I have a retirement account for a previous job; I no longer make contributions to it. It just sits there. Now, around 60% of it is in stocks (I’m 36, so I think this is roughly the recommended mix); the rest is in more conservative stuff. Looking at my recent statement, I see that my portfolio lost over $4000 last quarter, almost entirely due to this 60%. My wife wants me to transfer half of my stocks to guaranteed-return instruments like bonds or T-bills until the market recovers (whenever that is). I don’t know if this is such a hot idea. What do you think?
FWIW, I’m keeping the distribution the same (stock-heavy) in the retirement fund I am currently contributing to, on the theory that the more cheap stocks I can buy now the better. I’m just curious about the allocation on a fund to which I no longer contribute.
Not financial advice, per se, but I think that time is on your side to leave it alone. Do you want to retire at 50? 60? 65? If it’s 50, you may want to look at something a bit more safe, but I wouldn’t worry since even that is over a decade away. Is it possible to roll that retirement account into something not controlled by that company?
Anyway, time is on your side for the most part. Markets rise and fall in swings, but the chances of us having another 14 year global depression are pretty slim
I don’t plan to retire for another 25-30 years, so I’m thinking long-term here. But my wife doesn’t want me to spend the next few of those years losing money. Sure, it will go back up eventually, but in the meantime, is it best to ride the market down (and then back up again), or step out of the market (putting the money in guaranteed investments) and re-enter when things are more stable?
I could roll the retirement plan over into my current, active plan (i.e., the one I’m contributing to), but that doesn’t solve my immediate problem.
Well, if you switch out of those stocks now, you will be buying high and selling low, exactly the opposite of what you should be doing. You should only even consider selling if you need to cash the whole thing in soon, and you think the market has further to fall in that time, in which case you could cut your losses. But as you have a long time to go, I would leave them where they are.
In a way I would be selling low and “locking in” my losses. But I’m not selling the stocks and putting the money in a mattress; I would instead be shifting my money from investments that are losing money to those that are earning (a little bit of) money.
I’m inclined not to do anything. But I promised my wife I would think about it.
I agree 100% with this. Unless you have tax reasons to take a loss this year, you should hold them until you at least break even. Many stocks have lost value because the financial sector and credit system are in disarray… but the businesses themselves are still just as sound as ever (unless they’re banks).
Just my humble opinion but I wouldn’t touch anything right now. Yeah the market is at a low point right now and I guess it is possible it will keep trending downward but I don’t see it. Everyone lost money on the fall and is waiting for the rebound to recoup some losses. You shift your money into t-bills and bonds and you’re likely to miss the rebound. Once the rebound has happened shifting your money back into the market isn’t going to recoup anything.
The easiest way to get hurt when you are on a roller coaster is to jump off.
You have time. You shouldn’t even be looking at this stuff on a daily basis. I’ve lost a lot of money in the past year. My accounts, which I have had for a long time now, are now worth what they were a year and half ago. So I’ve made and lost a ton of money in the past 18 months but I am fairly certain they will rebound again. This won’t be the first time they’ve been down and it won’t be the last.
I have also been wondering how often some of the younger investors on this board have been checking their retirement accounts. Mine have not suffered so much on the roller coaster of the past two weeks, most of the damage was done during the slow downward slide of this year. I have a feeling that a lot of people haven’t checked their balances in a while which is increasing the freakout effect.
Your wife is having an emotional reaction to the current market conditions, which is exactly what you don’t want to do. At this point, you haven’t lost anything, it’s just decreased in value. You don’t lose unless you sell. As long as you stay put you have a chance for the value to bounce back.
“My portfolio does not contain dollars. It’s shares of stocks / bonds / funds/ etc”
While the dollar value will fluctuate with the market, the actual shares owned by you don’t ever decrease (unless someone more knowledgeable could correct me) until you start withdrawing. Your portfolio’s gains from dividends / interest might not be as much in this market, but if you had 1000 shares of X + Y + Z before, you still have 1000 shares (even though the value of those shares have dropped).
Obviously, once you’re closer to retirement (the time you will start making withdrawals) the actual dollar value is more of a concern. But with 20-ish years ahead of you before that, I think shuffling things based on current market conditions may do more harm than good.
I’m not a professional advisor planner by any stretch of the term, so YMM Certainly V.
As everyone else said, do not sell low, which is what you’d be doing if you offload the stocks. If anything, you should be taking advantage of the deal now and adding more stocks to your portfolio. Or rebalancing, which will have pretty much the same result in this case.
As everyone else said, do not sell low, which is what you’d be doing if you offload the stocks. If anything, you should be taking advantage of the deal now and adding more stocks to your portfolio. Or rebalancing, which will have pretty much the same result in this case.
I’ll go even farther than everyone else. Of course, do not sell. But you’re 36. Why are you only 60% in stocks? That bull pucky about “subtracting your age from 100 to get the percentage in stocks” is just that. My opinion: you should be 100% in stocks in your retirement money.
There are several important facts to remember:
This is all long term money that you aren’t going to touch for decades.
The biggest risk of long term money is not fluctuations in value. It’s inflation.
Bonds, guaranteed-return investments, etc. don’t beat inflation over the long haul.
Stocks (i.e., the stock market), which have an average annual return of 10% - 11%, are the best inflation defense we have.
You can not time the market. NO ONE has ever been capable of pulling their money out of market, then putting it back in to avoid loss and accomplish gains.
If anyone ever tells you that they know when to do this, RUN.
Retirement is NOT a single event from an investment point of view. You are not going to need all of your “retirement money” at age 65. Even at age 65, some of your retirement money will have a long-term investment horizon of 10, 20, 30, or more years.
Choose a good S&P 500 low-cost index fund (like Vanguard) and just leave it there. The value is going to fluctuate. If it makes you nervous, don’t look at the value. As others have said, you haven’t lost anything until you sell.
It’s sound investment advice. A regularly rebalanced portfolio will outperform a 100% stock portfolio in the long run.
To the OP: You should actually do the opposite: You should shift more money into stocks right now. If 60/40 is an asset allocation that you were comfortable with, then you should stick to it. At regular intervals, say, once or twice a year, tally up your totals and readjust so that you stay close to that ratio.
If your stocks have fallen so what was 60/40 is now more like 50/50, you should sell some bonds and buy stock to get it back to 60/40.
I go along with this. I’m 38 and my wife is 30. All 100% of our retirement investments (while very diversified) are in stocks. Some in index funds, some in international, others very specialized.
Sure the market sucks right now but we’re talking “long term” which means not touching the money for another 30 years.
If it was my account, I’d move about 20% of the money from conservative stuff to a couple of stock index funds, probably VFINX (S&P 500), NAESX (small cap), and VGTSX (interational) at about a 50/25/25 mix.
Note that I’m a complete absolute amateur, but the market has been getting the shit kicked out of it lately, so it’s a great time to buy, not sell. It’s far more likely the market will recover than go to zero. The only reason I’d hold 20% back is that there’s a good chance things will go down even further in coming months, at which point I’d put the last 20% into stocks.
This is the worst possible time to pull your money out of stocks and put it in something else. That would be an emotional decision and you create two problems: First, you realize the loss, which only helps if you have other gains to offset (I’m not sure how the accounting for the loss works if you have a tax-deferred retirement account like a 401(k)). Second, the market is bottoming out now, and if you wait until after the market recovers you will be kicking yourself that you didn’t benefit from the recovery.
All the experts I have heard say sit tight. Don’t panic.
Ever hear the saying “Buy low, sell high?” You are asking if you should sell low.
This is pretty much what I expected to hear. I promised my wife I’d ask around (and Dopers seem like a pretty bright group to ask questions of). But I hadn’t thought of going in the other direction and shifting my portfolio even more toward stocks. It makes sense to me, but I’m sure my wife will veto this. About some things, she is highly risk-averse. Not much I can do about it.
