Sold all my stocks

[exnavynuke]

The last epic crash, I went into it with a boglehead type portfolio, i.e. tilted towards momentum and requiring capital gains for most of the profits. That was a good lesson for me to understand that the modern portfolio theory, 4% withdrawal strategy, etc. is not for me.

Even on bogleheads.org, which I followed since back when it was on morningstar, people were panicking and talking about "plan B's". As a result, I completely lost faith in the boglehead strategy of investing.

This next crash I will have reliable cash flow from companies selling essential services and mostly high credit quality fixed income. I think I will be much more comfortable with this strategy, this time.

I hope the crash hurries up and starts already. I have been planning on ESR at 45, which is three years away. If were going to have another epic crash, which I believe we probably will, then the sooner the better.

Maybe I missed it, but none of the traditional boglehead portfolios I've heard of would be classified as "momentum" portfolios by any metric I've heard of. Broad based, low cost, index fund investments (total market + total bond + total foreign being the most commonly discussed investments style there I've seen).

 

[GrayHare]

Should I start a thread: "Sold all my bonds" ?

This is a good point. Where does one put the proceeds? What is underpriced currently? The low interest rates being paid by banks say cash is undervalued, as it has been for years.

 

[audreyh1]

If you know there will be a painful adjustment why not reduce holdings now?

I expect there to be a painful adjustment. I may be wrong.

To reduce holdings to avoid a painful adjustment would mean going to cash from both stocks and bonds.

Personally I’d rather hold on and rebalance after the fact. That seems to be the only thing that works for me. As things have climbed I’ve rebalanced. I always expect to give some back at any time.

 

[PoorOldCountryBoy]

I sold all my bond ETFs (Even the target dated funds) and bought 1-2 year T-bills. The stocks are trimmed and hedged, so in place for a downdraft this year, with some upside possible.

 

[LOL!]

This is a good point. Where does one put the proceeds? What is underpriced currently? The low interest rates being paid by banks say cash is undervalued, as it has been for years.

Bond ETFs went up 0.3% or so today. That's a respectable one day rise suitable for a market timer to sell on. Buy back next time there is a drop. Hang out in short-term T-bills. Sorry T-bills are short-term by definition.

 

[NW-Bound]

Bonds do not have large movements, so I do not trade them short-term. With a 0.3% move, a $100K trade makes only $300. I never have that much bond to trade anyway.

Even with stocks which move 10x as much per day, I am not good enough to trade them daily, and can only do them on a monthly basis, and then only on the really volatile stocks.

 

[redduck]

Too bad Warren isn't a forum member so I could ask his opinion.

Hmmn, OK REWahoo, you get one question. (And, it seems as if you've been putting on some weight).

 

[MichaelB]

I expect there to be a painful adjustment. I may be wrong.

To reduce holdings to avoid a painful adjustment would mean going to cash from both stocks and bonds.

Personally I’d rather hold on and rebalance after the fact. That seems to be the only thing that works for me. As things have climbed I’ve rebalanced. I always expect to give some back at any time.

Yeah, that and the fact that with an all-taxable portfolio (which we both have), a large change in allocations means a big tax bill.

 

[LOL!]

Bonds do not have large movements, so I do not trade them short-term. With a 0.3% move, a $100K trade only makes $300. I never have that much bond to trade anyway.

I am not bothered by trading bond ETFs on a 0.3% move. After all, the total return from AGG in the past 12 months through yesterday is 0.43% according to Morningstar.com. And AGG closed lower than I sold it for today.

But yes, at this rate, I'll get to an 8-figure portfolio in another hundred years or so if I am lucky.

 

[NW-Bound]

Well, I would not refuse $300 as that would get me two dinners out for a couple at a fancy steakhouse. Or it can be spent on several grocery trips.

It's just that I could get the same amount or more writing a covered call on a volatile stock valued at less than $100K. And I get that opportunity several times a month (known after the fact), of which I only take up the chance about 1/10 the times because I am chicken.

PS. Of course a stock valued at $100K has much more risk than a bond at $100K. I have to admit I like the volatility and the thrill it brings. No better way to face your greed and fear.

 

[Lsbcal]

....
PS. Of course a stock valued at $100K has much more risk than a bond at $100K. I have to admit I like the volatility and the thrill it brings. No better way to face your greed and fear.

Ahhh, now we are getting to the crux of the matter. It's probably testosterone poisoning.

 

[Luck_Club]

Risk free return is getting higher. MM funds and banks paying 1.4%, makes a 3% yield on a dividend stock with a PE of 35 look crazy risky.

 

[copyright1997reloaded]

I wish RunningMan well, and don't disparage his choice. There have been a few posts earlier that (in summary) say "Hey, I have enough money and don't need to worry about those risky stock market returns". However, there are risks in addition to the risk of losing capital (e.g. market risk). By having all the money in fixed income (e.g. a Laddered CD structure), you also run an inflation risk. Yes, by layering the CD's you can somewhat mitigate the risk, but you do not eliminate it. This is also true with equities, however companies which have an underlying asset base in real things (e.g. oil, copper) or even in items which would have barriers to entry giving them pricing power would likely be better hedged against inflation than CD's or (most) other fixed instruments.

This is a significant reason why I keep a good chuck of my net worth in equities.

 

[ShokWaveRider]

I wish RunningMan well, and don't disparage his choice. There have been a few posts earlier that (in summary) say "Hey, I have enough money and don't need to worry about those risky stock market returns". However, there are risks in addition to the risk of losing capital (e.g. market risk). By having all the money in fixed income (e.g. a Laddered CD structure), you also run an inflation risk. Yes, by layering the CD's you can somewhat mitigate the risk, but you do not eliminate it.

BUT, if you have enough for your own lifestyle, a good buffer, and still do not care, as one gets older capital preservation and sleeping well is a lot more important. at least it is to me. We could handle a 12% inflation for 15 - 20 years and still not need to worry.

 

[Scratchy]

I don't see how the second part of the second sentence follows from the first.
And I've seen no evidence that it is correct. Quite the contrary.

Perhaps you have a link to something that backs it up?

There is a "rock breaks scissors" excerpt I posted in a thread a long time ago that illustrates something like this. The timing is on a very long time scale, so any action you take today, you have to be able to stick with for the rest of your life, pretty much, because the buy indication may be a very long time coming.

The only way I'd buy your argument is if the 30 days were picked completely at random.

There are probably not many paraglider pilots here, but I'll make this analogy anyway... You can get yourself oscillating like a pendulum (bad), and if you do what is instinctive with the brakes, you'll make the oscillation worse. The best thing to do is nothing. So what I'm saying is that in the typical short term market timing scenario, doing what is instinctive is going to result is something much more likely to be worse than better than doing nothing.

If your thinking is correct and your analogy applicable to equities, then you have figured out a way to make a fortune in the market. Ask grandma what her instinct is, or your friend, or a pool of people what their instinct is and do the opposite. I don't share your belief that may work. If it did work once, the big funds and managers figured it out and it doesn't work any more.

 

[daylatedollarshort]

I wish RunningMan well, and don't disparage his choice. There have been a few posts earlier that (in summary) say "Hey, I have enough money and don't need to worry about those risky stock market returns". However, there are risks in addition to the risk of losing capital (e.g. market risk). By having all the money in fixed income (e.g. a Laddered CD structure), you also run an inflation risk. Yes, by layering the CD's you can somewhat mitigate the risk, but you do not eliminate it. This is also true with equities, however companies which have an underlying asset base in real things (e.g. oil, copper) or even in items which would have barriers to entry giving them pricing power would likely be better hedged against inflation than CD's or (most) other fixed instruments.

This is a significant reason why I keep a good chuck of my net worth in equities.

There is a list in the Bogleheads' forum on how to use matching strategies to counteract the potential of high inflation:

https://www.bogleheads.org/wiki/Matching_strategy

CD ladders are not on the list but TIPS ladders and I-bonds are.

 

[Running_Man]

What % of your holdings did stocks represent?

I was at 25%

 

[copyright1997reloaded]

BUT, if you have enough for your own lifestyle, a good buffer, and still do not care, as one gets older capital preservation and sleeping well is a lot more important. at least it is to me. We could handle a 12% inflation for 15 - 20 years and still not need to worry.

Agreed (for your case). Here's how I look at it: My pension plus what I have in cash, cash equivalents, and bonds (mostly short duration) is likely enough to live out my days in reasonable comfort. The rest is in equities. In addition, if the equity portion goes to zero, I'd imagine that my "safe" money wouldn't be looking so safe, so about the only assumption I can make is that case won't happen...because if it did, nothing would matter.

"Those who decide these things" will do everything they can to not have a repeat of the great depression. That means they would likely make other mistakes instead, e.g. kick off massive inflation. We've already seen that they were willing to 'buy' assets (debt in the case of QE 1, 2, ...). I have no doubt in my mind that "they" would extend that as needed to include purchases of equities themselves if deemed necessary to keep "critical" industries afloat.

 

[copyright1997reloaded]

There is a list in the Bogleheads' forum on how to use matching strategies to counteract the potential of high inflation:

https://www.bogleheads.org/wiki/Matching_strategy

CD ladders are not on the list but TIPS ladders and I-bonds are.

Thanks. I will check it out. I've got a goodly amount of TIPS and I-bonds. In an old spreadsheet I used to have a column where I would take a guess at each holdings ability to track w/inflation. For example, I might have had TIPS at 95% and gold at 90%, while I might have an Exxon Mobile (XOM) at 75%, etc. While not perfect, it gave me a rough estimate on how protected my assets were overall in terms of inflation risk. When I switched over to tracking w/Google sheets, I didn't add it...but might look into that again.

 

[audreyh1]

Yeah, that and the fact that with an all-taxable portfolio (which we both have), a large change in allocations means a big tax bill.

Yeah same here 85% of the retirement portfolio is in taxable accounts.

 

[NW-Bound]

Ahhh, now we are getting to the crux of the matter. It's probably testosterone poisoning.

Is it testosterone that makes one greedy when others are fearful, and vice versa?

Some years ago, I read an article that claimed women made better traders than men, as the latter could not keep a cool head. But I am a man (and also like women a lot ). What traits I share with most women are that I do not care about spectator sports nor fast cars, and preferring drama to action movies, etc...

 

[Running_Man]

This is market timing.... plain and simple.... and it seems that you got one of the calls right last time...

The problem with market timing is that you have to get two calls correct... when to sell and when to buy.... so when did you get back into the market? From what I know (which is not much) one of my BILs sold before the last big drop... but never did get back in... I think he is still mostly cash... it does not matter much as they have pensions that cover all their needs so no big deal...

March 10th,2009
http://www.early-retirement.org/forums/f28/step-up-and-call-the-bottom-42856-6.html#post793950

 

[Sunset]

March 10th,2009
http://www.early-retirement.org/forums/f28/step-up-and-call-the-bottom-42856-6.html#post793950

OK, so now I'm nervous....

 

[braumeister]

 

[aja8888]

Oh no! ^^^^ The dreaded reverse upside down WHEEEEE!!