Just cleaned my portfolio out and sold around 90% of my ETF’s and hand picked shares. Still do have some, but this is just to keep the toe in the water. Bought some ZGLD (Gold ETF) and am currently 30% invested and 70% in cash (and growing). Same with VIAC > transfered into cash.
Do understand the logic to buy and hold and do 100% agree. But there were some special times like in the 1930’ or 1970’ were a heavy recession took place and the recovery took several years. With my age cose to 50y I don’t have 30y to wait and recover, so this is my plan B for now.
So I will sit out this year and watch the market closely. Maybe I will FOMO 10-20% during this year, but I don’t see the current heat market sustainable at all. It feels like the Bitcoin run in 2017 or the Dotcom run in 2000 - in both times the market felt invincible similar to now. And sometime it is also a good stratety trying not to lose money and fight the fear of missing out on something.
I can relate to your thinking – I’m also close to 50y, but leaving it from the other end, I’m guessing – but when I get into the “the world is ending” train of thought (which, if I understand correctly, isn’t exactly your thinking yet, but you’re maybe moving towards it, anticipating low valuation and bad returns for equities for years to come?), I remind myself that – long view – cash is just belief into that respective country’s ability to maintain purchase power in that currency.
While I don’t think immediate inflation is approaching us investors, I do believe that “harder” assets such as having shares in companies purchased as “reasonable” prices that have sustainable cash flows and tangible assets attributable to their shares might be more resilient to devaluation than mere cash in the currency you’re holding.
As for you sitting out the rest of 2020, I can totally see this position from a defensive point of view. An opportunistic – and possibly more risky – point of view might be to pick on opportunities that arise once in a decade or two: buy the equities that always seemed too expensive, whether it’s ETFs or – upon careful consideration – individual stocks.
As for what I would label as market timing: who knows? I also believe that currently investors / speculators are too optimistic. But who am I to judge? Same for when markets hit new lows … only Mr. Market knows.
@OogieBoogie I wonder if there are many people like you. Who sell, because they believe we’re in for a crash. It’s interesting to think what the consequences may be. Many people dropping their investments to preserve their purchasing power. Central banks stepping in, launching money printers, buying out whatever the panicking crowd is selling.
What good asset type is there to preserve wealth without high short-term volatility swings? I feel cash is an easy bet, but it guarantees steady loss. Gold and other precious metals have high volatility and can take decades to come back to the same value. Bonds? Maybe. I still haven’t figured out fully how bond ETFs works.
I don’t think “the world is ending” at all! I just truly think that we are in the end bubble phase of a cycle. Can I be wrong? Of course… Can this bull market run the next 20 years? Maybe yes. But the signals are loud and clear. Zero interest rates, heavy pumping in the market by Central Banks around the globe, shares go up - no matter what you buy. And important is that the banks&traders have record opening of private trading/investment accounts. To my surprise many of my personal friends are fresh “all-in” and most of my financial contacts in business are quitely most out.
There is a saying in German - “Wenn die Putzfrau Aktien kauft… ist es allerhöchste Zeit zu verkaufen” and this point is just reached for me.
Stay the course - but set on what? He or she might only be a few years away from retiring. A preservation of capital might very well be the course to set on.
It’s not the first time that I’ms saying it reminds me of Japan:
Stock market valuations (Shiller CAPE) are higher than virtually ever
Growth rates will likely be stunted (nationalisation, anti-globalisation, higher taxes, knock-on effects of covid-related unemployment and bankruptcies, etc.)
Sub-2% interest rates, approaching zero (which Japan has had since the mid-1990s)
High debt (again, Japan has had 100+% debt-to-GDP since the mid-1990s)
Would I be surprised to see equity prices contract 30-50% over the coming years? Not at all.
Very reasonable thought.
Which notably differs from the preeminent advice on this forum.
The latter generally being to buy all shit under the sun (as long as it’s only contained in a stock index).
My question would be: how far are you away from reaching FI? Also: how large is your net worth?
If you are 10% before reaching your FI/FU number, I do understand your thoughts. If you have already reached your FI number, you are basically adjusting your asset allocation in fear of a really bad sequence of SWDR.
A really big downside: with 30% stocks only, the 4% rule would not longer work for you regarding FI.
You need to have another plan when to get back into more stocks. Which would be market-timing.
As other people also mentioned: please think about your long-term risk tolerance and long term asset allocation. With 30% stocks/70% cash, your FI number is much higher (if this is one of your goals).
I can relate to this one, but was that point really reached already?
You have a 50:50 chance of your conclusion being true. OogieBoogie might also be the one one who laughs at the rest of us. We simply don’t know.
Your total net worth invested might be Oogies daily losses in the last downturn during Corona…
Also don’t forget: you are 20something, Oogie is almost 50 years.
I also agree with this thought. There’s just the question “what are reasonable prices” and when did we see a “reasonable prices” last time for many stocks.
He actually did change his AA (30/70) The problem is that Oogie will change his AA again in the future, which indeed is market timing.
A wrong decision can always lead to a good outcome. It doesn’t make the decision right. It also works the other way around: investing a lump sum instead of DCA because of the academical research and experiencing a sharp downfall. The outcome was bad but the decision was still right. OP already posted about Florian Homm for example. I think he watched/read way too many doomsday videos/articels and got scared. That’s why he pulled out. It wasn’t a rational decision based on a re-evaluation of the asset allocation and risk tolerance, it was just jumping out of the market because of fear. That’s why I think this was a bad idea.
I already said it in another thread. Timing the market and being right is worse than being wrong. Being right will lead to future timing decisions that might harm you greatly. It’s not a good thing to think that you know more or that you have a great gut feeling.
@OogieBoogie
I know that you are 50 years old. But your investment time horizon isn’t “years till retirement”, it’s “years till expected death”. You basically stay invested for the rest of your life. The only thing you should adjust is your AA. Going from 100/0 to 30/70 in a single day was a very extreme solution. It’s even more extreme if it’s based on fear.
Your safe withdrawal rate with a 30/70 allocation is probably closer to 2%/year with the current interest rates. I’m not sure if this will work out as you need way more money for FIRE now. Going back to a higher stock allocation in the future is just a terrible idea in my opinion. One should gradually adjust his stock exposure and not just make such big jumps up and down.
I did almost exactly the same a couple of weeks back. Kept a little Gold. I am turning 50 but age is not the main reason I sold. I just believe that what is going on is in no way normal anymore. Of course some smart experts will come with numbers and ratios showing that the sky is still blue, but turning on the TV one should slowly realize that this “hype” is not sustainable. I have family and friends in Africa and Latin America and in some countries there you have people left dying in the streets… Literally… And I don’t even want to talk about what happening in the USA… Come on guys, open your eyes, what’s going on at the stock market is “Casino Capitalism”!
Lol actually yes, 568 CHF will be invested today on Viac. But I think the market only cares about bigger investments. So I don’t expect it to fall now.
So you’re saying: there are two stocks, A & B. A has sustainable cash flows and tangible assets (Coca Cola?) and B not. But both are priced at $100. And according to you we should buy A and not B. So why is B priced at $100? I guess the investors are just stupid? If only it was all that simple. All these strategies have been tested and none shows superior returns without increasing volatility.
Do appreciate you all and do realize that I am heavily swiming against the tide here… It is not about who is right and wrong, that only time will tell. But for me it is the right decision right now. I tried to explain this with some comments below.
I am really not driven by fear with that decision. I am really relaxed, seeing the facts in front of me and think that this decision is the best decision for my personal situation.
I will reach my FI number of 1,5m when I am 60 years old. Even with zero yield on return.
My position on this is that we are turning into a deep recession like probably no one of us live thru. This will take several years to recover from. During that time equity prices will go down, then bit recover before it goes down again - similar to the 1930 or Japan Nikkei225 after 1990. Let me find a Dow Jones chart on this… So yes, it is market-timing. And yes, I will return into higher allocation of stocks for sure, just not now.
Not necessarily! Especially not regarding his/her portofolio. He or she might have to withdraw and even deplete his/her portofolio much earlier.
It’s quite conceivable that he/she might retire at 50 or 55, live from withdrawing from his portfolio investments and depleting them by age 65 - and (only) then receive monthly pension from AHV, another government-run pension scheme, and/or pension fund.
If these pensions pensions cover one’s monthly expenses (maybe not in Switzerland but maybe somewhere else), the investment horizon for his portofolio might be only til reaching pension age.
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– but when I get into the “the world is ending” train of thought (which, if I understand correctly, isn’t exactly your thinking yet, but you’re maybe moving towards it, anticipating low valuation and bad returns for equities for years to come?), I remind myself that – long view – cash is just belief into that respective country’s ability to maintain purchase power in that currency.
The problem is that Oogie will change his AA again in the future, which indeed is market timing.