Talk me out of selling everything

connor77

connor77

Recycles dryer sheets
Joined
Nov 7, 2021
Messages
78
Location
Augusta
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?
 
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.
 
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.
 
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.
 
W2R said:
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.
Click to expand...

This a good advice ^. I would not sell in these times unless you absolutely need the money.
 
Sell it all now. Do it tomorrow.
 
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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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.
 
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.
 
I don’t mean to be unkind but the OP’s 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.
 

Charlie Munger talks about what you are worried about, see if you get any wisdom from him.
 
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.
 
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.
 
Like you, I’ve lost about $700k and I retired at the first of this year. I’m cutting back on some plans but I’d never get out of the market…

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

https://youtu.be/z2uEBHZFauM
 
copyright1997reloaded said:
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.
Click to expand...
You buy bonds when inflation is raging, like now.
 
COcheesehead said:
You buy bonds when inflation is raging, like now.
Click to expand...


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.
 
daylatedollarshort said:
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.
Click to expand...
Yes, I agree, then why did you say bonds are bad right now?
 
OP-

I was in your situation in 2009; FI and on the verge of retiring at the conclusion of my current assignment. I bit the bullet, continued to invest (investing all bonuses in the face of losses), cut some discretionary spending, and continued working for a few more years. I’m glad I did.

My advice is: continue your consulting gig (extend it if possible), ask DW to continue working for income + health insurance, cut discretionary spending as much as you can without making your life suck, and stay invested. You’ll come out the other end (likely in just a few years) in a financially sound position, confident about retiring.

BTW, the primary reason you think “it’s different this time” is because of the timing of this Bear market with your retirement plans, and that’s not sound reasoning. Best to you & DW.
 
COcheesehead said:
You just said above that being in fixed income is bad. Shrug.
Click to expand...


The news headlines say fixed income is bad right now. I'm saying not for people who have ladders or individual bonds who hold to maturity, which I do and I believe you do. I suggested the OP move to fixed income with maturity dates.
 
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There's some glimmer of hope that the Fed will only do a 0.50% rate hike for the next rate hike. A Fed member said the Fed Frontloaded almost all the rate hikes in the three 0.75% rate hikes, and that will taper off soon. When the market senses the rate hike approaches the top, investors will start to load up. In my own opinion, the Fed will probably stop March 2023, because March 22 had 8.5% inflation and I think March 2023 we will probably see 2% up year-over-year from that 8.5%. At some point next year, the market will start to cover as inflation tapers off. The US debt is enormous and the Fed can't keep interest rates up for years.
 
I’ve always had a good portion of my income in CD’s throughout my career. This hasn’t changed since I retired 4 years ago. The plan was always to have enough in CD’s to last until I started SS.
 
connor77 said:
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?
Click to expand...

I will say it again. :facepalm: The stock market is a house of cards.

Keep working unless you have a big pension or a FIRE blog or a FIRE You tube channel that gets enough eyeball clicks to generate a living wage to cover your expenses.

It sounds like you are low on funds to retire early? Although if you are down 700k from your high you must have a large portfolio?

We are all in the same boat as investors. The wisdom is taxpayer bailouts of corporate America continuing to support Corporate socialism as we have known it these past several decades. Thats what your gut is telling you.;)

Socialism for the rich might fade quickly as the the Baby boomers age out and expire.
 
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