Back in February, a friend told me to get out of emerging markets. I didn't get to move any money around, then I was out of the country and out of touch with my accounts for a couple weeks (yeah, I know, I could have tried harder).

In March, when I finally got the nerve to check my 401(k), I had lost over $150k. At the advice of another friend, I left it all alone. I am in a relatively conservative mix of mostly stock funds with a few bond funds and some in "stable value". I had planned to retire next January.

This week, my losses are down to $40K. Around a fourth of the March number.

I am still planning to retire next year, probably around June.

Any suggestions? I am thinking I should move a bunch of money out of stocks now, realize the recovery I got, suck it up and accept the $40K loss which in reality is just a small percentage of what I gained over the last two or three years, and put the money into the stable value fund.

I am expecting a second wave of the virus to hit this fall, and to hit with a vengeance -- worse than the first, and much more devastating to the economy. Also, I think the market will become very shaky in the lead-up to the election.

Advice?

Thoughts and prayers?

Forgive the personal question, but to what extent do you need to live off the portfolio once you retire?

Like, do you have a pension? Or just social security?

Pension? What dat?

As an academic, my "pension" is my ORP. That, plus my personal accounts, is what I'll live off of. Plus SS, of course, but from age 18 I have pretended that SS won't be there and saved accordingly.

My question is about "emerging markets." If the bulk of your 401-k was invested in stocks from China, Brazil, Argentina, India, and other "emerging markets," then you were probably taking on too much risk anyway.

My 403-b is broadly invested (CREF). It rises and falls with the broader indexes. It's down about 6.7% since the start of the year. On the other hand, my managed accounts are up by 6.6%. They're more NASDAQ-heavy and more focussed on payments/tech stocks that have done well.

When I retire, I do not plan to convert everything to "safe" stuff or to annuities. Some of it, sure. Guarantees are good. But I plan to keep a decent % in the regular markets for the benefits that brings.

The general rule for retirement age is 60% stocks, 40% fixed income (bonds)

quote:

Originally posted by Mikhailoh:
The general rule for retirement age is 60% stocks, 40% fixed income (bonds)

That was true for a while - though I'm not as wild about bonds given how unimaginably low they are these days. I also have TIAA/CREF and in lieu of a bond fund, have a fair amount in a TIAA guaranteed account which never changes from 3%. That's a better return from most bonds these days - and if things ever become inflationary, bonds (and funds) prices will sink dramatically. OTOH, I can move money out of the 3% account to a higher returning investment.

No way the second wave will have that big of an impact. Literally everyone I know it will be going into it with a much better supply of toilet paper.

No pension here. I figure I need to keep a certain amount of money in the stock market to protect myself against long-term inflation risk. As a 40 plus year financial investment professional, I have zero confidence in my ability to predict the market. If I sold, I have to stress out about when would I have the nerve to buy back in.

I keep enough money in cash, money market and CDs, and short term bonds so that I don’t have to look at the value of the stocks very often. My strategy is basically to have enough money in non-stock investments to be able to ignore the market for at least five years.

quote:

No way the second wave will have that big of an impact. Literally everyone I know it will be going into it with a much better supply of toilet paper.

I'm going to resort to generalities rather than post very detailed financial data. But, it is hard to get a clear picture without some of the personal stuff.

I am the same age as Heinz has varieties.

I am just into the seven figure territory on my 401(k) balance. Some portion of my balance is categorized as Roth-401(k), but I don't think that's important at this point.

If I retire next spring, I will get about $2K a month in pension (I am expecting it will still be there -- my benevolent employer has always said that the pension is invested in a separate corporation and the money goes through a one-way valve to get there which is supposed to make it impossible to buy the company, raid the pension fund, and sell off the smoldering wreckage as happened to so many companies in the recent past, also, the company can't withdraw or borrow from the pension to cover other expenses, however, in recent years, the pension has been a tad underfunded or underperforming for the projected obligations).

Like P*D, I have never counted on SS being there. SS says at 67, I'll get $2800/mo. I will probably wait until I'm well past 65 to even think about taking it unless I need to. It's just gravy.

I have some other things, Roth IRA (that I want to touch last to maximize the tax-free forever growth), and non-qualified investments.

I own my house free-and-clear. I could sell it and buy a better house two counties away for a fourth of what I'd get for it. Houses like mine in this hood sell for just into seven figures.

My cost of living is fairly low, and could be even lower when I stop working (this home-detention has cut my expenses a lot in the commuting and eating out categories). I could go full MMM. I'm not sure Mrs pj would have it.

So, I could barely squeak by on my pension. I'd do fine on pension and SS. I can live very comfortably with the pension and a meager monthly withdrawal from my 401(k).

I think my actuarial life expectancy is 85-ish. Both of my parents died young-ish: 66 and 75.

Finally, after I retire from the corporate megalith and after a suitable period of decompression, I will probably do some other work, not full time, and might be bringing home another $40 - $50K after expenses. Or not.

That's about it.


The question at hand is: my YTD loss is down from $150K in March to $40K now. Should I remain in mostly stocks and a few bonds and some stable value (I think the stable value fund is now paying about 3%), or move a bunch from stocks to stable value on the prediction that the market is going to take it in the shorts later this year? Or something else entirely?

quote:

My question is about "emerging markets." If the bulk of your 401-k was invested in stocks from China, Brazil, Argentina, India, and other "emerging markets," then you were probably taking on too much risk anyway.

All of my emerging markets investments are in my Roth IRA and non-qualified accounts. It's not money I need for the foreseeable future. It's all long-term stuff.

The only reason I'd need to get my hands on it in the next few years would be in lieu of a bridge loan if I sell my house and buy somewhere else.

Anyone? Bueller? Anyone?

I don't know enough to offer any advice on specific stuff. I'm not being coy, I just literally don't know. My general philosophy is to balance my investments based on my risk tolerance, and revisit/rebalance about once a year. Given the times now, maybe more than once a year. I don't pick specific stocks, again because I know nothing.

Sound advice for normal times.

These aren't normal times.

I just chatted with a fellow employee who said back in January he saw the thing growing in China and he moved everything into bonds, then a couple weeks ago when stocks started rising again, he moved it all back into stocks. He made about $200K.

One of our biggest customers just said they were getting back to 55% operational and their stock went up about 40% in one day. I don't own any of their stock because ENRON.

quote:

I just chatted with a fellow employee who said back in January he saw the thing growing in China and he moved everything into bonds, then a couple weeks ago when stocks started rising again, he moved it all back into stocks. He made about $200K.

Yes, and I bought Virgin Galactic at $19, and sold it less than a day later for $42. Three hours after I sold it, the stock was back down in the low 20s. My financial team joked that if I pulled off one more trade like that they had an office waiting for me.

Point: genius stock trader I am NOT. I got lucky, and it was my shock at a 120% gain in a few hours that caused me to pull out. I had no clue that it would fall. It could have risen another 100% over the next week for all I knew.

How many people, I wonder, sold at the bottom of the market in April and are kicking themselves now. Probably a lot more than the group who sold right on the edge of the collapse. The usual "timer" mistake is to sell after the portfolio has taken the bulk of the damage, and to buy back in after the majority of the gains have already been made.

Instead of panicking, I rode the roller coaster, using significant downward moves to find buying opportunities in great value stocks that seemed way oversold. You can't really know if a stock has bottomed, but you shouldn't really care. Once a great company has stabilized, you buy. If it goes a bit lower, you buy again. My main stock account is up 36% since January 1, and the entire portfolio (including cash that pays zip) is up about 14% for the year so far.

Yes, you have to have some stomach for pixel losses to do that. When the market was shedding 10% in a day, I simply didn't look ...

Really!

PJ - what's your current asset allocation, roughly?

quote:

Originally posted by jon-nyc:
PJ - what's your current asset allocation, roughly?

Coming soon. Thanks.