Will you hold - if there's a new Covid Crash?

[MichealKnight]

Greetings and Salutations....

I ER'd 9 months ago (46) and have taken my time getting the investments put into place. Right now I'm 45% stocks. 5% bonds. 9% rental homes. 41% cash. Of course I don't plan to stay that way....but it's not been easy buying homes and I don't want to rush and jump into stuff.

Like most - I"ve seen a nice run-up this year in stocks and I know - it's not my talent, it's just been timing and frankly - what I consider funny-money but I'll take it. In my previous life - I've always failed at stocks. Always sold in panic during a crash, only to see the subsequent rebound , and knowing I missed out.

I'm bracing myself- if this thing gets worse I may see tons of red ink soon so I guess, I'm here- asking for what I know will be the answer, but I guess I need to hear it from people here.

If there's a 5, 10, 20% dip in the stock market soon.....will you sell, hold, or add?

Thanks

 

[disneysteve]

I won't sell in a downfall. The real question is if I'll buy more and the answer is probably yes. If you really want to sell, and I'm not suggesting you should, you should do it when everything is hitting record highs, not after the correction.


The problem is people get fearful. "Oh, it's dropped 10% or 20%. What if it keeps falling and I lose everything? I better cut my losses and get out now." That sort of thinking is what gets people in big trouble.

 

[VanWinkle]

No, I'll live on the bond funds that no one seems to like these days.

VW

 

[RobbieB]

Didn't sell the first time, not going to sell the next time or even the time after the next time -

 

[REWahoo]

If there's a 5, 10, 20% dip in the stock market soon.....will you sell, hold, or add?

Hold, and I might add a little - also known as rebalancing.

 

[CyclingInvestor]

After retiring in 2006 I held at 100% equities thru 2008-2009 (-43%) and 2020 (-53%), so I suppose I will hold in any future scenerio.

 

[W2R]

I'll do nothing, as always. I don't try to time the market any more, because I am no good at it!

Like some other forum members, I hung on and did nothing during the 2008 drop in the market. I have a conservative asset allocation, so that worked pretty well for me. If the market drops again, I'll do the same. I'll try to cut my spending back and put whatever I can into the market too.

 

[teetee]

I find asking people their investment plan only interferes your own and impulse decisions can sneak in and cause something to regret later.

I just buy and hold. I don't even rebalance because I know if I change anything it would be counted as timing the market. I never had any luck on changing large amount of money in the investment account.

Maybe that is the reason I never feel like I am wealthy. My cash is 1% of my net worth and that is enough to last me 2+ years. All the rest of my net worth are either in stock index funds or some other funds which I don't plan to take any out for the next 20 years (unless I decide to make a major purchase such as houses).

All I know is I have very low living expense and it will likely increase after my retirement (lots of trips planned even there is still at least 6 years to go). So the more I can save, the better chance I get to enjoy travel in the future. And that my investment can shrink to nothing (on paper) when the major recession hits.

 

[GravitySucks]

I'll try to buy.
Last dip I couldn't convince myself to rebalance until the worst was over.

 

[Markola]

I have invested through two 50% drops in the stock market in 2000/2001 and 2008/2009 and, now, here we are at record highs. Not selling, ever, nor holding cash, as the only way to earn a return is to invest.

 

[2017ish]

If 20% drop, I would start to look at painful levels of Roth conversions. Then rebalance if still down at rebalancing time...

 

[NW-Bound]

If I sell, it will be to trade one stock for something else that has a better prospect. In other words, no net selling of equity. But at this point, looking at my stocks, I don't see anything yet to trade any of them.

 

[tmm99]

I will hold and hopefully buy some.

 

[travelover]

I'd wait, it might go lower, then I'll sell.

 

[SecondCor521]

I would rebalance on the way down. I'm about half a percentage point off of my target AA currently.

Depending on the timing of the dip relative to the calendar year, I would evaluate Roth conversions.

If things got really bad, I would consider tax loss harvesting in taxable. But if I did TLH, I would shift the money to a different but similar investment immediately. So it would be a tax move, not an AA move.

Finally, if things got really bad *and* I were old enough to be eligible for starting Social Security, I would consider that. But that's not for another decade or so; therefore not applicable to the immediately next market dip/correction/whatever.

But all of the above are just minor tweaks. In general, I never buy or sell based on market conditions. I only buy or sell if (a) I need money, (b) my AA is off target, or (c) my spending, net worth, or life expectancy changes.

 

[marko]

Didnt sell in 87 or '00 or 08 or '20. Never sold to cash, only to exchange one stock for a better opportunity.

 

[flyingaway]

If I knew that there would be a sure crash in the market, I would definitely sell. However, because I don't know that, I will not sell. I have never sold anything during the previous crashes, starting from 2000.

 

[JoeWras]

I have a little free cash I may spend into the dip.

I will definitely rebalance my DAF which is very conservative right now. I'll take on more risk with it.

 

[iloveyoga]

I have a rebalance day coming up on December 4, so will do whatever is needed then.

 

[audreyh1]

No, I'll live on the bond funds that no one seems to like these days.

VW

Exactly!

 

[audreyh1]

Hold, and I might add a little - also known as rebalancing.

Right, some of those bond funds get used in rebalancing to buy more stocks.

The rest plenty to live off of for a while.

I also keep an eye out for improving the tax efficiency of my taxable investments. A really big sell off gives me an opportunity to tax loss harvest active funds and buy index funds instead.

 

[audreyh1]

I'll try to buy.
Last dip I couldn't convince myself to rebalance until the worst was over.

This can be a serious psychological obstacle especially if you’ve caught a falling knife several times in the past.

One thing that helps is simply making sure you sure you would still have a good cushion in fixed income, then bite the bullet.

 

[Midpack]

Hold, and I might add a little - also known as rebalancing.

+1. There’s going to be a big pullback sooner or later, with or without Covid. And I’ll stay fully invested regardless as I did in ‘87, ‘00 and ‘09 - since proven a good call. Frankly I don’t see how Omicron could be worse than the original Covid sell off…

 

[Dash man]

I typically only sell in a lower market to take advantage of tax loss harvesting as some others have mentioned. I do plan on selling something in December to meet our cash needs. If the market tanks before I do that, I’ll unload some bonds.
We would also take the tax and IRMAA hits to do a mega Roth conversion if there is a major drop. We did that in 2020 and will be in the highest IRMAA tier next year. I just used Pralana Gold for the first time, and it is suggesting we do large conversions before the tax brackets revert back in 2026. So I’m rethinking my Roth strategies anyway.

 

[target2019]

The Invsting Supermarket

Greetings and Salutations....

I ER'd 9 months ago (46) and have taken my time getting the investments put into place. Right now I'm 45% stocks. 5% bonds. 9% rental homes. 41% cash. Of course I don't plan to stay that way....but it's not been easy buying homes and I don't want to rush and jump into stuff.

Like most - I"ve seen a nice run-up this year in stocks and I know - it's not my talent, it's just been timing and frankly - what I consider funny-money but I'll take it. In my previous life - I've always failed at stocks. Always sold in panic during a crash, only to see the subsequent rebound , and knowing I missed out.

I'm bracing myself- if this thing gets worse I may see tons of red ink soon so I guess, I'm here- asking for what I know will be the answer, but I guess I need to hear it from people here.

If there's a 5, 10, 20% dip in the stock market soon.....will you sell, hold, or add?

Thanks

Each situation is different. IMO disneysteve's answer (#2 post) is the best general advice. But you have to consider your own specifics.

I'm in the investing supermarket with uninvested cash due to 401(k) consolidation into Rollover IRA. At intervals of -2.5% drops I am buying on the equity side.

Your situation is unique. When you decide what your target equity is, then it becomes clearer what to do.