Consulting

Tempted to pull my entire 401k portfolio out of stocks and into cash and safer assets in the short term. I don't trust the market and think it's a bubble waiting for a correction. Is this a bad move?

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the odds you time this right are basically zero. For retirement assets that you won’t need for another 20 years there’s almost certainly no reason to take them out of the market. Assuming you have a solid emergency fund and could survive a layoff and being unemployed

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SC1 for the win

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I wouldn’t try to time this market. If you’re nervous then just forget about the money. Ignore it since you won’t need it for decades and riding out a correction here won’t be material to where you are in 30 years. If you’re looking to make some better returns then move 10-15% cash and wait for a correction to buy at lower prices. Of course another year like 2019, and a market correction could still be at higher levels than we have now.

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Ding ding ding!

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Timing the market is a pretty dangerous game. The market has been expensive by most measures for years. If you'd pulled out years ago, you'd have missed the run. What if you're right and the market crashes, but skyrockets back before you can reinvest? Why does it have to be binary? If you think the market is overvalued or susceptible to a market shock, why not go from 100% to 50-80% invested? Then you derisk your portfolio and build cash to buy at lower prices, but still participate if you guess wrong. You could also derisk what you hold by moving towards an S&P 500 index fund, or a large cap vanguard or similar fund (own 1-2 funds that own only high quality stocks vs numerous riskier funds), which will bring your gains or losses in line with the broader market. Do you look at the portfolio of the funds you own, or at least the Top 10 holdings? If not, good time to do so and make sure you like what you see.

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SM1 I didn't read the question as withdrawing the funds, but rather, simply moving to cash within the account. Definitely don't withdraw from a retirement account... OP In general, I don't buy target date funds, but if that's your strategy, having numerous funds doesn't make much sense. In a target date fund, you're relying on someone else to diversify for you (even more so than with a mutual fund. What is the wisdom of diversifying to something that is designed to be diversified to that degree?

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Generally agree with the advice here but there’s something to be said about OPs risk tolerance. It’s okay to not be 100% in stocks. Take some time to assess what your mix needs to be. Maybe you’d be more comfortable with a different ratio, and that’s fine. But generally retirement assets have such a long horizon that the movements (even if scary) in a year don’t matter.

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It’s unlikely OP is actually all in stocks. If that’s the case, OP should redistribute irrespective of market view.

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Dollar cost average.

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Better of rebalancing your 401k to be heavier on bonds and T-Bills than equity. Bond market strengthens when the stock market softens. Or just put your money into gold and bury it. That’s what I do.

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Probably joking

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If you really want to time the market, you need a good election prediction model...

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Touche

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Trying to figure out if there are safer assets to hold for the next year. Currently in early 30s.

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Do you think the market will rally another 20-30% until the next recession? You can pull out now miss out the gains but buy back in 1-2 years after the start of the recession and hopefully get the ~20% gain from the recovery that happens.

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People felt the same way after Trump was elected; how do you think they feel? Never smart to time the market. Everyone gloats when they do well but you never hear anyone talking about their terrible decisions.

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Markets skyrocketed when Trump got elected. If you have an administration telling you they’re going to cut taxes and regulations, you should probably know markets are going up. Clearly all of the major players did

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There was a couple who overstayed their appointment with my CPA since they had withdrew 400k from their 401k early and bought gold. They didn’t plan for the income tax or penalty applied to 401k withdrawals. Not that this is your situation, but your post reminded me how annoyed I was waiting an extra hour as they figured their shit out.

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I wish they withdrew $401k from their 401k. This couple are obviously unsophisticated investors.

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What are some safe options for ~2-3% returns

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Which ones?

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https://www.etf.com/docs/IfYouCan.pdf

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What would the advice be for someone nearing retirement?

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This is a time to relax, shift the allocation to a less risky allocation, but for God’s sake, please don’t tale it out! I worked through 5 or these starting from the 80’s. The best you can do is shift to lower risk asset allocations for the time being 40% -50% stock, 50%-60% bonds and keep contributing. These downturns can last quite a while - about 4 months to 4-5 years. So move to more risky allocation when things pick back up in 2021 -or 2022. Of course, in 2007-08, the losses lasted from 2009 all the way to 2012 when they finally broke even, even with additional contributions. So remember for this and future recessions.

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