Alternatives to Reverse Dollar Cost Averaging

[Unionville]

I've read several articles that say when you want to cash out some funds in retirement you shouldn't do reverse dollar cost averaging, nor should you time the market (with stats to back it up).  But oddly, they didn't offer recommendations what a person should do.  There are not a lot of choices left that I can think of. Any opinions?

[reeshau]

If you reverse dollar cost average--that is, if you are a fixed dollar amount at a time--you end up selling fewer shares when the price is high, and more when the price is low.  That is not optimal.  You do want to set a selling period, at whatever pace you are comfortable with: annually, semi-annually, quarterly monthly.  But if you set a fixed number of shares to sell each time, you will then do a better job of getting the average price for your sales.

Of course, this can be tricky to manage over the year.  You could sell according to plan, and there could be a big market drop.  If you keep to plan, you may not get enough cash to meet your plan.  If the market goes up, you may get a lot of cash, but complicate your tax / ACA planning.  If you have a cash cushion beyond your emergency fund, you can at least mitigate the first scenario.  The second scenario doesn't really need mitigation--just sell less that time, and celebrate that you are ahead of your plan.

I have a barbell portfolio: 100% stoxks, with more than 1 year of cash.  I also invest in individual stocks, so I generally sell when the stock performance says so, and end up managing the other way: how much do I reinvest from cash into stocks?  But it's a way to think of it.

[Mr. Green]

If the math says DCA results in the best outcome on inflows, it would be the exact same for outflows. Everything else is shades of market timing. Can you link the info you're finding that makes a different argument?

[scottish]

Google "prime harvesting".

The idea is that you sell your bonds.     If you run out of bonds, then you sell your stocks.   

If your stocks appreciate more than x% of your asset allocation target, you sell them and buy more bonds to rebalance.

The principle is to avoid selling your stocks when they're down.

[bacchi]

Google "prime harvesting".

The idea is that you sell your bonds.     If you run out of bonds, then you sell your stocks.   

If your stocks appreciate more than x% of your asset allocation target, you sell them and buy more bonds to rebalance.

The principle is to avoid selling your stocks when they're down.

Prime harvesting is what I follow. I'm still selling bonds bought at the end of 2021 (because my stock allocation returned >20% that year).

[Fru-Gal]

I need to force myself to do reverse DCA. Regretting not selling some stock in January, of course. I just went into my Robinhood account a few days ago and sold some winners. Not that that amounts to a lot of money, but it meant I was harvesting gains not losses. Haven’t sold any other stock so far this year.

[MustacheAndaHalf]

(1) turn off reinvest.
Let ETF / mutual fund dividends pay out in cash.  Let bond funds deposit interest in your account, in cash.  Withdraw cash for expenses.

(2) rebalance by selling.
A traditional 60/40 portfolio might grow to 65% stocks and 35% bonds (stocks generally outperform bonds).  You might sell stocks and withdraw cash, bringing your portfolio down to 63% stocks / 37% bonds.