Why I sold most of my shares

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.

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What was your overall assets allocation before selling?

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I think John Bogle would have advised you to go to a 50-50 allocation.

What if next year there is a 7% inflation? (Like at the beginning of the 90’s).
Is money in cash really safe?

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Thanks for sharing!

I can relate to your thinking – I’m also close to 50y, but leaving it from the other end, I’m guessing :slight_smile: – 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.

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I think you are making a big mistake. You probably watched way too many videos on the current economical situation.

You should have listened to John Bogle. Ignore the news and stay the course.

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Ignore the news and stay the course.

@Cortana’s advice is much more succinct than mine.

If you don’t have a course already, now’s a good time to form one, IMO.

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@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 do not think it is a mistake to adapt (reduce equity, increase security) now (or at anytime) your asset allocation, as at your age / this time of your life you are obviously more risk averse.

I do think it would be a mistake to reverse it (increase equity again) in the future, that would be market timing at its best. Unless you time it right twice (out and in), you will feel stress and pain.

Adapt your strategy according to your risk tolerance, not to the market. Or may luck be on your side.

EDIT:
By the way: why do you invest? What is your goal? Do you need to invest at all? How much are you ready to lose?
When I read people talking about timing the market (in & out), i think they are either 1) arrogant (know best) 2) ignorant (have no plan)… 1) or 2) = fools

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Thanks for your feedback and your views on this.

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.

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To buy what?

  • Food, car, holidays, house?..That money should not be invested in equities.
  • Equities? I already hat equities, but sold. So I’m gonna buy equities again. I’m not saying you will not succeed, but you will need skills or luck, not just gut feelings.

If you are not a pro, find your right AA, stay the course, rebalance if needed, and as life goes on (not the economy) you adapt your AA. If you are a pro, you can try to beat the probabilities. A non pro trying to play pro is gonna suffer for sure.

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First, thank you for posting about it. It is an interesting topic.

I would answer:

  • i have more faith in J. Bogle than my friends.
  • why all-in vs all-out… 50:50?

I believe the taxi driver is in the englisch version. So going is 1/2 of the work. And when would you go back in?

Is @Cortana buying tomorrow? Did I miss the memo?!

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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).

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keyword is “most”, not all

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The right thing to do would be to change the AA. For example 60/40 or 50/50.

This is just market timing.

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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) :wink: The problem is that Oogie will change his AA again in the future, which indeed is market timing.

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With that logic, you also have a 50:50 chance of winning the lottery: you may win or you may lose :wink:

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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.

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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”!

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It’s not. Basing your investment decisions on what you see on TV, come on…

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