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Sell when your share prices increase?
Old 10-09-2008, 08:56 PM   #1
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Sell when your share prices increase?

If someone bought a bundled fund (Target Retirement, or something like Fidelity's 4 in 1: FFNOX) at its lowest level, and in a year its shares doubled....would you want to sell some of it? Or would you continue to just let it sit?

I'm confused because my thinking would be to sell half of it because my money just double. I would then take that money and purchase shares in something else, or stick it in a money market account.
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Old 10-09-2008, 10:38 PM   #2
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If someone bought a bundled fund (Target Retirement, or something like Fidelity's 4 in 1: FFNOX) at its lowest level, and in a year its shares doubled....would you want to sell some of it? Or would you continue to just let it sit?

I'm confused because my thinking would be to sell half of it because my money just double. I would then take that money and purchase shares in something else, or stick it in a money market account.
Boy is this ever a hypothetical problem at this point.

Ha
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Old 10-09-2008, 10:42 PM   #3
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Boy is this ever a hypothetical problem at this point.
Ha
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Old 10-10-2008, 12:22 AM   #4
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Originally Posted by Keyboard Ninja View Post
If someone bought a bundled fund (Target Retirement, or something like Fidelity's 4 in 1: FFNOX) at its lowest level, and in a year its shares doubled....would you want to sell some of it? Or would you continue to just let it sit?

I'm confused because my thinking would be to sell half of it because my money just double. I would then take that money and purchase shares in something else, or stick it in a money market account.
There are wiser heads than mine here, and maybe they'll chime in, but here I go anyway --

1. Why are you investing? I think of target retirement accounts as long-term investing (you know, for retirement at a target date). So why would you pull your money out in a year? Is that when you're retiring?

2. What "something else" would you purchase shares in?

3. Say you did double your money, and you pull it out and stick it in a money market account, and then the market keeps going up. You missed a big part of the uptick and gave up potentially large gains (factoring in compounding) to park your cash in a MM account where it's going to earn 3% (if you're lucky).

There's a lot of good stuff on these boards about asset allocation and investment horizons -- I'm still learning too but our investment decision is to leave money in the market so we don't miss the upside. Of course, that means we don't miss the downside, either. Ugh. So far, we're getting a pretty good downside education. Rather have it sooner than later but it's still ugly.
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Old 10-10-2008, 12:44 AM   #5
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Depends.

My basic understanding:

For example, if you had a lot of money in funds, say, late December 2007, and you decided to pull them out and put them in a 5% CD because the news of the impending recession worried you, you'd be feeling pretty smug right now (and ready to put that money back into funds at the current firesale prices), and will probably do better, at least from this point forward than people that equate "long term" with "hands off."
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Old 10-10-2008, 12:38 PM   #6
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3. Say you did double your money, and you pull it out and stick it in a money market account, and then the market keeps going up. You missed a big part of the uptick and gave up potentially large gains (factoring in compounding) to park your cash in a MM account where it's going to earn 3% (if you're lucky).
Thanks for the reminder. I keep forgetting about the whole compounding interest part of the equation.
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Old 10-10-2008, 01:03 PM   #7
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If someone bought a bundled fund at its lowest highest level, and in a year its shares doubled cratered....would you want to sell buy some of it? Or would you continue to just let it sit fester?
There, fixed that for you.
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Old 10-12-2008, 11:41 AM   #8
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In the original hypothetical, I would look at the returns in view of your other investments.

For example, if you originally meant it to have 10% of your portfolio be in a particular aggressive fund and in the course of 1-3 years it became 25%+ of your portfolio, you would likely want to sell it back down to 10% and put it into one or more of your investments which have a low correlation to it, but similar overall risk/reward in the long term (another aggressive fund).

You may also want to consider re-balancing between your aggressive and conservative funds, but that would be a separate calculation, one that you would probably want to do before making adjustments within your aggressive funds, since re-balancing aggressive v. conservative funds occurs on a higher level than re-balancing between aggressive funds.
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