I'm curious who on this site is not investing. Or cashing in their chips now to take some of the risk off the table. I've been thinking a lot about it. We're dumping quite a bit into the market right now and I do worry it's high. This is a big topic if you can imagine in a tax office. We're all discussing whether we think the market has another year of gains. So it's on my mind.
Well I decided the other day that we're staying invested. We are sticking with the plan. I am going to put more in and hold it. I'm not going to sit in cash or buy more bonds. I will put rebalance being the beginning of the year, but I'm not going to hold back or change our aggressive stance.
What made me decide this? PS wrote that. Well as I perused our previous net worth and years of record keeping. I know we kept investing in 2007/2008 when we had less than we saved. But then it paid off gangbusters afterwards.
So now yes we have a more invested. And yes we are 10 years older. But talking with DH, he's in it for 10-15 more years. He's not planning on retiring until 15 years when our youngest should be done with college. If they lay him off that's a different story but as of right now it's in our heads he's going to work 15 more years.
That being said I think with a 15-20 year time frame of investing we risk it now. We stay in an aggressive investment strategy of 85% stocks/10% bonds and 5% cash. I don't think we cash in and take some of the returns off the table because we could miss out on more gains. My thoughts are until we are 5 years out we keep on investing aggressively. At 5 years out we switch more to preservation. And perhaps because at 5 years we can make a year to year decision to retire if the market is down maybe work 1 more year.
Do you think you'll keep on investing? Or is it better to take gains off the table?
Staying Invested
January 12th, 2018 at 07:04 pm
January 12th, 2018 at 07:25 pm 1515785141
In my experience, people tend to pull out way too early. Given these talks, I'd say we could easily have another 2-3 years of gains. (I believe MyMoneyBlog had a post about this recently ~ I will look for it. He said what I was thinking).
& then there is age and time in market. If we had crazy gains in taxable accounts, I would personally maybe consider cashing out to pay off mortgage (or other debts if we had them). But as is, we started out with really volatile stock market years, which completely offsets recent gains. So I don't feel I am extraordinarily ahead, and most my money is tied up in retirement funds anyway. So it's moot.
For the most part, my investing horizon is 20+ years. So we have no other plans but to stay invested through thick and thin. The only thing I do is rebalance periodically so that we stick with our investment plan. (I could see being very heavy in stocks if we didn't manage investments and rebalance during this long bull run).
January 12th, 2018 at 07:49 pm 1515786575
I agree with MMB. It's moot because I won't be changing my asset allocation no matter where we are in the cycle. But this is what I think about when I hear (young) people seriously discussing pulling money out of the stock market.
I guess the question is (to everyone), are you trying to time the market? Or are you adjusting because you haven't adjusted appropriately for your risk tolerance? I am guessing a lot of younger people (who have only experienced stock market gains) may be in the latter category.
January 12th, 2018 at 08:18 pm 1515788323
If I were about to retire I might think differently, but I too see myself working another 20+ years.
January 12th, 2018 at 08:29 pm 1515788966
Most of my investments are at record highs, so it's tempting to not buy anything right now, in case there is a 'crash'. On the other hand, if I had thought that way over the past few years, I wouldn't have been able to achieve a 27% return last year!
January 12th, 2018 at 11:37 pm 1515800242
January 12th, 2018 at 11:52 pm 1515801157
January 13th, 2018 at 02:09 am 1515809384
January 13th, 2018 at 01:39 pm 1515850792
So my asset allocation is only about 30% US stock and and 15% international stock.
I have 32% in domestic bonds and 13% in int'l bonds and 10% in cash (money market accounts and CDs)
January 13th, 2018 at 06:56 pm 1515869793
January 14th, 2018 at 10:42 pm 1515969749
January 14th, 2018 at 10:52 pm 1515970350
It is helpful to think of things in buckets, so that you think of any cash that you have in investing accounts as funds to get you through lean times once you are in the distribution phase of retirement.
Rebalance your portfolio once a year--that way if your equity portion got high, you will reduce it to the appropriate percentage and move the money into cash or fixed income and that rebalancing will "take some gains off the table" while not harming your overall strategy.
Once you get close to retirement, you want to build a cash reserve so that you have the freedom to stay out of the market during declines. For me, right now I am paying down my mortgage and some other debt, but I am on target to have that paid down in about 6-7 years and once I do, for the last few years of my working life, I'll be putting that money into increasing my cash buffer.
Even conservative investors and retirees should have a substantial chunk of money (at least 40%) in the market to provide a hedge against inflation.
January 30th, 2018 at 05:30 pm 1517333413
This is the portfolio I think I'd build, but I'm not the only manager of my family's affairs: 25% domestic stocks, 25% foreign stocks (not in dollar denominations), 25% cash/high quality bonds/T-Bills, 25% hard assets (precious metals, undeveloped land, etc).
It is fairly skewed towards inflation hedge, but that is where we are headed eventually.
For my inflation thoughts see: Inflation - a Tax on your Savings
question: is it bad form to post links to my blog if it is a SA blog with no affiliated links?