[FinanceAnon]

I would just hold it - I have sold most of my index fund holdings in the past 6-9 months and been just holding cash. I don't think stocks have reached the bottom yet, so holding cash at 0% return is still better than negative returns from stocks. Right now, it's about not taking losses. I also don't see the market and economy rebounding quickly after reaching bottom - they will stay flat for a while IMHO

[atombender]

As a counterpoint, I would quote the great John C Bogle: "Never, never get out of the market." [1] Knowing when the market has reached the bottom is not really possible.

During the dot com crash in 2000-2001, investors sold all the way down to the bottom (and lots of them sold at the very bottom), and then they eventually sold all the way up to the peak, when instead they could have just held onto their shares.

Rebalancing doesn't really work. That's another thing Bogle showed us.

Of course, if you need the cash, that's another matter. But then you arguably shouldn't have invested it in the stock market to begin with. If you have a time horizon less than 5 years, the market is just too volatile.

[1] https://youtu.be/1SLb1QJvTvg

[notch656a]

>"Never, never get out of the market."

Cash is a market though, just a different market. If you hold cash you're in a particular market, one that has earned significant returns measured against equities this year. (of course, depending on timespan you may want to pick _which_ market you think best)

It's been strange indeed. My highest yielding investment the past couple years was buying a new vehicle. Conventional wisdom says new vehicles are horrible investment, but in this market it's exceeded yields of every single asset in my pretty diverse basket.

[atombender]

In the context of Bogle's statement (and the parent's comment), it was the stock market, specifically index funds.

It goes back to the realization that no investor can predict the peaks or troughs of the market, so getting out of the market is effectively trying to time it. One may be lucky and get out at the peak and then buy back in at the bottom, but on average you will lose money this way.

[sumedh]

> If you hold cash you're in a particular market, one that has earned significant returns measured against equities this year.

What about the last 100 years?

[notch656a]

Depends. Pennies from 1920? Beat inflation. $20 coin from 1924 ($20 was worth an ounce of gold, so it was just an ounce gold goin)? Beat inflation.

Dollar bill from 1922? Lose, but mostly because the fed reneged on their obligation of gold backing.

I believe If you held 100 years from 1805 to 1905 there wasn't much inflation at all.

So it really depends.

[TameAntelope]

Not during the last 100 years, for the last 100 years.

The whole point is you have no clue when the bear market will end, and a lot of the recovery happens in the first few days (or sometimes even just the one day) of the new bull market.

Trying to pull in or out means you miss out on the best gain days.

[kqr]

So the refinement of the statement might be "never, never move your allocation to 100 % of a single asset."

(But since you speak of a diverse basket, you probably know this already.)

[kqr]

> Rebalancing doesn't really work. That's another thing Bogle showed us.

Wait, what? Rebalancing has worked very well in my backtesting, assuming the fairly generous trading fees I get, at least.

What are you referring to?

[atombender]

Bogle did extensive analysis on the impact of rebalancing (between stocks and bonds) on historical portfolio returns, and decided that it does not meaningfully increase your returns.

His main argument was rebalancing effectively switches high-returning assets for lower-returning ones. If one part of your portfolio did better than another part, why would you get rid of it just to bring the asset allocation back to your target?

Rebalancing will also generally generate capital gains in taxable accounts. If you're aiming for 60/40, but your stocks are now up and it's 70/30, selling those stocks to bring it back to 60/40 again means you will pay capital gains on whatever you sell.

The data shows you can get better returns by rebalancing weekly, but this is really too much for most investors, unless you use something like M1 where rebalancing is a single button click.

Of course, there's more complexity to this question. The above mostly applies to the accumulation phase. To someone in, or close to, retirement, for example, having a portfolio that's drifted too far into stocks can be a risk.

[staticman2]

"His main argument was rebalancing effectively switches high-returning assets for lower-returning ones. If one part of your portfolio did better than another part, why would you get rid of it just to bring the asset allocation back to your target?"

Because of reversion to the mean. Rebalancing should insulate you from weird outcomes like 90% of your money being in GameStop stock then crashing to nothing a week later.

Pretty much every professional fund of fund rebalances, including those by the company Bogle founded. This is weird advice.

[kqr]

Another way to phrase the reply you have already had: because these assets are martingale.

In other words, to the extent good historic performance says anything about future performance, that effect is already priced in. This means you shouldn't hold on to a historically good investment just for that reason -- it's just as likely to be a loser going forward.

If you determined that the amount of risk you're willing to put into equity is 60 %, the only thing that happens if you let it drift up to 70 % is that you increase your exposure to equity higher than you originally intended.

Maybe you have good reason to do that, but historic good performance is not that reason.

[atombender]

> they eventually sold all the way up to the peak

Edit: Bought all the way up.

[andsoitis]

> so holding cash at 0% return is still better than negative returns from stocks

holding stocks as they go down in price does not necessarily matter. It only matters at time of sale. Selling an index (or a particular stock or set of stocks) as they go down only to buy them again later is not the right strategy... you're incurring transaction costs at the very least and the fact that you cannot time the market means you'll probably lose out even further.

Hold the index, unless you need the cash flow or forecast that you need more buffer for flexibility and don't want, in the short term, to be penalized for volatile stock prices (e.g. in case you need to sell to service some cash needs).

And if you have the cash, continue to buy the index on the way down. If your view is that the market, over the long term, is the best generator of wealth, then continuing to buy into it is the more rational strategy.

Inaction is sometimes the best action. There are more ways to be dead than being alive.

[Retric]

If you can sell 100 shares today and use that money to buy buy 200 shares in 6 months then you are better off than if you had held 100 shares for that same six months as long as you buy back into the market.

Actually trying to time the market is largely a fools game, but people do get lucky. Or more often realize they shouldn’t try and time the market.

[roflyear]

Yah and if I could buy bananas today for $1 and sell them tomorrow for $5 I'd be fairly wealthy. And if my uncle was a monkey and my aunt a banana farmer we'd all be well off.

[seoaeu]

Yeah, except in six months you’d be thinking of waiting until you could buy 300 shares, and might miss the buying window entirely

[andsoitis]

Right. Hindsight is 2020 but that does not an investment strategy make.

[ushakov]

> holding cash at 0%

as consumer prices are surging this no longer may be true

my bet is on physical assets: guitars, gold, watches

[subsubzero]

Gold looks ok, I don't know about guitars but watches are plummeting just like the stockmarket.

[kingnothing]

Which watches are plummeting? I've had my eye on a couple of specifics for a while and they're still as expensive as ever.

[iancmceachern]

Luxury collectable items typically suffer in a recession