401k allocation during Covid

[qofcc]

So when they changed the rules for the 401k withdrawals for Covid relief I decided to take a withdrawal to pay off debt and lower my monthly expenses to be able to save more in my emergency fund. I'm happy with that decision and I think it will put me in a better financial position 10-15 years from now at retirement. The issue is in preparation for the withdrawal I moved money in my 401k to the stable value fund since I didn't want to risk the market dropping more before i was able to make the withdrawal. I was thinking stocks would continue to drop. The problem is they are up from that point. After the withdrawal I kept 50% of the balance in stable value and divided the rest between a target retirement date fund, an S&P 500 fund and a managed growth stock fund. I figured I would dollar cost average the stable value in over time and hedge my bets if the market goes up or down I still have half invested and half waiting. Now I need to decide when to start moving the rest back in... Thoughts on timing or specific triggers?

[bean29]

Do you have more in the stable value that you should for your age?

I also moved a higher % of my portfolio to bonds than I previously had.  I am not going to change, because I still am below the 100-age %.  I am closer to 120-age in Equities.  

I have seen that we may still see a recession later in the year.  Just because the are opening the country and ending most quarantines doesn't mean there will be no further job losses or spikes in Covid -19 cases before they have a vaccine that is effective and they can produce enough to vaccinate everyone in the world.

Also, I think we are going to see massive shifts in supply chains, with the winners and losers to be determined later.  You are probably over-weighted in bonds b/c the target date fund is probably about 40% bonds also.  

[Deleted]

It's pointless to try and time the market (as you've found out withdrawing thinking it would go down).  I'd just look at your overall asset allocation and get it where you want it to be.  If you feel better doing it in smaller increments do it that way, but it's doubtful it will make much of a difference when you're looking at the long term.  

[qofcc]

Jun 1, 2020 13:25:36 GMT -5 bean29 said:

Do you have more in the stable value that you should for your age?

I also moved a higher % of my portfolio to bonds than I previously had.  I am not going to change, because I still am below the 100-age %.  I am closer to 120-age in Equities.  

I have seen that we may still see a recession later in the year.  Just because the are opening the country and ending most quarantines doesn't mean there will be no further job losses or spikes in Covid -19 cases before they have a vaccine that is effective and they can produce enough to vaccinate everyone in the world.

Also, I think we are going to see massive shifts in supply chains, with the winners and losers to be determined later.  You are probably over-weighted in bonds b/c the target date fund is probably about 40% bonds also.  

[qofcc]

Jun 1, 2020 13:44:52 GMT -5 qofcc said:

Jun 1, 2020 13:25:36 GMT -5 bean29 said:

Do you have more in the stable value that you should for your age?

I also moved a higher % of my portfolio to bonds than I previously had.  I am not going to change, because I still am below the 100-age %.  I am closer to 120-age in Equities.  

I have seen that we may still see a recession later in the year.  Just because the are opening the country and ending most quarantines doesn't mean there will be no further job losses or spikes in Covid -19 cases before they have a vaccine that is effective and they can produce enough to vaccinate everyone in the world.

Also, I think we are going to see massive shifts in supply chains, with the winners and losers to be determined later.  You are probably over-weighted in bonds b/c the target date fund is probably about 40% bonds also.  

Yes I have way too much in stable value. Goal is to get to 1/3 in each target fund, s&p fund and growth fund

[qofcc]

Jun 1, 2020 13:36:01 GMT -5 minnesotapaintlady said:

It's pointless to try and time the market (as you've found out withdrawing thinking it would go down).  I'd just look at your overall asset allocation and get it where you want it to be.  If you feel better doing it in smaller increments do it that way, but it's doubtful it will make much of a difference when you're looking at the long term.  

I do feel better moving it in smaller increments. Right now I'm still at positive growth vs a year ago. I feel like there should be another opportunity to put the rest back in at a lower price. It seems crazy that unemployment is high and we're in a pandemic and there's rioting in the streets but stocks are still going up.

[bean29]

This article is about inflation/deflaton/stagflation.  Basically they are saying the Fed has no room to maneuver to keep inflation at bay. 

www.jsonline.com/story/money/2020/05/29/tom-saler-could-deflation-followed-inflation/5284446002/

Who knows where the stock market will go, but I still think we will see it go down.  Paying off your debt was undoubtedly the correct move.

I don't know what you should do with your stock/bonds allocation, hopefully someone much more knowledgeable than me will advise you.

[resolution]

Jun 1, 2020 13:54:34 GMT -5 qofcc said:

Jun 1, 2020 13:36:01 GMT -5 minnesotapaintlady said:

It's pointless to try and time the market (as you've found out withdrawing thinking it would go down).  I'd just look at your overall asset allocation and get it where you want it to be.  If you feel better doing it in smaller increments do it that way, but it's doubtful it will make much of a difference when you're looking at the long term.  

I do feel better moving it in smaller increments. Right now I'm still at positive growth vs a year ago. I feel like there should be another opportunity to put the rest back in at a lower price. It seems crazy that unemployment is high and we're in a pandemic and there's rioting in the streets but stocks are still going up.

Goes to show how much the Fed is pumping into propping up the markets while we all complain about people getting their $1200. The problem is, there is no way to predict what the market will actually do if it stops looking at the Fed for reassurance and starts looking at the real world. 

I think it's a good idea to move back to your ideal allocation without trying to time things (if you do increments, make a schedule to follow within a reasonable amount of time). I am also struggling with the temptation to make my allocation more conservative, because I don't see how the market is maintaining its value and even going up during riots. However I am going to try to stay the course while things play out.

[teen persuasion]

Jun 1, 2020 13:47:35 GMT -5 qofcc said:

Jun 1, 2020 13:44:52 GMT -5 qofcc said:

Yes I have way too much in stable value. Goal is to get to 1/3 in each target fund, s&p fund and growth fund

I don't understand having 1/3 in a target date fund.  The whole point of a TDF is to set it and forget it - it does the rebalancing for you.  

[qofcc]

Jun 1, 2020 14:45:51 GMT -5 teen persuasion said:

Jun 1, 2020 13:47:35 GMT -5 qofcc said:

Yes I have way too much in stable value. Goal is to get to 1/3 in each target fund, s&p fund and growth fund

I don't understand having 1/3 in a target date fund.  The whole point of a TDF is to set it and forget it - it does the rebalancing for you.  

There are very limited investment options in the 401k and I'm 50 so I want to be a little more aggressive in investing knowing I have at least 10 years best case scenario or 20 years worst case scenario. So I use the target date as the conservative option, the S&P as the middle of the road option and the growth fund as speculative aggressive option.

[phil5185]

"""stable value fund since I didn't want to risk the market dropping more before i was able to make the withdrawal. I was thinking stocks would continue to drop. The problem is they are up from that point.

I feel like there should be another opportunity to put the rest back in at a lower price. It seems crazy that unemployment is high and we're in a pandemic and there's rioting in the streets but stocks are still going up.

I'm 50 so I want to be a little more aggressive in investing knowing I have at least 10 years best case scenario or 20 years worst case scenario. So I use the target date as the conservative option, the S&P as the middle of the road option and the growth fund as speculative aggressive option."""

I found it liberating to understand the concept that the market cannot be timed - that allows you to simply invest w/o worrying about the market dropping, climbing, etc. All predictive events & tools - wars, elections, natural disasters, charting, elliot waves, fibonacci series, stoicatics, etc - are based on studies of market history. And the Market doesn't respond to history, it responds to current actions.

IMO, you should pick a low risk fund and an agressive fund. Then adjust only the mix. Eg, if you use an 11% stock fund and a 4% bond fund, a 50/50 mix of the two provides a 7.5% return. If you want more risk, go to a 60/40 or a 75/25 mix. If you want less risk, go to a 40/60 or a 25/75. 

With your 10 to 20-year time-frame, I would want to be at least 75% in stocks, ie a 9.25% return. (about a 2.5X return in 10 years, 6X return in 20 years).  And I would avoid spending money on debt, that cuts sharply into your 6X.

[qofcc]

Jun 1, 2020 16:23:03 GMT -5 phil5185 said:

"""stable value fund since I didn't want to risk the market dropping more before i was able to make the withdrawal. I was thinking stocks would continue to drop. The problem is they are up from that point.

I feel like there should be another opportunity to put the rest back in at a lower price. It seems crazy that unemployment is high and we're in a pandemic and there's rioting in the streets but stocks are still going up.

I'm 50 so I want to be a little more aggressive in investing knowing I have at least 10 years best case scenario or 20 years worst case scenario. So I use the target date as the conservative option, the S&P as the middle of the road option and the growth fund as speculative aggressive option."""

I found it liberating to understand the concept that the market cannot be timed - that allows you to simply invest w/o worrying about the market dropping, climbing, etc. All predictive events & tools - wars, elections, natural disasters, charting, elliot waves, fibonacci series, stoicatics, etc - are based on studies of market history. And the Market doesn't respond to history, it responds to current actions.

IMO, you should pick a low risk fund and an agressive fund. Then adjust only the mix. Eg, if you use an 11% stock fund and a 4% bond fund, a 50/50 mix of the two provides a 7.5% return. If you want more risk, go to a 60/40 or a 75/25 mix. If you want less risk, go to a 40/60 or a 25/75. 

With your 10 to 20-year time-frame, I would want to be at least 75% in stocks, ie a 9.25% return. (about a 2.5X return in 10 years, 6X return in 20 years).  And I would avoid spending money on debt, that cuts sharply into your 6X.

So you think I should just go all in now and not dollar cost average over a period of time?

[phil5185]

Jun 1, 2020 17:38:55 GMT -5 qofcc said:

Jun 1, 2020 16:23:03 GMT -5 phil5185 said:

"""stable value fund since I didn't want to risk the market dropping more before i was able to make the withdrawal. I was thinking stocks would continue to drop. The problem is they are up from that point.

I feel like there should be another opportunity to put the rest back in at a lower price. It seems crazy that unemployment is high and we're in a pandemic and there's rioting in the streets but stocks are still going up.

I'm 50 so I want to be a little more aggressive in investing knowing I have at least 10 years best case scenario or 20 years worst case scenario. So I use the target date as the conservative option, the S&P as the middle of the road option and the growth fund as speculative aggressive option."""

I found it liberating to understand the concept that the market cannot be timed - that allows you to simply invest w/o worrying about the market dropping, climbing, etc. All predictive events & tools - wars, elections, natural disasters, charting, elliot waves, fibonacci series, stoicatics, etc - are based on studies of market history. And the Market doesn't respond to history, it responds to current actions.

IMO, you should pick a low risk fund and an agressive fund. Then adjust only the mix. Eg, if you use an 11% stock fund and a 4% bond fund, a 50/50 mix of the two provides a 7.5% return. If you want more risk, go to a 60/40 or a 75/25 mix. If you want less risk, go to a 40/60 or a 25/75. 

With your 10 to 20-year time-frame, I would want to be at least 75% in stocks, ie a 9.25% return. (about a 2.5X return in 10 years, 6X return in 20 years).  And I would avoid spending money on debt, that cuts sharply into your 6X.

So you think I should just go all in now and not dollar cost average over a period of time?DCA is yet another 'timing thing' that we can't know. But I can tell you that when I DCA'd  large lump sums, I was wrong every time.

[movinonup]

Market timing generally doesn't work.  Can you be right once?  Yes.  Will you consistently be right with multiple attempts?  Probably not.  I favor investing the lump sum.  If you are uncomfortable with this and you want to DCA, I favor investing at fixed intervals.  I have no insight into specific triggers for buying.

-movinonup