Sell Equities or Bonds?

[SoReady]

For most of my early retirement I have not had to sell anything from my mutual funds or bond funds. I've been able to live off of after tax investments and do yearly Roth conversions.

This year I most likely will need to start taking some money from my IRA/401-k investments. Over the years I've read about selling your equities when they are up and when they are down sell bonds. It all seems to make sense.

Now that it is time for me to implement this I'm struggling with it. If I look at my overall portfolio over the course of time, everything is up!

At this point in time, is it better to sell the bond funds and let the equities ride or sell equities funds and keep the bond funds?

Bob D

 

[OldShooter]

If the equities go down this year, sell them now.

 

[VanWinkle]

For most of my early retirement I have not had to sell anything from my mutual funds or bond funds. I've been able to live off of after tax investments and do yearly Roth conversions.

This year I most likely will need to start taking some money from my IRA/401-k investments. Over the years I've read about selling your equities when they are up and when they are down sell bonds. It all seems to make sense.

Now that it is time for me to implement this I'm struggling with it. If I look at my overall portfolio over the course of time, everything is up!

At this point in time, is it better to sell the bond funds and let the equities ride or sell equities funds and keep the bond funds?

Bob D

It is better to maintain your asset allocation across all accounts. If you have decided on a 50/50 allocation, then sell whatever is needed to get you to that allocation. If you are at 50/50, sell whatever keeps you at your target allocation while keeping an eye on capital gains and possible tax loss harvesting targets.

 

[LOL!]

What is your desired asset allocation to equities?

What is your current asset allocation to equities? (Check tonight since today is a good day in the market.)

Compare the two numbers. That should tell you what to do.

 

[VanWinkle]

If the equities go down this year, sell them now.

And reinvest only in stocks that go up!!

 

[OldShooter]

And reinvest only in stocks that go up!!

Will Rogers agreed: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Realistically, @SoReady, your withdrawal probably will not affect your AA as much as a day or two of market action. If that's the case, then while the "keep your AA" recommendation is sound, it isn't all that important.

In the end do what you think is best based on tax considerations and your very own market predictions, including timing. Then forget about it. Mr. Market will do whatever Mr. Market wants to do and his decision does not determine whether you were a genius or a dolt. It just determines whether you were lucky or not.

 

[VanWinkle]

Will Rogers agreed: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Realistically, @SoReady, your withdrawal probably will not affect your AA as much as a day or two of market action. If that's the case, then while the "keep your AA" recommendation is sound, it isn't all that important.

In the end do what you think is best based on tax considerations and your very own market predictions, including timing. Then forget about it. Mr. Market will do whatever Mr. Market wants to do and his decision does not determine whether you were a genius or a dolt. It just determines whether you were lucky or not.

You seem to contradict your other posts with this(bolded) statement?

The mechanics of asset allocation take the emotions out of some decisions.
Less emotions=better outcomes when involved in investing.

 

[audreyh1]

For most of my early retirement I have not had to sell anything from my mutual funds or bond funds. I've been able to live off of after tax investments and do yearly Roth conversions.

This year I most likely will need to start taking some money from my IRA/401-k investments. Over the years I've read about selling your equities when they are up and when they are down sell bonds. It all seems to make sense.

Now that it is time for me to implement this I'm struggling with it. If I look at my overall portfolio over the course of time, everything is up!

At this point in time, is it better to sell the bond funds and let the equities ride or sell equities funds and keep the bond funds?

Bob D

This is where having a target AA and rebalancing helps. You just sell enough from either to get back to the target AA. Occasionally you are selling some from both, but most times you’ll be selling from one or the other depending on the prior year performances.

If you don’t have a target AA then I can’t help you.

 

[SoReady]

Will Rogers agreed: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Realistically, @SoReady, your withdrawal probably will not affect your AA as much as a day or two of market action. If that's the case, then while the "keep your AA" recommendation is sound, it isn't all that important.

In the end do what you think is best based on tax considerations and your very own market predictions, including timing. Then forget about it. Mr. Market will do whatever Mr. Market wants to do and his decision does not determine whether you were a genius or a dolt. It just determines whether you were lucky or not.

Thanks. This sounds like sage advice.

It is all coming from ira’s and401k’s so capital gains and taxes aren’t of concern since it is considered ordinary income.

I’ll just take what I need and be sure to keep my 60/40 allocation roughly the same.

 

[OldShooter]

You seem to contradict your other posts with this(bolded) statement?

The mechanics of asset allocation take the emotions out of some decisions.
Less emotions=better outcomes when involved in investing.

Gee, I don't think so. Or I didn't mean to. I view the OP's decision as being relatively minor, like flipping a coin to see who pays for coffee. Truthfully, I view our occasional withdrawals pretty much the same way. Just picking something to sell based on gut feel regardless of AA. In the end it's basically a random outcome and its effect on the overall portfolio is undetectable; I don't lose any sleep when I lose the coffee coin toss either. We'll sort out any impact next time we look at the AA.

Asset allocation, big strategy stuff is another matter entirely. Leaving the emotions out of that is more important because the numbers are big enough to matter. For example, a couple of weeks ago we moved serious six figures out of a floating rate (aka leveraged loan) fund (SAMBX) because Janet Yellen, Schwab, and The Economist are telling us that risks have gone up substantially, though default rates have not (yet).. That is a place where Thaler's "Endowment Effect" could have affected the decision but IMHO it did not. I paid no attention to sunk costs and no attention to recent or current price action. DW and I made the strategic call and executed. We then reinvested the cash according to our big picture plan, in this case holding a constant AA. And, whether it turns out to be wise or not, we'll never look back on that decision with any kind of emotion. We made the decision based on the best information we had and life goes on.

Probably the question for each person's investment decision hinges on what he/she considers to be "big stuff." i.e., personally impactful.

Does that make sense?