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Best strategy for Bear market

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  • Best strategy for Bear market

    Have been following WCI for 1 year and have found it immensely helpful. I am a novice in all matters pertaining to finance. Assuming the pessimists are true and we enter a bear market, what would you advise for the following situation.

    Loans: Nil

    Mortgage: bought a condo but no mortgage now

    Cash: 150k in savings account but looking to buy a house at some point in the near future..

    Retirement fund:300 k with about 50k in money market fund which I

     

    Questions:

    1. I have 250k retirement fund in 2 "all in one" target retirement funds.I have lost ( albeit virtual loss) about 8% on the retirement funds in this year just like others, due to the market.  I have no problems with that as I am looking at a long term future.However, Would anyone recommend removing them into something more conservative like bonds till we see the worst of the predicted bear market and then reinvest straight back into these target retirement funds?

    2. Would anyone recommend investing the 50K in the retirement funds lying in the money market fund into the market at this point of time?

    2. If yes, what would you go with? The classic index funds or something more aggressive. Again, I am looking at the long term.

    3. Given the markets current shape, is this a good time to go with robo-advisors or does it require a more active financial planner?

    Thanks so much and keep up the great work WCI.

    RB

     

  • #2
    I'll give the classic boglehead answers which I agree with...

    1) Keep them where they are at and don't try to time the market. History has shown you most likely will be wrong on your timing.

    2a) No matter what the market is doing, invest all money that is not needed in the short-term.

    2b) As long as your Target fund is a low cost one (less than 20 basis points), why not continue with them? Do not change your asset allocation based on how the market is doing.

    3) How about neither? The benefit of a roboadvisor is for tax lost harvesting which wouldn't apply to tax advantaged retirement accounts. A financial planner would for the most part just hold your hand (for a fee) to prevent you from taking all your money out before the turnaround.

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    • #3
      Agree with above.

       

      While it feels riskier to invest now, it is of course safer than it was 8% ago for sure. That does not mean we wont see continued pressures or even a bear market or a rip your face off rally (we dont know!), but if you have the means, periodically and consistently invest. These times are a long term gift. I hope to get a good bit more money in at these levels and chance willing even lower.

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      • #4
        It is great that you have no debt.  I would immediately invest the money in your retirement account.  You need to look at the target date fund that you currently have.  You want low fees.  You also need to examine the asset allocation in the fund.  The bond positions, foreign stock percentage, and glidepaths all differ.  By glidepath I mean how rapidly the fund converts from mostly stocks to bonds. If you are comfortable with these then just put the money (50k) into this fund.  If you post what the fund is and your age posters can better help you. The 150k in cash is ok if you think you are close to buying a house.  You really only need 3-6 months expenses unless your job is unstable.  Don't carry excessive cash when you are young just because you are afraid of a bear market.  Markets go up and down but cash pays next to nothing these days.

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        • #5

          1. Your TDF's already have bonds (unfortunately) - you need less, not more. I consider bonds quite risky, not conservative, unless you are buying individual bonds timed to mature at a short-term date of need for a specific goal in the short term (less than 5 years). Otherwise, you are sacrificing long-term growth and income to the wolf in sheep's clothing (bonds and cash).

          2. No reason to keep cash in a tax-friendly retirement plan - at any point in time - unless you plan to use it in the next 5 years. The end of the sentence for your first reference to the cash is cut off and I'm not sure if there is relevant information I'm missing, however.

          3. I would go with a well-balanced equity mutual fund/ETF allocation, same as where I'd recommend you put the rest of your portfolio, as outlined in Simple Wealth, Inevitable Wealth: 6-way split among LC Growth, SC Growth, LC Value, SC Value, International, and REITs.

          4. The current market condition is irrelevant as to the type of assistance you seek, if any.


          An 8% loss is rather extreme for last year and not "just like others". I believe it is a direct result of not investing in a well-balanced portfolio of equity mutual funds/ETFs but were in TDFs. With a real long-term plan and a strategy for accomplishing the goals in said plan, you will be far more likely to mirror the market over time. I'm not sure where you are along the trajectory toward retirement, but from the facts presented, you appear to be in robust financial shape, presuming, of course, that other pieces are in place such as OO Disability, Term Life, etc.

          If you can access any pre-tax retirement money, this would be a good time to consider a Roth conversion.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            Thanks all. That was very helpful.

            If one did not have the choice of vanguard in retirement funds and had to choose between Fidelity, TAA-CREF, VOYA  - are there any clear winners? or is it more of an individual choice/ look for low expenses in good index funds.

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            • #7
              Hope you'll read the book I suggested. You'll have the clarity to make those decisions. There are no clear "winners" (except for you) as long as you can muster the discipline to follow the model Mr. Murray suggests and stick with low-cost funds that don't drift into areas that don't fit your portfolio model and invest only after figuring out your short-term (5 years) and long-term (beyond 5 years) plan.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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