Author Topic: forced to cash out of market last month, when to move back into stocks?  (Read 1996 times)

Valhalla

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I had an unfortunate timing with rolling over a previous 401k at the end of the year a few weeks ago.  The only way the 401k admin would distribute was to sell into cash and send me a check.  It was about $200k, or about 1/4 of my pre-tax dollars (all of which are invested in the indexes / market).  So I had 25% of my pre-tax dollars sitting in cash when the market surged during this time.

Logistically, it took a while for the check to make it to me and with the holidays and travel I finally got it last week, right when the Iran conflict ended and the trade deal seemed settled.  So basically I've missed out on around 2.5% - 3% of the stocks surging since then.

For now I've deposited it into my current 401k but into bond index, waiting to see if the market can take a dip so I can roll it back into stocks.

I hate timing the market, and really hated the fact I was forced to sell out of stocks into cash just to do the rollover.  The exposure of sitting out of the market just for a few weeks highlights how risky it can be to move in / out of stocks and miss some significant increases.

So now I'm forced to decide if I want to immediately roll into stocks from cash / bonds when the market has rallied so much, or wait for a dip over the next few weeks before moving back.  I won't sit out for more than a few weeks, but gosh darn it, it's been so frustrating to see the surge while I was forced into cash.

What do you all sense?  Would you sit and wait to see what happens for the next few weeks, or would you move it all in now (perhaps at the top? ugh)?

reeshau

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #1 on: January 17, 2020, 10:28:14 AM »
So basically I've missed out on around 2.5% - 3% of the stocks surging since then.

You are worried about having missed 2.5-3%?!?!  Get back in the market!

You got out, presumably to get out of a 401(k) with worse choices than you could have yourself.  Or maybe just to simplify your financial life.  Chalk up this cost to that purpose and move on.  It will only get harder to get back in, the longer you wait:  you will have more gains you have missed on, or this reason or that reason.  Your reason is a sunk cost fallacy:  you can't get it back; you can only get the gains that come in the future.  If you are physically sick trying to do it, then pledge to do 1/4 every week, or the next 4 months--something pre-planned, so you don't corner yourself into analysis paralysis again.

JGS1980

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #2 on: January 17, 2020, 01:14:38 PM »
Just get back in and stop thinking about it to much. 10 years from now this will be a tiny blip in your memory, or you'll forget about it entirely.

MilesTeg

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #3 on: January 17, 2020, 01:55:44 PM »
I had an unfortunate timing with rolling over a previous 401k at the end of the year a few weeks ago.  The only way the 401k admin would distribute was to sell into cash and send me a check.  It was about $200k, or about 1/4 of my pre-tax dollars (all of which are invested in the indexes / market).  So I had 25% of my pre-tax dollars sitting in cash when the market surged during this time.

Logistically, it took a while for the check to make it to me and with the holidays and travel I finally got it last week, right when the Iran conflict ended and the trade deal seemed settled.  So basically I've missed out on around 2.5% - 3% of the stocks surging since then.

For now I've deposited it into my current 401k but into bond index, waiting to see if the market can take a dip so I can roll it back into stocks.

I hate timing the market, and really hated the fact I was forced to sell out of stocks into cash just to do the rollover.  The exposure of sitting out of the market just for a few weeks highlights how risky it can be to move in / out of stocks and miss some significant increases.

So now I'm forced to decide if I want to immediately roll into stocks from cash / bonds when the market has rallied so much, or wait for a dip over the next few weeks before moving back.  I won't sit out for more than a few weeks, but gosh darn it, it's been so frustrating to see the surge while I was forced into cash.

What do you all sense?  Would you sit and wait to see what happens for the next few weeks, or would you move it all in now (perhaps at the top? ugh)?

I really hope that check was not made out to you. If it was, you're going to get screwed on taxes. Hopefully it was made out to whatever financial institution you putting the money with?

BrightFIRE

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #4 on: January 17, 2020, 02:07:27 PM »
I had an unfortunate timing with rolling over a previous 401k at the end of the year a few weeks ago.  The only way the 401k admin would distribute was to sell into cash and send me a check.  It was about $200k, or about 1/4 of my pre-tax dollars (all of which are invested in the indexes / market).  So I had 25% of my pre-tax dollars sitting in cash when the market surged during this time.

Logistically, it took a while for the check to make it to me and with the holidays and travel I finally got it last week, right when the Iran conflict ended and the trade deal seemed settled.  So basically I've missed out on around 2.5% - 3% of the stocks surging since then.

For now I've deposited it into my current 401k but into bond index, waiting to see if the market can take a dip so I can roll it back into stocks.

I hate timing the market, and really hated the fact I was forced to sell out of stocks into cash just to do the rollover.  The exposure of sitting out of the market just for a few weeks highlights how risky it can be to move in / out of stocks and miss some significant increases.

So now I'm forced to decide if I want to immediately roll into stocks from cash / bonds when the market has rallied so much, or wait for a dip over the next few weeks before moving back.  I won't sit out for more than a few weeks, but gosh darn it, it's been so frustrating to see the surge while I was forced into cash.

What do you all sense?  Would you sit and wait to see what happens for the next few weeks, or would you move it all in now (perhaps at the top? ugh)?

I sense that you suddenly turned into a market timer when handed a large check.

So you're complaining about being forced to cash out, but when given the chance to jump back in, you... bought bonds. Would you have sold if you weren't forced? Either cashing out was terrible, in which case, buy back in, or it was great, in which case, stay in cash. You're contradicting yourself.

Freedomin5

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #5 on: January 17, 2020, 02:40:31 PM »
Wait...let me get this straight. You are upset that you were forced to go to cash. So to try to compensate for holding so much cash, you are contemplating...holding onto your cash for an even longer period of time?

Get back in the market already! Or if you want to try to catch a dip, dollar cost average over the next couple weeks. (Statistically, people who dump in a lump sum all at once tend to do better than people who DCA, but some people may need to DCA for psychological reasons.)

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #6 on: January 17, 2020, 02:50:17 PM »

I really hope that check was not made out to you. If it was, you're going to get screwed on taxes. Hopefully it was made out to whatever financial institution you putting the money with?
No, definitely not.  I was hoping for a trustee to trustee transfer, but the best I got was a check made out to my financial institution for my 401k, mailed via plain old first class envelope to me (no tracking / overnight priority, etc).  I definitely would avoid any withholding and potential tax conversion issues!

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #7 on: January 17, 2020, 02:53:29 PM »

I sense that you suddenly turned into a market timer when handed a large check.

So you're complaining about being forced to cash out, but when given the chance to jump back in, you... bought bonds. Would you have sold if you weren't forced? Either cashing out was terrible, in which case, buy back in, or it was great, in which case, stay in cash. You're contradicting yourself.
I wanted to deposit it into my 401k and put it into money market ideally, for a few days / weeks before I reallocate it to stocks.

Markets seems to have been very volatile recently with the Iran situation, and I was hoping for another piece of bad news to depress the market for me to buy back in at a lower price.

My max time in bonds / cash will be no more than 30 days.  If things don't go down during that time, I'm all back into stocks no matter what.  I'm hoping for some piece of bad news that can spook the market for a few days so I can get back in without too high of a cost.

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #8 on: January 17, 2020, 02:54:31 PM »
Wait...let me get this straight. You are upset that you were forced to go to cash. So to try to compensate for holding so much cash, you are contemplating...holding onto your cash for an even longer period of time?

Get back in the market already! Or if you want to try to catch a dip, dollar cost average over the next couple weeks. (Statistically, people who dump in a lump sum all at once tend to do better than people who DCA, but some people may need to DCA for psychological reasons.)
I have max 30 days to move it all back in.  I'm going to see if anything happens during this long 3 day holiday weekend.  If nothing, I'll most likely move at least 40% back into stocks, and then dollar cost average it back in by the rest of the month.

I'd like to live Warren Buffet's motto for this - buy when others are selling, and sell when others are buying...lol

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #9 on: January 17, 2020, 02:56:18 PM »
Just get back in and stop thinking about it to much. 10 years from now this will be a tiny blip in your memory, or you'll forget about it entirely.
Appreciate this. Agreed.  Just was hoping to buy a bit lower than I had cashed out at.

Villanelle

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #10 on: January 17, 2020, 03:03:36 PM »
If you hadn't been forced to do this, all that money would be in the market.  Putting in there now, in a lump sum, simply gets you right back to where you were, and where you presumably were comfortable being.  if you wouldn't have changed things if not forced to cash out, then your answer is easy.  Investing now simply undoes what you didn't actually want to do in the first place.

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #11 on: January 17, 2020, 03:36:05 PM »
If you hadn't been forced to do this, all that money would be in the market.  Putting in there now, in a lump sum, simply gets you right back to where you were, and where you presumably were comfortable being.  if you wouldn't have changed things if not forced to cash out, then your answer is easy.  Investing now simply undoes what you didn't actually want to do in the first place.
True, except for a 3% cost for the timing of the cash transfer to my new 401k.   I'm essentially paying a 3% cost to move money from old 401k to new 401k, which is kind of expensive and depressing.  I'm hoping to reduce that cost by taking advantage of a small bump during volatility of some bad news, although it probably won't happen in the next few weeks.

JLee

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #12 on: January 17, 2020, 03:38:47 PM »
If you hadn't been forced to do this, all that money would be in the market.  Putting in there now, in a lump sum, simply gets you right back to where you were, and where you presumably were comfortable being.  if you wouldn't have changed things if not forced to cash out, then your answer is easy.  Investing now simply undoes what you didn't actually want to do in the first place.
True, except for a 3% cost for the timing of the cash transfer to my new 401k.   I'm essentially paying a 3% cost to move money from old 401k to new 401k, which is kind of expensive and depressing.  I'm hoping to reduce that cost by taking advantage of a small bump during volatility of some bad news, although it probably won't happen in the next few weeks.

What if the market is up another 3% over the next 30 days?

PDXTabs

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #13 on: January 17, 2020, 03:40:52 PM »
I'm essentially paying a 3% cost to move money from old 401k to new 401k, which is kind of expensive and depressing.

It sure is. I paid almost as much to rebalance into my Fidelity BrokerageLink one time. Suck it up and move on before you miss any more dividends.

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #14 on: January 17, 2020, 04:54:35 PM »

What if the market is up another 3% over the next 30 days?
Then I would cry.

Ok, you guys have convinced me. I'm going to move 50% back into the market ASAP, and then the rest over the next 2 weeks. 

Seems like the world could get hit by a dinosaur ending asteroid and the market wouldn't give a crap.  It's insane.

Villanelle

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #15 on: January 17, 2020, 05:02:19 PM »
If you hadn't been forced to do this, all that money would be in the market.  Putting in there now, in a lump sum, simply gets you right back to where you were, and where you presumably were comfortable being.  if you wouldn't have changed things if not forced to cash out, then your answer is easy.  Investing now simply undoes what you didn't actually want to do in the first place.
True, except for a 3% cost for the timing of the cash transfer to my new 401k.   I'm essentially paying a 3% cost to move money from old 401k to new 401k, which is kind of expensive and depressing.  I'm hoping to reduce that cost by taking advantage of a small bump during volatility of some bad news, although it probably won't happen in the next few weeks.

Sure, but that's done. I was talking about the question of when to buy back in.  That's just about restoring you back to where you were, and where you were happy being. 

Rob_bob

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #16 on: January 17, 2020, 05:41:54 PM »
Let us know when you invest the money...we all want to buy the dip you cause :-D

Valhalla

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #17 on: January 17, 2020, 05:51:44 PM »
Let us know when you invest the money...we all want to buy the dip you cause :-D
LOL!  I moved half it back effective Tuesday, so predict a 20% drop.  Then I move rest of it in another week, so predict another 20% drop!! 

UnleashHell

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #18 on: January 18, 2020, 05:02:06 AM »
two years ago (almost exactly) I finally got my arse in gear and moved my holdings from one account to my new shiny 401k. Especially as it invests in Vanguard funds. Right as I hit the go button and saw the old funds sold the market went up. I missed that run up in January 2018 as it took 2 weeks to get the check to me and then send it on and get it reinvested. The money went in right at the top.
I missed 100 points on the run up and got all of the 200 point drop. I reckon that if I'd delayed my transfer by 2 weeks then i'd have been 25k better off.


you know what though. I just had to go back and check to see what the figures were. The money is in the market and has been for the last 2 years. I'm now at 500k net worth and with a few things happening this year I could be looking FIRE in the face. What happened 2 years ago - even with the drop - really didn't matter in the long run. Time in the market wins.

DaMa

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #19 on: January 18, 2020, 07:47:33 AM »
DH's 401k was with Fidelity.  When I went to roll it to my Fidelity IRA, they said they had to mail me a check.  I said oh hell no (more because of not trusting USPS than for being out of the market).  I had to talk to several people, but they did eventually do it in-house.

If they had insisted, I'd have sent the check to Vanguard instead.

Mighty-Dollar

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #20 on: January 18, 2020, 09:29:03 PM »
Quote
What do you all sense?  Would you sit and wait to see what happens for the next few weeks, or would you move it all in now (perhaps at the top? ugh)?
Nobody knows. And if you're properly diversified (into bonds too) then you aren't concerned about what the stock market does in the FIRST PLACE.

MustacheAndaHalf

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #21 on: January 19, 2020, 04:43:28 AM »
Let us know when you invest the money...we all want to buy the dip you cause :-D
LOL!  I moved half it back effective Tuesday, so predict a 20% drop.  Then I move rest of it in another week, so predict another 20% drop!!
Cute, but two points:
investing right after a -20% drop is almost certainly a good investment.  Everyone else bought before that, and you got a -20% discount.  So half your money would be quite well positioned, historically speaking.

But also, do you know how rarely the market drops -36%?  (80% x 80% = 64%, a drop of -36%).  Here's the US Total Stock Market performance from 2006 - 2010, the years surrounding the 2008 world crisis (biggest event of our lifetimes):
https://www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults
+15.5% .. +5.5% .. -37% .. +28.7% .. +17.1%

See that middle drop?  It's almost identical to the -36% you joked about.  And that was considered a once in a lifetime event (if not more rare).  If you multiply those 5 years together, you get a lousy +3% return.  Cash returned +2%.  So even knowing the world's worst financial crisis will hit in the next 5 years... you were better off owning stocks than cash.  What you jokingly feared actually described the worst stock market crash in the last ~80 years, and yet the recovery was so fast that you came out ahead in the 5 years centered on that crash.
« Last Edit: January 19, 2020, 04:45:20 AM by MustacheAndaHalf »

ChickenStash

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #22 on: January 20, 2020, 07:42:18 AM »
I had similar problems recently rolling a 401k from a past job into my tIRA. The sending institution took weeks to cash out and cut the check, I was out of the country when it finally arrived, then between the holidays and Vanguard taking an absurd amount of time to process it I lost 2ish months of having the money invested.

What did I do when the money finally made it? I immediately  invested it according to my desired allocation split and carried on with life.

DoNorth

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #23 on: January 20, 2020, 11:03:39 AM »
I'd wait and see what happens.  Nothing wrong with a little profit taking.  It is almost inevitable that stocks will be lower by 10, 15, or 20% lower than they are today and you can DCA back in based on your asset allocation. 

frugalnacho

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Re: forced to cash out of market last month, when to move back into stocks?
« Reply #24 on: January 20, 2020, 11:10:02 AM »
Just put it in according to your AA and stop worrying.  I had the same worries every time I've had to rollover a 401k into my IRA, but I comfort myself by telling myself I'm not market timing - I'm moving my funds from my old 401k to my IRA as fast as possible and it's out of my hands.  I'm not going to try to time the market, I'm just going to withdraw and deposit the funds as fast as I can, and anything that happens to the market in the meantime is what it is.  If I lose out on some growth, oh well, it was out of my hands.  If I miss out on some down days and get back in higher than I started, that's cool but it's completely coincidental.