Liquidate Small % of Funds While Market Is High

[younginvestor2013]

I'm curious if anyone has contemplated or carried out a small liquidation of their portfolio (not talking huge amounts, maybe 5% or 10% max) because the market is high to "lock in" some gains? With the intent to use the funds to pay down a mortgage a bit, for large capital expenditures, to increase their rainy day fund, etc?

Of course, this is all predicated on the viewpoint that there will be a correction, or values will decline. I know this is, in essence, timing the market, so not looking for any lectures on that. I am not a market timer, and would classify this is more of a soft-market timer (if that phrase exists! ).

If you have done this or have contemplated it, I am curious to hear your strategies or why you did so.

Seeing my values rise quite significantly over the past 6 - 12 months has been great, of course. I am 28, and have a long horizon, so I'm enjoying the investment returns. But I've been thinking lately if I should liquidate a portion to pay down my mortgage a bit, take a cool trip, purchase a rental place, etc.

 

[Ian S]

I'm 65, retired and not yet taking SS but do have a small pension ($5500/year). Since November, I've been taking some stock and mutual fund profits and moving them into short term bond funds and cash with some to be used for living expenses. I will also be converting some traditional IRA money into a Roth. I expect to take SS at the start of next year. At this point my nest egg is quite adequate and I'm more worried about preserving it than growing it significantly.

At your age, I'd be less inclined to spend any liquidated funds but hold them in reserve for some future buying opportunities. I was not much older than you and fully invested when the market crashed in 1987. I have regretted ever since not having cash to put into stocks immediately following that crash.

 

[exnavynuke]

I'm curious if anyone has contemplated or carried out a small liquidation of their portfolio (not talking huge amounts, maybe 5% or 10% max) because the market is high to "lock in" some gains? With the intent to use the funds to pay down a mortgage a bit, for large capital expenditures, to increase their rainy day fund, etc?

Of course, this is all predicated on the viewpoint that there will be a correction, or values will decline. I know this is, in essence, timing the market, so not looking for any lectures on that. I am not a market timer, and would classify this is more of a soft-market timer (if that phrase exists! ).

If you have done this or have contemplated it, I am curious to hear your strategies or why you did so.

Seeing my values rise quite significantly over the past 6 - 12 months has been great, of course. I am 28, and have a long horizon, so I'm enjoying the investment returns. But I've been thinking lately if I should liquidate a portion to pay down my mortgage a bit, take a cool trip, purchase a rental place, etc.

At your age I'd leave my investments in close to 100% stocks and not worry about or nor pay attention to "market highs" or "market lows" at all.

 

[FiveDriver]

IMO, trying to guess ahead of time when The Correction is coming is not a prescription for success. You're pulling money out of the market to avoid a 5% downturn, and Mr Market continues to rise.....what have you gained ?? Just let it ride.

Also, "paying down your mortgage a bit" doesn't really benefit you all that much. You've just given more money to the Bank. Unless you can pay off the Mortgage completely, what have you gained ??

 

[Fedup]

At your age I'd leave my investments in close to 100% stocks and not worry about or not attention to "market highs" or "market lows" at all.

It's a good practice. My kid's account is at an all time high. YTD is something like 10%, but I'm not doing anything. No trading allowed in her account.

 

[OldShooter]

 

[Danmar]

At your age I'd leave my investments in close to 100% stocks and not worry about or not attention to "market highs" or "market lows" at all.

Agree. Market timing is difficult. Just keep saving/investing. In the long run you will be glad you just kept plugging along.

 

[travelover]

Agree, at your age, just leave it all in stocks and let it ride. As you near retirement, add bonds and rebalance yearly, this will capture rises in stocks as well as buying opportunities. I did take advantage of the recent run up to buy a new car, but I'm in the withdrawal stage and it was a byproduct of my rebalancing.

 

[Sunset]

I have strongly considered it, when the market got to a record high of 19,000

 

[pb4uski]

At your age I'd leave my investments in close to 100% stocks and not worry about or nor pay attention to "market highs" or "market lows" at all.

+1 It is relatively easy to time an exit but very difficult to time re-entrance... just see many who panicked and sold in 2008 but never got back into equities again because it never seemed to be the right time. Just set it and forget it... slow and steady wins the race.

 

[Blue Collar Guy]

when the market tanked in 1987 i sold, this is the opposite of what you want to do. knowing what i know now, stay in. Maybe reconsider your asset allocation, i remember taking a risk tolerance test, if your going to freak out when the correction comes, than the stock market isnt for you in the first place.

 

[LOL!]

I have rebalanced a small amount out of equities when my portfolio hit the top end trigger point for having too large a percentage in equities. The amount sold was less than 5% of the total portfolio. I need the money to pay bills next week.

This is normal portfolio management. So set your rebalancing bands and trigger points and keep emotions out of your investing behavior.

But why are you asking this now? You do realize the market was just as high back on March 1st, right?

 

[younginvestor2013]

Thanks everybody.

No specific reason. I am just referring to the "general good run" the market has had over the past year.

This all goes back to my personal theory that - it is mentally challenging to watch your assets grow and take no action! Which, I believe, is one of the reasons why a lot of people aren't able to accumulate sizable nest eggs.

I probably won't take any action....One thing that I have contemplated is buying a bigger (more expensive) condo. I live in a large city in a fairly small 950 sq foot 1 bedroom condo. It is fine for now but long term, it would be nice to have 2 bedrooms. I don't need it, so everytime I look online, I always have to tell myself no. I can certainly afford one. Part of me wonders if I will get a bigger place eventually, and if so, why not just do it now? Maybe this is what I am itching at deep down inside...

 

[OldShooter]

T ... it is mentally challenging to watch your assets grow and take no action! ...

Not only difficult, but wise.

 

[jjquantz]

I was just starting to think that I might want to rebalance since the AA had drifted a little bit over the past year or so. However, the receipt of an unexpected bit of cash plus an expected paycheck for my hobby gig means I didn't need to sell anything to accomplish that.

 

[walkinwood]

Since you're working and obviously saving money, my guess is that you'll be better off sticking to your AA & dollar cost averaging your savings into your portfolio. In my early 30s, I was 80% equity 20% bonds.

Getting two decisions right - selling out and buying in - is tough & studies show that the chances of getting both right is very low.

For someone in my shoes - already retired and with no "income" sources, it may make sense to raise enough money to fund another year of expenses. I'm contemplating that like I have done so many times before - but so far, I haven't sold anything just because the market is high.

 

[Whisper66]

Yes, I have liquidated portions of portfolios during high market times for some of things like you mentioned.

Many years ago, I sold stock to pay off a 12% home loan. Preferred to "guarantee" the 12% return (on paying the loand and thus not paying interest) rather than hope for better market returns (12% is pretty good return, even back then).

More recently, over the later part of 2016, lowered my asset allocation from 85/15 to 75/25 to "lock in" some of the gains due to high market value. I'm recently back up to 85/15 after purchasing some dividend paying stock that was priced quite low. If it gets back to what I consider it's normal value, I'll resell and be back to 75/25.

My advice at your age is to avoid blowing savings on anything you don't have to. More important to get in the regular habit of saving and not spending it. It's too easy to incorrectly guess which way the market is going (go read the papers predictions for post election expectations).

 

[Marita40]

I'm taking a little right now ($5000) to pay for my new patio. I'd probably do the same in a down year as the patio has been planned for awhile and will happen no matter what. But I feel so much better taking some when the market is high!
I agree with others that you are in strong years for accumulation and should make that the priority. Just keep paying a little extra on your mortgage every month if you can; slow and steady wins the race here.

 

[scrabbler1]

Back in 1997 and 1998, I took some gains so I could pay off my mortgage. The interest rate was rising on my 1-year ARM, and some of the tax deductibility of the mortgage interest was disappearing, making any tax benefit from keeping the mortgage lower.


I actually sold off enough of the mixed-asset fund so that I was basically playing with the house's money with that was left in it.


Just through simple rebalancing over the years, I have sold off small parts of my portfolio to take some gains while buying low elsewhere in the portfolio. That's the beauty of rebalancing, it forces you to sell high and buy low.

 

[pb4uski]

....Part of me wonders if I will get a bigger place eventually, and if so, why not just do it now? ...

If you think that you will eventually get a bigger condo eventually, it would be better to get it sooner rather than later... you'll get to enjoy it for longer and if it is in a market that is appreciating you'll have more appreciating.

 

[brett]

We were a little high in equities..approaching 65 percent. Pulled some money out last week for a real estate transaction. Back down to 55/58 percent equities.

 

[audreyh1]

If you are a young investor, then just rebalance.

 

[GravitySucks]

28 years old, Let it ride.
I did sell some equity funds to buy another wrung on the bond ladder. The Dirty Market Timer in me called it rebalancing. I rebalance when I feel like it as long as I stay within a couple of points of my AA.

 

[DrRoy]

At your age I'd leave my investments in close to 100% stocks and not worry about or nor pay attention to "market highs" or "market lows" at all.

+1. I RE'd this year. Over the last 3-4 years I have slowly reduced my equity AA from 82% to 61%. As (if) the market continues to rise, I will further reduce the AA to 55%, 1% at a time. At your age, I was not close to 100%, rather in the 80's, but I would not make any systematic reductions.

 

[audreyh1]

I left my investments 100% in stocks until I was in my late 30s.