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Pulling back into cash from SP500 Index funds?

Started by david123, April 01, 2019, 07:47:36 AM

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david123

I'm generally a buy and hold investor and am probably over invested in stock funds (ie. higher return/higher risk/longer timeline).  I'm to the point in my life where I'd like to retire in 5 years or so.  For the last 30 years, I've made no attempts to time the market, and have weathered all the bad markets and came out on top afterwards.  Now I'm starting to get cold feet with all the talk of an upcoming recession.  I'm tempted to pull out at least 30% and hold it in cash, or bond funds until the market adjusts.  I probably should be keeping 30% in safer investments anyway.

Thoughts?

Sam

Not a bad idea IMO. If you're so close to the finish line, why take extra risks?

Fair value of 2,850 on the S&P seems reasonable. But the Fed has done an about face and helped investors out surprisingly.

Within 3 years of retiring, I'd go 50/50 at most.

All depends on your entire financial situation.
Regards,

Sam

BruceV

Like david 123 I've pretty much have held on and weathered the storms and have done all right.  I am very close to retiring (as soon as right now) I would say I have a 60/40 mix.  I have way too much pre tax money but feel it's too late to really fix that now.

I also feel the long bull run is coming to an end.

Where to put some of this money - how much to leave in the market - trying to be realistic and keep my greed factor to a minimum.


Sam

Quote from: BruceV on April 11, 2019, 06:36:42 AM
Like david 123 I've pretty much have held on and weathered the storms and have done all right.  I am very close to retiring (as soon as right now) I would say I have a 60/40 mix.  I have way too much pre tax money but feel it's too late to really fix that now.

I also feel the long bull run is coming to an end.

Where to put some of this money - how much to leave in the market - trying to be realistic and keep my greed factor to a minimum.

The funny thing is, w/ rates collapsing this year, real estate is catching a bid again. Lots of interesting comments and info about REITs in this post: https://www.financialsamurai.com/annualized-returns-by-asset-class-from-1999-2018/
Regards,

Sam

Cheezus

If you are retiring and only drawing 3% - 4% off the account, then there is no reason to try and time the market.  Leave it in the fund.  Take your distributions and don't worry about it.

dmk395

I recently sold a bunch after the newest high.  Used it to pay off a mortgage.  Its great having a bunch of money in a brokerage account, but you don't really feel it until you have something tangible in hand.  I'd def sell a good portion.

Money Ronin

I've advised two people regarding retirement who actually retired--everyone else is too young or too poor.  They are my mother-in-law who retired at 65 and my police officer friend who retired at 55.

I disagree with the "rules of thumbs" of 50/50 or 60/40 provided by others.  The answer depends entirely on your personal situation financial and otherwise.

My mother-in-law retired with a solid school administrator's pension and lifetime healthcare.  She also had some rental income.  Her daily expenses and needs including leisure activity were completely covered.  She was widowed.  Her kids were grown and independent.

My friend has two young kids and a stay at home spouse.  He also has a solid pension and lifetime healthcare insurance.  He moved to a lower cost of living state and his expenses are very comfortably covered.  The kids are about 10 years away from college.

In both cases, they had other after tax and pre tax funds to invest.  Since they both have steady income streams that more than covered their expenses, I advised them to invest the rest of their money aggressively without regard to their age.  Treat it like an endowment fund and let it grow in perpetuity.  Who says there is no money in government work; none of my private sector friends including myself will have it as easy.

You need to assess your sources of retirement income (e.g., social security, pensions, IRA RMD, etc.) and then decide how aggressively you should be invest.

Good luck!

tramos520

Why not try a Reg. A+ project for blockchain?

Blockchain / cryptocurrency investment for payments platform for goods and services - Theodor / $0.0375 Reg. A+ or cheaper for Series A.

That the speculation out of crypto, and into the implementation stage for the mass consumer market.

S.E.C. qualified JOBS Act - Reg. A, exempt offerings, CIK #s 0001579586,  and 0001640170 at authorized asking price of $0.0375. Authorized to accept crypto in payment for shares.

Series A - U.S. and Series A - London preferred convertible to common with dilution also available.

Not an offer to sell shares in any U.S. State, except New York.

mhb7

I have similar concerns, though not necessarily about impending recession.  I'm more concerned that all asset classes appear to be poised for low returns over the next 10 years.  Stocks have high Cape Ratios, Bonds have low yields, and Case-Shiller house index is up.  If stocks, bonds, and real estate all have high valuations at the same time, where do I put my money?

I had the same thought in 2017 when valuations were above 30 which caused me to pull some money out of stocks and buy some rental properties.  That has worked out, but real estate prices have gone up since then and the deals that were there in 2017 don't appear to be there now.  Another rental may very well be my best bet as of now, but I'd love to hear how other people are dealing with high valuations across asset classes.  My only answers were considering another rental property and reallocating a little more money toward global stocks and emerging markets which are at lower valuations.

Sam

I decided to take $500,000 in profits off the table and pay cash for a larger house in SF.

https://www.financialsamurai.com/what-to-do-if-your-real-estate-offer-is-rejected-and-you-still-want-to-buy/

I like turning paper money into real assets that provide utility.

Glad you didn't sell david123!
Regards,

Sam

mhb7

Did you refi the house after the cash offer? I hate having money tied up in house equity that could be earning more in investments. But with valuations as high as they are I suppose avoiding interests payments isn't a bad move. Just curious to know your tactics. @sam