Locking in gains

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Rkakli
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Joined: Thu Mar 26, 2020 8:51 am

Locking in gains

Post by Rkakli » Thu Mar 26, 2020 9:03 am

I am new to the forum and it’s too late for this now; but still wondering. I had a friend who locked in her gains few weeks back. I was at an overall allocation that I was ok with. It didn’t seem like a good idea for me to do this at that time; I akin this to market timing. But it feels we are going to be in this for awhile. This seems different than 2008, 2001 where I never touched the portfolios, only for rebalancing. But I’m also that much older as well. I also was adding more to fixed income and cash for 2 years now. I’m at 60/40 and early 50s, husband 9.5 years older than me. I’m too chicken to look at our accounts right now.
Thoughts? Did people lock in or are riding it out?

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JoeRetire
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Re: Locking in gains

Post by JoeRetire » Thu Mar 26, 2020 9:17 am

Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I had a friend who locked in her gains few weeks back.
How did she do that?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

adamthesmythe
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Re: Locking in gains

Post by adamthesmythe » Thu Mar 26, 2020 12:44 pm

Your friend was lucky or prescient.

Or maybe a member of Congress. In any case: it's (probably) too late to lock in gains NOW.

[The "probably" is because...we don't know for sure that the market won't go down from here].

vipertom1970
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Re: Locking in gains

Post by vipertom1970 » Thu Mar 26, 2020 12:47 pm

JoeRetire wrote:
Thu Mar 26, 2020 9:17 am
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I had a friend who locked in her gains few weeks back.
How did she do that?
If you had stayed the course in the market the last 25 years then you should have a gain over 350%.
Last edited by vipertom1970 on Thu Mar 26, 2020 3:36 pm, edited 1 time in total.

Thesaints
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Re: Locking in gains

Post by Thesaints » Thu Mar 26, 2020 1:03 pm

Unless the gains you want to lock in are sufficient to the point that you won't ever need other gains, sure: lock them in.
Otherwise locking in past gains has the drawback of locking out all future ones.

dbr
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Re: Locking in gains

Post by dbr » Thu Mar 26, 2020 1:22 pm

Thesaints wrote:
Thu Mar 26, 2020 1:03 pm
Unless the gains you want to lock in are sufficient to the point that you won't ever need other gains, sure: lock them in.
Otherwise locking in past gains has the drawback of locking out all future ones.
Right. The idea would be that you are no longer investing. Otherwise it is a puzzle what one's intention is.

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watchnerd
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Location: Seattle, WA, USA

Re: Locking in gains

Post by watchnerd » Thu Mar 26, 2020 1:28 pm

JoeRetire wrote:
Thu Mar 26, 2020 9:17 am
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I had a friend who locked in her gains few weeks back.
How did she do that?
I locked in some of my long term ESPP gains on Feb 18th and 20th.

Index investments are still in the market.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

mega317
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Re: Locking in gains

Post by mega317 » Thu Mar 26, 2020 3:18 pm

Rkakli wrote:
Thu Mar 26, 2020 9:03 am
it feels
This seems
Basically any thought or sentence that includes these words is meaningless and should be dropped/ignored. No matter what you think or feel, you don't know what the future holds.
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I was at an overall allocation that I was ok with.
This is now proven to be wrong. You need to reevaluate your goals, risk tolerance, and then asset allocation. Now is a very difficult time to do that, unfortunately.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

lowndes
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Re: Locking in gains

Post by lowndes » Thu Mar 26, 2020 3:23 pm

mega317 wrote:
Thu Mar 26, 2020 3:18 pm
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
it feels
This seems
Basically any thought or sentence that includes these words is meaningless and should be dropped/ignored. No matter what you think or feel, you don't know what the future holds.
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I was at an overall allocation that I was ok with.
This is now proven to be wrong. You need to reevaluate your goals, risk tolerance, and then asset allocation. Now is a very difficult time to do that, unfortunately.
That isn't necessarily true - one could be at a comfortable allocation and still decide they want to sit on the sidelines for awhile. That decision does not necessarily have anything to do with one's asset allocation but them thinking they know what the market is going to do next. I think the research shows that doesn't work but I wouldn't describe it as being uncomfortable with one's asset allocation, panic, etc.

LookinAround
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Re: Locking in gains

Post by LookinAround » Thu Mar 26, 2020 4:03 pm

adamthesmythe wrote:
Thu Mar 26, 2020 12:44 pm
Your friend was lucky or prescient.

Or maybe a member of Congress...
:thumbsup LOL :D

mega317
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Re: Locking in gains

Post by mega317 » Thu Mar 26, 2020 4:21 pm

lowndes wrote:
Thu Mar 26, 2020 3:23 pm
one could be at a comfortable allocation and still decide they want to sit on the sidelines for awhile.
That makes no sense. If 60/40 is the comfortable allocation then why change it? 0/100 is quite different.
That decision does not necessarily have anything to do with one's asset allocation but them thinking they know what the market is going to do next.
Anyone who thinks this is wrong (as you basically said in your next sentence) and needs to know that, not have it be renamed and get into a semantic discussion.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

lowndes
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Re: Locking in gains

Post by lowndes » Thu Mar 26, 2020 4:36 pm

It really isn't just semantics. Most on here believe you can't time the market, etc. I put myself in that camp and simply buy and hold and maintain my allocation for the long term. Others (certainly the minority on here) believe that you can read what is going on and get in and out of the market. If one is confident that the market is going to go down from here then that seems like a logical approach irrespective of what their current allocation is (I just have never had such confidence in short term market direction - pretty confident the long term market direction is up).

This is very different than "panicking" or having the wrong allocation (as that would suggest they should never even be in the market). For example, if I were to be in the second camp and my allocation was 90/10 but I thought I could time the market in this situation I probably would get in and out at the same allocation.

I'm not here to tell people that they are certainly wrong, etc. as most investors probably are a lot smarter than me. All that said, the current pandemic isn't something we have seen in the past with regards to a complete shutdown of society, how it plays out, etc. Too early to tell how this plays out, if some of the folks who think this time is different and want to be on the sidelines are right, etc.

And for all my talk about timing the market I guess I sort of attempted it last week as I put virtually all the free cash I could spare into the market as long term I liked buying in at those levels. I wasn't doing that in early February.

FoolMeOnce
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Re: Locking in gains

Post by FoolMeOnce » Thu Mar 26, 2020 5:01 pm

Riding it out, not uncomfortable about waiting this out (was roughly 92/8 at the peak and have rebalanced into equities), but this has made me realize that my lack of need to take risk is greater than my ability or willingness to take risk, so after the recovery - whenever that is - I'll probably shift to something more conservative. "Won the game" and all that. If we get another couple days of the current bounce and get close to where we were, I might pull the trigger then.

RCL
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Joined: Sat Jul 05, 2014 2:48 am

Re: Locking in gains

Post by RCL » Thu Mar 26, 2020 5:14 pm

mega317 wrote:
Thu Mar 26, 2020 3:18 pm
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
it feels
This seems
Basically any thought or sentence that includes these words is meaningless and should be dropped/ignored. No matter what you think or feel, you don't know what the future holds.
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I was at an overall allocation that I was ok with.
This is now proven to be wrong. You need to reevaluate your goals, risk tolerance, and then asset allocation. Now is a very difficult time to do that, unfortunately.
Did I miss-interpret the OP's post?
I thought it was a friend who locked in their gains and the OP was okay with their allocation? (and therefore did nothing)?
It Is Best To Consult Others Before Taking Unusual Actions

mega317
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Re: Locking in gains

Post by mega317 » Thu Mar 26, 2020 5:18 pm

lowndes wrote:
Thu Mar 26, 2020 4:36 pm
Others (certainly the minority on here) believe that you can read what is going on and get in and out of the market. If one is confident that the market is going to go down from here then that seems like a logical approach irrespective of what their current allocation is (I just have never had such confidence in short term market direction - pretty confident the long term market direction is up).

This is very different than "panicking" or having the wrong allocation (as that would suggest they should never even be in the market).
The description doesn't fit the OP. "It's too late now." "Didn't seem like a good idea at the time." Does that sound like someone who believes they "can read what is going on and get in and out of the market"? Does it sound like someone who is confident in anything? It reads like panicking.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

lowndes
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Re: Locking in gains

Post by lowndes » Thu Mar 26, 2020 5:38 pm

mega317 wrote:
Thu Mar 26, 2020 5:18 pm
lowndes wrote:
Thu Mar 26, 2020 4:36 pm
Others (certainly the minority on here) believe that you can read what is going on and get in and out of the market. If one is confident that the market is going to go down from here then that seems like a logical approach irrespective of what their current allocation is (I just have never had such confidence in short term market direction - pretty confident the long term market direction is up).

This is very different than "panicking" or having the wrong allocation (as that would suggest they should never even be in the market).
The description doesn't fit the OP. "It's too late now." "Didn't seem like a good idea at the time." Does that sound like someone who believes they "can read what is going on and get in and out of the market"? Does it sound like someone who is confident in anything? It reads like panicking.
Honestly - I have no idea. Hard to decipher much of anything based on forum postings. I personally just think the world "panic" is way overused here and ignores a broader point. Trying to time the market has not historically been successful. People who do so aren't necessarily "panicking" but think they can beat the market. Two very different points. One suggests maybe their allocation wasn't right to ride out the market and one suggests maybe they should read up and get more knowledgeable on pros/cons of trying to time the market.

livesoft
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Re: Locking in gains

Post by livesoft » Thu Mar 26, 2020 5:51 pm

Since our taxable accounts are 100% equity shares, selling to lock in gains would have bumped us up big time in tax brackets and cost quite a bit of money. Our tax-deferred accounts are mostly fixed income, so if we sold they would not be much different than where they are now.

The net after-tax result would not be that much different than not selling.

For reference, I think a 60/40 benchmark portfolio consisting of the Vanguard LifeStrategy Moderate Growth fund has a total YTD performance of -12.09%.

I'll also add that sometimes folks with small portfolios can sell everything with few tax consequences.
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Topic Author
Rkakli
Posts: 2
Joined: Thu Mar 26, 2020 8:51 am

Re: Locking in gains

Post by Rkakli » Wed May 13, 2020 8:00 am

JoeRetire wrote:
Thu Mar 26, 2020 9:17 am
Rkakli wrote:
Thu Mar 26, 2020 9:03 am
I had a friend who locked in her gains few weeks back.
How did she do that?
Sorry for delayed response. She sold equity positions. I honestly don’t know all the details.

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