I moved to cash on March 13th and I’m regretting my decision now

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
random_walker_77
Posts: 917
Joined: Tue May 21, 2013 8:49 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by random_walker_77 » Thu Mar 26, 2020 9:47 pm

mrspock wrote:
Thu Mar 26, 2020 8:41 pm
nanameg wrote:
Thu Mar 26, 2020 8:18 pm
I did the same ...cashed out...because I didn’t have a IPS and panicked.

I will take the advice to do nothing until I have an IPS but I’m locked out of reinvesting into the total bond and total stock for 4 weeks. Is that the true for all Vanguard mutual funds?
That’s correct. You’d have to buy ETFs instead.
VTI, VV and VOO are all fine and are highly correlated. You can also check if there are MF versions of the funds you can buy into immediately.
Don't buy back into the exact same fund. You've got a loss, so at least you now have a tax deduction. If you buy the same fund, then you've got a wash sale and can't take the deduction until someday in the future.

Go for an ETF of a similar, but not substantially identical fund. Maybe the fidelity or schwab etf equivalents of whatever you'd sold. The vanguard ETF is probably just a different share class of the same vanguard fund, and that's going to be hard to argue that it's not "substantially identical"

See also: viewtopic.php?t=173531

User avatar
Cubicle
Posts: 639
Joined: Sun Sep 22, 2019 1:43 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Cubicle » Thu Mar 26, 2020 9:49 pm

Extreme recency bias makes you want to buy back in right now. Take a "short" break, ~1 week. Breathe. You'll be fine if you do nothing else. If you want to get back in, determine your risk tolerance first. Then buy in to a proper allocation.
"Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be.

User avatar
MP123
Posts: 1242
Joined: Thu Feb 16, 2017 3:32 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by MP123 » Thu Mar 26, 2020 9:57 pm

random_walker_77 wrote:
Thu Mar 26, 2020 9:47 pm
mrspock wrote:
Thu Mar 26, 2020 8:41 pm
nanameg wrote:
Thu Mar 26, 2020 8:18 pm
I did the same ...cashed out...because I didn’t have a IPS and panicked.

I will take the advice to do nothing until I have an IPS but I’m locked out of reinvesting into the total bond and total stock for 4 weeks. Is that the true for all Vanguard mutual funds?
That’s correct. You’d have to buy ETFs instead.
VTI, VV and VOO are all fine and are highly correlated. You can also check if there are MF versions of the funds you can buy into immediately.
Don't buy back into the exact same fund. You've got a loss, so at least you now have a tax deduction. If you buy the same fund, then you've got a wash sale and can't take the deduction until someday in the future.

Go for an ETF of a similar, but not substantially identical fund. Maybe the fidelity or schwab etf equivalents of whatever you'd sold. The vanguard ETF is probably just a different share class of the same vanguard fund, and that's going to be hard to argue that it's not "substantially identical"

See also: viewtopic.php?t=173531
Yes. And then you can recast this whole experience as being tax loss harvesting. :beer

User avatar
F150HD
Posts: 2823
Joined: Fri Sep 18, 2015 7:49 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by F150HD » Thu Mar 26, 2020 10:04 pm

Triple digit golfer wrote:
Thu Mar 26, 2020 4:07 pm
Sometimes emotions get the best of us. Best thing you could do now is forget what happened...
He had $220,000 in losses and you want him to forget what happened.

:confused

Luckywon
Posts: 775
Joined: Tue Mar 28, 2017 10:33 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Luckywon » Fri Mar 27, 2020 12:31 am

F150HD wrote:
Thu Mar 26, 2020 10:04 pm
Triple digit golfer wrote:
Thu Mar 26, 2020 4:07 pm
Sometimes emotions get the best of us. Best thing you could do now is forget what happened...
He had $220,000 in losses and you want him to forget what happened.

:confused
My understanding is OP did not have $220000 in losses. He stated in his OP he had a positive return. The $220,000 is the difference between selling when he did and at the peak. He could buy in now for the same price he sold at. This whole thing is a tempest in a teapot, IMO.

Topic Author
harrington
Posts: 200
Joined: Tue Jun 21, 2011 9:09 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by harrington » Fri Mar 27, 2020 6:10 am

Luckywon wrote:
Fri Mar 27, 2020 12:31 am
F150HD wrote:
Thu Mar 26, 2020 10:04 pm
Triple digit golfer wrote:
Thu Mar 26, 2020 4:07 pm
Sometimes emotions get the best of us. Best thing you could do now is forget what happened...
He had $220,000 in losses and you want him to forget what happened.

:confused
My understanding is OP did not have $220000 in losses. He stated in his OP he had a positive return. The $220,000 is the difference between selling when he did and at the peak. He could buy in now for the same price he sold at. This whole thing is a tempest in a teapot, IMO.
This is correct. I should never have said I had $220,000 in losses.

Call_Me_Op
Posts: 7647
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Call_Me_Op » Fri Mar 27, 2020 6:39 am

CT-Scott wrote:
Thu Mar 26, 2020 7:14 pm
Don't worry. Doing anything now would be market-timing. Stay the course! We've got a long way to go before we hit the bottom.
:confused
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

User avatar
tvubpwcisla
Posts: 195
Joined: Sat Nov 09, 2019 10:09 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by tvubpwcisla » Fri Mar 27, 2020 6:45 am

Call_Me_Op wrote:
Fri Mar 27, 2020 6:39 am
CT-Scott wrote:
Thu Mar 26, 2020 7:14 pm
Don't worry. Doing anything now would be market-timing. Stay the course! We've got a long way to go before we hit the bottom.
:confused
:oops:
The secret to building wealth is to have a plan, keep expenses low, become an expert in your craft, consistently buy the market, diversify, establish multiple income streams, and always smile.

Triple digit golfer
Posts: 4485
Joined: Mon May 18, 2009 5:57 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Triple digit golfer » Fri Mar 27, 2020 7:21 am

F150HD wrote:
Thu Mar 26, 2020 10:04 pm
Triple digit golfer wrote:
Thu Mar 26, 2020 4:07 pm
Sometimes emotions get the best of us. Best thing you could do now is forget what happened...
He had $220,000 in losses and you want him to forget what happened.

:confused
No, he did not have $220k in losses.

But even if he did, my advice stands. What advice other than "get to his true desired AA as soon as possible" would be recommended, regardless of the losses?

User avatar
Harry Livermore
Posts: 211
Joined: Thu Apr 04, 2019 5:32 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Harry Livermore » Fri Mar 27, 2020 7:54 am

So much good advice in this thread! Bogleheads are amazing.
OP, I agree with the others who have stated that you may have had an incorrect AA for your temperament. Spend some time and write up an IPS. If you decide you want to have equities in your mix, get back in. Others here will tell you that lump sum always wins, and I will not disagree. But if it were me, I would get back in via DCA over the next few months, as I believe we have not yet seen the bottom.
Just my 2 cents.
And as others have said, chin up! you have a gain. Just not as large a gain as you would have by using your crystal ball ;)
Cheers

Triple digit golfer
Posts: 4485
Joined: Mon May 18, 2009 5:57 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Triple digit golfer » Fri Mar 27, 2020 8:13 am

panhead wrote:
Thu Mar 26, 2020 6:55 pm
Triple digit golfer wrote:
Thu Mar 26, 2020 4:07 pm
Sometimes emotions get the best of us. Best thing you could do now is forget what happened, really reflect and decide what your true, tolerable AA is, and get to it immediately, whether it's staying at 100% cash or getting back in the market with some money. Chalk it up to a learning experience. The loss occurred already. You tried to time the market and failed. Waiting to get back in on another low is trying to time it again. Don't get burned again.

On March 12, I rebalanced because I hit a band, selling $32k of bonds to buy $32k of equities. This kept me at 80/20 AA.

I soon thereafter realized that I would have preferred to stay at 75/25, and regretted rebalancing.

Yesterday, I sold the $32k back to bonds. I basically broke even, perhaps coming out a bit ahead. Bonds were down 1-2% in that time and equities were down around 0.25%, so I think I actually came out ahead of where I have been.

Today, of course, seeing a 6% market increase, has me regretting "undoing" my rebalance.

The way I look at it is I got lucky. Here's what happened to me:

1. I initially overestimated my risk tolerance I wanted a bond/cash floor that rebalancing didn't allow me.
2. I rebalanced anyway, forcing myself to use the IPS I created, without acknowledging that maybe the IPS was wrong!
3. I regretted rebalancing because I lost my bond/cash floor.
4. The market came back up to right at the level that I rebalanced, so I did the opposite and "unrebalanced" back.
5. Now, my portfolio is sitting at where it would have been had I never rebalanced in the first place, at 75/25.
6. I plan on staying at 75/25 indefinitely. It allows me a bond/cash floor and lets me sleep well at night.

If the market shoots up, will I rebalance into even more bonds? Yes. The logic is I don't just want a bond floor. I will rebalance on the way up always, but I will never again rebalance below my bond floor in dollars.
Excellent post. We see so many flippant, "stay the course" threads these days, but this shows clearly what people are going through, even people with a plan. I would bet that having that plan kept you from doing anything too crazy, but at the same time these crazy markets made you realize you slightly overestimated your risk tolerance. I hope the OP sees this post, I think it's very valuable...
Yes, I did slightly overestimate my risk tolerance. Not even so much risk tolerance in terms of percentage or dollars lost in equity funds, but I realized that I needed a bond floor to feel secure. The turmoil in the markets, places shutting down, job losses, etc. made me realize, "Shoot, I'm not necessarily immune to a black swan event of my own in my industry" and realized that the level of bonds I happened to have at the time equaled roughly, coincidentally, what would be a 2+ year floor. When I rebalanced, I went less than 2 years and I was not comfortable with it.

Moving forward, I have to determine if I want to stay at 75/25 or simply stay at a 2-2.5 year bond floor with the rest in equities. I am strongly leaning toward 75/25 (but never lower than 2 years in bonds!), the logic being:

1. As I get older, I'm more likely to lose my job, take longer to find a replacement, or run into health issues.
2. I will have more money in my portfolio, which means more money at risk of loss.
3. I will have less time to recoup portfolio losses. The "long term" continually becomes shorter and shorter.
4. Staying with simply a "bond floor" of 2 years means no plan to ever introduce any additional bonds into the portfolio. I don't want to be 2 years from retirement, have 23 years of expenses in equities and 2 in bonds for what feels like a solid 25 years of expenses, and then suddenly the market crashes 60% and then I'm down to 11.2 years and am now far, far away from retirement.
5. It builds a habit of continually holding a steady AA, maintaining a level of overall portfolio risk, and always adds more and more bonds, meaning that theoretically I'm always becoming just a little bit more secure from a black swan event every pay period. Maybe this one is largely mental, but it helps.

bltn
Posts: 671
Joined: Mon Feb 20, 2017 9:32 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by bltn » Fri Mar 27, 2020 9:00 am

Triple digit golfer wrote:
Fri Mar 27, 2020 7:21 am
F150HD wrote:
Thu Mar 26, 2020 10:04 pm
Triple digit golfer wrote:
Thu Mar 26, 2020 4:07 pm
Sometimes emotions get the best of us. Best thing you could do now is forget what happened...
He had $220,000 in losses and you want him to forget what happened.

:confused
No, he did not have $220k in losses.

But even if he did, my advice stands. What advice other than "get to his true desired AA as soon as possible" would be recommended, regardless of the losses?
Agree with this.

But one thought. To have better control of your asset allocation, put reinvestment money into separate stock and bond index funds.

Daneo
Posts: 8
Joined: Sun Mar 06, 2016 7:31 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Daneo » Fri Mar 27, 2020 9:04 am

Might be a few decent buys this morning I know I’m looking.

saintsfan342000
Posts: 122
Joined: Wed Apr 04, 2018 9:46 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by saintsfan342000 » Fri Mar 27, 2020 9:09 am

FelixTheCat wrote:
Thu Mar 26, 2020 2:50 pm
This is why everyone should have an IPS https://www.bogleheads.org/wiki/Investm ... _statement
I cannot emphasize this enough. Having this document helped immensely during this downturn. Among other things:
- My IPS lists TLH partners. So no research or other gymnastics needed to support TLHing.
- Rebalancing criteria kept me from having to needlessly check my account to "decide" whether or not to TLH
- It's nice to re-read my rationale for my investment choices. I made those decisions with a rational mind. Bear markets make us think irrationally. So seeing those clear-minded thoughts reminded me why I'm doing what I do.

Nowizard
Posts: 2586
Joined: Tue Oct 23, 2007 5:33 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Nowizard » Fri Mar 27, 2020 9:11 am

Hang on. People are recognizing risk tolerance has changed. You made a decision and, quite probably, have seen posts that would have advised against it. There are circumstances where the change was very reasonable that have been mentioned elsewhere. Avoid the whipsaw. For example, you regretted the move the past couple of days and are not regretful at the moment today. Some of the stay the course folks are revisiting their decision today while being pleased with their standing a couple of days ago, others are not concerned for both rational and irrational reasons. The point is that if you have made a reasonable decision to go to cash, then that process is all you can control. If it was an error, then please don't compound it by getting back in right now. Even this thread can be confusing in that there will be a mixture of responses from support to opining on the decision to purchase today. Just remember that you know nothing about circumstances of others and they know little of yours.

Tim
Last edited by Nowizard on Fri Mar 27, 2020 9:13 am, edited 1 time in total.

User avatar
goodenyou
Posts: 2127
Joined: Sun Jan 31, 2010 11:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by goodenyou » Fri Mar 27, 2020 9:11 am

Having an IPS is great. Trusting it through extreme and unprecedented market volatility is another thing. You are experiencing what most people feel when the market goes down. It is the fallacy that they wish that they had sold at the highs. They anchor to the highs in their portfolio and then have an irrational regret that they didn’t “lock in” their gains. It me a long time to realize that the most important aspect of investing is to choose an AA that would allow me to safely live in my desired lifestyle and not try to maximize my returns. I think that is what Bernstein meant by stop playing the game.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

Dottie57
Posts: 8126
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Dottie57 » Fri Mar 27, 2020 10:01 am

cloneman33 wrote:
Thu Mar 26, 2020 7:12 pm
Thanks for sharing. We have all had a lot of market angst over the years and for sure the last month. My thought is like many others have posted about setting a AA you feel you can live with in any market, be it 50/50, 40/60 or even 30/70. You have to assess what you can handle on the next market craziness, which could be next week!

Also, I think we are going to have some more big down days before this is over, maybe look for a down day in the next week or so and start DCA maybe that same day each week for a month or so, might help to DCA back in. All the best and don’t beat yourself up, you stated you have enough for a lifetime so you have done very well in life!!
+1

My AA has helped me during this downturn. By having enough very conservative fixed income, I know I have enough for the next several years spending. Panic tamped down.

Topic Author
harrington
Posts: 200
Joined: Tue Jun 21, 2011 9:09 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by harrington » Fri Mar 27, 2020 10:04 am

Nowizard wrote:
Fri Mar 27, 2020 9:11 am
Hang on. People are recognizing risk tolerance has changed. You made a decision and, quite probably, have seen posts that would have advised against it. There are circumstances where the change was very reasonable that have been mentioned elsewhere. Avoid the whipsaw. For example, you regretted the move the past couple of days and are not regretful at the moment today. Some of the stay the course folks are revisiting their decision today while being pleased with their standing a couple of days ago, others are not concerned for both rational and irrational reasons. The point is that if you have made a reasonable decision to go to cash, then that process is all you can control. If it was an error, then please don't compound it by getting back in right now. Even this thread can be confusing in that there will be a mixture of responses from support to opining on the decision to purchase today. Just remember that you know nothing about circumstances of others and they know little of yours.

Tim
What’s done is done. I’ll stay on the sidelines until I come up with a plan that will not include a panic sell again. I’ve done well through the years and am extremely fortunate to have what I have. So many people have lost jobs and are struggling with so many bigger problems than me getting out of the stock market. This has been a great thread and I’ve loved reading all the comments. So many smart individuals on this forum. Stay safe everyone.

Keenobserver
Posts: 177
Joined: Thu Aug 13, 2015 1:05 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Keenobserver » Fri Mar 27, 2020 10:06 am

Amazing how our plans change blinded by emotions. I too am struggling with decision making, and have decided to.just DCA. I feel it is the best thing for me psychologically and hopefully financially.

cashboy
Posts: 315
Joined: Tue Sep 11, 2018 5:03 pm
Location: USA

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by cashboy » Fri Mar 27, 2020 10:22 am

thanks for sharing.

good luck moving forward from here!

:sharebeer
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CDs - CASH - Canned Beans - Rice - Bottled Water)

JBTX
Posts: 5955
Joined: Wed Jul 26, 2017 12:46 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by JBTX » Fri Mar 27, 2020 10:30 am

harrington wrote:
Thu Mar 26, 2020 2:47 pm
I’m age 59 and have been retired for 10 years. I moved $350,000 out of Wellington and $400,000 out of Life Strategy Moderate into Vanguard MM. I had plenty of cash to weather the storm and realize now I made a mistake locking in about $220,000 in losses although my overall ROR was about 7.5% over the last 20 years or so. At this point I’m not sure what to do going forward. I could actually stay out of the market all together because I have enough to live on for the rest of my life. All opinions are welcome, and I already feel bad enough so no piling on :sharebeer
We won't know your entire portfolio, but the two funds you mentioned Wellington is about 67% stock and life strategy moderate is 60% stock. Perhaps move the amounts sold from wellington to Wellesley income which is 1/3 stock. Whatever the case in your situation I wouldn't go over 60% equity, and if you truly are set for life go to an even lower percentage.

Perhaps move lifestrategy to a comparable allocation target date that will go more conservative as you age.

Once you get to an allocation engage in hypotheticals. If you are 60/40, you will probably lose about half of what the total stock market loses. If the market loses 50%, which it likely certainly will at some future date, and you lose 25%, can you live with that? if not, maybe go to 50%, or 40% stock. While rare, the market could, and has lost more than 50%.

Such hypotheticals aren't perfect but they may be helpful.

Thought Is Free
Posts: 14
Joined: Mon Feb 17, 2020 4:47 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Thought Is Free » Fri Mar 27, 2020 10:49 am

harrington wrote:
Thu Mar 26, 2020 2:47 pm
I’m age 59 and have been retired for 10 years. I could actually stay out of the market all together because I have enough to live on for the rest of my life.
You are living my big goals right now. If I were in your shoes I would be cooling down from a morning workout by floating around my pool and plotting what to put on the grill before my afternoon cat nap (or whatever your equivalent is). I would just wait it out for a few months and then re access at that time, no sense in stressing about a game you already won.

randomguy
Posts: 8660
Joined: Wed Sep 17, 2014 9:00 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by randomguy » Fri Mar 27, 2020 10:59 am

harrington wrote:
Thu Mar 26, 2020 3:02 pm
FelixTheCat wrote:
Thu Mar 26, 2020 2:50 pm
This is why everyone should have an IPS https://www.bogleheads.org/wiki/Investm ... _statement
Great idea.
And do you think you would have followed a piece of paper that you wrote down when things were good, or would you have performed the same actions? It is real easy to write things down and doing it does force you to think about issues. I am not sure if it really helps people not to panic. It is one thing to say, I am ok with a 25% loss. It is another to log in and see that 25% loss and realize you just lost a million bucks.

And heck I don't know if following your IPS is even smart. Did you really think about the effects of a global pandemic when writing yours?

forevernaive
Posts: 118
Joined: Tue May 20, 2014 3:46 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by forevernaive » Fri Mar 27, 2020 11:41 am

If you can keep a level head, this is a great time to write or update your IPS, though a volatile market is probably not the best time to execute those changes except through rebalancing.

Market downturns are what challenge you to think hardest about your risk tolerance and find your appropriate AA. The important thing to understand is that you must be pre-positioned for downturns as well as upswings in the long term.

Rosencrantz1
Posts: 280
Joined: Tue Sep 10, 2019 12:28 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by Rosencrantz1 » Fri Mar 27, 2020 12:09 pm

Nowizard wrote:
Fri Mar 27, 2020 9:11 am
Hang on. People are recognizing risk tolerance has changed. You made a decision and, quite probably, have seen posts that would have advised against it. There are circumstances where the change was very reasonable that have been mentioned elsewhere. Avoid the whipsaw. For example, you regretted the move the past couple of days and are not regretful at the moment today. Some of the stay the course folks are revisiting their decision today while being pleased with their standing a couple of days ago, others are not concerned for both rational and irrational reasons. The point is that if you have made a reasonable decision to go to cash, then that process is all you can control. If it was an error, then please don't compound it by getting back in right now. Even this thread can be confusing in that there will be a mixture of responses from support to opining on the decision to purchase today. Just remember that you know nothing about circumstances of others and they know little of yours.

Tim
Nothing like a bear market to remind folks what their true appetite for risk might be. As many have noticed, it's much easier to be equity heavy during a bull market. The point, though, is well taken. NOW is the time (presumably having experienced both bear and bull) to really think about one's AA and, perhaps, do a little self reflection and then come up with an AA that truly matches their risk tolerance.

User avatar
lock.that.stock
Posts: 135
Joined: Sun Apr 28, 2019 2:01 pm

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by lock.that.stock » Fri Mar 27, 2020 12:10 pm

I don't think you're in as bad a position as you are led to believe, unless you decide to sit on the sidelines for sometime.

Today's valuation of VTI is ~6% less than when you sold on March 13th. So you can still buy at a discount if you buy today, and reap the potential upside like your sell-off never happened.

I do agree with other posters though that an IPS is in order.

nanameg
Posts: 12
Joined: Fri Mar 20, 2020 10:57 am

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by nanameg » Fri Mar 27, 2020 7:00 pm

All my funds are in retirement accounts...no wash rules apply.

I’ll call vanguard Monday but it says on the fund in my accounts that I can’t reinvest for 1 month.

I suppose i could go to a different stock and bond fund for the month of April. Or a balanced fund. I held total stock, total bond and just panicked after a few sleepless nights.

Do many or most participants use an advisor? Maybe if I had had one I wouldn’t have panicked and would have saved myself the cost of an advisor and then some.

ochotona
Posts: 144
Joined: Thu Jan 29, 2015 2:08 pm
Location: Houston, TX
Contact:

Re: I moved to cash on March 13th and I’m regretting my decision now

Post by ochotona » Fri Mar 27, 2020 7:17 pm

Reality check time for asset allocations -

Worst-case 1972-2020 length of time underwater for three different portfolios (underwater means time it took to come back to even)

100% stocks - 5 yr 8 mo
60/40 - 3 yr 5 mo
40/60 - 2 yr 9 mo

from portfoliovisualizer.com

Great Depression - worse than all of the above. The index did not recover for 25 years, though it of course earned dividends. So let's say a decade in total return terms? The language being used in relation to the last months is "worst since GD". These manic rallies and crashes are classic bear sign... when the market goes up 10% a day, and VIX is 65, it's not a good thing!

So HOW BIG do you think your "bond floor" should be??? I t should be big.

Frankly, if I were a B&H Boglehead, I'd set my IPS to be in tune with the times and set my equity percentage to about 1/3, and then revise it when the world substantively improves. Of course, I'm 59 and I've already "won", so I'm concerned about wealth preservation + inflation more than anything.
Peter W., MBA, CRPC

Post Reply