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Message
re: Should I move my 401k money to the cash option ahead of the election?
Posted on 10/28/20 at 2:51 pm to rintintin
Posted on 10/28/20 at 2:51 pm to rintintin
quote:
What are your parameters? What if it goes up 5%, then subsequently down 10%? What if it goes down 5% then subsequently up 10%? The market does not move in a straight line, and it does not indicate it's direction on a short term, day by day, basis.
If the bottom doesn't fall out on the 4th, I'll buy back in the next day. I'm having a hard time understanding what's so upsetting about this.
2
Posted on 10/28/20 at 2:57 pm to Rex Feral
I sold out too
Tired of losing a shite ton every day
Tired of losing a shite ton every day
Posted on 10/28/20 at 2:59 pm to yatesdog38
quote:
Do all these ratios and stuff factor in the amount of cheap money that will be available for the next 3 years?
Yes, the inverse of the P/E is the earnings yield which, at a P/E of 30, reflects a yield of 3.33%. Theoretically, that yield should reflect some premium to the risk-free rate to account for the riskiness of stocks. It's up to you to determine whether that level of yield is appropriate compensation for the risk you're taking.
Recall that as money becomes cheaper the earnings yield should decline, too, pushing equity prices up. But here's the question: do you expect interest rates to go any lower than they are today? If you don't, then "cheap money" may not have any additional positive impact on stocks. In addition, cheap money has other impacts that could offset the positive uplift from lower discount rates alone.
Looked at in that way, for those claiming bond prices have peaked due to interest rates that can't go any lower, it would only be logically consistent to apply that same argument to equity prices. If the risk-free rate doesn't compress anymore and if corporate earnings remain flat, the only way equity prices increase is if the market assigns an even lower risk premium to stocks. I don't know how that is possible given the current state of the world.
This post was edited on 10/28/20 at 3:11 pm
Posted on 10/28/20 at 4:26 pm to tom1987
quote:
I have 4 different 401ks (3 prior companies and one current).
Dude. Rollover those 3 prior companies to your own IRA. Mine is at Vanguard. Much lower fees and better options.
Posted on 10/28/20 at 4:44 pm to RedStickBR
quote:
Nope, what I'm advocating for is the elimination of ridiculously broad brush strokes in these types of threads. I've explicitly highlighted multiple times that buy and hold has been a winning strategy the majority of the time. I'm simply saying that anyone with an investment horizon as short as the OP's should go into his twilight working years as wide-eyed as possible. We're at valuation levels that have historically resulted in poor risk-adjusted returns for stocks, and that's relative to prior periods when the Federal Reserve and Federal Government each had much more monetary / fiscal capacity available at their disposal.
It is easy to say "valuation is high so your 10 year prospects for return are low." You have to carry it to its logical extension if it is to be of any real value. If now is not the time to invest, when is? Using your 1929 value, when would Ol’ Grandad have gotten in? To keep things simple I will keep using September values.
Would it have been Sept. 1930, when the CAPE was 21? First year of the Great Depression. Hmmm, probably not. Good thing, he would have underperformed the cash savings approach over the next 10 years.
How about Sept. 1931, CAPE is at 15 then, looking better! Ooof, unemployment is over 16% and the US is experiencing the Dust Bowl. Darn. Another good miss, as he would have underperformed cash again.
1932,1933,1934, all the same. Underperform cash, all while looking at an attractive CAPE ratio value of just over 10.
For Grandpa to beat the "stick it in the bank" approach over 10 years, he would have had to wait to put his money in until 1935. In 1935, CAPE is now over 14, higher than the average of 13.5 starting in 1900 up to that point. Germany is beginning to marshal an army as fascism spreads across Europe. Put it in the year that FDR passes the Social Security Act, when unemployment is still over 20%. Or, more likely, he does what people do when they fall prey to these behavioral biases, and he stays on the sideline, waiting for the perfect time to get in.
Point is, you can say it isn’t timing, but it is. The approach necessitates buying back in at some future date.
This post was edited on 10/28/20 at 4:46 pm
Posted on 10/28/20 at 5:05 pm to CrawfishOfWallstreet
quote:
It is easy to say "valuation is high so your 10 year prospects for return are low." You have to carry it to its logical extension if it is to be of any real value. If now is not the time to invest, when is? Using your 1929 value, when would Ol’ Grandad have gotten in? To keep things simple I will keep using September values.
Would it have been Sept. 1930, when the CAPE was 21? First year of the Great Depression. Hmmm, probably not. Good thing, he would have underperformed the cash savings approach over the next 10 years.
How about Sept. 1931, CAPE is at 15 then, looking better! Ooof, unemployment is over 16% and the US is experiencing the Dust Bowl. Darn. Another good miss, as he would have underperformed cash again.
1932,1933,1934, all the same. Underperform cash, all while looking at an attractive CAPE ratio value of just over 10.
For Grandpa to beat the "stick it in the bank" approach over 10 years, he would have had to wait to put his money in until 1935. In 1935, CAPE is now over 14, higher than the average of 13.5 starting in 1900 up to that point. Germany is beginning to marshal an army as fascism spreads across Europe. Put it in the year that FDR passes the Social Security Act, when unemployment is still over 20%. Or, more likely, he does what people do when they fall prey to these behavioral biases, and he stays on the sideline, waiting for the perfect time to get in.
Point is, you can say it isn’t timing, but it is. The approach necessitates buying back in at some future date.
He wouldn't have had to get back in at all to meet his target of $190,000. That math was pretty straightforward; he started with $100,000 and planned on investing or saving $10,000 per year for the next 9 years. The key is, being that close to retirement, he would have protected his initial principal instead of losing a huge chunk of it in the years that followed. And given the deflation experienced over the next decade, his all-cash position would have earned 20% in real dollars.
He had the advantage, as those close to retirement often do, of already having been close to achieving his goals. That's precisely what would have given him the confidence to move to the sidelines in the first place. See how relevant that is to someone who is 10 years or less to retirement, such as the OP?
This post was edited on 10/28/20 at 5:08 pm
Posted on 10/28/20 at 5:31 pm to el Gaucho
quote:
I sold out too
Tired of losing a shite ton every day
How close to retirement are you?
Posted on 10/28/20 at 8:43 pm to Rex Feral
quote:
the bottom doesn't fall out on the 4th, I'll buy back in the next day. I'm having a hard time understanding what's so upsetting about this.
Nobody is upset, it's your money and you are free to do whatever you want with it. This is a message board where people post advice, thoughts, etc. People are just pointing out that what you are doing is indeed timing the market, which typically does not bode well.
You're making arbitrary parameters for your return back into the market. What do you consider "bottom falling out"? Then when do you get back in if it does?
What if there is a delay in the bottom falling out? What if it shoots up and you miss out on gains?
These are scenarios you typically want to have a plan for.
This post was edited on 10/28/20 at 8:45 pm
Posted on 10/29/20 at 4:23 pm to rintintin
Just received this from Vanguard.
Posted on 10/29/20 at 4:55 pm to Twenty 49
How many of those Democrats were socialist though? I look back at the Obama era. They benefited from the Democrats not wanting to do mortgage reform that led to the housing market bust. That recession was manufactured by the Democrats. Dow as at 18,500 on election night. There is a real risk of it dropping back down to the low 20's if Trump doesn't win.
Posted on 10/29/20 at 5:59 pm to TimeOutdoors
quote:
How many of those Democrats were socialist though? I look back at the Obama era. They benefited from the Democrats not wanting to do mortgage reform that led to the housing market bust. That recession was manufactured by the Democrats. Dow as at 18,500 on election night. There is a real risk of it dropping back down to the low 20's if Trump doesn't win.
Just gave your utterly asinine and baseless comment your 5th downvote.
Posted on 10/29/20 at 7:00 pm to TimeOutdoors
Maybe you should spend some more
quote:
TimeOutdoors
Posted on 11/5/20 at 9:35 am to tom1987
Bump
Interested to hear what some people in this thread did.
For those who sold pre-election, are you now back in?
Basically, what many experts predicted as the worse outcome for the market (prolonged counting without a stated winner) has happened, yet the market has jumped significantly.
Interested to hear what some people in this thread did.
For those who sold pre-election, are you now back in?
Basically, what many experts predicted as the worse outcome for the market (prolonged counting without a stated winner) has happened, yet the market has jumped significantly.
Posted on 11/5/20 at 9:47 am to rintintin
Back in Monday. Not sure how long I am staying in though. Will see what happens with the Senate results.
Posted on 11/5/20 at 10:55 am to TimeOutdoors
quote:
Back in Monday.
???
This is why people are having a hard time believing you:
quote:
Dow as at 18,500 on election night. There is a real risk of it dropping back down to the low 20's if Trump doesn't win.
Posted on 11/5/20 at 11:16 am to Jag_Warrior
? Why would anyone not? Everyone believes the stimulus package will go forward after the election. Markets usually drop before the election. Was pretty convinced on Monday that Trump would win again as well. Not really that complicated. After the stimulus package I can't say that I will stay in for long though. Will have to wait and see what the political climate is.
Honestly though, believe what you want. Enjoy your day.
Honestly though, believe what you want. Enjoy your day.
Posted on 11/5/20 at 11:17 am to TimeOutdoors
Just for clarity, not an attack, you believe that President Trump won the election?
Posted on 11/5/20 at 11:34 am to TimeOutdoors
If you jumped out before the dip and were able to get back in on Monday, more power to you.
Although it doesn't seem like your actions are based on your stated reasoning. You said you were concerned about a contested election before. Now you say you were convinced that Trump would win again on Monday.
Yet, here we are with what looks to be a contested election and Trump a huge underdog, but you're back in and confident the market will go up.
Interesting.
Although it doesn't seem like your actions are based on your stated reasoning. You said you were concerned about a contested election before. Now you say you were convinced that Trump would win again on Monday.
Yet, here we are with what looks to be a contested election and Trump a huge underdog, but you're back in and confident the market will go up.
Interesting.
Posted on 11/5/20 at 11:36 am to CrawfishOfWallstreet
quote:
Just for clarity, not an attack, you believe that President Trump won the election?
On Monday I thought he would. As for now... I think there are some odd things going on, but I don't believe anything I hear on the news, twitter, etc. I am perfectly content with what the end count is. If the courts get involved I am perfectly content with that also. I have worked hard, saved well, invested well, and personally I am going to be fine no matter what happens. Selfish point of view I know, but I have never looked for anyone else to take care of me.
So since you asked for clarity... Right now I believe Biden will be President unless evidence comes out that voter fraud is taking place. I choose to believe Americans would not do that. Hope I am not proven wrong.
Lastly, not trying to come off as ungrateful, hateful, etc. Yes I am hard headed, stubborn, etc, but most engineers are. I do enjoy this board and the post from all members here. It is a good source of information even though we all will not always agree. If someone ask me what I have done or will do I will answer honestly. I will also admit when it was a mistake.
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