quote:
It sounds like you have it all figured out. I am not saying that scenario will not play out in your favor, but if it does it will be pure luck.

Pure luck is strong. If OP happens to be of sane mind when most people aren’t and happens to notice how horrible the underlying fundamentals of both the economy and the market are, and then decides to raise cash in his portfolio because the risk/reward of equities is no longer acceptable, that would be a very reasonable stance as far as I’m concerned. Timing the exit and re-entry will of course be difficult, but long term expected equity market returns are publicly available from some of the largest investment firms in the world.

GMO, for instance, whose work is stellar, is now forecasting a negative 5.8% annual real return for large cap US stocks over the next 7 years. Couldn’t OP just find somebody whose advice he trusts, like GMO, and wait to buy back in when that long term forecast compensates him more fairly than does a potential negative return in the face of an arguable bubble in risk assets?

LINK

Timing the market is notoriously hard. Most people will get their arse handed to them. But for a 56yo retiring in 10 years to temporarily move his portfolio into cash upon recognizing stocks feel detached from reality is not some crazy notion deserving of all the condescension he’s received in this thread. Especially if it helps him sleep at night, which counts for something.

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Posted by rintintin

Life is Life

Member since Nov 2008

16238 posts

Posted on 10/28/20 at 8:41 am to RedStickBR

quote:
Pure luck is strong. If OP happens to be of sane mind when most people aren’t and happens to notice how horrible the underlying fundamentals of both the economy and the market are, and then decides to raise cash in his portfolio because the risk/reward of equities is no longer acceptable, that would be a very reasonable stance as far as I’m concerned. Timing the exit and re-entry will of course be difficult, but long term expected equity market returns are publicly available from some of the largest investment firms in the world.

GMO, for instance, whose work is stellar, is now forecasting a negative 5.8% annual real return for large cap US stocks over the next 7 years. Couldn’t OP just find somebody whose advice he trusts, like GMO, and wait to buy back in when that long term forecast compensates him more fairly than does a potential negative return in the face of an arguable bubble in risk assets?

LINK

Timing the market is notoriously hard. Most people will get their arse handed to them. But for a 56yo retiring in 10 years to temporarily move his portfolio into cash upon recognizing stocks feel detached from reality is not some crazy notion deserving of all the condescension he’s received in this thread. Especially if it helps him sleep at night, which counts for something.

That's a fair assessment, although, even assuming GMO's forecast is correct (which is a big assumption) being in pure large cap US stocks 10 years away from retirement isn't the most prudent strategy.

If he is diversified and in the broad market, and maybe bonds, there is a good chance that he will be fine over that 10 year period and not run the risk of missing out on a bull market. Opportunity cost should play a factor in this decision.

It's the "temporary" part of moving into cash which is the problem, because you assume you'll know when to get back in, when just continuing to dollar cost average over that 10 year period will more than likely (based on historical data) provide a suitable return.

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