Just Cashed in on 3 Small Cap funds that did 30% - 40% YTD for 2021

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cyber888

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So based on the pundits, growth stocks might slow down, with all the interest rate talk and inflation talk, so hopefully I did right by rebalancing my high growth funds to something more traditional. I put on it the fixed fund earning 3% - haven't decided yet where to put it yet, but will probably put it in large caps or S&P.

Did any of you guys do any rebalancing ?
 
I did a little. Yesterday, I decided to cap gain harvest a few shares from a relatively high cost Mid-Cap ETF that I don’t really want and moved the money into my bond fund. I am balancing things to maintain a good ACA subsidy, so I didn’t sell as much as I would have liked, but it helps me get a little closer to my preferred asset allocation.
 
I did a little, moving some into international which I’ve ignored in 2021. I might get spanked.
 
A small/midcap stock fund I have owned for a long time had a large capital gains distribution that I rebalanced about half into a broader market fund and set aside the rest towards I bond purchases next week. It is part of my long term plan to reduce my holdings in that small/mid-cap fund.
 
Rebalancing more INTO my small cap value especially. Small cap value should be good in an inflationary environment.

Making a few other changes I'm still working on.
 
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I have an allocation of dozens of high growth stocks, and sold 50% of their allocations. December hasn't been kind to them, and I expect more drops in 2022. It's risky to move out of the market, so I'm currently planning on buying back in 4-6 months.

I think it might also make sense to look at leveraged tech holdings, like my QQQ calls. The Fed can have a dramatic impact on bond and stock markets, and 2022 should be a very active (and crucial) year for the Fed.
 
I re-balanced my one stock fund VTSAX into my 2 bond funds to keep my 50/50 allocation intact. I like things simple and boring....... I'll report my return on 50/50 after Jan 1st.

VW
 
I can't make myself pull out of one asset and put into a bond fund earning negative 1%
 
Fermion said:
I can't make myself pull out of one asset and put into a bond fund earning negative 1%
Click to expand...

It's there for protection of the portfolio, not for return. It made 10% in 2020 and I didn't hear anyone complaining then...... recency bias is not a good emotion.

VW
 
VanWinkle said:
It's there for protection of the portfolio, not for return. It made 10% in 2020 and I didn't hear anyone complaining then...... recency bias is not a good emotion.

VW
Click to expand...

But the whole thread is about cashing in based on emotion and recent performance?
 
"Rebalancing" to me means having a target AA and adjusting one's existing AA to that target, usually either based on rebalancing bands or some regular time interval. I last rebalanced on October 12th.

This thread seems to be about something I would call tactical market timing, which I haven't ever done and don't plan to do.
 
Nothing wrong with locking in some gains, IMHO. - especially on Asset classes that are up 25-30% YTD.

I just did the first of two sells today to do the exact same thing - one VTMFX (today, although that's only up half that amount - it's just a bucket I can pull from and have LT cap gains that won't be taxed in the 12% bracket) and VTMSX tomorrow as I ran out of time today to get to both.

As they say..buy low. Sell high.

Casual observation: there seems to be a lot of "buy stocks and hold them literally forever" that gets advocated here pretty often. Not sure I ever understood that. If you can lock in gains and either need those $$s to pay the bills in ER - OR if you are doing AA rebalancing OR just want to reduce your risk that may have gotten ahead of your skis, there's nothing wrong with selling some shares of highly appreciated assets, especially at all time market highs.
 
Sure, nothing wrong with it, except that these same signs were there a year ago when the market was 20% lower. If you sold out then you are feeling pretty sad now when everyone else has a 25% gain YTD.

So how will you feel in December 2022 when the government decided to pay off most student loans and the market roars forward another 25% and you are sitting there with your "safe" bonds that have lost 3%?
 
Fermion said:
Sure, nothing wrong with it, except that these same signs were there a year ago when the market was 20% lower. If you sold out then you are feeling pretty sad now when everyone else has a 25% gain YTD.

So how will you feel in December 2022 when the government decided to pay off most student loans and the market roars forward another 25% and you are sitting there with your "safe" bonds that have lost 3%?
Click to expand...

First, no-one knows what's going to happen by Dec 2022.

The market could just as easily be down 25% or more than it could be up another 25%. And plenty of pretty smart people are not expecting 2022 to be anything like 2021 or even 2020.

Who will feel "pretty sad" then?

As they say..A bird in the hand is worth two in the bush. And unless you have other income sources in ER that pay all your bills, at some point you'll have to decide that 30% (or whatever gains you've made) is "enough" to pull some off the table to either pay bills or re-adjust the amount of risk you are taking.

PS: there's a precisely zero percent chance the government is going to pay off student loans. First, there's no money to do so. But more importantly, it would be absolute political suicide. It's not anything more than a talking point to get the young and gullible to pull a certain color lever in the voting booth. Will NEVER happen.
 
If the original poster has a bond fund that yields 3% and did 10% return this past year, then I would think that has to be a high yield/junk bond fund. I am not sure that the risk in that fund is much different than investing in the small caps that were traded out of.
 
I'm thinking if you are going from Growth to Value now, you likely missed the boat seeing the returns for 2021.
 
The Fed was wrong about how long inflation would last, and when they corrected their view, the market corrected growth stock valuations with it. Inflation is now expected to calm in the first half of 2022, with the Fed hiking rates by 0.75% next year. I think the risk to growth stocks is higher than normal, and I'm doing market timing.

While OP had small/growth ETFs, I had call options in the tech ETF QQQ (Nasdaq 100) which I've sold. December beat up my individual aggressive growth stocks, so I've sold a fraction of those. In case that reads as panic, it's not - I've sold down to 80% equities from an even higher allocation.
 
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