Has anyone reduced their stock exposure this year?

[NW-Bound]

I reduced my stock AA in mid Nov 2021.

Then, in Dec 2021 and Jan 2022, I sold OTM puts which got assigned, and my stock AA is now back up to 75+%.

 

[joesxm3]

I honestly can't figure out why folks find it necessary to make a big decision (e.g. 20% of 70% of their net worth) on ONE DAY.

If I sell, it is little bits at a time. If I buy, it is little bits at a time. Why? Because I can't predict the top or bottom. But it also does help psychologically, i.e. I "did something".

The best time to lighten up is when you are feeling greedy and your equity allocation is too high. The best time to buy is when you are feeling fearful and your equity allocation is too low.

I do the same thing. Just enough to get it out of my system.

 

[jollystomper]

I have stayed with my current allocation, but we do have my pension and DW's SS income and a healthy cash buffer for times like these. The current gyrations do not impact our daily living. I have been doing some slight "market timing gambling" by adding a bit to existing stocks and mutual funds. It is not enough to alter my AA, and the long term odds are better than casino or sports bets .

 

[Markola]

One should gradually reduce their stock exposure until they sleep well at night. For us, it’s 50/50 plus our property.

 

[Iggysmom]

I do the same thing. Just enough to get it out of my system.

+1

 

[tulak]

Nope. Over 80% and gradually increasing.

 

[FREE866]

I gave up timing the market many years ago and it was the best thing that has ever happened to me financially and is the reason I was able to retire so early.



I'm 55 years old so, barring a tragedy, I have a 30+ year investment time horizon.



Changing an allocation based on regional wars, interest rates, inflation , etc doesn't make sense to me. We have almost a 100 years of history that supports that strategy.

 

[ExFlyBoy5]

Changing an allocation based on regional wars, interest rates, inflation , etc doesn't make sense to me. We have almost a 100 years of history that supports that strategy.

You forgot about 3,241 more reasons [-]hair-on-fire[/-] for changing allocations.

 

[NW-Bound]

You forgot about 3,241 more reasons [-]hair-on-fire[/-] for changing allocations.

I only need one reason: I feel like it.

 

[aja8888]

Something to think about....

Margin debt trends: short read.

https://wolfstreet.com/2022/02/18/m...rushed-but-its-still-gigantic-long-way-to-go/

The only measure of stock market leverage that is reported monthly is margin debt at brokers, via FINRA. Much of the stock market leverage isn’t reported, such as Securities Based Lending, and even banks and brokers that fund this leverage don’t know the leverage in the overall market, or even the leverage of their client if that client is levered as well at other banks. Funds can leverage at the institutional level. There is leverage associated with options and other equities-based derivatives, etc.

Leverage is the great accelerator of stock prices on the way up and on the way down. And the one part of leverage that we can see plunged in January by the largest dollar-amount ever, and by one of the largest percentages ever.

Stock market margin debt, after a historic spike during the Fed’s QE money-printing and interest-rate-repression extravaganza that started in March 2020, plunged by $80 billion in January from December, the largest dollar-decline in the data, which goes back to 1990, and the third month in a row of declines, to $830 billion, according to FINRA today (Graph).



But margin debt is still gigantic, with just a small portion having been unwound. The blistering historic spike in margin debt during the Fed’s $4.7 trillion QE in 22 months was a historic outlier, peaking last October with a two-year increase of 67%.

In November, the Nasdaq peaked as we now know with hindsight. Since then, it has fallen 16%.

 

[jimbee]

No. And I don't know why I would.

 

[steelyman]

I think rebalancing on schedule as planned will tell me what to sell. If the market stays on its trend for the rest of 2022 (hope not!), I’ll be selling bond funds.

 

[Out-to-Lunch]

Define "exposure." I seem to have about 9% less stocks than I did at the beginning of the year, so, in a sense I guess I have (or perhaps I should say that Mr. Market has) reduced my stock exposure!

I guess I should check and see if I have hit a rebalancing band yet. I kinda doubt it.

 

[Fermion]

I still have 30% of our portfolio in cash, which is why I missed out on some gains last year (only made 17% while many of you made 25% or more) but I don't feel super great right now dumping it back in.

I feel like this weekend is when Russia is going to move on Ukraine. I want to see what the response is by Europe and the USA before I put that cash to work. Monday is a holiday anyway.

If things escalate a lot, I am going to be more concerned with making sure I have a lot more toilet paper than I did last time. I stocked up before everyone else but still had that anxious time when I was down to 4 rolls.

 

[Still Learning]

We actually want to increase our stock exposure in Vanguard funds and transfer cash to new investments, but not until things shake out a bit. For now bonds have yielded less loss than stocks, next week will shift our 100% bond funds to mixed funds at least until the smoke clears regarding inflation. For now we have reduced our investment withdrawal rate from 3.6% to 1.8% which still maintains our lifestyle, just with less money into savings for now.

 

[Out-to-Lunch]

I guess I should check and see if I have hit a rebalancing band yet. I kinda doubt it.

Not even close. My AA has shifted about 1 point.

 

[F.I.R.E User]

I sleep through the down markets. I am not retiring in next couple years so I will still be ? stocks.

 

[pb4uski]

OP already hit on the problem. To play the market timing game, you have to be more right than the market about the future to time getting out and be more right again than the market again on when to get back in. Folks that get frightened out tend to overstay on the sidelines and end up worse off than just staying in the barrel and going over the falls now an then. ...

Not necessarily with a LEAP call option. I have some LEAP calls on the SPY at 400 that don't expire until Dec 2023, so if the SPY goes down and then goes up I don't have to worry about the timing of getting out and getting in... I get the price appreciation of the SPY between when I bought the LEAP and Dec 2023 whether it goes up and down a lot between now and then or whether it just gradually creeps up between now and then.

 

[pb4uski]

I have more liquidity/dry powder than I have ever had in my life... about 37% of my portfolio. About 45% is in CDs and USTs... most of the CDs are 3.0-3.5% for a weighted average of ~3.1%.

I only have ~6% in equities, but if I gross up for the SPY LEAP my total equity exposure is about 26% of the total. IOW, each LEAP contract gives me the appreciation of 100 shares of SPY and 100 shares of SPY is about $43,423.

Right now I'm thinking that some of the dry powder will be used to buy some Dec 2024 SPY LEAPs and/or to collateralize selling for income out-of-the-money put contracts on individual stocks that I wouldn't mind owning.

 

[Dash man]

I did some tax loss harvesting with bonds and an international ETF to raise cash for 2022 tax payments for Roth conversions. Other than that I’m mostly staying put. I’ve been putting dividends into some of my individual stock holdings where the stocks are on sale. Mostly I’m staying put.

 

[Koolau]

Mentioned elsewhere, I sold a block of megacorp stock from my 401(k) to "fund" my RMD this year. I was too concentrated in that stock due to its meteoric rise in price. Of course, I still have a bunch left. Otherwise, I'm sticking with the plan. YMMV

 

[Lsbcal]

I've been feeling uncomfortable recently with Russia and Ukraine, If that starts, I suspect the oil pipeline may be compromised and I'm concerned China will take advantage of that and go into Taiwan. Also, I'm sure the administration will be increasing interest rates, that will slow at least the housing splurge and in the end I think stock prices.
We are retired and have a large cushion, I had slightly over 70% of our net worth in stocks, So at close on 2-15 I sold a little more than 20% of my portfolio mostly VTSAX, all in tax deferred funds. I'm just in cash now, not sure if I'll put it in anything. I'm more concerned about a loss now than earning a lot more. Last year was so goo I earned 6 years of spending, so I feel better just sitting on the sideline for a bit.
Anyone else moving that direction?


PS, tell me when to get back in.

Most geopolitical events do not cause intermediate lasting damage to equities. An exception might be something like Nazi Germany invading France in WW2. I do not think (hope?) that Russia's invading Ukraine will be the same level of conflict bleeding into economic issues. Unlikely to draw developed countries into direct conflict. But there is some chance of economic pain like cyber attacks in response to sanctions. And the market does react to uncertainty which is probably already factored in.

Interest rates and inflation are probably more worrisome. But probably already factored into equities ... famous last words.

I have not sold any equities and expect the market will be up for 2022.

 

[Markola]

^^^^ However, Russia is Europe’s major source of natural resources, including natural gas, so it could get rocky, not that I’m making any changes. I’ve learned the hard way too many times not to change my allocation based on the newspapers.

 

[VanWinkle]

I've gradually brought our asset allocation from 100% equities to about 50%/50% from December 2017 to December 2021. I did this because I left the workforce in December 2017 and my wife is thinking about doing the same in the near future. Going from 100%/0% to a 50%/50% allocation at this point in our lives seemed to make sense and helps us sleep at night.

No further tinkering is planned due to Russia-Ukraine.

That 50/50 spot is comfortable for me too!! Almost 6 years into retirement.

VW

 

[Markola]

That 50/50 spot is comfortable for me too!! Almost 6 years into retirement.



VW

+1. There is a different feeling about 50/50 for me in our late 50s, after working down through the higher stocks allocations that built our nut. We’ve been at 50/50 for about 3.5 years and it’s the first time I don’t fret about it, like we’re as ready as we can be for anything that happens in the markets. Our Vanguard AUM advisor will want us to eventually be at 40/60 when we’re older but I don’t know. 40/60 feels awfully conservative when SS starts, and we have our house and other property. Globally-diversified, 50/50 AA for our long-term securities portfolio has a kind of balance that is appealing emotionally, which I didn’t expect..