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Should you stick , sell or buy after a crash?

Bud
in Fund Discussions
From the author:

"The stock market has declined by 25% or more on 11 occasions since 1871. The median recovery time from this point has been 1.8 years.
Investors who shifted to cash after the 1929 crash faced a 34-year wait to break even, compared with 15 years for those who remained invested and less than 7 years for those who drip-fed additional small amounts in.
A “dash for cash” in 2001 and 2008 would still have left investors out of pocket today"

I would add that one needs to be aware of their own investment time horizon.





https://www.schroders.com/en/insights/economics/downturns-this-deep-can-take-a-long-time-to-recover-from-financially-and-mentally/

Comments

  • beebee
    edited April 2020
    If you have room in your income tax bracket to add income to that bracket (the 12% federal income tax bracket is my threshold) consider doing Roth conversions with some of your deferred IRAs.

    A dropped of 12% (we have already experience this from the market high) or more in these holdings would allow you to lock in this "paper loss" by doing a roth conversion.

    State and Federal taxes are paid on these conversions 1 year from now (April 2021) providing time for those investments to potentially recover and these gains would be tax free gains from the date of conversion.

    I consider this similar to the tax loss harvesting strategy used in taxable accounts, but instead you are managing market temporary pullbacks as "Market Loss Harvesting" in your tax deferred accounts.

    Manage taxes will help you manage your total return.
  • Old_Skeet
    @Bud, Thanks for posting the article. For me, it was great reading because I am one who has since the age of twelve (now 72+) have always kept some cash available to buy the downdrafts that come from time to time in the stock market. And, I have been a buyer in this one as well.
    Thanks again for posting the article. Old_Skeet

  • beebee
    Thought this would be worth posting. It points out the value of rebalancing, especially when in retirement and making withdrawals.

    https://thefinancebuff.com/better-withdraw-cash-bonds-bear-market.html
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