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is anyone else doing this with their IRA's?
Old 10-27-2008, 12:26 PM   #1
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is anyone else doing this with their IRA's?

My IRA's are all depleting every day.
There is an option which I thought might be worth doing. Within these IRA's I can move the funds into simple Money markets or "cash reserves" . The money stays in the same IRA's, I'm not "cashing it in", but it is moved into these very low risk/low gain funds. It just looks to me like the value is going to continue to fall if I leave it as is and makes sense to at least stop it from going any further. When it looks like things are finally bottomed out, I'd move it back into the higher risk/ higher gain options in those IRA's.

Does this make sense to do? If not, why?
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Old 10-27-2008, 12:41 PM   #2
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If you're correct that the market is headed lower, and if you time your re-entry correctly, your plan will work great!

Just curious, what indicators will you be using to determine that "things are finally bottomed out?"
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Old 10-27-2008, 12:41 PM   #3
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Quote:
Originally Posted by Mikedb View Post
My IRA's are all depleting every day.
There is an option which I thought might be worth doing. Within these IRA's I can move the funds into simple Money markets or "cash reserves" . The money stays in the same IRA's, I'm not "cashing it in", but it is moved into these very low risk/low gain funds. It just looks to me like the value is going to continue to fall if I leave it as is and makes sense to at least stop it from going any further. When it looks like things are finally bottomed out, I'd move it back into the higher risk/ higher gain options in those IRA's.

Does this make sense to do? If not, why?
No - while it feels like the correct thing to do emotionally it is the worst thing to do financially.

You state it is "not cashing in" when you will, in fact, lock in your paper losses. You then have to try and time yourself back into the market. Something no-one can do correctly consistently.

I recommend you read this: Reprinted with permission 1-800-843-0008

DD
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Old 10-27-2008, 12:46 PM   #4
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Before you do something like this, I would urge you to think about how many times over the past several months it has looked like the market was bottoming out, only to have it go back down and retest or set new lows. IMO, it's more likely that you will get whipsawed a few times and ultimately end up missing the genuine rally.
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Old 10-27-2008, 01:02 PM   #5
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This is a lot of fancy words and rationalizations for saying "sell low."

If we could all cash out at the top and buy in at the bottom, we'd all be filthy rich -- which, of course, can't happen.
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Old 10-27-2008, 01:03 PM   #6
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I agree that normally this would not be a good move for me to make.

Virtually every interview/article/report etc., etc., seems to be saying that without question we are still a long way from the expected bottoming out. What that tells me is that my funds are going to continue to drop in value for quite a while yet before there is the upswing. Doesn't it make sense to just "stop the bleeding" while all this is going on?
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Old 10-27-2008, 01:06 PM   #7
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I use my IRAs for my fixed income funds and for cash. They contain no stock funds. So I guess I can write that "Yes, I am doing this.". A benefit of this kind of asset allocation is that my IRAs have not gone down much this year. With my stock funds in my taxable accounts, I have been able to get the IRS to help pay for my losses.
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Old 10-27-2008, 01:42 PM   #8
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I agree that normally this would not be a good move for me to make.

Virtually every interview/article/report etc., etc., seems to be saying that without question we are still a long way from the expected bottoming out. What that tells me is that my funds are going to continue to drop in value for quite a while yet before there is the upswing. Doesn't it make sense to just "stop the bleeding" while all this is going on?
Where were the people doing interviews, writing articles and writing reports this time last year? Were they giving interviews, writing articles and writing reports telling you that we were at the top and ready for a big fall? The answer is "No" because they dont know any better than you or I where the market is going in the short term. They didnt know back then and they dont know right now.
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Old 10-27-2008, 03:32 PM   #9
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While it would have been much better to arrive at this plan of action about 11 months ago, it will also be better to make the decision based on your own thinking, rather than that of others.
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Old 10-27-2008, 08:45 PM   #10
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Back in 1997 or 1998 I had an equal amount of Janus Funds in my taxable and IRA.

I had been reading a book called "how to make money in mutual funds" that said when your fund broke the 200-day moving average you should dump it.

I figured that I would sell all of the fund in my IRA since I would not trigger a taxable event and I held onto the fund in the taxable account - amounts were about equal.

Several years later when the dust cleared I had about $20k in the IRA and about $40k in the taxable, having bought the same fund back into the IRA when it seemed safe and not making any additional contributions to either.
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Old 10-27-2008, 08:51 PM   #11
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please sell now, it will make it that much cheaper when i buy later this week or next week
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Old 10-27-2008, 10:49 PM   #12
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Quote:
Originally Posted by Mikedb View Post
I agree that normally this would not be a good move for me to make.
Virtually every interview/article/report etc., etc., seems to be saying that without question we are still a long way from the expected bottoming out. What that tells me is that my funds are going to continue to drop in value for quite a while yet before there is the upswing. Doesn't it make sense to just "stop the bleeding" while all this is going on?
What/who will tell you when to get back in?
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Old 10-28-2008, 07:22 AM   #13
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Mikedb - If the DOW falls to 6000 or 5000 and you chose that moment to get back in you will feel like a genius. If the market bounces around like it has been and rises to 9000 in a week or two will you jump back in or will you assume the bottom is not coming until sometime next year? If the later, but it rises to 10500 and some pundits start talking about how the market is a leading indicator will you guess you were wrong and jump in or hold tight for the real plunge?
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Old 10-28-2008, 07:54 AM   #14
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The financial porn articles will not be positive about how the market is doing until way after the bottom occurs, I guarantee it. By then you will have lost your shirt and then some if you had not been in the market well before.

I would suggest looking for better sources of information if you can, ones that are actually based on facts and figures, rather than stating the current events, and how horrible they are, and then saying "the worst is yet to come," without being able to really prove it (because it is simply not predictable). Those articles are meant for entertainment, not information.
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Old 10-28-2008, 02:55 PM   #15
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The erratic behavior, the Dow up 300, down 300 points in a day then today, right now up 658 is classic bottoming behavior. Could I be wrong - sure - could I be right sure. Ultimately no one knows. I feel that IRA, 401k and 403b's should be married with your whole portfolio. I have no money in stocks that I need for 5-10years. Regardless of the vehicle it is in. For me having that buffer keeps me away from watching the news and getting all upset about a 30-40% drop in my portfolio value.

When the market swings back is the time to re-allocate, re-balance to your allocation levels.
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Old 10-28-2008, 03:16 PM   #16
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The erratic behavior, the Dow up 300, down 300 points in a day then today, right now up 658 is classic bottoming behavior. Could I be wrong - sure - could I be right sure. Ultimately no one knows. I feel that IRA, 401k and 403b's should be married with your whole portfolio. I have no money in stocks that I need for 5-10years. Regardless of the vehicle it is in. For me having that buffer keeps me away from watching the news and getting all upset about a 30-40% drop in my portfolio value.

When the market swings back is the time to re-allocate, re-balance to your allocation levels.
Dow is up 889, S&P 91. I'm sure it will head back down but I hope it doesn't break below 8000. enough is enough.
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Old 10-28-2008, 03:48 PM   #17
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Having lived through the stock markets of the 1970s, 80s, 90s and current roller coasters, one thing that I know to be true is that I do not know how to time the market...if anything others should look to me and do the exact opposite: when I sell, it's a clear signal that the market is about to jump, and when I buy, the market is on it's way down! (hmmm, does that make me a contrarian??)

Anyhoo, over the years, I have learned and practiced one very important tenet: Do not panic and act on impulse. The money I have invested in the stock market is money that I will not need for at least five years, and hopefully longer. Any five year period is likely to have serious downs followed by uplifting (no pun intended) returns...but over time, the market is still the best place for my long-term investments. So, despite all the bad news lately, I am staying the course.
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Old 10-28-2008, 04:10 PM   #18
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Heres the counter argument to all those doomsayers out there.

Why it pays to hang tough in a take-no-prisoners market: Financial News - Yahoo! Finance

Quote:
"Look, it's always painful near the bottom, but the outlook from here is extraordinary for investors," he says, echoing Malkiel. "I think the important thing is that the question of buy-and-hold comes up at the bottom of every bear market that I have gone through, and I get calls about it, and invariably that proves to be the time when you should own stocks." Let's hope history repeats itself.
I hope no one sold out before today given the double digit climb

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