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Talk me out of selling everything
Old 10-01-2022, 07:27 PM   #1
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Talk me out of selling everything

Okay - sorry for the melodramatic title...


I'm 55 and DW is 57 and we are (were) right on the cusp of fully retiring. Now down 700k from our high and have a really lousy feeling about the foreseeable future in terms of equities.

We have a portfolio of 100% equities - all in Vanguard and all, or very nearly all, in Index funds with decent diversification in terms of value, growth, dividend payers and intl exposure.
We have a year's worth of cash to cover living expenses and probably could eek out another 6 months (total 18) without needing to sell anything.
No debt except regular monthly expenses. Recently, my wife's former employer (I'm still consulting, she was retired) has asked her to return to work. She will draw a small salary but, more importantly, we'll have healthcare insurance. We had been paying $1k for COBRA monthly.
I made what is now a mistake when bond funds started to go down by selling them and using the proceeds to add to my equity funds/ETFs.
I'm not comfortable seeing what we have in our taxable and nontaxable accounts potentially decline by another 20+ percent. If we were to sell, it's conceivable that we could live close to our "end of life" age with the proceeds invested in considerably less risky investments than equities and have enough but it would certainly change our lifestyle considerably.
I'm one of those people that is currently feeling "this time is different" meaning I have very little confidence things will get better for a very long time. I could handle an occasional 10% decline and possibly a bit more but I'm already down 22% with more downside coming IMO.
My consulting gig will probably end soon (by end of year) not by my choice but likely because of the economy slowing. My wife's job should be more stable.
I'm struggling and fighting the desire to sell and cut my losses knowing that the market has historically rebounded. There are already lots of graphs and charts for how long bear markets take to recover from so no need to rehash those.
In another forum there is a person who has posed the question: "What reason would one want to keep money in or invest in the market today?". The only answer provided is that "The market always comes back". Not much substance to that I'm afraid.
I'm aware I should have probably put aside 3 or more years of expenses worth of cash so lesson learned there. If the FED succumbs to pressure and starts to ease, we'll have another artificially propped up economy. If they continue to tighten (rip the band-aid off essentially), there will be further erosion in the markets and we'll see more of our $ erased.
Sorry for the long post. Not how I thought things would go...obviously. For what it's worth, I sort of hoped we'd make an average of 7% a year in equities with some down years and some up years but average 7%.
Thoughts? Words of wisdom?
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Old 10-01-2022, 07:43 PM   #2
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I was in a similar mindset when the market tanked in early 2020. My concern was that the market had never experienced a pandemic, at least not in more than 100 years, so the typical downturn and recovery thought processes didn’t apply. I talked to my Vanguard advisor and discussed getting completely out of equities. He recommended not only staying the course, but to rebalance and buy into the downturn. That conversation occurred on the day of the bottom of the market. I’m super glad that I took his advice and stayed in.

I can relate to your concern. While I’ve been retired for 5 years, I haven’t touched my portfolio from a withdrawal perspective and won’t need to until mid year next year. But starting withdrawals while the market is crashing is a scary proposition. If you did pull out, the greatest challenge, at least in my mind, is deciding when to get back in. There’s a thread on the forum - something like “I have sinned - I sold” where the OP sold everything but was planning to buy back in when the SP500 hit 3750, which it has since passed. I don’t know if he actually got back in or not.

I agree that this is a painful downturn, made worse because it feels self-inflicted due to economic policy. But because of that, I have to believe that there’s a way to manage out of it. How long that will ultimately take and how far down things will need to go is the question.

Good luck with whatever you decide! Be sure to consider tax implications if you sell.
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Old 10-01-2022, 07:44 PM   #3
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Sounds like you are well aware that selling low is not advisable. So don't sell low! Remember, in a sense you have not lost a cent until you sell and lock in your losses.

Hang in there until the market is high again. Then when it's high enough that you won't lose money by doing so, sell and rebalance to an AA that is a better match to your risk tolerance.

Meanwhile, maybe you can tuck away a few stray dollars to get you through these tough times. Try cutting back on your spending if you can. And spend some time considering what AA you could put in place in the future, that would make you feel more comfortable during times like these.
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Old 10-01-2022, 08:09 PM   #4
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The market is likely to go lower before it rebounds and the rebound could take years. Do what makes you feel comfortable. I sold a lot last Spring and plan to reinvest when two key things happen in the market.
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Old 10-01-2022, 08:17 PM   #5
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Originally Posted by W2R View Post
Sounds like you are well aware that selling low is not advisable. So don't sell low! Remember, in a sense you have not lost a cent until you sell and lock in your losses.

Hang in there until the market is high again. Then when it's high enough that you won't lose money by doing so, sell and rebalance to an AA that is a better match to your risk tolerance.

Meanwhile, maybe you can tuck away a few stray dollars to get you through these tough times. Try cutting back on your spending if you can. And spend some time considering what AA you could put in place in the future, that would make you feel more comfortable during times like these.
This a good advice ^. I would not sell in these times unless you absolutely need the money.
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Old 10-01-2022, 08:18 PM   #6
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Sell it all now. Do it tomorrow.
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Old 10-01-2022, 08:26 PM   #7
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My 2 cents:
- Too late to sell everything now.
- Diversification is better late than never
- But I know emotionally its very pain full to sell equities now to diversify.

Do in baby steps. Maybe 2-3% of your portfolio to fixed income (CDs/Bonds/Treasuries etc) every 2-4 weeks (or whatever frequency you feel comfortable with) until you reach your desired FI allocation. No need to go in one big bang.
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Old 10-01-2022, 08:30 PM   #8
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Sell it all now. Do it tomorrow.
Tomorrow is Sunday. Markets are closed unless you are trading crypto.
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Old 10-01-2022, 08:30 PM   #9
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Seems like you would want to sell high, and buy low. That's always what I've been told. I have been putting more money into the market then ever. But you don't want to sell low and buy high...unless you are a sucker. If you don't need the cash don't sell. And when you do need the cash, only sell what you need for that month and DCA out of the market as you decumulate.
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Old 10-01-2022, 08:34 PM   #10
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Going with 100% in equities into retirement is not usually recommended. Study sequence of return risk. You are on the doorstep of it right now. Fortunately fixed income pays something, actually a lot right now.
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Old 10-01-2022, 09:03 PM   #11
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I donít mean to be unkind but the OPís post contemplates a concise list of the great investing mistakes. My advice is take your hands off keyboard and call an advisor at Vanguard, Fidelity or Schwab, in that order, and no one else.
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Old 10-01-2022, 09:04 PM   #12
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Charlie Munger talks about what you are worried about, see if you get any wisdom from him.
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https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
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Old 10-01-2022, 09:15 PM   #13
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I like to invest for security and tranquility, not more risk for more money we don't need. It seems like you currently have more risk than you need or feel comfortable with. We sold off some equities early on in the great recession and missed the worst of it. No regrets. We've had a very conservative portfolio since then and have zero angst, including this year.

You have a lot of choices in between selling everything right now and selling nothing. If it were me I would start dollar cost averaging money out of equities into TIPS, your I-bond limits, and individual fixed income.
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Old 10-01-2022, 09:26 PM   #14
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I was wondering when we would start seeing posts like this.

OP, first it is important to remember that we collectively are just nameless folks on the internet.

Having said that, the backdrop of your post is that what you thought your risk tolerance was is now shown to be suspect.

However, I believe it is important to remember that this is not an all or none decision. There are a lot of data points between 100% equities (which I believe is too high for almost anyone entering retirement unless they have a huge pension) and 0%. So I think your ďsell it all ď is a sign of emotion and panic. That is what REAL bear markets do, they wear people out. So if you want to give into the panic (and maybe you should), perhaps you should panic to the tune of one extra years living expenses in terms of what you sell. That way, if it goes lower you have more cushion, and if it goes higher you arenít kicking yourself by selling everything.

Oh, one more very very important thing. Loss of capital is not your only risk. High inflation is also a risk, and one of the worst places to be in that environment (historically) is in fixed/cash. Having equities in that environment has historically been better (but not as good as land, food production, commodities, etc.)

Good luck and remember baby steps gives one time to both deal with the panic and to reassess.
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Old 10-01-2022, 09:26 PM   #15
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Like you, Iíve lost about $700k and I retired at the first of this year. Iím cutting back on some plans but Iíd never get out of the marketÖ

Rob Berger addresses this topic/concerns in a very elegant way here:

https://youtu.be/z2uEBHZFauM
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Old 10-01-2022, 09:36 PM   #16
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Originally Posted by copyright1997reloaded View Post
I was wondering when we would start seeing posts like this.

OP, first it is important to remember that we collectively are just nameless folks on the internet.

Having said that, the backdrop of your post is that what you thought your risk tolerance was is now shown to be suspect.

However, I believe it is important to remember that this is not an all or none decision. There are a lot of data points between 100% equities (which I believe is too high for almost anyone entering retirement unless they have a huge pension) and 0%. So I think your “sell it all “ is a sign of emotion and panic. That is what REAL bear markets do, they wear people out. So if you want to give into the panic (and maybe you should), perhaps you should panic to the tune of one extra years living expenses in terms of what you sell. That way, if it goes lower you have more cushion, and if it goes higher you aren’t kicking yourself by selling everything.

Oh, one more very very important thing. Loss of capital is not your only risk. High inflation is also a risk, and one of the worst places to be in that environment (historically) is in fixed/cash. Having equities in that environment has historically been better (but not as good as land, food production, commodities, etc.)

Good luck and remember baby steps gives one time to both deal with the panic and to reassess.
You buy bonds when inflation is raging, like now.
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Old 10-01-2022, 09:45 PM   #17
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You buy bonds when inflation is raging, like now.

I see all these headlines about bonds tanking, worst year ever, etc. yet that only applies to bonds sold prior to maturity or bond funds without maturity dates. Or maybe investors who bought 20 or 30 year bonds at really low yields. But otherwise it is an exciting time for individual bond holders, and investors with ladders, who hold to maturity, to see rates finally going up after all thee years. TIPS yields are pretty good right now.
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Old 10-01-2022, 09:46 PM   #18
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I see all these headlines about bonds tanking, worst year ever, etc. yet that only applies to bonds sold prior to maturity or bond funds without maturity dates. Or maybe investors who bought 20 or 30 year bonds at really low yields. But otherwise it is an exciting time for individual bond holders, and investors with ladders, who hold to maturity, to see rates finally going up after all thee years. TIPS yields are pretty good right now.
Yes, I agree, then why did you say bonds are bad right now?
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Old 10-01-2022, 10:17 PM   #19
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Yes, I agree, then why did you say bonds are bad right now?
I didn't say it, it is in the news headlines - Is This The Worst Year Ever For Bonds? (forbes.com); Bonds May Be Having Their Worst Year Yet - The New York Times (nytimes.com)

These are all because prices on down, which doesn't impact those of us who hold to maturity. I'm excited about rising yields.
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Old 10-01-2022, 10:20 PM   #20
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I didn't say it, it is in the news headlines - Is This The Worst Year Ever For Bonds? (forbes.com); Bonds May Be Having Their Worst Year Yet - The New York Times (nytimes.com)

These are all because prices on down, which doesn't impact those of us who hold to maturity. I'm excited about rising yields.
You just said above that being in fixed income is bad. Shrug.
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