Forget Balancing - sold all my 401k equities funds and put it in the safe short term

[gayl]

Right now I'm trying to build cash for bargain hunting by accumulating SPY dividends (average purchase price = 142). And I won't sell

 

[rayinpenn]

Call it market timing, but it makes perfect sense to me. If you've enjoyed the ride up, and have more now than you planned and hoped for, why not take your gains and sit out the next hand?

Or, to put it another way, it sounds to me like the OP has won the game and decided not to play anymore.

I'm not there yet (still more greed than fear) but I can relate. And I did use the excuse of taking out some of my unexpected gains when I rebalanced recently to be a little more conservative.

Ok let me add some details..
What I sold was roughly 25% of my portfolio..
Roughly 12% was already in cash like instruments..
Another 12% is locked in to company stock until February.
Another 12% will be sold on Monday

The remaining funds are in taxable accounts so any sales would be appreciated by Uncle Sam but not by me.

- A modest 3% yield on the portfolio is more money then the Mrs and I have ever spent. We are LBYM, have no debt, are very careful but I’m sure we’re aren’t cheap.
- the daughter is nearly financial independent
- the son has 3 more years of college and is covered
- I’m still working 4 days a week and it covers our expenses.

This is the second time I’ve done this. The first time was just before my firms stock dropped 75% in a market crash. Too many of my senior colleagues were loaded up on company stock and they were vaporized.

Luck you say? I don’t know but, I as you’d expect from a guy with an MBA and an MS in tax I have my nose in the WSJ and all things financial. Maybe it is just for me my feeling that “Pigs get roasted” keeps ringing in my ears. I’m not burying my silver coins in the backyard I’m just taking them out of the market...

Funny as I write this the wind is howling outside and over the next couple days we are expecting the lowest temperatures in a generation. Thank god I have my blanket.

 

[38Chevy454]

A correction may happen but I always say that the correction is only a loss once you sell and lock it in. Have a diversified allocation mix so you don’t have to sell low, and you can then smile when the change in direction occurs back to growth.

 

[Islandtraveler]

To me, trying to time the market is like running to the other side of the ship each time it moves. A lot of work with little to show for it. If the market doesn’t get you, capital gains will. Stick an umbrella in your drink and grab a chase lounge.

 

[LOL!]

So you were 12% cash and 88% equities before selling 25% of portfolio? If so, I would say you were market timing before selling the assets in your 401(k). Good on you!

 

[Sunset]

[CRABBY OLD LADY]
We all know how to make money in either an "up" market, or a "down" market. Remember those "blue light specials" back in 2008? Some of our members made a killing. If the market crashes again, most of us will end up wealthier than if it didn't............
[/CRABBY OLD LADY]

What is a "blue light specials" , as I wasn't around in 2008. Which also suggests there will always be fresh meat for the grinder..

 

[W2R]

What is a "blue light specials" , as I wasn't around in 2008. Which also suggests there will always be fresh meat for the grinder..

The "blue light specials" were when stocks plummeted downwards in share price (due to the crash), so you could buy them cheaply, as though they were essentially on sale!

We called this a blue light special, after the ones at K-Mart where they have a low sales price on something for a few minutes, and flash a blue light in that aisle to let everyone know.

 

[dixonge]

"An investor who stashed $10,000 in a portfolio tracking the Dow Jones Industrial Average at the end of 2001 and held on would have had $28,698 by the end of 2016, for a total return of 7.28 percent annualized, according to Putnam Investments. By missing out only on the Dow's 10 best days during that period, the investor would have ended up with just $14,697, for a total return of 2.60 percent annualized."

Some great charts here

Full article here

But missing the *worst* days would offset that nicely...

https://www.ifa.com/12steps/step4/missing_the_best_and_worst_days/

Now - just get out before the worst days and get in before the best days. Easy peasy...

 

[REWahoo]

... get out before the worst days and get in before the best days...

Looks like you've identified the perfect market timing system.

 

[Chuckanut]

Today’s WSJ has an article on how plenty of people have sold stocks over the past 5 years as they have gone higher and higher. People just got nervous. Stock ownership as a percent of population is going down.

https://www.wsj.com/articles/as-dow-tops-25000-individual-investors-sit-it-out-1515099703

The article is behind a paywall so here are a few relevant (to me) quotes:

U.S. stock funds in aggregate have suffered outflows in each of the past three years, according to trade group Investment Company Institute, a sign of mounting skepticism about the stock market’s steep climb.

he dipped his toes into investing shortly after college. After taking advice from CNBC, he said he invested small sums in bank stocks in 2007 and 2008, watching his small investment shrink during the ensuing crisis. “It was a good learning experience,” he said. “Now I’ll invest only in things I understand.

I’m 10 years from retirement, so I’m being more cautious,” said Jeffrey Lee Schantz, a 58-year-old architect in Boston, who has put what he considers to be his nest egg into “very conservative investments,” including fixed-income funds.

The most dedicated buyer of U.S. shares has been the companies themselves. Corporate stock buybacks started ramping in 2009, hitting a record of $572 billion in 2015, before leveling off, according to data from S&P Dow Jones Indices.

 

[Chuckanut]

Looks like you've identified the perfect market timing system.

Didn’t Will Rogers say “ I only buy stocks that go up. If they don’t go up, I don’t buy them”.

 

[MRG]

Looks like you've identified the perfect market timing system.

Does it have arrows? We need buy and sell signs.

 

[Texas Proud]

The "blue light specials" were when stocks plummeted downwards in share price (due to the crash), so you could buy them cheaply, as though they were essentially on sale!

We called this a blue light special, after the ones at K-Mart where they have a low sales price on something for a few minutes, and flash a blue light in that aisle to let everyone know.

You are dating yourself!!! But I know what they are as I used to look for them when I was young... IIRC we hardly ever bought one....

 

[Bigdawg]

What is a "blue light specials" , as I wasn't around in 2008.

You are 9 years old?

 

[rodi]

In general my mindset is rebalance as stocks go up, rebalance as stocks go down... My horizon is not short term, and I'd like to keep up with, and possibly beat inflation... so I have a 60% equity mindset, with 40% a mix of bonds and cash.

But.... This thread made me rethink changing the asset allocation on some funds that aren't part of my retirement stash.... The kids 529's. I have a Jr. in HS - and rebalanced him from 40/60 to 30/70... and my Freshman I rebalanced from 50/50 to 40/60.

They each have enough in their accounts to pay for a state school. Now it's literally just a matter of keeping up with inflation. Most markets recover within a few years - and school is at least 4 years in duration...

 

[FUEGO]

My dad sold up his 401k and went all cash. Not today but a couple years ago when the SP500 was at 1970. I recall mumbles about indicators, hearing a news story somewhere, etc. I hope he reinvested at some point for the sake of my inheritance .

Either way, my parents will be totally fine since 2x SS and 1 moderately decent semi-COLA'd government pension should cover their income needs.

 

[harley]

Truthfully, it seems pretty easy to me to know when to sell and get out of the market. I was one of the "geniuses" who did so before the 2008 crash, although there were a few extenuating circumstances.

But what is hard (if not impossible), at least for me, is being able to get back in. I was paralyzed for years, waiting for the second drop or the rampant inflation or deflation, or whatever. I eventually got back in right around where I got out, resulting in a wash. If I hadn't done anything at all I'd have still been in the same spot by then.

If I could have bought at the bottom I would have nearly doubled my net worth, but I couldn't do it. And I know some people that waited well beyond where I got back in, resulting in an overall significant loss.

So unless you have a plan, I suspect you are just panicking and will end up regretting this move. If not, congratulations. But I'll wait and see how that works out for you.

 

[VanWinkle]

I don’t believe in trying to time the Market and I’ll probably miss gains but the unfounded ‘Market Exuberance’ got hold of me; Yesterday I sold all my 401k equity funds (S&P, Large Cap, International). I’ve been investing so long it is more money then this guy from very humble beginnings could have every imagined. It makes me nervous just transferring it.

I have a spreadsheet that used yahoos free stock quotes to get updated prices. Click a button and bam I know where I stand. Yahoo decided to no longer offer the service. Two days ago I manually imputed prices and took a look where the Mrs and I stand. Crazy number and with all the crazy ness in the world ..well fear set in.

Hope I’m wrong...

If you really have enough to live on without equities, why would you ever try to get back into the market. You have won the game and the only risk is to keep playing. If none of this is true, get right back in and ride the momentum..........

 

[Senator]

Hmmm. Corporate taxes cut by over 40%. Profits will increase. Many large fortune companies giving employees raises and bonuses. The employees will spend adding profit to the companies they spend at.

Many corporations announcing additional investment in the USA.

Seems like we have a way to run in this market.

 

[Senator]

Truthfully, it seems pretty easy to me to know when to sell and get out of the market. I was one of the "geniuses" who did so before the 2008 crash, although there were a few extenuating circumstances.

But what is hard (if not impossible), at least for me, is being able to get back in. I was paralyzed for years, waiting for the second drop or the rampant inflation or deflation, or whatever. I eventually got back in right around where I got out, resulting in a wash. If I hadn't done anything at all I'd have still been in the same spot by then.

If I could have bought at the bottom I would have nearly doubled my net worth, but I couldn't do it. And I know some people that waited well beyond where I got back in, resulting in an overall significant loss.

So unless you have a plan, I suspect you are just panicking and will end up regretting this move. If not, congratulations. But I'll wait and see how that works out for you.

Exactly. You have to be right twice. Most people cannot even be right once. That is the common theme. Easy to get out, hard to get back in. I got out of my 401K after losing 15%. I got back in mostly by mid-2010. I beat the market (S&P) in both years, but it was a lucky guess.

 

[audreyh1]

Hmmm. Corporate taxes cut by over 40%. Profits will increase. Many large fortune companies giving employees raises and bonuses. The employees will spend adding profit to the companies they spend at.

Many corporations announcing additional investment in the USA.

Seems like we have a way to run in this market.

Many corporations announcing raises and bonuses also laying off a bunch of people!

 

[travelover]

Hmmm. Corporate taxes cut by over 40%. Profits will increase. Many large fortune companies giving employees raises and bonuses. The employees will spend adding profit to the companies they spend at.

Many corporations announcing additional investment in the USA.

Seems like we have a way to run in this market.

Everyone has a plan 'til they get punched in the mouth. I worry about the fist I don't see coming.

 

[ESRwannabe]

Invest in companies that provide something essential and necessary. Only buy them at a reasonable valuation. Only withdraw the dividend income. Do that and there is no reason not to always be 100% invested.

You can buy MLPs with 8% yield, utilities with 4%, telecoms with 5%, reits with 6%, etc. Maybe it doesn't beat the S&P 500 in total return, but who cares. If you can live off of the dividends you are set.

My dividend income from my brokerage account is up to $27.5k in qualified divs. That's enough to cover the bare bones living expenses. At $35k I'd be set. Shouldn't take too much longer to get there.

 

[atmsmshr]

The track record of Economists and stock analysts predicting future market returns make Astrologists look respectable.

 

[rayinpenn]

Invest in companies that provide something essential and necessary. Only buy them at a reasonable valuation. Only withdraw the dividend income. Do that and there is no reason not to always be 100% invested.



You can buy MLPs with 8% yield, utilities with 4%, telecoms with 5%, reits with 6%, etc. Maybe it doesn't beat the S&P 500 in total return, but who cares. If you can live off of the dividends you are set.



My dividend income from my brokerage account is up to $27.5k in qualified divs. That's enough to cover the bare bones living expenses. At $35k I'd be set. Shouldn't take too much longer to get there.

This was my plan but my crazy world buzzer started making a racket.
1) I’m not the impulsive type
2) I don’t have a plan when I’ll get back in
3) I am not waiting for a dip to buy back.

I’m waiting for the crazy world buzzer to stop. I know it could be a while ...