Author Topic: Withdrawal strategy  (Read 1332 times)

MoneyGoatee

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Withdrawal strategy
« on: June 16, 2019, 09:40:00 AM »
I imagine many of you have investment savings composed of various funds for diversity, and some funds perform better than others.  When you withdraw from them, do you withdraw from well-performed funds instead of under-performed ones?  Since performances fluctuate all the time, do you constantly evaluate what funds to choose to withdraw from, and what percentages of them to withdraw based on their performances?  E.g. Withdraw 5% from Fund A that has performed well, and 3% from Fund B that hasn't.  For instance, if your stock funds returned 8% the past year, and your bond funds yielded 0% or less, then you naturally don't want to withdraw from the bonds.
« Last Edit: June 16, 2019, 10:06:48 AM by MoneyGoatee »

Threshkin

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Re: Withdrawal strategy
« Reply #1 on: June 16, 2019, 12:28:04 PM »
I imagine many of you have investment savings composed of various funds for diversity, and some funds perform better than others.  When you withdraw from them, do you withdraw from well-performed funds instead of under-performed ones?  Since performances fluctuate all the time, do you constantly evaluate what funds to choose to withdraw from, and what percentages of them to withdraw based on their performances?  E.g. Withdraw 5% from Fund A that has performed well, and 3% from Fund B that hasn't.  For instance, if your stock funds returned 8% the past year, and your bond funds yielded 0% or less, then you naturally don't want to withdraw from the bonds.

I tend to follow the Art of War approach applied to finance and sell my lowest performing investments.  I have never been a fan of handicapping my portfolio by selling my best preforming assets.

That said, I have a very aggressive risk tolerance and maintain a large liquid reserve to ride out short to medium term market fluctuations.  I evaluate investment performance on a 5-10 year ROI basis.  I am very slow to make changes to my portfolio and tend to make large changes when I do. 

Your strategy may vary if you have a different risk tolerance or approach to portfolio re-balancing.

Telecaster

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Re: Withdrawal strategy
« Reply #2 on: June 16, 2019, 02:32:35 PM »
I imagine many of you have investment savings composed of various funds for diversity, and some funds perform better than others.  When you withdraw from them, do you withdraw from well-performed funds instead of under-performed ones?  Since performances fluctuate all the time, do you constantly evaluate what funds to choose to withdraw from, and what percentages of them to withdraw based on their performances?  E.g. Withdraw 5% from Fund A that has performed well, and 3% from Fund B that hasn't.  For instance, if your stock funds returned 8% the past year, and your bond funds yielded 0% or less, then you naturally don't want to withdraw from the bonds.

If you are maintaining balanced portfolio, say 80/20% stocks/bonds or whatever, then the decision is automatic.   If stocks do poorly and bonds do great, for example, then maybe at the end of the year your ratio 78/22% so you would naturally sell more bonds than stocks to bring the portfolio into balance.   

Taking that thought one step further it is a mistake to sell based on individual fund performance.   If your preferred stock asset allocation is say 70% US large cap, 20% US mid cap  and 10% international, you should sell the appropriate amount to stay within your preferred stock allocation.