faith ...humans will defeat pandemics....we will have a vaccine in a year .....meds in 3 months...

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dwickenh
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Re: Move my stock index funds to cash?

Post by dwickenh » Tue Mar 24, 2020 9:04 am

You have a reasonable allocation, but you need to get comfortable with what that allocation does in a down market. You are likely down about 13-15% overall not counting your cash allocation. This is what stocks do, so you have to get used to it or don't invest in stocks. I would not lock in my losses by selling low. I am currently a 50/50 investor like you, and I have been buying more stock to keep my 50/50 balance. If that is too risky sounding to you, just quit watching the market and live on the cash cushion until the market comes back. It always has reversed course and will likely do that again.

Best wishes for your success,

VW
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

Topic Author
sonoferu
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Re: Move my stock index funds to cash?

Post by sonoferu » Tue Mar 24, 2020 10:02 am

john0608 wrote:
Tue Mar 24, 2020 8:57 am
you didn't say how much you are talking about - best thing to do is hang tough and wait for it to rebound in my opinion - thats what i am doing

age 63 - was going to retire but will stay on till 65/66 now, 60/40 stocks to cash & Cds with 10% of fixed in the total bond index.

park your cash in savings or cd's for now.....i'm sure you can live on SS and the cash till things rebound....if they never rebound i guess we were all wrong but have faith ...humans will defeat pandemics....we will have a vaccine in a year .....meds in 3 months...
Sorry, yes, the amount - total yesterday $431,000, down from $513,000 before this started, so down 16%. Our SS is about $40,000 per year, and we have been living on about $65,000. With the tremendous growth the last few years we have covered the gap while the balance actually grew.

When I decided to retire I figured we would need about 4% per year growth to keep from running out in 20-25 years. So it was going great, but that's my fear now - if the VTSAX drops another say, 50%, the total would go to something around $335,000 [quick calc]. If it stabilized there, and then grew really slowly, that would last what, 15 years or so?

So that's my amount and sort of my time line. My IRA in 2008 was bad of course, but it came back fine. But I was working and building it and in my top earning years. I'm different now. When I fear this time is "different", too, it's the fear I already described - that it would be like a car in which lots of important parts were broken or missing. You couldn't just say, "Whew, that's over" and turn the key and drive away.

And yes, Dow and S&P are jumping up and down about about the stimulus deal. That's the part of the market that I take with a pillar of salt. At dramatic times it doesn't work like a market where value is calculated and analyzed, it's all emotion. And yes, my fear is a lot of emotion, but still it looks like something serious to be afraid of.

So I'm not knocking the posters here who are saying don't panic, not at all. I'm looking for reasons to think one way or another. Like I said, I'm not a regular follower of investments, so there is lots I haven't thought of, I'm sure.

Thanks all.

Topic Author
sonoferu
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Joined: Wed Oct 14, 2015 9:46 am

Re: Move my stock index funds to cash?

Post by sonoferu » Tue Mar 24, 2020 10:04 am

dwickenh wrote:
Tue Mar 24, 2020 9:04 am
It always has reversed course and will likely do that again.

Best wishes for your success,

VW
Thanks. And I like your Buffett quote

Tucker50
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Re: Move my stock index funds to cash?

Post by Tucker50 » Tue Mar 24, 2020 12:41 pm

I found this interview with Bill Gates comforting. https://www.gatesnotes.com/Health/A-coronavirus-AMA I think many of the assumptions in the Imperial College model were too strict and based on too little data. We will need a good surveillance system to catch rebounds when we quit distancing/lockdowns. It worries me that there is not a good surveillance system in place. We will also need some sort of system of testing persons entering our borders.

That China has not seen many new cases is encouraging. That said before I became less concerned about the future, I blinked and moved some index funds to safety. During all other times, I held fast in my investments. However, I have enough of a science background to be very concerned about the current situation - although I am not necessarily right and as always with science our knowledge grows and changes with time. I need to rethink risk tolerance. It appears my tolerance of risk varies by what causes the risk.

surfstar
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Location: Santa Barbara, CA

Re: Move my stock index funds to cash?

Post by surfstar » Tue Mar 24, 2020 12:47 pm

Maybe review VPW as an option https://www.bogleheads.org/wiki/Variabl ... withdrawal
Especially if your expenditures have flexibility, it is very adaptable to market movements.

billfromct
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Re: Move my stock index funds to cash?

Post by billfromct » Tue Mar 24, 2020 4:33 pm

You say, "It (cash cushion) would last several years without having to touch the IRAs."

Of course at age 71, you're taking Required Minimum Distributions (RMDs) from your IRAs, right?

I'm also 71 with my birthday early in the year & I've taken 2 RMDs (2019 & 2020) from my rollover IRA. I take the RMD early in the year so I get it out of the way. If something were to happen to me, I'm sure my kids will forget to do it even though I have everything written down.

bill

Topic Author
sonoferu
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Joined: Wed Oct 14, 2015 9:46 am

Re: Move my stock index funds to cash?

Post by sonoferu » Wed Mar 25, 2020 8:03 am

Yes I am taking RMD, and thank you Vanguard for doing it automatically for me each year now.

And I will note that yesterday the mad scramble drove the world up about 10% and with my allocation my balance is up by about 4%, or $17,000. Just a day at the stock market.

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