youbet
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When folks dread "selling in a down market," I wonder if that's as bad as it sounds.
I suppose it depends on how much of your portfolio you MUST sell each year to support your budget. After SS, pension, divs and interest, we generally don't have to sell anything out of our 50/45/5 FIRE portfolio. But, lets say we had to sell about 2% of the portfolio every year to supplement SS, pension, divs and interest.
First I'd look at the 45% bond portion to see if there was something maturing or, despite equities being down, some bond or shares of a bond fund worth selling. If not I'd go to the equity portion and look for tax loss harvesting possibilities. Or some equity that is up nicely even if the overall equity portion of the FIRE portfolio is down. If there was no alternative worth doing, I'd sell the broad market position and take the loss.
If the equity portion of the portfolio was down, say, 20%, that means I'd be selling 4% of my equities while they were 20% down. Not something that would be my first choice, but not a disaster IMO.
Unless it's a prolonged down market in equities and simultaneous with the fixed portion also being down, it just doesn't seem like protecting yourself from a year or two of "selling into a down market" is necessarily worthwhile. Especially when balanced with the opportunity cost of holding extra cash when cash investments are paying at historic lows.
An exception might be a year where you plan to spend significantly above your usual budget, say for a new car or a house remodel. For that, I'd begin accumulating cash in advance.
Maybe I need to rethink this and establish a cash fund to cover the next few years? Comments?
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I suppose it depends on how much of your portfolio you MUST sell each year to support your budget. After SS, pension, divs and interest, we generally don't have to sell anything out of our 50/45/5 FIRE portfolio. But, lets say we had to sell about 2% of the portfolio every year to supplement SS, pension, divs and interest.
First I'd look at the 45% bond portion to see if there was something maturing or, despite equities being down, some bond or shares of a bond fund worth selling. If not I'd go to the equity portion and look for tax loss harvesting possibilities. Or some equity that is up nicely even if the overall equity portion of the FIRE portfolio is down. If there was no alternative worth doing, I'd sell the broad market position and take the loss.
If the equity portion of the portfolio was down, say, 20%, that means I'd be selling 4% of my equities while they were 20% down. Not something that would be my first choice, but not a disaster IMO.
Unless it's a prolonged down market in equities and simultaneous with the fixed portion also being down, it just doesn't seem like protecting yourself from a year or two of "selling into a down market" is necessarily worthwhile. Especially when balanced with the opportunity cost of holding extra cash when cash investments are paying at historic lows.
An exception might be a year where you plan to spend significantly above your usual budget, say for a new car or a house remodel. For that, I'd begin accumulating cash in advance.
Maybe I need to rethink this and establish a cash fund to cover the next few years? Comments?
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