Glad I have cash and stable value

[Ready]

I did my annual rebalancing last year on December 9th by selling some Vanguard index funds and moving the money into bonds. I was thinking this turned out to be a great move, now that the market has dropped 6% in the past month. However, when I went back and looked at what I sold the stocks for on December 9th, here were the closing prices:

VTSAX $45.78
VTIAX $27.61

And here are the closing prices today:

VTSAX $44.14
VTIAX $26.23

A drop in price of 3.6% and 5%. So the drop is not quite as big as I would have thought, because there was a significant run up in just the last few weeks of December. So I suspect that we really only lost about the last month of gains in the market, and are still up all the gains we saw through November of last year.

For some reason it always seems a lot worse when looking at the Dow Jones numbers and reading all the news reports.

 

[robnplunder]

I know we're supposed to avoid market timing, but I couldn't resist and threw a few $K into QQQ at COB today. We'll see if I seem brilliant or idiotic in a few days.

... or in few months or in few years.

 

[gerntz]

Only one month from ER and I'm remarkably sanguine about this correction thanks to having 7 years of spending in stable value and cash.

That you feel the need to tell us how sanguine you are makes me think your more smug & an need of affirmation than anything else. But jmo.

 

[steelyman]

I don't know. It seems like sound defensive planning to me. I've slowly been building up my stable value fund and am glad it's there.

 

[dtbach]

I don't have 7 years worth but maybe 3.4 years. That should be good I think. (hope) [pray] Accckkkkkk

 

[Ronstar]

This isn't even a correction yet and most would consider a correction healthy anyway. These can be buying opportunities for those with cash.

i agree - not even a correction yet. My 401k is down 2.5% from its all time high. Weird thing is that I rebalanced in late November, putting 40% in an income fund. Today's pct in the income fund is 39.86%. I put 10% in a growth fund when I rebalanced. Now I have 10.17% in the growth fund. So it looks like growth stocks have outperformed income funds since late November to include the recent downturn.

I also kept a bunch of taxable in cash in November because I felt the market was too high. Now we have lower prices, but I'm still scared to pull the trigger.

 

[Animorph]

I'm having fun with multiple Roth conversions as my initial conversions drop below 90% of their conversion cost. I still have some conversion accounts that are all cash and I can buy shares that are down quite a bit. Lots of emerging market stuff is going in now. I hope my shares last until March or April when I recharacterize, wait 30 days, and get a chance to recycle the shares I converted last year.

 

[shasta]

I dont rebalance till august (pops popcorn)

 

[PERSonalTime]

Correction or not...Thank God for pensions!!!

 

[Cassie]

Correction or not...Thank God for pensions!!!

+1....I feel very fortunate. I'm leaving my TSP in the 2020 fund.....trying my best not to move it to the G.

 

[Live And Learn]

I don't know what's going to happen, but my AA was a little off and I had been redirecting new money to equities. I just made it happen a little faster. I also lost a couple of percentage points on the new purchases already - but that's offset by the difference between the non-existent interest and the new dividends I will receive now. It's days like this that make OMY syndrome feel a little more rational.

 

[Sarpy]

I've been following this forum for over a year, and am a bit surprised at some of the responses to the OP's post. I thought a consistent philosophy here was to ensure you have adequate liquidity or buffer in times like this.
(Either for paying bills until the market pops up, or using the funds to buy low.)

At any rate, I applaud OP for the cushion and glad we have also set aside some buffer--not that much, more like 5 years. (Sure glad we took most of a VG Index 500 and paid off the mortgage a month ago.)

 

[audreyh1]

Yes, we believe in a cushion. But with 47% fixed income (which includes bond funds) we have oodles of cushion in the retirement portfolio. Over 20 years expenses by my last calculation!

 

[nash031]

There's a correction going on?

 

[audreyh1]

There's a correction going on?

Yeah, we're all the way back to where we were in Oct 2013!!!

 

[nun]

That you feel the need to tell us how sanguine you are makes me think your more smug & an need of affirmation than anything else. But jmo.

A bit smug.....I suppose....but who isn't on this site, here we all are posting about our ER plans. Affirmation? well yes everyone likes that.

I'm really observing that a conservative AA for the money you will use to fund the years up to 59.5 is comforting, it might not be financially optimal, but for those of us with a pessimistic nature it saves on blood pressure medication.

My AA overall is 60/40 but if I just consider money that I can get at without penalty before 59.5 my AA is 30/70. I don't like "buckets" much, but in this case I have one bucket of money that I can access without penalty that must last at least 7 years and one that contains retirement accounts with early withdrawal penalties. The AAs are very different because I am willing to risk more for the longer term money. If I was over 59.5 I would not make that distinction.

 

[Spanky]

There's a correction going on?

A stock market correction, or pullback, is when the stock market declines 10% or less in a relatively short period of time. That's one of the definitions. It's up to you to interpret whether a correction is happening.

 

[jebmke]

I'm heavily weighted to fixed income but no cash. My bonds are up ~2% this year. Cash & stable value would have been a drag on performance.

 

[audreyh1]

A stock market correction, or pullback, is when the stock market declines 10% or less in a relatively short period of time. That's one of the definitions. It's up to you to interpret whether a correction is happening.

It has to meet 10% to be considered a correction. Less than that is not even considered a correction.

Between 10 and 20% is a correction, and if 20% is hit, then it's a bear market.

 

[nun]

I'm heavily weighted to fixed income but no cash. My bonds are up ~2% this year. Cash & stable value would have been a drag on performance.

My cash and stable value over weighting in the accounts I have access to before 59.5 is to avoid a perfect storm of stock market crash and interest rate increases jeopardizing my income stream before I reach 59.5. Bird in the hand and all that.

 

[FIREd]

There is no doubt that cash and cash-equivalents provide some ballast in stormy markets, a lesson I learned the hard way in 2008/2009.

 

[haha]

I withhold my opinions, if I even have any, to deny the usual B-B gun crowd any pleasure off my errors.

Ha

 

[robnplunder]

+1
And volatility was eerily low in 2013. This seems like going back to more "normal" market volatility.

Yeah, I was wondering about that in 2013. Hopefully, we get more volatility this year so that I can make some side income by trading (a short term market timing) .