Have had thoughts about cashing in the funds...

[Maxheader]

Take the tax hit but perhaps a little peace of mind from trying to understand the market fluctuations over the last month..or so. Anyone else consider doing this?

[empedocles]

1. Imo, a very old, hyper-extended bull.

'Buy and hold' theories have their defects. - however heavily advertised.

[lastlib]

2. Your age is a factor to consider...

If you're under 50, I'd say ride it out--look for the bottom and buy in some more. 50-60, reduce exposure by maybe half. Over 60--bail.

I'm in the 60+ set, and I'm looking real hard at getting out.

[Nitram]

9. Excellent point, lastlib. Get some good advice on the right mix. Consider index funds.

[Squinch]

3. I put everything in a money market in February. Haven't lost a dime

and saved myself a lot of angst. I got out in the bounce after the big fall.

I think there is a lot more downside to come. What republicans don't understand is when you give all the money to rich people, the rich people's companies don't have any customers. They are pulling money out of the system and expecting the system to keep growing.

The only sure thing in markets is that, eventually, republicans will trash the economy. After they rob it blind. We are still in the robbery phase, but the trash is coming.

[SWBTATTReg]

4. And rich people don't spend money either (not as much percentage wise), so big hit coming...nt

[Squinch]

5. Exactly. They hoard it and move a lot offshore.

[RKP5637]

6. Exactly what typically happens with the GOP!!! n/t

[sinkingfeeling]

7. I taking about 50% out of investments and putting it in CDs and

money market accounts. I lost about 6% in October. Was totally shocked.

[Nitram]

8. Nope. The market was due for an adjustment, and it will be going up and down for a while.

But my peace of mind is that the mutual funds I've invested in will do well over time.

[A HERETIC I AM]

10. If I may.......

I realize I am a little late to the thread, and it is possible you have already made your trades, but indulge me, if you will.

You said;

Have had thoughts about cashing in the funds...Take the tax hit but perhaps a little peace of mind from trying to understand the market fluctuations over the last month.

May I assume by "Funds" you meant Mutual Funds? If this is the case, you may very likely be able to switch to a low or zero risk Mutual Fund within the same fund family and not realize any tax liability. I suggest you talk to your broker of record or the fund family directly and ask this question.

Of course, the risk of being taxed on a capital gain applies only if the account in question is a non-tax qualified account. In other words, not an IRA or similar. If it is inside an IRA or 401(k) or a 457 plan then there would be no tax consequences unless you did a surrender and took possession of the cash. You can sell all day long and build up a cash position and suffer no tax liability whatsoever, as long as you leave it inside the qualified account.

Regardless of what you do, it is important that you are able to sleep at night! No amount of advice given on an anonymous internet forum can completely dispel your concerns. You have to be able to feel comfortable.

Having said that, what you are asking is a question that basically relates to attempting to "time the market".

There is an old expression;

"TimING the market is not nearly as effective as time IN the market"

Be prudent, thoughtful, don't trade out of fear or impulse and....

May all your trades be net gains.,

[progree]

11. One can switch funds within the same fund family and avoid capital gains taxes ??

Would you have a link to that? I've never heard/read that before. My info has always been if you sell it, you pay capital gains taxes (if it had a gain), no matter what you did with it... exchanges are a sell followed by a buy. In a taxable account. (As you say, that doesn't apply to IRAs or 401k's etc.)

May I assume by "Funds" you meant Mutual Funds? If this is the case, you may very likely be able to switch to a low or zero risk Mutual Fund within the same fund family and not realize any tax liability. I suggest you talk to your broker of record or the fund family directly and ask this question.

----------------------------------------------------------------------------------------

"TimING the market is not nearly as effective as time IN the market"

Be prudent, thoughtful, don't trade out of fear or impulse and....

Sage advice. Study after study after study by Dalbar and others have found that people who own mutual funds on average do substantially worse than the funds' performance, because of a tendency of people on average to sell on the dips and then to wait to buy again only after a long period of gains has occurred.

[A HERETIC I AM]

12. You are correct, I was wrong! Should have taken the few seconds to Google first!

For some reason I was thinking that an in-house exchange didn't trigger a tax liability, but you are right, it does. ONLY IF THERE IS A GAIN however, which I'm sure you knew as well.

As you stated, none of this applies inside a tax qualified account, but the OP does not specify the account type nor the asset class for that matter.

https://finance.zacks.com/exchange-mutual-funds-still-pay-taxes-6287.html

One thing to bear in mind in this type of transaction is cost basis. If the Mutual Fund is set up to automatically buy additional shares with each capital gains, dividend or interest distribution, then the position will have multiple cost basis points. That will affect the taxation. For instance, if 10 shares were bought at $10.00 and 10 were bought at $11.00, the amount in tax per group of shares sold will vary.

Most Mutual Fund companies will assist in this pretty easily, by redeeming the shares for you on a "First In, First Out" basis so you aren't paying a higher capital gains rate then necessarily (short term vs long term)

Thanks for catching my fuck up! I am more than happy to be corrected as I feel this group should strive to provide absolutely accurate information.

[PoindexterOglethorpe]

13. What funds?

More to the point, to you have a financial advisor? What does that person think?

Keep in mind that the markets go up, the markets go down. Over the long run they go up. Whether you should cash out now depends on all sorts of things, such as how old you are, what you need the money for, and so on. Which is why a financial advisor can be a good thing.

I'm going to go out on a limb here and suggest that if you are needing money in the near future, you probably ought to cash out to some degree. But not totally.

[Maxheader]

14. No financial advisor...

Have iras..and roths. Money manager acct...

If the current trend continues I imagine I will go into something safe and doesn't limit me on access to the funds...

[PoindexterOglethorpe]

15. Keep in mind that

a lot of people here thought it prudent to sell everything when Trump became President. Anyone who did so has missed out on a pretty decent increase in the market.

[Maxheader]

16. Yes...I've no intuition regarding

money matters..At least not like some...When the orange
haired idiot came to pass..along with the bull market I really
had no idea where the financial boom was coming from...Tax
breaks for the big boys helped I'm sure..But the future ?

Also past experience..the tech bust in 2000..I waited too long before
converting to bonds..Because I thought it would rebound.

[progree]

17. It did rebound and went on to set new all time highs

Last edited Mon Nov 26, 2018, 07:06 PM - Edit history (2)

then crashed in 2007-2009, then rebounded to set new all time highs...

The market has never, ever, ever set a new all time low, not even once. But it periodically sets new all time highs.

Over the long run, judging on the S&P 500 with dividends reinvested has averaged a 10.something% compounded average annualized return since 1926 -- that's a a doubling about every 7 years on average.

They say buy on the dips, not sell on the dips for good reason. Buying on the dip results in a gain when it inevitably gets back to its original value (if we're talking about a broad index fund like the S&P 500 index fund or Total Market fund). Selling on a dip locks in the loss on the dip.

Since its August 31, 1976 inception, the Vanguard S&P 500 index fund (VFINX) with dividends reinvested and after expenses, has returned 11.18%/year on average (through Nov 23, 2018). It has thus increased 87.75 fold during this 42.22 year period (1.1118^42.22 = 87.75). This represents, on average, a doubling every 6.54 years. On average.

https://www.thestreet.com/quote/VFINX.html

Yes...I've no intuition regarding money matters..At least not like some

Me neither. That's exactly why I'm a buy-and-hold investor, at least as far as a core of broad market index funds. Because I can't guess when and where the market will drop (I know it's inevitable), and I don't know when the market will rise (I know that's inevitable too). All I know is that the history of the market back almost 100 years is for higher lows and higher highs. So I don't attempt to time the market. Very few are successful at it enough to beat a buy-and-hold investor.

Studies have shown that the vast majority sell on dips, and then don't get back into the market until it has risen for years-- missing out on the gains that the unintuitive buy-and-hold investor has enjoyed all along. Studies by Dalbar and others have shown that most investors investing in mutual funds have done worse than the funds' performance because of this tendency to panic sell on the dips and to wait way too long to get back in.

[Maxheader]

19. In the past I've used financial advisors with investment

groups...Like Merrill edge..Schwab.

Went self direct after awhile...added more bond funds..
Interesting how morningstar ratings for their bond funds,
can be confusing...ratings vs actual growth..

[A HERETIC I AM]

20. Morningstar ratings are based on prior years performance.

Here is their methodology document on how they rate mutual funds;

(19 pages)
http://corporate.morningstar.com/US/documents/MethodologyDocuments/FactSheets/MorningstarRatingForFunds_FactSheet.pdf

And as a general rule, one shouldn't look for growth in a bond fund. That's not really what their purpose is. They generate income. Those income (interest) payments can be directed to purchase more shares, and as a consequence your balance will grow over time, but they don't have the same annualized rate of return as a growth oriented mutual fund, like a stock fund, for instance. That is why the share price of a bond fund rarely moves up or down dramatically over time.