For the first time ever I sold all my stocks

[Tiger8693]

I invite other members to steer away from the discussion on market timing, which is an ongoing discussion and found in hundreds of threads, and focus on helping OP with her request, which is how to allocate just fixed income.

I look forward to hearing ideas in fixed income positions. Even the little percentage (maybe 10%?) I have of fixed, is really a losing proposition at this point, especially anything in taxable accounts.

 

[Markola]

...and use the Ignore/Block function. Whoever built this software put it in there for a reason, didn’t they? In these distressing times I’m finding that it makes for a better Forum experience.

It seems entirely “planful”to focus less on one’s equity needs and more on one’s cash needs, as the OP has, and make the moves necessary to ensure those cash needs are taken care of. Some conditions have changed for me in this pandemic and I decided my cash needs are about 3-4 years and am adjusting cash and spending accordingly. The OP seems to have reasonably decided her cash/fixed income needs are not time limited. Who’s to judge?

 

[bmcgonig]

It seems to be contagious, doesn't it....

Maybe this should be placed in the COVID containment section? The fear driving this action seems to be 100% related to that issue, not based on any financial plan? JMHO.

I think that 'H' is very well placed.

 

[njhowie]

I look forward to hearing ideas in fixed income positions. Even the little percentage (maybe 10%?) I have of fixed, is really a losing proposition at this point, especially anything in taxable accounts.

As mentioned above, I am very happy at 2/98, so fixed income is where I live. I daily come across very good quality municipal bonds (both taxable and tax free) that are currently bargain priced for the environment. End of this past week I picked up 4% tax free (5.6% taxable equivalent) for 2 and 6 years.

I believe the key to being successful (at least) in the muni bond market is to own the individual bonds, and not the bond funds. When you own the bonds, everything is set the day you purchase. With the fund, you have no guarantee or control of anything. It does require work to do the research and many folks are not up to the task. However, if you are looking to excel in fixed income, where you view it as a losing proposition at this time, it's not going to happen by being "passive" about it.

 

[Tiger8693]

As mentioned above, I am very happy at 2/98, so fixed income is where I live. I daily come across very good quality municipal bonds (both taxable and tax free) that are currently bargain priced for the environment. End of this past week I picked up 4% tax free (5.6% taxable equivalent) for 2 and 6 years.

I believe the key to being successful (at least) in the muni bond market is to own the individual bonds, and not the bond funds. When you own the bonds, everything is set the day you purchase. With the fund, you have no guarantee or control of anything. It does require work to do the research and many folks are not up to the task. However, if you are looking to excel in fixed income, where you view it as a losing proposition at this time, it's not going to happen by being "passive" about it.

Interesting. Thanks and I appreciate your response. I'll do some research on municipal bonds, particularly the risks associated (if any)? I tend to think of the fixed as "risk free" areas. Well, besides the inflationary risk I guess.

 

[BeachOrCity]

As mentioned above, I am very happy at 2/98, so fixed income is where I live. I daily come across very good quality municipal bonds (both taxable and tax free) that are currently bargain priced for the environment. End of this past week I picked up 4% tax free (5.6% taxable equivalent) for 2 and 6 years.

I believe the key to being successful (at least) in the muni bond market is to own the individual bonds, and not the bond funds. When you own the bonds, everything is set the day you purchase. With the fund, you have no guarantee or control of anything. It does require work to do the research and many folks are not up to the task. However, if you are looking to excel in fixed income, where you view it as a losing proposition at this time, it's not going to happen by being "passive" about it.

@NJHowie, would love to hear how you get beyond a few things when buying your bonds.
-- Do you do it yourself or use a broker / advisor to recommend? I always feel a broker / advisor will try to sell you their inventory at inflated markup.
-- The market for bonds is not like stocks spread wise and pricing seems very opaque. How do you ensure what you do buy you are getting a good price?
-- What are your principal sources for research?

I am open to individual bonds for my bonds / cash part of my portfolio, and I like the ladder ability of individual bonds... I do spend alot of time on finances, but just can't seem to come up with a plan that I could execute where I feel the individual purchases would be both priced appropriately and fiscally sound.

 

[Car-Guy]

As I've said in many of the "won the game" threads in the past, I switched to two bucket investment strategy back in my mid 50's. Well over a decade ago. Bucket #1 (2m) is in all cash/fixed income investments. That along with SS should last me comfortably the rest of my life, if needed.

Bucket #2 is for "playing" the market and any other discretionary spending. I didn't have any losses when CV hit the market and I have made more than a few bucks swing trading the past few months. I haven't added it up, but I suspect I've traded more in the past three months than I have in the past three years....I still have a few chucks of stock that I've held longer than usual (weeks rather than days, due to greed) but I "probably" won't hold them much longer.

Still haven't needed to touch bucket #1 so I feel pretty good about my strategy.

 

[HadEnuff]

And on the personal investing front:

We had another neighborhood street happy hour last Friday. A recently retired corporate lawyer (and very success senior partner) told me he is completely out of the stock market for the first time in his life because of unrealistic forward PE estimates. His firm was in Delaware, so he provided legal advice primarily for companies listed on the NYSE.

Based on his 2008-2009 experience, he said corporate boardrooms in many sectors are likely in the panic mode right now, trying to raise capital in the short term to avoid bankruptcy filings by creditors, while not taking on too much debt and cripple earnings for too many years in the future. Since company executives and board members of publicly traded companies are heavy equity holders they have a personal interest to avoid restructuring under federal bankruptcy laws which can wipe out owners and replace them with the previous bondholders. At the same time, many of these companies have pulled annual earnings estimates because executives have little idea of what the future looks like, and are still trying to plan for different scenarios.

On a side note, he told me never to invest in a Chinese company (not that such risk was on my radar anyway) because they file onto the NYSE through shell companies, don't follow GAAP, and the Sarbanes-Oxley law cannot reach into China and imprison a CEO for cooking the books.

But what the hell does he know anyway?

Similarly, back in 2009, as the markets were hitting their lows I had a conversation with a college buddy of mine who was portfolio manager of one of the most successful ESG mutual funds at the time. His senior partner was terrified and indicated he was selling everything he had and buying farm land...said it was all over and things would never be the same again.

As the panic increases, there will be opportunities. The situation will take out the weak companies and individuals, but as a country, we will get past it. For those who do have appropriate AAs, there's nothing to do - stay the course. For those with too high an equity allocation, this is when you learn more about yourself - in practice, how high is your risk tolerance? For those with low equity AA's, now may be the time for increasing the equity portion going forward.

a number of years ago we were on the eve of a Presidential election. I am leaving this vague in order to avoid any semblance of a politically inspired post. I was with a group of guys I only knew very casually, in a winemaking club. One fellow who was a really nice guy, was a financial advisor, near New York City, in Westchester County. He told me that if "so and so" wins, he's advising all of his clients to get out of the market, totally, because it's going to be ugly. "So and So" won, and the market did very very well subsequent to the election. I haven't run into the guy since, but I always wondered if he was true to his word, and if so, if he had to find another line of work a few years later.

 

[Time2]

I love seeing all this money going to the sidelines as the market goes up.
Some of you will get back in and drive the prices up even more.
Except my neighbor, he got out after 9-11, and never got back in.

 

[brewer12345]

...and use the Ignore/Block function. Whoever built this software put it in there for a reason, didn’t they? In these distressing times I’m finding that it makes for a better Forum experience.

It seems entirely “planful”to focus less on one’s equity needs and more on one’s cash needs, as the OP has, and make the moves necessary to ensure those cash needs are taken care of. Some conditions have changed for me in this pandemic and I decided my cash needs are about 3-4 years and am adjusting cash and spending accordingly. The OP seems to have reasonably decided her cash/fixed income needs are not time limited. Who’s to judge?

My ignore list has been growing like a virus outbreak at a nursing home this year.

 

[Time2]

Would you be kind enough to overlay that lovely chart with the total return of the S&P 500? Asking for a friend.

I did the best I could, I used this S&P 500 chart.
https://www.macrotrends.net/2324/sp-500-historical-chart-data

Maybe someone with better google and graphics skills can do better.

 

[corn18]

I did the best I could, I used this S&P 500 chart.
https://www.macrotrends.net/2324/sp-500-historical-chart-data

Maybe someone with better google and graphics skills can do better.

So when the P/E ratio is high, the market goes up and when the P/E ratio is low the market goes up? Maybe we need to slice the data up to make a point.

 

[VanWinkle]

Good luck to you harllee, you have done what seems right for you. Just remember that your situation changed(age based). The market doesn't care about your age or the condition of the world. It can remain overpriced for years compared to what you perceive the markets value to be. I don't believe that this time is different than all of the other shocks that have hit the market before. I do respect your decision, with your money, to be able to sleep at night. It would not be right for me, at this time, but that is why investing can be so personal.

Best to you harllee,

VW

 

[Hermit]

As mentioned above, I am very happy at 2/98, so fixed income is where I live. I daily come across very good quality municipal bonds (both taxable and tax free) that are currently bargain priced for the environment. End of this past week I picked up 4% tax free (5.6% taxable equivalent) for 2 and 6 years.

I believe the key to being successful (at least) in the muni bond market is to own the individual bonds, and not the bond funds. When you own the bonds, everything is set the day you purchase. With the fund, you have no guarantee or control of anything. It does require work to do the research and many folks are not up to the task. However, if you are looking to excel in fixed income, where you view it as a losing proposition at this time, it's not going to happen by being "passive" about it.

How do you account for unexpected calamities that can affect the municipalities such as loosing their tax income suddenly? Do you discount your overall interest to make up any bonds that go sour? Do you limit the size of any one investment no matter how solid/good it appears?

 

[street]

To OP.
If you never needed those investments to live on, would you have sold your equity/bond investments?

 

[stephenson]

I read the entire thread ... and, get it.

But, this still seems like the OP made an emotion based decision. I reach this conclusion by removing C19 from the discussion. If the OP had sold all equities without C19, then it would not be emotion based.

I, too, have been buying and holding for 40 plus years ... I fight the emotion to sell every day.

 

[brewer12345]

I read the entire thread ... and, get it.

But, this still seems like the OP made an emotion based decision. I reach this conclusion by removing C19 from the discussion. If the OP had sold all equities without C19, then it would not be emotion based.

I, too, have been buying and holding for 40 plus years ... I fight the emotion to sell every day.

I don't understand how you remove a global pandemic and recession from your investing considerations.

 

[Freedom56]

Those that are getting out of equities are making a wise move. I have always held the position that equities are not suitable for retirees. I also held the view that you should be mortgage free/debt free entering retirement. The market averages are highly distorted by a few mega cap technology companies that most funds are crowding into. This is getting worse and major bubble is forming. I have been out of equities for over 30 years and don't buy funds. Right now, I am holding 42% cash and 58% corporate bonds and CDs. My bond holdings include only companies in technology, telecom, pharma, and biotechnology. For the first time in 30 years I am not holding any corporate bonds in financial companies. I am slowly trimming down my bond holdings as prices continue to appreciated. Approximately 20% of my bonds and CDs will mature in 2021 and another 28% in 2022. The market for stocks and bonds are separating those who will survive from those who will likely file for bankruptcy. There are a few options for parking your cash. FDIC insured money market funds from AMEX and Capital One are paying 1.5% for deposits. Short term CDs are paying less. Money market funds like the Fidelity treasury money market funds are now paying .01% and are in danger of going negative unless they reduce their fees to compensate and hold their $1 per unit NAV. I always time my purchases of bonds and wait for sell-offs to make purchases. At the moment, corporate bonds (investment grade or high yield) of those companies likely to survive are overpriced.

 

[bmcgonig]

I think you're underestimating reasoned decision making.

I read the entire thread ... and, get it.

But, this still seems like the OP made an emotion based decision. I reach this conclusion by removing C19 from the discussion. If the OP had sold all equities without C19, then it would not be emotion based.

I, too, have been buying and holding for 40 plus years ... I fight the emotion to sell every day.

 

[Ready]

Suze Orman used to give everyone advice not to buy bond funds, but instead to buy individual bonds. So I read an entire book on how to buy bonds.

And you know what? After reading the book, I realized how little I know about how to buy bonds. Doing it right is far more complicated than I imagined. That is when I lost confidence in Suze’s advice. If as a relatively informed investor I don’t feel knowledgeable enough to know how to do it, how does the average person watching her show figure it out?

Over the long term research has concluded that there is no difference in total returns between individual bonds and bond funds. They have their differences, particularly as it relates to holding them to maturity. But their long term returns should be the same. And funds have the advantage of having a professional manager buying the bonds at the best possible price using volume to negotiate lower fees. Individual bond prices must be negotiated. Not everyone has the skill to do so.

 

[Markola]

I read the entire thread ... and, get it.



But, this still seems like the OP made an emotion based decision. I reach this conclusion by removing C19 from the discussion. If the OP had sold all equities without C19, then it would not be emotion based.



I, too, have been buying and holding for 40 plus years ... I fight the emotion to sell every day.

What is this myth that emotion can be removed from decision making? Fighting one’s emotions sounds pretty emotional to me.

 

[bmcgonig]

Suze Orman used to give everyone advice not to buy bond funds, but instead to buy individual bonds. So I read an entire book on how to buy bonds.

And you know what? After reading the book, I realized how little I know about how to buy bonds. Doing it right is far more complicated than I imagined. That is when I lost confidence in Suze’s advice. If as a relatively informed investor I don’t feel knowledgeable enough to know how to do it, how does the average person watching her show figure it out?

Over the long term research has concluded that there is no difference in total returns between individual bonds and bond funds. They have their differences, particularly as it relates to holding them to maturity. But their long term returns should be the same. And funds have the advantage of having a professional manager buying the bonds at the best possible price using volume to negotiate lower fees. Individual bond prices must be negotiated. Not everyone has the skill to do so.

Freedom56 wants only technology, biotech, etc. He doesn't want financials for example. I don't think you can do that with an ETF. The largest and supposedly safest one is probably LQD and it's 1/3 financials.

I guess you could buy LQD and maybe short XLF (yes.. It's a stock ETF) in some ratio to do the same.

 

[Freedom56]

Suze Orman used to give everyone advice not to buy bond funds, but instead to buy individual bonds. So I read an entire book on how to buy bonds.

And you know what? After reading the book, I realized how little I know about how to buy bonds. Doing it right is far more complicated than I imagined. That is when I lost confidence in Suze’s advice. If as a relatively informed investor I don’t feel knowledgeable enough to know how to do it, how does the average person watching her show figure it out?

Over the long term research has concluded that there is no difference in total returns between individual bonds and bond funds. They have their differences, particularly as it relates to holding them to maturity. But their long term returns should be the same. And funds have the advantage of having a professional manager buying the bonds at the best possible price using volume to negotiate lower fees. Individual bond prices must be negotiated. Not everyone has the skill to do so.

Suze Orman was correct about bonds. Bonds funds do not eliminate market risk. Bond funds don't have professional managers. Bond and stock funds buys and sells are determined by software given inflows and outflows. Bond funds do not get the best possible price using volume and negotiated fees. I was in a buying binge in mid-March for corporate bonds. I purchased many bonds up to 18-22 points below par that were sold by your so called bond managers that were selling at "the best possible price". I put low ball limit orders and had many of them filled. Those same bond funds are buying back those bonds well over par. I can make the same claim for the preferred stocks and exchange traded baby bonds that I bought and sold during the same period. Don't be fooled by the rhetoric from Wall Street, corporate bond funds are a complete scam. They pay subpar yields (when they don't lose money) and don't protect your capital and charge you a fee for this mismanagement.

 

[Freedom56]

Freedom56 wants only technology, biotech, etc. He doesn't want financials for example. I don't think you can do that with an ETF. The largest and supposedly safest one is probably LQD and it's 1/3 financials.

I guess you could buy LQD and maybe short XLF (yes.. It's a stock ETF) in some ratio to do the same.

I also don't want to own oil and gas, retail, commercial real estate, restaurants, leisure and entertainment, travel, airlines etc...

 

[WyomingLife]

From Forbes (https://www.forbes.com/sites/janetn...mer-retirements/?ss=retirement#4abf93ad3474):

"3. Panic Will Doom Some Boomers’ Wealth

"The current market dive is scary, for sure. The stomach churning volatility that’s typical of a bear market has been so severe this time that the drops have triggered multiple automatic trading halts. Eventually, the bear market will end, but not all Boomers will be there to ride the recovery. During the 2008 market crash, about 5% of those 55 or older dumped all the stock in their 401(k)s and then missed the 2009 rebound, a 2011 study of 425,000 workers’ 401(ks) showed.

"The problem with 'going to cash' in a crash is that you lock in your losses. Maybe your plan is to jump right back in after the market bottoms? Good luck with that. When markets do turn back up, they do so quickly. As financial planner Kristin McKenna explains here, six of the 10 best daily gains in the S&P 500 between January 2000 and December 2019 occurred within two weeks of the worst 10 days. Had you missed all of those 10 best days, your average annualized total return on the S&P 500 for those two decades would have been 2.44% compared to 6.06% had you stayed fully invested and ridden the roller coaster down and back up."