Author Topic: Coronavirus - what are you doing with your investments / 401ks?  (Read 51437 times)

frugalnacho

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #400 on: March 13, 2020, 05:29:41 PM »
Wow, a thread full of market timers.  Did I log onto the wrong forum?


funny how everybody now magically has cash on hand.  I'm thinking the folks sitting on cash are just now coming out of the woodwork.  Def been the majority of posts recently.

I raided my emergency fund.  Investing more when the markets on a fire sale is an emergency.

the_fixer

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #401 on: March 13, 2020, 05:55:50 PM »
Planning to do a Roth conversion on an IRA while the value is down not changing my allocation.

For my 401k I am changing my contribution to the 70% max my company will allow and maxing my HSA in the next couple of paychecks to try and buy as much as I can during this period. Company has an automatic match so maxing out my 401k early has no effect on the match.



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DadJokes

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #402 on: March 13, 2020, 08:36:00 PM »
"The rumors of my demise have been greatly exaggerated."

-The market

use2betrix

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #403 on: March 13, 2020, 08:51:20 PM »
Wow, a thread full of market timers.  Did I log onto the wrong forum?


funny how everybody now magically has cash on hand.  I'm thinking the folks sitting on cash are just now coming out of the woodwork.  Def been the majority of posts recently.

You can search my posts for 1-2 years that I keep 1-2 years of living expenses in cash instead of bonds, due to the volatility of my work. It had slowly inflated into over 2 years of expenses (around $110k-$120k) in cash, so this seemed like a good time to drop it back down to 1 year. Once the Dow hits around 28k or 29k Ill start building the fund back up.

Basically has always been my plan. Like having 2 years savings then primarily invested in VTSAX, but knew if a strong downturn came, I could lighten up the emergency fund.

ChpBstrd

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #404 on: March 13, 2020, 09:30:26 PM »
Wow, a thread full of market timers.  Did I log onto the wrong forum?


funny how everybody now magically has cash on hand.  I'm thinking the folks sitting on cash are just now coming out of the woodwork.  Def been the majority of posts recently.

Ha, good point!

In my case, I'm looking for a low enough market to sell a few put options that I've been using as hedges just for a big correction. I am also open to going more aggressive with my asset allocation if valuations get more reasonable. The PE ratio of the S&P 500 is still about 30% over the historical average at 20.4 and CAPE has only fallen to 25.7.

https://www.multpl.com/s-p-500-pe-ratio
https://www.multpl.com/shiller-pe

I'm still technically in bond tent territory, so unless it's 2008 all over again I'm messing around the margins.


MustacheAndaHalf

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #405 on: March 13, 2020, 10:00:12 PM »
I really need to be more pithy - I didn't appear in the list of market timers, even though several people disagreed with my view.  Here's the most quotable part from Mar 9:
"... but wound up selling at 1.3% lower than current prices.  Selling ETF gives me a credit, which I then used to buy a long-term treasury ETF and gold."

I'm not proud about market timing, but the gap between the data and stock market annoys me.  The U.S. has between 1600 (CDC) and 2400 (worldometers.info) cases now, and that's with inadequate testing.  People are probably spreading the virus and unaware of it, just like in every other country that has gone through this.  I knew hope is a powerful drug, but does Trump declaring a national emergency merit +9% to U.S. stocks?

dragoncar

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #406 on: March 13, 2020, 10:56:16 PM »
Im sure there are plenty market timers on the forums, but culling specifically from this thread is probably sample bias

American GenX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #407 on: March 14, 2020, 08:27:30 AM »
I knew hope is a powerful drug, but does Trump declaring a national emergency merit +9% to U.S. stocks?

No, and I fully expect to see it drop significantly over the next week or two as things worsen, COVID-19 spreads, and people hunker down even more.

ender

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #408 on: March 14, 2020, 08:34:18 AM »
I knew hope is a powerful drug, but does Trump declaring a national emergency merit +9% to U.S. stocks?

Depends on what the losses were from - if enough of the recent market drops have been panic/fear based, then hope overrides that.

Many people are panicking and selling stocks. You see that even here, the number of threads that popped up in the last two or so weeks about selling/cashing out into something safer is, well, a lot higher than for the last 10 years.

Given we don't know how much of the selloff is irrational fear (vs credible expectations for economic impact), it doesn't surprise me at all that hope would cause the market to move up that much.

maizefolk

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #409 on: March 14, 2020, 08:50:26 AM »
Given we don't know how much of the selloff is irrational fear (vs credible expectations for economic impact), it doesn't surprise me at all that hope would cause the market to move up that much.

I agree, but would add that there is a third case in addition to (1) irrational fear and (2) rational calculation of long term economic impacts, which is (3) selling is driven by bands/companies/individuals trying to raise cash to cover near term obligations.

This third model is consistent with the prices of stocks, bonds, and gold all falling at the same time (as they have at least a couple of days this week). In the third scenario, companies may have a rational view that the long run economic impact will be modest looking back 10, 20, or 30 years from now, but still have to sell assets at depressed prices today to get the cash to weather the next few months where revenue will likely drop substantially. 

JetBlast

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #410 on: March 14, 2020, 10:17:39 AM »
I've made no changes except rebalancing an IRA that was a little too far off of my target allocation.  Same 401k deposits, and same percentage of take home pay going into savings and brokerage accounts.  I'd love to buy in a much larger way, but I'm conserving cash at the moment because my industry is in meltdown mode, and at 85% seniority a prolonged crisis could mean furlough.  Frivolous spending is down even more than normal.  Waiting to get a better feel for how my company is planning to address this over the next few months.

The airline industry has totally fallen to shit this last week with travel restrictions and basically every reason people travel except wedding and funerals coming to a grinding halt.  Bookings for the next four weeks are negative, with more cancellations than new bookings.  April is looking like a total wipeout for the industry.  Hopefully travel begins to rebound in the back half of May.

I did a little back of the envelope math using last year's 10Q reports for the first two quarters, public statements about the revenue environment, and wild ass guesses as to how the rebound will look over the next few months, and the revenue hit for my company was roughly $6.5 billion.  That said, I have no special insight into forward bookings or what the government plans over the next couple months for restrictions.  I am probably way off, but it gives some idea of the magnitude of the sudden liquidity crisis for the airlines.

 

MustacheAndaHalf

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #411 on: March 14, 2020, 10:45:01 AM »
I knew hope is a powerful drug, but does Trump declaring a national emergency merit +9% to U.S. stocks?
Given we don't know how much of the selloff is irrational fear (vs credible expectations for economic impact), it doesn't surprise me at all that hope would cause the market to move up that much.
I would argue it's both.  China, Italy and now Spain each decided to lock down large numbers of people to prevent COVID-19 from spreading.  Italy and Spain have 0.8% of world market cap, each.  Because of prior epidemics, Korea was more prepared, and combined a limited lock down with aggressive testing.

France and Germany haven't locked down, but aren't far behind Spain in the number of cases.  They represent 2.8% and 2.4% of the world market cap - what happens if both countries lock down?

U.S. now has 2,500 cases, and 55.8% of the world's market cap are in U.S. stocks.  If the U.S. shuts down a fraction of it's economy, that has a huge impact on both economic output and consumption.  That's why I think the level of cases in the U.S. should be watched carefully - to gauge what economic activity might go offline, and send stocks tumbling.

maizefolk

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #412 on: March 14, 2020, 11:01:16 AM »
I knew hope is a powerful drug, but does Trump declaring a national emergency merit +9% to U.S. stocks?
Given we don't know how much of the selloff is irrational fear (vs credible expectations for economic impact), it doesn't surprise me at all that hope would cause the market to move up that much.
I would argue it's both.  China, Italy and now Spain each decided to lock down large numbers of people to prevent COVID-19 from spreading.  Italy and Spain have 0.8% 2.5% and 1.6% of world market cap, each GDP, respectively.  Because of prior epidemics, Korea was more prepared, and combined a limited lock down with aggressive testing.

France and Germany haven't locked down, but aren't far behind Spain in the number of cases.  They represent 2.8% 3.3% and 2.4% 4.6% of the world market cap GDP - what happens if both countries lock down?

U.S. now has 2,500 cases, and 55.8% of the world's market cap are in U.S. stocks 24.5% of world GDP is in the US.  If the U.S. shuts down a fraction of it's economy, that has a huge impact on both economic output and consumption.  That's why I think the level of cases in the U.S. should be watched carefully - to gauge what economic activity might go offline, and send stocks tumbling.

I agree with the point that you are making, but I want to point out that it may give a better sense of the proportional impact of different countries going into lockdown if we look at each country as a percent of world GDP rather than the market cap of stocks listed on that country's exchanges. The US is only about 1/4 of total GDP but more than 1/2 of total market cap, but that's because a lot of US listed companies get the majority of their revenue and profit overseas.

The market cap of Italian listed companies is only 1/70th as large as of US listed companies but italy's GDP is actually about 1/10th as large as that of the USA.

MustacheAndaHalf

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #413 on: March 14, 2020, 11:09:28 AM »
If the U.S. shuts down a fraction of it's economy, that has a huge impact on both economic output and consumption.  That's why I think the level of cases in the U.S. should be watched carefully - to gauge what economic activity might go offline, and send stocks tumbling.
The US is only about 1/4 of total GDP but more than 1/2 of total market cap, but that's because a lot of US listed companies get the majority of their revenue and profit overseas.
That sounds more accurate.  If a U.S. company has overseas offices, those offices might continue being productive - so the impact might be proportional to U.S. GDP.  We'll also find out how many of those offices can work independently when their headquarters shuts down (if it comes to that).

Sultan58

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #414 on: March 14, 2020, 12:21:25 PM »
Wow, a thread full of market timers.  Did I log onto the wrong forum?
That's what I've been thinking! 

Is it? I think that there are very few people actually selling their assets.

Well....I'm pretty happy about my decision on Jan 16th.  If you read back thru the pooh pooh quotes from the last week of January....many thought this would pass in a  month.  That was about 7000 DJIA points ago.  We all make our own decisions with our investments and some don't care to ride the roller coaster as much as others. I moved some back in after late February....no I didnt catch the bottom but what I know is that i'm 10% down instead of 25%......so I'll keep doing what I do.

Best wishes to all.


"There are more than I expected there to be on this forum.  Here are just the ones in this thread.  I'm sure I'm biased by all the other threads I've been reading too.  This doesn't count the people discussing how they want to market time and it's so obvious why they should, but didn't actually specifically say they were selling anything."

I am taking profits and moving to a more conservative allocations by halving my stock allocations.
I got out 70% of my investments a couple weeks ago. The rest is still in but I will leave it alone for 30 years.
I've never timed the market in my life but felt this time it was just too obvious what was going to happen. Plus the market was so overvalued to begin with.
I sold much of my VTSAX at 3,243
Someone died in my state now of CV and the Governor declared emergency. I cannot stay as fully invested in the stonk market as I am and will be moving a bit out.
well.....after last years run---I got nervous and pulled all my funds from S&P index on Jan 16....
I went to cash in all accounts some time ago.

achvfi

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #415 on: March 14, 2020, 01:30:24 PM »
Sadly we are going to see lot more people suffering due to this crisis. In next week or two I suspect we are going to see significant ramp up of number of people infected and deaths in US.  There will be disruptions, income loss, illness and lives lost. Unfortunately we have incompetent shitty leadership in Washington to deal with all this. 

Regarding investments.
So far I dumped into market about 25K in last two weeks, maxing out IRAs and rest in taxable. Significantly reducing emergency fund.

Also I am refinancing my 15 year fixed mortgage to 30 year fixed, taking advantage of low mortgage interest rates reducing it by 25 basis points. More importantly its going to reduce monthly mortgage payment by about 40%. Goal is to reduce monthly cash flow needed for housing expenses. 

I am going to shift the increased cash flow from recent pay raise and lower mortgage payments to invest in taxable brokerage and replenish EF.

American GenX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #416 on: March 14, 2020, 03:00:46 PM »
I was thinking 30 to 40% off the S&P 500 closing high (Feb 19), so I'm still holding off on rebalancing at this point, at least until 30%, then reevaluate my AA at 40% if that ever happens.  I was down about 4 years of retirement spending on Thursday and gained about a year back on Friday.

GuitarStv

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #417 on: March 14, 2020, 03:46:42 PM »
My 60/40 stocks to bonds asset allocation got far enough out of whack that I had to sell some stocks and buy some bonds to rebalance..  Other than that, no change to my investments.

AdrianC

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #418 on: March 14, 2020, 04:09:49 PM »
My 60/40 stocks to bonds asset allocation got far enough out of whack that I had to sell some stocks and buy some bonds to rebalance..  Other than that, no change to my investments.
I sold some bonds and bought some stocks, but whatever floats your boat :-)

GuitarStv

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #419 on: March 14, 2020, 04:37:23 PM »
My 60/40 stocks to bonds asset allocation got far enough out of whack that I had to sell some stocks and buy some bonds to rebalance..  Other than that, no change to my investments.
I sold some bonds and bought some stocks, but whatever floats your boat :-)

Whoop, had that backwards.  Thank you.

TomTX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #420 on: March 14, 2020, 05:57:11 PM »
How low?  How long?
20,000 dead Americans from flu. 40,00,000 infected.

Seems media driven so far. Maybe not. Still on sidelines from 3,247

Flu is an extremely poor model when the fatality rate is 10x-30x higher.

MustacheAndaHalf

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #421 on: March 15, 2020, 06:02:14 AM »
Not only is the chance of death much higher, so is the chance of transmission:


"Virus Transmission
The measure scientists use to determine how easily a virus spreads is known as the "basic reproduction number," or R0 (pronounced R-nought). This is an estimate of the average number of people who catch the virus from a single infected person, Live science previously reported. The flu has an R0 value of about 1.3, according to The New York Times.

Researchers are still working to determine the R0 for COVID-19.  Preliminary studies have estimated an R0 value for the new coronavirus to be between 2 and 3, according to the JAMA review study published Feb. 28. This means each infected person has spread the virus to an average of 2 to 3 people"

https://www.livescience.com/new-coronavirus-compare-with-flu.html#virus-transmission
« Last Edit: March 15, 2020, 10:17:03 AM by MustacheAndaHalf »

BobTheBuilder

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #422 on: March 15, 2020, 07:05:52 AM »
I bought some puts just before the market crashed. I already sold them. Might have been smarter to try better timing, but who can.

Continuing the ETF savings as planned, with minor modifications. I see a decade of Pharma and Biotech coming, so there is a new ETF in my list.

SO had the luck to find a forgotten funds account and moved out of it early February because of the expense ratio. Basically it was a very expensive MSCI World.

She is short-term DCAing that back into the markets starting this month, and distributing over the continents.

This too shall pass, keep going!

ice_beard

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #423 on: March 15, 2020, 12:58:29 PM »
In my 403b contributions, I went back to 100% equities this week after being like 75/25 for a couple years.  It's offering a bit of cushion.  VBTIX is up almost 12% over the past year. 
« Last Edit: March 15, 2020, 02:34:21 PM by ice_beard »

Retireatee1

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #424 on: March 15, 2020, 01:42:44 PM »
My 60/40 stocks/bonds ratio got skewed to 55/45.  I'm going to rebalance 1% a week for five weeks and then reevaluate.

TempusFugit

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #425 on: March 15, 2020, 01:58:38 PM »
I did some back-of-the-envelope calculations yesterday to see what my YTD returns are for my portfolio

As of yesterday, my invested portfolio is down -11.8% YTD (excluding contributions).  Before the Friday bounce it would be more like -16.2%.  I'm pretty conservative with a 72/25/3 (Stocks/Bonds/Cash) AA at the start of the year.     

Which, all in all, is not that bad. Of course, I don't believe for a minute that the (financial) pain is over. I think we're going lower than we went last week, possibly by a lot, as the reality of the impact sets in.   

The economies of every city and town in the country are going to be hit hard when all the people whose livelihoods are based on social interaction are no longer able to make ends meet. Add to that the global trade impacts on both supply and demand and an oil price war as the big cherry on top.   

However, as bad as I think it will get, it also seems like something that we can get back out of within a reasonable period (maybe 12 months after the pandemic abates, so 15-18 months from now). Unfortunately, the government spending that is going to be necessary to keep things afloat for the next few quarters is going to add to the already crazy debt problem.  Long term that's got to start hurting eventually.





American GenX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #426 on: March 15, 2020, 03:17:22 PM »

I just read this.  In light of all the coronavirus related shutdowns, panic, hunkering down, etc., I question how much this will really do in preventing the markets from continuing a downward trend, as I still expect them to do.

Quote
In an emergency move Sunday, the Federal Reserve announced it is dropping its benchmark interest rate to zero and launching a new round of quantitative easing.

The QE program will entail $500 billion worth of asset purchases entailing Treasurys and mortgage-backed securities.


ice_beard

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #427 on: March 15, 2020, 03:23:39 PM »
The last emergency cut didn't go over so well for that day of trading. 
What time do the futures markets open?
Do we loose all of Fridays gains?

American GenX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #428 on: March 15, 2020, 06:19:39 PM »
The last emergency cut didn't go over so well for that day of trading. 
What time do the futures markets open?
Do we loose all of Fridays gains?

Not a good sign.

CNBC headline:

Stock futures drop hit limit down even as Fed slashes rates; Dow futures off 1,000 points

MustacheAndaHalf

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #429 on: March 15, 2020, 07:11:02 PM »
I hold 6% in 20yr/30yr Treasuries, so it's a good sign yields may drop and make existing Treasuries more valuable
I hold 60% in U.S./international equities, so overall it will hurt.

Ready2Save27

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #430 on: March 15, 2020, 07:34:00 PM »
I think the average American doesnt realize the gravity of the situation. I posted on the 1st page of this thread and at the time I had no idea how bad this was going to get. Im very confident that the market will drop like a rock over the next couple of weeks until businesses start to be forced to close by government/state action.

It seems like Fridays gains were based off of Trumps speech, which had a lot of completely false statements in there (such as Google developing a website for symptom checks to see if you need a test, and then Google saying theyre were not doing this). I assume the US is going to be similar to other European countries in a few weeks (except we wont have tests to identify sick people).

I know the common advice (which is almost always good) is to not time the market, but if scientists are saying this is going to get a lot worse, so will the market.

American GenX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #431 on: March 15, 2020, 07:37:04 PM »
Im very confident that the market will drop like a rock over the next couple of weeks until businesses start to be forced to close by government/state action.

That's already started in at least a couple states.  But I don't think that's going to stop the drop, yet.

Bloop Bloop

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #432 on: March 15, 2020, 09:21:46 PM »
I think the average American doesnt realize the gravity of the situation. I posted on the 1st page of this thread and at the time I had no idea how bad this was going to get. Im very confident that the market will drop like a rock over the next couple of weeks until businesses start to be forced to close by government/state action.

If that happens, anyone who keeps his or her job will be greatly advantaged by buying opportunities. I'm not referring to timing the market - just normal accumulation.

v8rx7guy

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #433 on: March 15, 2020, 09:28:58 PM »
I think the average American doesnt realize the gravity of the situation. I posted on the 1st page of this thread and at the time I had no idea how bad this was going to get. Im very confident that the market will drop like a rock over the next couple of weeks until businesses start to be forced to close by government/state action.

If that happens, anyone who keeps his or her job will be greatly advantaged by buying opportunities. I'm not referring to timing the market - just normal accumulation.

My thoughts exactly.  There will be buying opportunities for those who can weather this storm.

Radagast

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #434 on: March 15, 2020, 11:03:28 PM »
OK, I got permission to move about 1/3 of our taxable accounts back to stocks in the event that good prices should come to pass.  I plan to value average weekly over the next 2-3 months (dependent upon low prices continuing), which will still leave us at a conservative(ish) 60% bonds 40% stocks allocation there. Also I am thinking that I may pursue a couple of Capital One savings account signup bonuses and their relatively high interest rates for the "bond" part. And their FDIC insurance. Importantly, the bond/cash will be large enough for a 20% payment on a reasonable house and a 10% payment on an outrageous house.

Michael in ABQ

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #435 on: March 16, 2020, 11:48:05 AM »
I get paid twice a month and I was just looking at my last few 401k contributions since I increased my contribution to 25% this year.

3/13 - 13.10 shares of S&P 500 index fund
2/28 - 12.03 shares of S&P 500 index fund
2/14 - 10.52 shares of S&P 500 index fund
1/31 - 11.04 shares of S&P 500 index fund
1/15 - 10.83 shares of S&P 500 index fund

Basically I'm getting two extra shares now. Sure my account has dropped by five digits in the last month or so, but it will go back up well before I touch any of this and now I'm going to have a lot more shares than I would have otherwise.

MissNancyPryor

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #436 on: March 16, 2020, 12:43:38 PM »

MustacheAndaHalf

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #437 on: March 16, 2020, 01:10:53 PM »
Mad Fientist had JL Collins on- 
https://www.madfientist.com/coronavirus-market-crash/
Is there a transcript or summary anywhere of that podcast?

caracarn

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #438 on: March 16, 2020, 01:21:54 PM »
Mad Fientist had JL Collins on- 
https://www.madfientist.com/coronavirus-market-crash/
Is there a transcript or summary anywhere of that podcast?
Yes on the same page as the podcast.  Scroll down and you can read it.

dragoncar

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #439 on: March 16, 2020, 01:27:56 PM »
Mad Fientist had JL Collins on- 
https://www.madfientist.com/coronavirus-market-crash/
Is there a transcript or summary anywhere of that podcast?

It's on that page.  Maybe they just added it or maybe you have it blocked somehow

gsd802

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #440 on: March 16, 2020, 01:47:52 PM »
I see alot of posts of people selling bonds to buy stocks right now.  For example, I recently bought bonds (to make my AA 90/10) that are now worth $.19 less per share than they were when I bought them.  When is it a good idea to sell them at a loss in exchange to buy stocks at a lower price?  I am a long term investor, and is there any penalties to doing this if you are just reinvesting within the IRA?  I have searched high and low and have not found any explanation for this.  Thanks

frugalnacho

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #441 on: March 16, 2020, 01:51:56 PM »
I see alot of posts of people selling bonds to buy stocks right now.  For example, I recently bought bonds (to make my AA 90/10) that are now worth $.19 less per share than they were when I bought them. When is it a good idea to sell them at a loss in exchange to buy stocks at a lower price? I am a long term investor, and is there any penalties to doing this if you are just reinvesting within the IRA?  I have searched high and low and have not found any explanation for this.  Thanks

When you need to get your asset allocation back into alignment.

dragoncar

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #442 on: March 16, 2020, 01:53:19 PM »
I see alot of posts of people selling bonds to buy stocks right now.  For example, I recently bought bonds (to make my AA 90/10) that are now worth $.19 less per share than they were when I bought them.  When is it a good idea to sell them at a loss in exchange to buy stocks at a lower price?  I am a long term investor, and is there any penalties to doing this if you are just reinvesting within the IRA?  I have searched high and low and have not found any explanation for this.  Thanks

No penalty within IRA only drag due to commissions and/or trading spread. 

As for when is a good time... I'd say follow your IPS but it sounds like you don't have one.  If you are going to stick to your 10% bonds allocation, wait until the bonds increase as a percentage of your portfolio past some rebalance point... say when stocks go down and bonds go up such that you now have an 80/20 portfolio rebalance back to a 90/10.

Search terms for this are REBALANCING BANDS STRATEGY TRIGGER

American GenX

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #443 on: March 16, 2020, 03:21:48 PM »
It's right on the edge of my first rebalancing target of being 30% off the closing record high of the S&P 500, but based on the way it's dropping, I think I'll hold out a while as I think my earlier prediction of up to 40% off the high may come to pass, if not worse, based on how much and how quickly it's dropping, even after the Fed stepped in, and with the worst of COVID-19 yet to come.

gsd802

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Re: Coronavirus - what are you doing with your investments / 401k’s?
« Reply #444 on: March 16, 2020, 04:57:46 PM »
I see alot of posts of people selling bonds to buy stocks right now.  For example, I recently bought bonds (to make my AA 90/10) that are now worth $.19 less per share than they were when I bought them.  When is it a good idea to sell them at a loss in exchange to buy stocks at a lower price?  I am a long term investor, and is there any penalties to doing this if you are just reinvesting within the IRA?  I have searched high and low and have not found any explanation for this.  Thanks

No penalty within IRA only drag due to commissions and/or trading spread. 

As for when is a good time... I'd say follow your IPS but it sounds like you don't have one.  If you are going to stick to your 10% bonds allocation, wait until the bonds increase as a percentage of your portfolio past some rebalance point... say when stocks go down and bonds go up such that you now have an 80/20 portfolio rebalance back to a 90/10.

Search terms for this are REBALANCING BANDS STRATEGY TRIGGER

I was 100% stocks until not too long ago.  I read that its safer to have some bonds, so I bought some from cash I had in money market.  After the fact, I saw that alot of people older than me still had 100% stocks.  I am 30, and a long ways from retiring. 

I guess my thought process was if you sold bonds when market is down, you wont loose a whole lot, and if you take that money and buy into stocks that are priced extremely low, once the market bounces back you will regain the money lost from the bonds and then much more because stocks are valued higher.  Or, am I way off?

And thank you,  I will search for that

dragoncar

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #445 on: March 16, 2020, 05:06:10 PM »
You are right that holding bonds is typically an opportunity to earn a rebalancing bonus (this is not guaranteed just like everything else in finance).  But without having pre-determined triggers for rebalancing you are market timing and likely to let emotion influence you.  This can work out fine if you are lucky or go slightly bad otherwise.  But either way 10% bonds is pretty small potatoes so if it were me Id just hold my current allocation and try not to lose any sleep at night

GuitarStv

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #446 on: March 16, 2020, 08:03:48 PM »
You are right that holding bonds is typically an opportunity to earn a rebalancing bonus (this is not guaranteed just like everything else in finance).  But without having pre-determined triggers for rebalancing you are market timing and likely to let emotion influence you.  This can work out fine if you are lucky or go slightly bad otherwise.  But either way 10% bonds is pretty small potatoes so if it were me Id just hold my current allocation and try not to lose any sleep at night

Not sure I agree.

If you have a defined asset allocation, re-balancing is kinda the opposite of market timing.  It makes sense to have pre-defined triggers for re-balancing, but unless you're failing to do it each year or two or you're doing it weekly it's pretty safe and quite different than market timing.  You are always selling your highest performing asset to buy your lowest performing one.  It forces you to sell high and buy low.

When you're market timing, you think that you know what the future is and are making a gambling bet.  When you re-balance you're returning to the asset allocation you determined was the correct path to follow years ago.

effigy98

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #447 on: March 16, 2020, 08:34:35 PM »
I guess put options on the couple stocks did work out at end of day. Insane profit for min risk.

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Radagast

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #448 on: March 16, 2020, 09:37:28 PM »
You are right that holding bonds is typically an opportunity to earn a rebalancing bonus (this is not guaranteed just like everything else in finance).  But without having pre-determined triggers for rebalancing you are market timing and likely to let emotion influence you.  This can work out fine if you are lucky or go slightly bad otherwise.  But either way 10% bonds is pretty small potatoes so if it were me Id just hold my current allocation and try not to lose any sleep at night

Not sure I agree.

If you have a defined asset allocation, re-balancing is kinda the opposite of market timing.  It makes sense to have pre-defined triggers for re-balancing, but unless you're failing to do it each year or two or you're doing it weekly it's pretty safe and quite different than market timing.  You are always selling your highest performing asset to buy your lowest performing one.  It forces you to sell high and buy low.

When you're market timing, you think that you know what the future is and are making a gambling bet.  When you re-balance you're returning to the asset allocation you determined was the correct path to follow years ago.
I think you misread dragoncar? He said "without" predefined triggers for rebalancing you are market timing.

dragoncar

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Re: Coronavirus - what are you doing with your investments / 401ks?
« Reply #449 on: March 16, 2020, 09:48:26 PM »
You are right that holding bonds is typically an opportunity to earn a rebalancing bonus (this is not guaranteed just like everything else in finance).  But without having pre-determined triggers for rebalancing you are market timing and likely to let emotion influence you.  This can work out fine if you are lucky or go slightly bad otherwise.  But either way 10% bonds is pretty small potatoes so if it were me Id just hold my current allocation and try not to lose any sleep at night

Not sure I agree.

If you have a defined asset allocation, re-balancing is kinda the opposite of market timing.  It makes sense to have pre-defined triggers for re-balancing, but unless you're failing to do it each year or two or you're doing it weekly it's pretty safe and quite different than market timing.  You are always selling your highest performing asset to buy your lowest performing one.  It forces you to sell high and buy low.

When you're market timing, you think that you know what the future is and are making a gambling bet.  When you re-balance you're returning to the asset allocation you determined was the correct path to follow years ago.
I think you misread dragoncar? He said "without" predefined triggers for rebalancing you are market timing.

Lets dispel with this notion that guitarstv doesnt know exactly what hes saying