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buying a house in 1mo-3yr, when should I sell bonds?
Old 03-14-2019, 06:53 AM   #1
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buying a house in 1mo-3yr, when should I sell bonds?

I'm starting to look for a new house but am taking my time. We want to move to the burbs by the time the kids would enter Kindergarten at the latest, which is three and a half years from now, but would be fine moving sooner too. We are starting to look so early because we are considering a raw land purchase, or a rehab and want to take a year or more to see if we find anything, and then if not start looking at standard existing homes.

As such I might need to make a down payment anytime between one month from now and 3 years from now. I have 3/4 of my current down payment savings in a stable income mutual fund (RPSIX). It's currently at it's highest ever value (no additions in several years, just appreciation) so I'm inclined to cash it out now, but at the same time it's supposed to be 'stable income' (84% bonds, 10% equities, 5% cash) so shouldn't vary that much, but is designed to grow slowly and keep up with inflation I guess. I want to give the money time in the market rather than sit in cash losing value to inflation for up to 3 years.

I'm not as familiar with bond market movements so a little less sure here, if it were mostly stocks I'd cash it out now for sure. It sounds like the fed is taking a break from increasing rates for a little bit (maybe that isn't a sure thing) so the bond market shouldn't be getting hammered any time soon, but I don't really know how bonds as a category perform if a recession hits either.

Answers I'm expecting:
  1. Just cash it out and stop fretting, you aren't selling low at least.
  2. There is no right answer, whatever you are comfortable with/depends on your risk tolerance.
  3. This is market timing so standard market timing response.


Thanks for any opinions and help.
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Old 03-14-2019, 07:15 AM   #2
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From the website:

Investment Objective
The fund seeks a high level of current income with moderate share price fluctuation.


I would not own this fund. It is not "safe" and it underperforms.

In your shoes, I would sell this in as tax efficient manner as possible and put the proceeds into much safer paper, such as short term treasuries and high yield savings.
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Old 03-14-2019, 08:18 AM   #3
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From the website:

Investment Objective
The fund seeks a high level of current income with moderate share price fluctuation.


I would not own this fund. It is not "safe" and it underperforms.

In your shoes, I would sell this in as tax efficient manner as possible and put the proceeds into much safer paper, such as short term treasuries and high yield savings.



What tax efficient manners exist? Don't I just have to sell it and eat the resultant capital gains taxes?
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Old 03-14-2019, 01:45 PM   #4
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I was in this position and I put the money into a short term CD. There are no penalty CDs out there that pay almost inflation rate interest.
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Old 03-14-2019, 02:07 PM   #5
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What tax efficient manners exist? Don't I just have to sell it and eat the resultant capital gains taxes?
If you don't know when you will buy the house, plan to sell it over multiple years if that will reduce the tax.
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Old 03-14-2019, 02:22 PM   #6
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What tax efficient manners exist? Don't I just have to sell it and eat the resultant capital gains taxes?
How much would that CG tax be? What is your marginal income tax bracket expected to be in 2019? If you are in the 12% or less, *long term* capital gains will have NO taxes due while your income remains in the 12% (or less) bracket.

Also, since it is a mutual fund, it may distribute capital gains each year. If you have reinvested interest and distributed capital gains, have you remembered to add those (already taxed) reinvested amounts to your cost basis? When they are distributed in a taxable account, you pay taxes on them that year, and if you reinvest, it is added to your cost basis in the security. That could mean your capital gain for cashing out may be less than anticipated.
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Old 03-14-2019, 03:29 PM   #7
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I would not keep near term down payment money in RPSIX.... it is too volatile short term... check back on what it did in 2008/2009.... ugly.

Cash out, pay any tax whcih you'll eventually have to do anyway, and put it in VMMXX of some similar high yielding $1/share money market fund.
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Old 03-15-2019, 08:53 AM   #8
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Thanks for the feedback all. I transferred today into PRRXX, a money market fund. I liked the look of Vanguard much better from an expense ratio perspective, but kept it at TRowe for the simplicity of staying in the same institution as I don't have anything at Vanguard currently.
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