Time to pull money out of the stock market?

[OliverQ]

Dow Jones broke 24,000 today over the strong odds that corporations and the rich will get their massive tax cut. Of course, every time these big tax cuts go through, they crash stock market crashes and destroys everyone finances.

Is it now dangerous to leave money in the stock market?

[maxsolomon]

1. I don't know, what do you think?

Sounds like you think it is.

[NRaleighLiberal]

2. not according to my financial adviser.

But she is watching carefully. Her thinking - the market has no soul - and despite what many think, there is no real reasoning, connection to presidents or politics. It is business - it does what it does.

She has me in a slew of different mutual funds - when things get overheated, she takes some profits and moves things to cash.

She does think that a big correction is coming - and that in nearly all cases it happens and people don't believe it at first, so some loss is inevitable.

She is very liberal, progressive thinking - and her advice for us for the past 7 years has been excellent.

[unblock]

6. yeah the problem with predicting crashes, even in bubble markets, is timing.

it's pretty easy to say stocks are overpriced and a crash is coming.

but that could be a year and a half from now with the dow at 30,000 before that happens. then it crashes 5,000 points in a week, but that still leaves it up from where it is now.

who knows.


that said, the case for strong upward movement is getting weaker and weaker, and the case for a crash is getting stronger and stronger.

which is why i'm mostly in, but easing off and keeping a close eye on the exit.

[NRaleighLiberal]

9. exactly what we are doing - I have 1/3 in chash, 2/3 still invested, but a wide variety.

so I am not getting the highest of highs, but also not the lowest of lows. My account is up 25% for the year, which is making me pretty happy, sitting here at 61 and retired (well, from the corporate world - as an author, speaker and my wife as a quilter, we are just patching things together and being frugal!)

[unblock]

3. i'm nearly 100% in stocks nearly all the time, but i'm easing off now

and may get out altogether soon. i might even put on a small short position.

it seems any perceived market bump from this idiotic tax bill is already priced in, meaning the market will take a "profit-taking" hit if it passes or a much big "oh crap" dive if it fails.

either way, it's hard to build a case for any big further upward movement once the tax situation is resolved one way or the other.

especially with no real agenda from the white house other than "all bigotry all the time".

[klook]

4. Never try to time the market.

It's a loser's game.

Keep a diversified portfolio, and don't panic-sell at a low price either.

I would also add, buy index funds instead of individual stocks.

Also, I am not a financial professional or any kind of expert -- just a regular schmuck whose retirement depends on investing wisely. So take my advice with a grain of salt, because you may have a different situation or different priorities.

This advice from Vanguard may be of use. From the section called Principles for Investing Success:

4. Maintain perspective and long-term discipline

Investing can provoke strong emotions. In the face of market turmoil, some investors may find themselves making impulsive decisions or, conversely, becoming paralyzed, unable to implement an investment strategy or rebalance a portfolio as needed. Discipline and perspective can help them remain committed to a long-term investment program through periods of market uncertainty.

[Yonnie3]

14. I was scrolling down to make a comment and see you already made most of it. A bit more from me.

I am now 90% retired. I tried to time the market back in the time frame of the dot com crash and did great until I did poorly.

Since then I have moved everything to Vanguard. I picked and stuck to a nearly all index allocation between cash, bonds and stocks with a portion in international stocks and bonds. As my time horizon shortens I have shifted the allocation gradually towards bonds. I re-balance periodically, which causes me to sell high and buy low.

Since I made this change in investment philosophy, I've done well. Careful attention to which type of asset is in taxable and non-taxable accounts has significantly reduced my tax burden.

I am able to distance myself from the investments and relax about them. The markets will fluctuate with or without my attention.

If you don't want to do this allocation yourself, Vanguard (and others) offer retirement target funds that gradually shift the allocations as you get nearer to retirement. Vanguard has very low costs, some other firms don't.

[klook]

16. Yes indeed!

You and I are of similar minds. Before I get to the drawdown phase, I definitely need to set up my accounts to avoid unnecessary taxes.

I guess the best strategy would be a) become a multi-millionaire, b) buy a Congress member or two, and c) sit back while they create laws that exempt me from most taxes.

Short of that, I'll have to manage my own affairs.

[Yonnie3]

24. Some people are saying, not me of course, but many people are saying ...

and we will look into it, that the new tax bill makes buying your own Congressmen tax deductible. Although I am joking, I wonder if they will make political contributions deductible.

The tax avoidance (efficiency) is simply to take advantage of the favorable tax treatments that dividends and capital gains get. It was counter intuitive to have my IRA heavy in bond funds and my non-retirement account heavy in stock funds, but makes sense because all the dividends and capital gains that are part of my IRA will get taxed at regular income rates upon distribution. I've also taken distributions from the IRA when I didn't need them because I was in a low tax year thereby avoiding taxes later. I consider myself very fortunate that I was able to save, both from a employment standpoint and a psychological one. I lost my high dollar job in 2004 and have managed to get by because I had no debt.

Nice to meet a like minded spirit.

[lapfog_1]

5. Buy on the rumor (or hold) and sell on the news

The tax giveaway is baked in the cake (or the market).

We absolutely know that this bill is NOT a stimulus to the economy.

Stocks MAY rise a bit more as corporations use the windfall to do stock buy backs.

Now would be the time to put in stop losses on all your stock holdings and move them up on any stock that advances over the next year.

2019 is the year of the crash (as it becomes evident that the economic growth rate actually SLOWS due to reduced demand).

Giving the rich more money in the hopes that they invest in an expansion is complete nonsense. We are awash in cheap money now... there has to be demand... and that means the masses of consumers have to have more money to spend. They don't. And they won't.

Not to mention that IF any company returns to manufacturing in the US from overseas (which could happen) they will not be hiring that many additional workers. Automation is set to take over all factory work (and a lot else besides that).

[Beakybird]

7. I made the mistake of pulling half my portfolio out of the market after the election

but at the beginning of the year, I invested 1/6th of my portfolio in solar and wind ETFs. The solar ETF is up 45%.

[RobinA]

15. I've Been

seriously thinking about this since the election.

First I thought, Well, Trump was elected, which is an obvious disaster so I should probably diversify a bit. Didn't, made money.

Then I thought, Well, Trump is in now and it will become obvious to all the idiots who ran up the market that he will not do anything he said he would, so I should probably diversify. Didn't and made money.

Late summer I figured, Well, Trump has been in for awhile, has done nothing he said and people are bound to realize it EVENTUALLY, so maybe I should diversify. Didn't, made money.

Then, It's October, crash month, Trump is now a proven disaster, so I better...oh, what the hell. Up is down and down is up.

So now I'm thinking...

[gvstn]

8. My no evidence guess is yes

Too long without a correction. After Christmas but before end of March. Probably a big drop, couple thousand followed by a near recovery and then a more drastic and long lasting drop a few months later. That's been the pattern and with Trump so volatile even the computer algorithims that make most of the decisions and which seem to ignore current news happpenings will be obliged to make corrections.

[OnDoutside]

10. As it looks like the Repug's are going to pass the Tax Bill in the Senate, I would have thought it

selling within 24 hours of that, would be the right thing to do. It then goes into conference, and there's no guarantee the final bill will pass.

[Yavin4]

11. Make sure you are liquid enough to get through another 2008 economic style collapse

After that amount, put it into the market. That's how I play it. I have enough to survive a year or two in cash should the markets collapse again, and I have money in the market when it goes up.

[PoindexterOglethorpe]

12. I recall a lot of people here saying they were getting entirely out of the market

immediately after the election. Don't know how many did, but they've missed an impressive run-up.

I am well diversified, and I understand (in no small part because I've been through more than one market down-turn) that staying in for the long haul is always the best strategy.

I have been taking some money out to do things like pay down my credit card bill, to do some landscaping, stuff like that.

[roamer65]

13. If you can take a decent profit, I would say yes.

[NCTraveler]

17. Historically, the stock market has done well for long-term investors.

We have built up an extremely strong investor class in this country. Too strong. They will keep the wheels moving until the spend every penny you get class has no pennies left.

It simply depends what stage of life you are in and what investments make you feel comfortable.

[grantcart]

18. Yes. A government shutdown always triggers a loss

Twenty five percent in 2011 and six percent in 2013.

In addition we are sitting on a 20% Trump bubble which will pop if they don't get their tax bill.

Now if you have any medical or legal issues to handle go ahead

(never take advice from anyone on an internet chat room)

[Blue_true]

19. Move to high security cash instruments over the next four months.

In 2007, I did that and watched the bloodbath with calm. I am out of the market again after riding Obama's economy upward. I compare the current market to Japan during the early nineties. The Japanese stock market hit high after high before it started to plunge, for close to 25 years now it at best has gone sideways.

[Dawson Leery]

21. +1,000,000

[L. Coyote]

20. Half of it yes, and half no.

Good luck figuring out which is which. Oil/coal is bad, wind/solar is good .... might be a good place to start shifting investments.

A lot will change in a few days if the tax bill passes. Suddenly a bunch of gig corporations will be handed a giant paycheck, in effect.

[Dawson Leery]

22. If these cuts pass, all that cash

will go into speculation.

As the 1870's/1920's/1980's/2000's demonstrated, the combination of easy money to wealthiest and little regulation on the markets,
a bubble is guaranteed to form.

Since the economy has been growing for 8 and 1/2 years now, the bubble will not have too much room to grow.

Passage of the tax cuts will ensure a hard landing after 1 year or 2 of speculation.

[Calculating]

23. Timing the market usually fails

Just make sure you are diversified and don't panic sell during recessions. You'll usually come out ahead.