Need advice on selling high and buying low

[lyn421]

Years ago I bought Tech Stocks. Even though these stocks have doubled, they did take a beating during the recession. They have recovered and are about $2000 short of what they were in 2008. When they reach what they were in 2008, I'd like to sell them. I'd like to sell high and put them into a retirement date mutual fund - either 2015 or 2019 retirement fund. I don't want to buy into these funds when the stock market is high. I'd rather wait until another dip.

Recently, I sold bonds that were not earning anything but did well during the recession. I then bought into a 2015 mutual fund retirement account. Because I sold these bonds when the stock market had dipped and now has recovered, I've earned $1500 this month on them which I don't think is bad for a novice.

How can I sell the Tech stocks high and then buy low without taking them out of the 401K fund? Can I park the funds somewhere within the 401K fund until the market dips again?

Any suggestions?

[yclept]

You seek the Holy Grail? There are many who will beckon and say "come hither, follow me to the Grail" -- they are false prophets deluding you either because they seek some advantage to themselves or because they are themselves deluded. The effect on your investments will be the same.

Generally speaking, I am no fan of mutual funds. To me they only represent an opportunity for the client to contribute a share to the fund manager's "Sardinia Vacation Villa" account. I am particularly suspicious of the targeted funds that move your allotments from stocks to bonds over time as a response to the client's age rather than to anything that's actually happening in the markets. This seems a particularly idiotic strategy to me. Very low cost funds, such as the ETFs that follow indices or other broad market sectors using a mechanically defined selection strategy are an exception to my above negative bias. I consider them a good way to obtain diversification without having to actually know what one is doing. I limit this to only ETFs whose fees are negligibly low.
Your question was too general for any specific answers. It did contain a logical error in that your stated aim to sell current stocks when they reach some price they attained earlier. The current value of a stock and its prospects going forward have absolutely nothing to do with some arbitrary earlier price or the price at which you bought it -- earlier price is not a valid parameter on which to base a sell decision (with the possible exception of tax considerations, but even those are questionable criteria). A stock should be sold when the reasons for which it was bought have begun to deteriorate or have become no longer true. Individual stocks should sometimes all be sold in response to an overall market decline (many "buy and hopers" will disagree vehemently with this statement).
Generally speaking if you sell your stocks at a high point and simultaneously buy some mutual fund or other, you will be buying the fund also at a high point.

"Recently, I sold bonds that were not earning anything but did well during the recession. I then bought into a 2015 mutual fund retirement account. Because I sold these bonds when the stock market had dipped and now has recovered, I've earned $1500 this month on them which I don't think is bad for a novice."

There is no way to comment on the $1500 return without knowing what yield it represents. Personally I think this is a good time to be ditching bonds as I see interest rates having only one way to go (up), and bond prices decline as interest rates rise.
Being in a 401k plan significantly limits one's investment choices, but one has to participate to get the employer match. Being part of a 401k unfortunately mandates that one contribute to the "Corsican Retirement Villa" accounts of whomever administers the plan for your company. But again, one has to do it for the company match -- if there is no match, don't participate. Any match less than 50% in my opinion makes participation questionable. Never put in money above the amount required to attain the maximum company match -- there are much better vehicles to use for such funds like self-directed IRAs or Roth IRAs. The only 401 plans I've ever seen all had some sort of "fixed return" option (usually paying about the same rates as concurrent CDs) where one could park money that was not otherwise "invested". I am a little confused about your statement about having existing "Tech Stock" investments in the 401k, as I never saw one that had the option of investing in individual tickers.
Here are a couple of questions to ponder:

[rovo]

Original Poster: How can I sell the Tech stocks high and then buy low without taking them out of the 401K fund? Can I park the funds somewhere within the 401K fund until the market dips again?

You have individual stocks in your 401K?

[2kids10horses]

I am not the original poster, but back when I was employed and had a 401k, we were allowed to buy individual stocks. It wasn't typical, and there were some hoops to jump thru (ie. extra paperwork) but it was an available option.

I didn't use that option because there were funds that I liked, but I could have bought individual stocks. I realize that was unusual.

I agree with yclepts analysis.

But, may I make a comment?

The Original Poster made the comment that he would like to get out when his stocks reach a certain "break even" level. He does not want to evaluate whether those stocks should still be held, he has had a loss, and wants out. Assuming he does so, those shares he holds have a "memory" of their purchase price, and when the price of those shares reaches the "memory level" they will be sold. This, as we all know, is Resistance.

Resistance level have nothing to do with the future prospects of the stock, it's just a price point where a lot of investors will choose to sell. Support is the opposite, it is a price point where investors will choose to buy, thinking the stock is now undervalued.

Support and Resistance levels are easily seen on a stock chart, and it is behaviour as evidenced by our Original poster that validates them.

[lyn421]

Thank you for your replies. I'll continue to study Yclept.
Rovo, these stocks were part of group of stocks in one of my 401k choices. They are described as more aggressive growth options. They contain stocks like Apple, Exon Mobile, and even a few banks. The portfolio of choices had a matrix of 9 boxes where the first teir of choices were described as more conservative (less risk), the second tier were described as more moderate, and the top tier were described as aggressive (with more risk). Since my spouse has all moderate stocks, I chose to invest in the top tier in order to diversify some. Later I bought bonds to offset the more aggressive choices mentioned above.

I chose to get out of the bonds, because I've read they were going south and I was earning less than I could if they were in CD's in the bank. So I waited until the market tumbled and transferred my funds into a retirement designated mutual fund account.

I guess I'll have to do some more reading and studying about where to park my funds after I sell them at a high. Then I'll wait for a market tumble and buy something else at a low.

Whether one is a fan or not of mutual funds, I, the average person, am limited to the stock choices put forth by my 401k's. As you can tell, I don't have the level of expertise to take on the stock market where my entire retirement depends on it. However, I do study, read, ask questions, and try to make as informed a decision as I can.

I still want to sell these more aggressive stocks. I still don't know where to park these funds until the market tumbles - at which point I will buy. It seems pretty basic to me (and I'm sure elementary to some).

Again thanks for your input.

[yclept]

1. Market timing does not work and will not work.
3. Market timing does not work and will not work.
5. Amateur market timing is simply luck and sooner or later will not end well.

This is an age-old argument. Notice there is no data presented above to validate the above opinions. There is a reasonably balanced presentation on Wikipedia on this topic: en.wikipedia.org/wiki/Market_timing

My experience (which is, of course, purely anecdotal since it's impossible to examine all the paths not taken) is that one can combine mechanical systems to time the market with rigid fundamental analysis and attain results that significantly beat the performance of simple buy and hold as represented by long term returns of all the market indices. There are a multitude of tools to use, none of which are beyond the capability of anyone willing to study them.

Much of the disparaging commentary regarding market timing was probably best described in Aesop's fable of the Fox and the Grapes:

Driven by hunger, a fox tried to reach some grapes hanging high on the vine but was unable to, although he leaped with all his strength. As he went away, the fox remarked, 'Oh, you aren't even ripe yet! I don't need any sour grapes.' People who speak disparagingly of things that they cannot attain would do well to apply this story to themselves.

I'm not willing to devote more time to arguing this topic. It's as futile as arguing religious tenets. However it is frustrating to see people continue to disparage strategies they clearly don't understand. I do think it's interesting to ponder the point made in the Wikipedia article regarding the Efficient Market Hypothesis with respect to timing:

(EMH) says that market-timing strategies can not work. It says that investors can't "beat the market"; interestingly, it says that investors can't do worse (on average) than the market either.

[danshirley]

When people say 'you cannot time the market' what they really mean is "I cannot time the market'.

Because I can't doesn't mean that you can't. Just maybe you are smarter than me.

All the research showing that 'market timing fails' really shows that on the average market timing fails. Well in my experience the average trader is an idiot and his failure is just the perfect opportunity for me to succeed.

Since we are quoting such absolutes one example to the contrary should suffice:

VLAAX is a classic market timing fund:

finance.yahoo.com/q/pr?s=VLAAX+Profile

whose many years of outstanding performance is quite impressive:

finance.yahoo.com/q/pm?s=VLAAX+Performance

It's the things we know for certain that most make us look foolish.

BTW:
A guy who really times the market is John Hussman. It's hard to see from his fund's profile but if you read his weekly commentary it is full of his timing rationale. So how does John do??
finance.yahoo.com/q/pm?s=HSTRX+Performance

That's a consistency that's hard to beat.

[danshirley]

What a pitiful response to being proven wrong.

tsk tsk.

Are they doing timing ??

It follows an asset allocation strategy that enables the Adviser to periodically shift the assets of the fund among three types of securities: (a) common stocks, (b) debt securities with maturities of more than one year (principally investment grade) and (c) money market instruments (debt securities with maturities of less than one year)

You can't get more timing than that.

[lyn421]

And I thought I asked a simple question...

I have held these funds for decades and am now ready to dial the risk back to a moderate or conservatively moderate level. While I will reach 66 in a few years, I don't plan on drawing from my stock portfolios until I'm 70 (in an attempt to not outlive our retirement savings and to let the market recover). However, the amount of funds I am contemplating selling and transferring are only a small portion of my portfolio - let's say close to $35,000. I say small portion, but it is significant.

I didn't know that market timing was such a hot topic! Why would I not buy stock when the market is low??? Why would I not trade a risky stock that has not done well when it is nearing a market high??
I mean one has to sell it sometime and why not pick the time rather than wait until you absolutely have to sell.

I still don't have an idea of where to park these funds when I sell, but I will read the suggested reading. Maybe then I won't park them. Maybe I will transfer them somewhere immediately. Again, thanks for the discussions.

The discussions here are a prime example, though, of why most people throw their arms up and shout wtf ! and say forget it. I refuse to do it, because our retirement is mostly dependent on the stock market.

So far, so good. We're batting better than average.

[clarkrl2]

I agree that near term target funds could be dangerous. If you have a money market fund available it might be an alternative to the target funds. Also you might consider moving money out in stages and back in stages. I always like to consider what if I'm wrong. Right now my retirement account is only about 18% equities but I'm considering upping that to as much as 72%. My brokerage account is about 75% equities. I have no idea what the right % should be but those are numbers I'm comfortable with at this time. The best advice I can give is do what you feel comfortable with. Good luck and may God bless you with great returns.

[2kids10horses]

lyn,

You still need to be exposed to the stock market even in your 60's and 70's. You need the growth.

My mother is 97. Had she not had stocks in her portfolio, she would have outlived her money!

At age 97, she now insists that she "not be in the stock market", but, I've worked with her financial planner, and she still is. (She lives in an assisted liviing home, and has fixed expenses for the most part, so it is easy to figure what her income needs are. We have her portfolio set up to generate the amount of needed cash to cover her expenses, the rest is invested in the stock market with an overall growth approach.)