Author Topic: I did the unthinkable and sold near the low, what should I do now???  (Read 3753 times)

Sim Simma

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I know, I did exactly what this blog and MMM is against and tried to time the market.  I sold about 60% of my VTSAX and S&P 500 (401K) funds near the low a couple weeks ago because I bought into the market is going into a depression and things are going to get worse.  Of course things have not got worse over the last two weeks, in fact, since I sold the market has gone up roughly 14% (as of 4/8/20).  I am not sure if I should bite the bullet and buy back in now, or buy back in increments over the next few months.  I really would like to break even and really prefer to buy all the way back when (if) the market hits the level I sold at.  I started investing in 2010, so I've had a great run the last decade.  This is the most volatility I've seen since starting investing, and I've learned my lesson to never try to time the market again.  I know its hard to predict the market but I was looking for some advice on whether I should keep what I sold aside and hope for another drop? 

DaveSch

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #1 on: April 08, 2020, 04:18:48 PM »
It could go back down again. I don't think anyone knows for sure.
The first thing is you admitted you made a goof, at least as it shows for now. Then again, you may have been the smartest one in the room if the market tumbles again.

How old are you? If you are young, you can dump it in again. If you are old, better step back a bit and have a closer look.

You need a better plan or even a plan. I keep a personal blog, which only I see. I chat with myself thinking of what might happen, and what would I do if this or that happens.

I just turned 70. My asset allocation was 62% stocks. Most of my money is in taxable accounts, so I slowly have been trimming for a few years keeping taxes in mind.

In early to mid March, I found I could do a little tax loss selling. Since I had a wonderful 2019 in the markets, I didn't mind these loses. But I'm not going to put that back in. I sold about 3% of my portfolio and only in taxable where I could show the loss.

But you need to do what makes you feel ok.

BicycleB

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #2 on: April 08, 2020, 04:25:51 PM »
It's very hard to know without predicting the market.

I mean, the right thing is probably to have a planned allocation that suits your personal stage of life. Are you near retirement or just starting your accumulation? Earning money steadily, or uncertain about job security? Saving to buy a house, or comfortably enjoying large monthly savings with no purchases planned for 5 years? 25 years old or 50?

If just starting and all the other answers are "Yes", an example could be 70% stock 30% bonds. Then you should deploy the cash you have immediately so that your investments fulfill the plan.

TheHardenedInvestor

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #3 on: April 08, 2020, 04:28:34 PM »
So your question now, after just learning about the perils of timing the market, is asking if you should try to time the market again? Buy and HOLD period. Consider this your first lesson.

bthewalls

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #4 on: April 08, 2020, 04:44:43 PM »
All in and leave for 10 years

Sim Simma

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #5 on: April 08, 2020, 05:05:30 PM »
Thanks for the feedback.  I'm 37 and I'm roughly half way to my goal of retirement in terms of savings.  I'd like to retire in 8 years if I can reach my goal (fixed chunk of money to live off).  So I understand long term plan of just buying and holding and continuing to contribute.  I just hate losing 14% on what I sold, but suppose that is the lesson learned.  I'm leaning toward buying back in the next red day, which given the run over the last few days could be tomorrow or Friday or not .....  There is still a part of me that believes I'll buy in now only for it to dip again in another week or so.

Sim Simma

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #6 on: April 08, 2020, 05:13:26 PM »
I should add, after that last sale , I'm about 60% cash 20% in VTSAX or S&P 500, 10% in real estate (fundrise) , and about 10% bonds.  My future plan is to be 75% VTSAX/S&P , 10% real estate, 10% bonds, 5% cash.  I just need to figure out the timing of buying back in. 

Christof

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #7 on: April 08, 2020, 05:16:20 PM »
I'm leaning toward buying back in the next red day, which given the run over the last few days could be tomorrow or Friday or not .....  There is still a part of me that believes I'll buy in now only for it to dip again in another week or so.

You are still trying to time the market and you still look at short term results. Honestly, Iím not sure if investing into the stock market is the right thing for you. Maybe you should first review how you feel about investing, in good times and in bad times.

Freedomin5

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #8 on: April 08, 2020, 05:40:11 PM »
You say in your original post that youíve learned your lesson to never try to time the market again. Yet your question is exactly ďHow can I time the market so that I make back the money I lost?Ē

If youíve really learned your lesson like you say you have, you should just put the money back into the market today, and then leave it alone! In 20 years, you will likely have made back the money you lost, and then some.

nsmall

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #9 on: April 08, 2020, 05:45:32 PM »
Let's say you buy back in tomorrow and it goes down another 20% next month, will you sell again?

You can dollar cost average your way back in.

I think you need to set up an asset allocation that's more conservative.

Good luck and thanks for being honest.  We've all lost money and none of us can tell what the future holds.

YoungInvestor

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #10 on: April 08, 2020, 06:36:34 PM »
I think this event clearly shows that your risk tolerance is not what you thought it was.

Find an allocation that is suitable for you, buy in, and HOLD.

jeroly

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #11 on: April 08, 2020, 06:47:00 PM »
You say in your original post that youíve learned your lesson to never try to time the market again. Yet your question is exactly ďHow can I time the market so that I make back the money I lost?Ē
+1
Quote
If youíve really learned your lesson like you say you have, you should just put the money back into the market today, and then leave it alone! In 20 years, you will likely have made back the money you lost, and then some.
I don't think this is the best plan given all your anxiety about making the wrong decision on timing the repurchase.  Some dollar cost averaging strategy over, say, the next six months would probably be better for your apparent risk tolerance.

Let's say you buy back in tomorrow and it goes down another 20% next month, will you sell again?

You can dollar cost average your way back in.

I think you need to set up an asset allocation that's more conservative.

Good luck and thanks for being honest.  We've all lost money and none of us can tell what the future holds.
+1 on this too.
You clearly were in an asset allocation that did not match your actual risk tolerance. It's easy to think that you have a high risk tolerance when things are always going up, as they pretty much have since 2010.  It's these spasmotic drops in the market that show what your real risk tolerance is... as Mike Tyson said, "Everybody has a plan until they get punched in the face."

My recommendation is to come up with an asset allocation that truly matches your risk tolerance (there are various methodologies to estimate this out there), write down an investment policy statement, and stick to it.  This way you will get the emotion out of your investment decisions (likely leading to better investment outcomes) AND sleep better at night.

Steeze

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #12 on: April 08, 2020, 07:50:22 PM »
You made a mistake and realized your error - forgive yourself, dust off your boots, and get back to work. You still have 8 solid years of saving ahead of you and this lesson, while expensive, can be made up for by a little extra earning and a little extra saving over time. Donít beat yourself up, we all make mistakes.

I think step 1 is to have an allocation you can live with, that makes sense to you, that you arenít going to make adjustments to for the next 6-8 years no matter what. Even if the market tanks another 50%. We can still be heading into a 80% down depression just as fast as we could be back at new highs. Wall Street is celebrating the buying opportunity while Main Street is preparing for the Great Depression 2. Who knows who will be right or when they will be right.

I have a rule - only sell stock when my  bank account is empty, I have no cash, and I need to buy groceries. Otherwise I am in buy-only mode. The only time I would sell is to rebalance to my target allocation.

Now - about getting back in. I agree with others that you are asking about timing your repurchase after making the mistake of trying to time an exit/entry to the market. Only after you decide you will not sell again for at least 8 years, and what your allocation will look like during that period should you get back in. How you do it should be something that regardless of the results you will not continue to judge yourself for.

You could go 100% back in tomorrow and the market falls off a cliff and you have pie on your face twice. You could dollar cost average in and the market continues marching upward and you hurt your portfolio recovery even more. Maybe you split the difference and go 50% at once and then DCA the other half over a few months. You have to decide what you can live with if things donít go the way you think they will.

The problem with DCA back in is you will be tempted to try to time every purchase waiting for the best day or hour or minute to click the buy button. I would only recommend DCA if you can automate it. Otherwise just lump it back in, the stress of timing a purchase every week is too much.

Your going to be alright either way. Best of luck.

BicycleB

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #13 on: April 08, 2020, 08:28:21 PM »
I should add, after that last sale , I'm about 60% cash 20% in VTSAX or S&P 500, 10% in real estate (fundrise) , and about 10% bonds.  My future plan is to be 75% VTSAX/S&P , 10% real estate, 10% bonds, 5% cash.  I just need to figure out the timing of buying back in.

Markets are open tomorrow. Just buy 55% S&P!


vand

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #14 on: April 09, 2020, 06:20:11 AM »
I don't think you should go straight back in, because your asset allocation was never correct in the first place.  Just saying that you've learnt your lesson isn't really going to cut it. Why did you panic? Because your stash was too aggressively positioned.

There is absolutely no shame at all in admitting to yourself that a 100% stock portfolio is too aggressive. I personally think 80/20 is still way too aggressive for most people.

So I think you should re-examine your asset allocation, decide how much risk you are comfortable holding, and only then jump back in. It's painful, but anything can happen in the short term, and if you just jump back in and the market halves from its current level by this time next year you are just going to get scared out of it again because you haven't addressed the underlying fundamental problem.

14% loss is a blow, but it's not the end of the world, and I assume that it can be recovered with, say a year's additional saving. IMO that is a price that is worth paying for finding out a lot about yourself as an investor.

vand

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #15 on: April 09, 2020, 06:39:58 AM »
I don't usually like to wheel out Warren Buffett's advice because it seems every passive investor seems to glibly quote the great man while doing their best to ignore his advice, but in his 2018 letter to his shareholders he wrote:

"Be prepared for occassional losses of 50% or greater... which are not just possible, but inevitable."


Correspondingly, only put in the amount of your wealth into stocks that are you prepared to ride on that rollercoaster when that eventuality comes to pass. Anything else is foolish and violates another Buffett principle - margin of safety. If the market has fallen 50% and you still sleeping like baby, then great, shift some more of you non-equity wealth back into stocks.

We didn't come close to a 50% loss, and a lot of people totally freaked out.

talltexan

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #16 on: April 09, 2020, 08:52:33 AM »
I do think learning that you are someone who needs less risk (and sacrifices return in order to get it) is incredibly valuable. The thing about investing is that you get better at it over time.

85% in risky assets many not be right for you. Try to double your VTSAX position to 40% right away. Even the most cautious investor should be there. (10% REIT in addition to that should be fine)

magnet18

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #17 on: April 09, 2020, 09:43:38 AM »
The correct answer is, whatever gets you back in instead of sitting

If that's dumping it in now and vowing to never sell again, do it

If you don't have the stones for that, but you can do 20% per week for the next 5 weeks, then do that, and start now

In parallel, you need to take a deep stare into the depths of your soul, and determine if your asset allocation aligns with your volatility tolerance

vand

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #18 on: April 10, 2020, 03:36:01 AM »
I know, I did exactly what this blog and MMM is against and tried to time the market.  I sold about 60% of my VTSAX and S&P 500 (401K) funds near the low a couple weeks ago because I bought into the market is going into a depression and things are going to get worse.  Of course things have not got worse over the last two weeks, in fact, since I sold the market has gone up roughly 14% (as of 4/8/20).  I am not sure if I should bite the bullet and buy back in now, or buy back in increments over the next few months.  I really would like to break even and really prefer to buy all the way back when (if) the market hits the level I sold at.  I started investing in 2010, so I've had a great run the last decade.  This is the most volatility I've seen since starting investing, and I've learned my lesson to never try to time the market again.  I know its hard to predict the market but I was looking for some advice on whether I should keep what I sold aside and hope for another drop?

Classic Anchoring.

The price you liquidated at is irrelevant, as important as it may be to your own circumstances. The only thing that matters is where the market is now.

PJC74

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #19 on: April 10, 2020, 06:28:51 AM »
I would dump it back in Monday to your desired AA and leave it alone, albeit a re-balance every 6 -12 months.

IMHO, I see us going higher for a # of reasons; cases slowing, fed launching bazookas, and overall sentiment of the folks I talk to is they want back to normal ASAP.

You think you feel bad now at 14%. What if we go back to new highs and you're still sitting on cash?

thd7t

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #20 on: April 10, 2020, 06:34:16 AM »
Did you sell when you saw how much your investments had dropped or how much the market had dropped? 

If it was the first, you need to adjust your Asset Allocation to where you are comfortable with how much it may drop under various conditions. 

If it was the second, you need to learn to tune out.

There are different lessons depending on what made you feel like you should sell.

MustacheAndaHalf

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #21 on: April 10, 2020, 07:03:47 AM »
I sold about 60% of my VTSAX and S&P 500 (401K) funds near the low a couple weeks ago ... I really would like to break even and really prefer to buy all the way back when (if) the market hits the level I sold at.
Classic Anchoring.
The price you liquidated at is irrelevant, as important as it may be to your own circumstances. The only thing that matters is where the market is now.
Sim Simma - I strongly agree with vand, and hope you spend a minute to understand the Anchoring bias.

Try doing a reset on your thinking.  If you woke up to markets being -15% down YTD and had 60% in cash, what should you do?

Missy B

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #22 on: April 12, 2020, 06:26:51 PM »
I'm leaning toward buying back in the next red day, which given the run over the last few days could be tomorrow or Friday or not .....  There is still a part of me that believes I'll buy in now only for it to dip again in another week or so.

You are still trying to time the market and you still look at short term results. Honestly, Iím not sure if investing into the stock market is the right thing for you. Maybe you should first review how you feel about investing, in good times and in bad times.
Sim, whatever you do I hope it works out for you. Looking at your posts though, I do not think you are emotionally ready to be well in this market. I doubt you've 'learned your lesson'. The lesson to be learned here is what your risk tolerance truly is, what your personal certainty about markets is. It isn't really 'don't sell when the market is crashing.'
I've made money and lost money in the markets. I also have a flare of 'aaagh! Fuck! It's going to zero!' when the market has really bad days, like the day you sold. But I don't sell. I've been through the cycle enough times now. It's not that I assume that everything will go back up to what it was before or that something new and shitty can't happen. But I can sit and look at it logically. Ask myself is the behaviour of the market actually rational. Do the sellers of those stocks know something I don't, or are they loss-averse, relatively short-term investors or momentum traders? Are those sellers selling based on fundamentals, or on emotion and following the crowd?
Unless you can work your emotional stuff through, you are at risk of doing the same thing again, whenever the market drops below whatever your personal 'pain point' is.

Villanelle

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #23 on: April 12, 2020, 06:38:11 PM »
Your original post seems to acknowledge that trying to time the market is wrong.  Yet you are creating a strategy that once again relies on market timing.  The market could go up 20%+ before a "red day" that is only down 5%.   (As one example.)

In your shoes, I'd buy in first thing Monday, and use whatever loss I had to remind myself of why I shouldn't ever again sell in a panic over a low. Or ever try to time the market again. 

ChpBstrd

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #24 on: April 12, 2020, 08:05:54 PM »
I don't necessarily think the reasons you sold are now off the table. There could still be a depression, and the disease is hardly eradicated.

Consider spending a fraction of your assets buying very long dated call options instead of going all-in and all-out with the news narrative of the week. These will be a 100% loss (of a fraction of your assets) if markets go even slightly down, but will pay off handsomely if markets go up. Thus you have limited downside and unlimited upside. I think that sort of risk profile would get you off the news roller coaster and give you the confidence to let time take its course.

Car Jack

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #25 on: April 13, 2020, 09:07:53 AM »
This response is going to be hard to read for you.

You are one of those people who should find a financial advisor and pay their 1% AUM and let them handle your money.  Selling at the bottom is the absolutely worst thing you can do in investing and even paying a FA his 1% and even paying outrageously high ERs is better than what you've done.  I'm sorry, but you should not handle your money yourself.  Feel free to look at your quarterly statements, but you shouldn't even have the password to your account.

I saw this happen with my in-laws who acted exactly the same way during the 08 downturn.  My MIL saw here work's pension rolled into a 401k.  She met with their appointed advisor who put her into "who knows what?".  My FIL became a big market fanatic and watched the market constantly, seeing those initial balances skyrocket in 07.  Then the bottom fell out and they panicked.  They sold at the low and went completely into annuities.  While this isn't something most people should do, for them that isn't a bad idea.  Single Premium Immediate Annuities are sold like a commodity and don't have much fat in them.  You're too young for one of these.
« Last Edit: April 13, 2020, 09:09:40 AM by Car Jack »

magnet18

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #26 on: April 13, 2020, 12:58:12 PM »
OP, have you gotten back in yet? (Or a plan)

utaca

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #27 on: April 13, 2020, 02:11:31 PM »
You are one of those people who should find a financial advisor and pay their 1% AUM and let them handle your money.  Selling at the bottom is the absolutely worst thing you can do in investing and even paying a FA his 1% and even paying outrageously high ERs is better than what you've done.  I'm sorry, but you should not handle your money yourself.  Feel free to look at your quarterly statements, but you shouldn't even have the password to your account.

You make a good point but a financial advisor can't stop the client from selling at the bottom (although they will of course try to walk the client off the bridge). Paying a financial advisor on an hourly basis to discuss long term planning and, as others have mentioned, asset allocation might be a good optino for OP.

Body Surfer

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #28 on: April 13, 2020, 03:25:24 PM »
The market has focused or refocused on earnings today. We may see more down days than up for awhile. Will be a good time to get back in if the next few weeks focus on earnings....but who knows?????

talltexan

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #29 on: April 15, 2020, 02:14:03 PM »
I don't necessarily think the reasons you sold are now off the table. There could still be a depression, and the disease is hardly eradicated.

Consider spending a fraction of your assets buying very long dated call options instead of going all-in and all-out with the news narrative of the week. These will be a 100% loss (of a fraction of your assets) if markets go even slightly down, but will pay off handsomely if markets go up. Thus you have limited downside and unlimited upside. I think that sort of risk profile would get you off the news roller coaster and give you the confidence to let time take its course.

OP, this is a very sophisticated strategy called a barbell. If you'd like many of the benefits without having to deal with options, I'd suggest a portfolio called the "Larry" based on work by Larry Swedroe. 80% bonds, 20% in a small cap value index, perhaps $IJS or $SLYV

grettman

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #30 on: April 16, 2020, 04:44:01 PM »
I'll call it:  The OP is a troll.  This was his first post.

Sim Simma

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #31 on: April 16, 2020, 11:14:35 PM »
Sorry for the delay. I wanted to buy back in before posting again. I was trying to buy back in earlier in the week but I couldnít buy back into the funds I wanted in my 401 k accounts because I had to wait 30 days from when I sold.  I mostly bought back VTSAX earlier today. Iím still holding about 20% in money market/bonds but Iíll plan to buy back more VTSAX in the next month or so. The feedback was about what I expected with several people (in true Mustachian fashion) saying donít ever try to time the market and keep contributing. There were surprisingly a lot of others  Iíve heard in here and in other threads who talk of rebalancing quite often.  In some cases I feel rebalancing is just another way of saying , timing the market.  Iíve spent a lot of time in the last month reading the stocks news with ďanalyst predictionsĒ. Man is that stuff toxic! I feel convinced more than ever to just buy and hold and keep contributing.

jeroly

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #32 on: April 17, 2020, 07:47:06 AM »
Sorry for the delay. I wanted to buy back in before posting again. I was trying to buy back in earlier in the week but I couldnít buy back into the funds I wanted in my 401 k accounts because I had to wait 30 days from when I sold.  I mostly bought back VTSAX earlier today. Iím still holding about 20% in money market/bonds but Iíll plan to buy back more VTSAX in the next month or so. The feedback was about what I expected with several people (in true Mustachian fashion) saying donít ever try to time the market and keep contributing. There were surprisingly a lot of others  Iíve heard in here and in other threads who talk of rebalancing quite often.  In some cases I feel rebalancing is just another way of saying , timing the market.  Iíve spent a lot of time in the last month reading the stocks news with ďanalyst predictionsĒ. Man is that stuff toxic! I feel convinced more than ever to just buy and hold and keep contributing.
If you ever need to buy back into a fund but don't want to have to wait 30 days, you can also buy the ETF version which has no such limitations.  VTI is the ETF version of VTSAX and has similar expense ratios (IIRC even slightly lower) with the same holdings.

As far as rebalancing being the same as timing the market, it really depends on how you do it.  If you say "I'm going to wait to put another 20k into the market until there's a 5% down day" or "now that we're down 20% I'm moving money from my bond fund" well, then yes you are market timing.  If you have an investment policy statement that defines the criteria under which you will rebalance (e.g. "I target an 80/20 allocation with 5% bands - when the stock portion is under 75% or over 85% I will rebalance" or "I will rebalance back to 50/50 every six months in January and July" then no, your rebalancing is not market timing... although it may well have the effect a market timer seeks, namely buying low and selling high.

MustacheAndaHalf

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #33 on: April 17, 2020, 07:48:24 AM »
Rebalancing means bringing a portfolio back to it's original asset allocation.  You could decide on market conditions or on a schedule that ignores market conditions.  Most often, it's not market timing.

Freedomin5

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #34 on: April 17, 2020, 03:45:41 PM »
Rebalancing means bringing a portfolio back to it's original asset allocation.  You could decide on market conditions or on a schedule that ignores market conditions.  Most often, it's not market timing.

Yes, I rebalance every quarter to go back to my original asset allocation regardless of how the well/poorly the market is doing at that time. I donít ever skip a rebalancing date because the market has crashed or the prices are too high. Hence, not market timing.

LightTripper

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Re: I did the unthinkable and sold near the low, what should I do now???
« Reply #35 on: April 17, 2020, 04:00:46 PM »
I think at this point what's done is done.  Start from the asset allocation you have now and decide where you want to be, medium to long term.  Then

FWIW I'm also too much in cash.  In my case that's from holding off buying, rather than selling, but although it's less "in my face" I've probably burned more value by being out of the market too long than you have by selling at the wrong time!  We all make mistakes.  The best thing we can do is learn from them.

Personally I've chosen a 75% equity allocation as my medium term goal.  I'm currently at 50%.  I am aiming to go in fairly heavily over the next 6 months, getting to around 65% by regular purchases (I've got diary entries in and I'm determined to avoid the news and the level of the market and just buy on the appointed days).  The rest is currently tied up in term savings products, so will get fed in as it matures: mainly in the next 2 years, but out to 5.

I have no idea if that's a good strategy or not.  I think it's a pretty cautious one, but I'm close to retirement so that suits me.  But what I can say is it made me feel a LOT better to have a plan that didn't depend on what the market does or what the news is over the next 6 months.  It is still a kind of market timing, as I was previously holding off buying as things felt overinflated (I had been dripping in over the last few years but half heartedly).  But having made the decision to start to move more decisively into equities, from now on it's not about timing, it's just slow and steady to let me sleep at night.