I'm not a market timer, but...

[jjquantz]

As some of you may have read, we just replaced our AC and Furnace and we are also underwriting most of DD's wedding this summer. This will exhaust our cash cushion before the end of the year comes around with the usual refill. When I paid the AC bill yesterday, I remarked that the timing was perfect, I just hit the first day of the new billing cycle on my CC. So the question is:

If you have an known expense due in 55 days and need to liquidate some of your equity positions to pay it, when would you sell?

 

[NW-Bound]

A poll about something very applicable to my own situation. My bill is more than $12K, and I have 6 months to get the cash. As a self-proclaimed market timer, of course I vote accordingly.

PS. The truth is if the market keeps on tanking, I will more likely dip into my cash hoard, ie. I-bonds, rather than be selling stock low.

 

[Walt34]

In that situation, with the recent "sort of" settlement with Greece, I'd bet on market going up at least for a short time and sell in a few weeks.

But for myself I'd have raised the cash 6+ months ago for the wedding and had enough in the "stuff happens" fund for the A/C.

 

[FIREd]

The third option sounds good on paper, but the "right time" will only be evident in hindsight. If I knew that I needed the money for sure in 55 days, I'd sell now.

 

[jjquantz]

But for myself I'd have raised the cash 6+ months ago for the wedding and had enough in the "stuff happens" fund for the A/C.

Yeah, that was the original plan. With DW still working I was playing the "stuff happens" fund a little too close to the vest figuring that "most stuff" could have been handled through cash flow until the next rebalance at the first of the year. Wedding costs have needed to be fronted to the kids a little earlier than planned, DW's take home pay was notched down a bit in adjusting withholding for taxes, and that was a result of the tax bill in April being just a little larger than expected. With my lumpy part time gig income, it's actually more that the timing was wrong rather than the income not being there over the course of the year. I could, God forbid, pay interest on the CC for a couple of months until things balance out.

I figure it's all part of figuring out the details of the cash flow situation in my first year of retirement.

The new plan is that the equity cash out will also fill up the "stuff happens" bucket to where I should have had it.

Next year will be better with one year of experience.

 

[jetpack]

Id try to plan better so I don't need to sell things you want. To get more cash, you can turn off auto reinvest on mutual funds. If I had to sell stuff, I'd pick those with loses (depending on tax situation).


Sent from my iPhone using Early Retirement Forum

 

[Walt34]

Next year will be better with one year of experience.

Understood, I had that experience myself. Did you know that brand new houses do not come with curtains or blinds on any of the windows?

 

[LOL!]

We pay for college from the portfolio. There is no doubt that we cash in something about 4 days before payment is due. That gives 3 days to settle the trade and one day to ACH transfer the money into checking.

And by "payment is due" that means paying off the credit card bill since we charge college expenses to a 2% cashback card (and the college charges no extra fees for that as well), so that reduces college expenses by 2%.

 

[MRG]

Understood, I had that experience myself. Did you know that brand new houses do not come with curtains or blinds on any of the windows?

What about yard, landscaping, storm doors, and all the rest of the missing stuff? Almost glad I was still w*rking during that time.

 

[Texas Proud]

But for myself I'd have raised the cash 6+ months ago for the wedding and had enough in the "stuff happens" fund for the A/C.

+whatever the next number is....

 

[audreyh1]

None of the above.

I don't like to sell assets from the retirement fund during the year to pay for current expenses. I take a withdrawal each Jan which will cover the whole year, and I have cash set aside for those one off items that exceed the normal budget plus unexpected expenses. I don't have to worry about cash flow in the short term.

As for selling stuff, sell whatever is up the most YTD assuming you were rebalanced at the start of the year. As for when, Lord only knows. It really doesn't matter.

Do you have to sell specifically from equities?

 

[MichaelB]

I dislike selling equities during the year if not part of a reallocation scheme and would take from fixed income. Will the equity sale create an unplanned tax liability?

 

[jebmke]

I sell monthly for the next month. Whichever is out of balance compared to target equity/fixed.

 

[hesperus]

None of the above.
We keep a large cash cushion so we don't have to sell equities, except for rebalancing.

 

[ERD50]

None of the above.

I don't like to sell assets from the retirement fund during the year to pay for current expenses. I take a withdrawal each Jan ....

I dislike selling equities during the year ...

What is special about a specific calendar date?


Since I don't know which way the market will go over the course of any given year, it seems to me it makes no difference when I decide to sell. Only hindsight will tell me that.

I didn't vote in the poll, my selection would have been, whenever.

I don't know if the market will be higher "Immediately" or "At the last minute", so I have no basis to pick between them. And if I "watch the markets and wait for the right time", how do I know what the "right time" is?

"I'm not a market timer, but..." really?

I just don't think you can time this over a 55 day period. Now, if you were talking about some permanent sell off (I guess this counts), and never planned to adjust your AA back to the previous level, I think something like the Schiller PE10 could provide some guidance as to the relative level of the stock market, and probably give some clues as to relatively good/bad times to sell. But that is a long term indicator.


edit/add: Hah! I just looked at the poll results, we have a bunch (largest group so far) of Dirty Market Timers here! Who knew!

-ERD50

 

[Sunset]

Over a 55 day period, you are pretty well helpless. But if I know I'll need a big chunk of cash say 15K or more in about a year, I'll watch the market carefully.

If its really low... I'll wait... if it goes up near its 52 wk high, I'll sell and put the cash in an interest bearing account.

Yes it's market timing, but I do that when I shop at the grocery store as well, I will refuse to buy chicken if the price jumps to $10/lb , but I'll easily buy it at $1/lb.

Everyone market times in various ways on lots of things, otherwise they overpay often.

I do feel like a Dirty Old Market Timer

 

[NW-Bound]

Nah, I attempt to time the market all the time, and feel whistle clean as long as I take a shower daily.

 

[Texas Proud]

edit/add: Hah! I just looked at the poll results, we have a bunch (largest group so far) of Dirty Market Timers here! Who knew!

-ERD50

Well, as an example I sold a bit in the past week... I thought I had put in my orders to sell last Friday, but missed a couple by seconds... so I sold on the big down Monday...

If I had known, I would not have sold on Monday.... hoping that it was a short term drop and I would get that extra 1 or 2%....

The timing cost me a couple hundred bucks, so not any big deal.... but yea, I would not knowingly have sold that day...

 

[audreyh1]

What is special about a specific calendar date?

Since I don't know which way the market will go over the course of any given year, it seems to me it makes no difference when I decide to sell. Only hindsight will tell me that.

-ERD50

Purely logistics. Early Jan is a good time for me to withdraw and rebalance because I have a large number of MF distributions by then, and it's the start of a new tax year and a new budget year. So that date is convenient for managing my portfolio and cash flow. All my calcs - withdrawal, AA, rebalancing - are based on the Dec 31 portfolio value.

 

[ERD50]

Purely logistics. Early Jan is a good time for me to withdraw and rebalance because I have a large number of MF distributions by then, and it's the start of a new tax year and a new budget year. So that date is convenient for managing my portfolio and cash flow. All my calcs - withdrawal, AA, rebalancing - are based on the Dec 31 portfolio value.

Oh, I understand the inconvenience/logistics of it. Hey, ya gotta do it sometime, Jan sounds as good a time as any. You've got your year-end statements, you probably can't do much on taxes yet, so why not?

I just didn't see how that fit in with the OP question, like if he didn't do it in Jan he shouldn't now, or what?

My thought process is, on average I expect the markets to go up, so I might as well wait until my cash buffer is low before refilling. But lots of other ways work as well.

-ERD50

 

[audreyh1]

Oh, I understand the inconvenience/logistics of it. Hey, ya gotta do it sometime, Jan sounds as good a time as any. You've got your year-end statements, you probably can't do much on taxes yet, so why not?

I just didn't see how that fit in with the OP question, like if he didn't do it in Jan he shouldn't now, or what?

My thought process is, on average I expect the markets to go up, so I might as well wait until my cash buffer is low before refilling. But lots of other ways work as well.

-ERD50

No, I was just saying I make portfolio withdrawals once a year and then rebalance. I don't try to sell anything for the purposes of withdrawing cash at any other time (during my fiscal year). Which month doesn't really matter, I could have picked April or something. Some people do this monthly or quarterly.

 

[jjquantz]

Thanks for the replies, everyone. A few responses to some questions/comments.

1) Yeah, selling equities is really the only choice right now. That's the only thing in the taxable account and I don't want to start to dip into the deferred accounts yet.
2) No tax losses to harvest, everything is up.
3) No serious tax consequences. One nice thing is that our marginal tax rate will be 15% this year, that means no Fed capital gains tax. State will take a little, but not a big deal.
4) This will allow me to dump a "legacy" MF that I invested in a few years ago before I converted everything to index funds. The expenses weren't high enough to suffer the tax consequences in previous years, but that's not an issue this year.
5) I think that I mentioned that I am just thinking of this as filling up my cash bucket a few months early. As many of you do, I was planning on doing this in January as part of the annual rebalance.

All in all, it's really nothing major, it's hardly even minor. I just thought it was a chance to see what others might do/ have done in similar situations.

 

[Amethyst]

I'm more interested in where people find AC, etc. contractors who will take CC's for stuff that costs over $2-$3K. Every one I've dealt with has been like, pay by check, or we add 3% to the bill.

Amethyst

 

[NW-Bound]

We recently spent $14K on a home improvement project. I could easily pay for it, but the contractor arranged for a deferred-interest loan.

The loan's 14% interest will be deferred for 10 months, and nulled if we pay in full before the 10th month. So, I will pay it in full on the 9th month (want 1 extra month in case they claim they do not get the money). Between now and then, I am looking for selling opportunity. I might just get the money out of my cash AA, which is at 27% right now.

 

[mickeyd]

I voted last minute but have never (will never) find myself in such a pickle as to have to sell equities to generate cash. My cash reserves are big enough to cover just about any situation. But, to play along, if necessary I would hang on to stocks as long as I could.