Author Topic: Feeling locked into international market - what should I do?  (Read 3117 times)

El Gringo

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Feeling locked into international market - what should I do?
« on: January 05, 2015, 10:05:26 AM »
So I feel like I made a dumb move a few months ago. I normally just dollar cost average and don't try to time the market. But I recently rolled my previous 401k over to an IRA and tried to be fancy. The whole 401k was in an S&P500 index fund because that was the only cheap one. In my new 401k, I'm also putting all my money into US index funds because they are really cheap. Meanwhile, the US has been in a bull market for years now (the entire time I've been in invested in the markets, it's been a bull market).

Considering these two things (exclusively investing in US in current 401k, and very long US bull market) I figured I'd put pretty much all of my rollover money in international - not for the long term, but temporarily. This has caused me to be heavily weighted in international markets. If there was a huge drop in US markets, I figured I could seize on that opportunity to buy a bunch of US index funds. Otherwise, I was thinking I could gradually transition into a more normal asset allocation (like 80-20, or something like that).

However, pretty much as soon as I did the rollover, international markets started tanking, or seriously under performing. VXUS is down about 5% and S&P500 is up about 5% since I made the trade. The US economy is continuing to look up and people like Bogle are saying you're much better off long term being in the US markets. I'm wishing I wouldn't have tried to do anything special and that I would've just bought straight into my planned long-term asset allocation when I did the rollover. I'm resisting all of my urge to be emotional and sell a bunch of international shares, as that will just lock me into my losses, but I also worry that I'll lose out on a bunch of future gains if I keep my portfolio heavily weighted towards international.

What do people recommend I do?

iamlindoro

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Re: Feeling locked into international market - what should I do?
« Reply #1 on: January 05, 2015, 10:23:59 AM »
There's probably no demonstrably "right" answer because ultimately none of us know what's going to happen for sure in the future-- but I think the most logical thing to do is to get your asset allocation back in line with your investment policy, today.  You may be right, you may be wrong, but long term you are best served by charting a course and following it based on your desired asset allocation.
« Last Edit: January 05, 2015, 10:35:05 AM by iamlindoro »

Mr. Captain Cash

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Re: Feeling locked into international market - what should I do?
« Reply #2 on: January 05, 2015, 10:48:49 AM »
First off repeatedly punch yourself in the face until you calm down and relax!

It is hard to recommend solutions with knowing very little details about your situation. Additionally none of us can predict the future of the markets and what is going to happen. If I was in your situation I would:

- If I had available capital and it went down 5% I would be buying more as it has now became even more attractive to buy.
- I would not worry about what the media is saying as over every period of time certain asset classes will exceed and lag other asset classes. Tune out the noise and stay the course
- If I was really would begin buying different indexes to work on transitioning into a more "normal" asset class as you say. Even being heavily weighted in the U.S. markets is not always the greatest approach.

Those are just a few things off the top of my head but the main recommendation would be to stay the course and not panic with these short term market fluctuations.

Mr. Captain Cash



El Gringo

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Re: Feeling locked into international market - what should I do?
« Reply #3 on: January 05, 2015, 11:00:13 AM »
Thanks! I realize there's not an single, right answer. I think in a single sentence, what I'm trying to ask is "Which action would be more of a long-term view and less emotional: eat my losses and get back to my long-term asset allocation (and of course stick to it from then on!) or keep my current asset allocation for the possible medium term until international markets do better and then get back to my long-term asset allocation? And again, I realize there's not single/simple solution, but I figured I'd at least be helpful to get others' opinions.

trailrated

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Re: Feeling locked into international market - what should I do?
« Reply #4 on: January 05, 2015, 11:13:55 AM »
Write down on paper an IPS and STICK WITH IT, this will avoid future impulse trading. Have a plan, stick with it, have an AA, stick with it, have re-balancing targets, stick with it.

trailrated

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Re: Feeling locked into international market - what should I do?
« Reply #5 on: January 05, 2015, 11:15:03 AM »
First off repeatedly punch yourself in the face until you calm down and relax!

Could not stop laughing at this, kudos on the great advice!

InternationalStache

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Re: Feeling locked into international market - what should I do?
« Reply #6 on: January 05, 2015, 11:15:14 AM »
One potentially relevant query: if you just re-balance with your contributions, how long will it take you to bring the portfolio back to your desired allocation? If it's something that could be done in a year or less, I'd probably just "fix" it with contributions; if it'd take a decade, I'd fix it now. Obviously a number of other factors to consider as well.

GGNoob

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Re: Feeling locked into international market - what should I do?
« Reply #7 on: January 05, 2015, 11:52:56 AM »
What is your current allocation and what is your preferred allocation?

You may just want to learn from your mistake of not sticking to your preferred allocation and rebalance now. But if you are not far from your preferred and can catch up soon with new deposits, you may just decide to keep things as they are. For your long term investment, you want to write down your plan and stick with it, rebalancing as needed.