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

[LRDave]

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.

I encouraged my elderly parents and DW's elderly parents to get substantially out of equities with their tax-sheltered savings 4 years ago and then again 3 years ago - and then I gave up. Good for them!

I reasoned that they both had a reasonable amount for EOL care and that capital retention for the time they had remaining was a more important goal than incremental investment gains.

Fast-forward to today - 2 of the 4 have passed, one on each side. Their savings are in good shape and are proportionally less in equities now, but this is only because I did convince both sides to take up to the top of their tax bracket instead of RMD. The cash is just sitting there, though, because I can't convince them to even open an Ally account for a decent short term CD.

 

[ripper1]

That's been my thinking for a while now. I've missed out as compared to many, but so has someone with a 50/50 blend as compared to someone all stocks. The problem is finding the right mix for longevity and taking care of the pucker factor. The old pucker can get in the way.

Yeah, my 50/50 seems like it should be up more.....but you know only suffering half the losses when it is down helps me sleep.

 

[John Galt III]

I've really gone wild and am participating in the 'irrational exuberance' by riding the updraft by not harvesting profits when my stock index funds keep going higher and higher. But I'm still about 75/25, which is what I'm comfortable with.

Sorry. Must correct this. I meant to say I'm 25/75 (25% stocks and 75% stable value funds). Senior moment....

 

[ripper1]

Well, to me having a tool like FireCalc keeps my emotions in check. I like what I see 10 years...20 years down the road.

 

[Danmar]

"Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves." Peter Lynch.

Coincides with my view. In the long term corrections are generally (Japan?) insignificant. At least as long as we dont have wide scale war and our population keeps rising.

 

[Bigdawg]

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

The unemployment rate is 4.1%. Basically if you want a job you can have a job.

Construction CEOs: We're hiring but can't find workers | Fox Business

"We are hiring but can't find workers"

 

[garyt]

You don't believe trying to time the market, but just sold all your 401k, so essentially, you market timed.

That's kind of like saying you aren't superstitious at all but keep a special penny in your pocket for good luck.

I think there's gonna be a nice, big, beautiful market crash in 2018. But don't trust my subjective gut feeling, so rebalancing according to my pre-determined target allocations. If there is such a big, beautiful crash I'll just have to ride out the storm and repeat to myself (like in the meltdown of 2008-2009) that it's only a paper loss unless I sell.

Well, I guess he could say he's not timing if he has no intention of getting back in. He says he has more than enough money, so need to take any risks. Great place to be if you can get there.

 

[LOL!]

The unemployment rate is 4.1%. Basically if you want a job you can have a job.

Construction CEOs: We're hiring but can't find workers | Fox Business

"We are hiring but can't find workers"

Well, you have to pass the drug test, too. Maybe that's why self-driving trucks are gonna take off.

 

[harley]

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 ...

A long as you've been alive, has it ever stopped?

 

[NW-Bound]

The unemployment rate is 4.1%. Basically if you want a job you can have a job.

Construction CEOs: We're hiring but can't find workers | Fox Business

"We are hiring but can't find workers"

That gives me some ideas to look for stocks to buy.

Prior to the meltdown of 2008-2009, I made good money investing in the material sector such as steel and copper miners, steel and cement makers. Maybe this is a repeat?

 

[sengsational]

I made a move like this a while back, when the CAPE hit the trigger point. My move was not real drastic, I just began pretending I was older than I am, and used that to select an age-appropriate asset allocation. When (if) the CAPE hits the bottom trigger point, I will re-adjust to me real age. All mechanical, so no talking heads required.

Maybe it is just for me my feeling that “Pigs get roasted” keeps ringing in my ears.

I respect your expertise and don't blame you one bit for making your move. But presuming that you want to get out to preserve your gains, then later get back in at a lower point, I wonder if that is more pig-like behavior. Could it be that people who are staying invested (not trying to lock-in gains) are being LESS greedy?

By the way, my grandmother also had her version of the crazy world buzzer, but for specific stocks. She was much more successful than either my uncle or my dad at buying and selling at a reasonably good time. She'd say she wanted to buy something or sell something, then they'd try to talk her out of it, but she knew what she wanted to do, and did it. The boys always had to eat crow.

- I’m still working 4 days a week and it covers our expenses.

I would not have made my move if I had an external cash flow. I figure that's my insurance against selling low. When I quit, I no longer had that, so felt more justified in my bit of DMT.

 

[rayinpenn]

A long as you've been alive, has it ever stopped?

To me it has never screamed as loud as it is now.

It must be more than 30 years ago. I was working as a divisional controller and one of my divisions had about 100 programmers in it. They had a huge room near where we controllers sat. I always had the radio on sitting on behind me playing 1010 WINS new radio. At the time programmers were papered lot and exceptionally well paid. There was no talk of concentration risk and these guys and gals were 100% all in company stock. As I remember it the market went into a free fall (this was before they instituted those rules to shut the market after a big drop). Our blue chip rock solid company dropped from the mid thirties to $8. Once it started the station would give regular market updates and programmers would swing by and say where are we? It continued until the market closed. There is no way to describe just how that devastation affected them.

The memory of that is still pretty vivid just maybe it clouds my judgement.

 

[harley]

Yes, but everything recovered in short order. I'm assuming you're talking about Black Monday in '87. It took less than two years to get back to where things were after that. Same with the Great Recession more recently, although that one took a little longer. But I'm here to tell you, through experience, that you'll likely miss out on more than you'll save by bailing. Good luck to you.

 

[Texas Proud]

To me it has never screamed as loud as it is now.

It must be more than 30 years ago. I was working as a divisional controller and one of my divisions had about 100 programmers in it. They had a huge room near where we controllers sat. I always had the radio on sitting on behind me playing 1010 WINS new radio. At the time programmers were papered lot and exceptionally well paid. There was no talk of concentration risk and these guys and gals were 100% all in company stock. As I remember it the market went into a free fall (this was before they instituted those rules to shut the market after a big drop). Our blue chip rock solid company dropped from the mid thirties to $8. Once it started the station would give regular market updates and programmers would swing by and say where are we? It continued until the market closed. There is no way to describe just how that devastation affected them.

The memory of that is still pretty vivid just maybe it clouds my judgement.

So you are basing some of your investment decisions on people who were stupid and had 100% of their investments in their company's stock

To me this would just teach me to diversify, not to stay out of the market...


BTW, when I was young I worked at a bank that failed... people who were invested 100% lost 100% of their investments and no way to recover....

Just curious, did the firms stock ever recover?

 

[FUEGO]

Just curious, did the firms stock ever recover?

He neglected to mention he worked at Apple. Now all those folks are racing around the Bay sword-fighting each other from the poop decks on their megayachts.

 

[REWahoo]

Ray, your posts make it clear you don't have the risk tolerance to be a buy/hold/rebalance style investor. You invest based on "gut reactions" that you see as reducing your risk when in fact it serves to make your investments even more risky.

I think you made the correct decision for you in getting out of the market. The best thing you can do now is not try to get back in, find some CDs or savings account that will pay you some interest and get on with enjoying life.

 

[easysurfer]

Well, I guess he could say he's not timing if he has no intention of getting back in. He says he has more than enough money, so need to take any risks. Great place to be if you can get there.

Guess depends on his intention for exiting the market. If because of sudden fear, that's timing. If because he won the game, maybe time for a new hobby .

 

[audreyh1]

Yes, but everything recovered in short order. I'm assuming you're talking about Black Monday in '87. It took less than two years to get back to where things were after that. Same with the Great Recession more recently, although that one took a little longer. But I'm here to tell you, through experience, that you'll likely miss out on more than you'll save by bailing. Good luck to you.

I never count on a fast recovery, especially when taking inflation into account.

The S&P500 index briefly exceeded 1527 in early 2000. It didn’t reach that level again until 2007 - a couple of brief times - promptly crashed, and took another 5 years to finally cross that level again. It pays dividends, but inflation exceeded dividends during the 2000s.

 

[rayinpenn]

Ray, your posts make it clear you don't have the risk tolerance to be a buy/hold/rebalance style investor. You invest based on "gut reactions" that you see as reducing your risk when in fact it serves to make your investments even more risky.

1) I have been buy and hold for almost 35 years. Selling only once when what I had was pretty modest. I’d argue there are few that bought and hold as much and as long as I’ve have.

2) the cash equivalents I have pay nearly 4.5% together with the new short term fund holding should cover inflation. With nearly zero principal risk.

If I’ve got inflation covered and how is that making anything more risky? The loss of potential gains? People take risk to build enough to safely retire.. once there isn’t it prudent to reduce exposure?

 

[pb4uski]

What cash equivalents pay 4.5% with zero principal risk?

FWIW, the run last week has prompted me to do a mini "rebalance" since I am overweight in equities by more than the cost of the kitchen renovation that we plan to do this year.... I'll squirrel away some gains and have that covered off.

 

[Sasset]

After I retired last year I did change my AA fro 75% stocks to 60%. I sometimes thinks about how much I would have gained this past year if I had left it alone, but I can live with it.

I have cash and stable fund to cover for the next 5 years if there is a down turn so I think I can handle that AA. I think I would be concerned with having the money last if I had no stocks. The OP looks to be in a different situation, so this is probably the right thing for them

 

[growerVon]

[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.

In 2008, I truly felt absolutely terrible for those who were posting that they had lost everything, had to go back to work, were selling low, and so on. It really affected me, to the point of losing sleep worrying about all of us. But I wonder - - perhaps if we had another crash now, I'd be not only less worried, but also less sympathetic.

C'mon, members, we already learned those hard lessons and we know what to do and what not to do. There is absolutely no reason to sell everything today and miss out on part of the market surge, or to sell everything low later on and lock in your losses. Just go play golf or something and things will all work out in the long run.
[/CRABBY OLD LADY]

I really appreciate this perspective and sentiment. Like a lot, I feel the valuations just keep going sky high and have that fear of the cliff. Getting a strong reminder on holding the course and rebalancing is much appreciated by me, still in accumulation.

 

[rayinpenn]

What cash equivalents pay 4.5% with zero principal risk?.

Company funded ‘cash’ Retirement account (not 401k) that I suspect is invested in GICs...

 

[Luck_Club]

That gives me some ideas to look for stocks to buy.

Prior to the meltdown of 2008-2009, I made good money investing in the material sector such as steel and copper miners, steel and cement makers. Maybe this is a repeat?

Spoke with a guy who is in the specialty steel industry. He indicated the Metals industry has been crushed by China dumping. He indicated there is going to be 169% duty on aluminum soon. So share your picks, I'll play right along. Not timing the market but using macro economic trends to minimize downside risk and maximize growth opportunities.

 

[calmloki]

Good on you Ray - hard pressed to imagine that various companies are worth the amount people are paying for them now - Amazon up 46% since 2/2017? Looking at our NW I fantasize about selling the rentals and stocks and going to all cash. Our annual spending indicates that we could make it till 100 years of age spending at 2017 equivalent with the cash stuffed in a mattress and 4% inflation. Gal is NOT a fan of such talk - she feels I need to keep shuffling paper for profit and enjoying the rental excitement.

I feel you though - if you have enough why take risk? What would have a greater impact on your life? A 30% drop in your investable assets or a 30% increase? If you don't need MORE! then the potential loss is more worrisome than the potential gain is satisfying.