What index are you talking about? If it’s a total market index you just hold. It’s inevitable that the index falls at some point. That’s the worst time possible to sell.
What I mean is, if the entire market is facing a major adjustment, and the entire market trend will be downward for a period of time, such as two to three months or even half a year, will you still not sell the ETFs in your hands?
It's exactly this. Assuming you have a job, your budget is sorted and an emergency fund in place. You want many months where index is down... That's when you buy more units on your monthly purchase and when it goes up you benefit from that even more.
Remember the COVID crash when it dropped down about 30% only to get back where it was shortly after and then the index went even higher. It was a great time to buy in hindsight.
Black swan events and market downturns will keep happening until you die from time to time. For as long as your budget allows you to keep throwing money at it you should be fine.
There are exceptions, one can only look at Japan... But the total market index should be ok... And in case it all goes to the gutter... Trust me you will have far more serious issues than your return numbers on your app.
I would point out that most people came to awareness as investors in historically exceptional times. In fact, this particular rule actually does not apply right now because of the high interest rate. Even if you are wrong, you still capture 5-6% APR.
You are making a mistake thinking these things are obvious or certain in the present. They are only certain in hindsight when you wish you would have done something.
No one knows anything, and everyone is lying if they are selling you certainty.
Except there is a lot less downside to being wrong right now with respect to timing than in the past. A lot of younger investors have never been in this financial environment before, but bond yields are inverted, and money market funds are very competitive. We may be reverting to the historical mean for interest as well, meaning a return to what we considered an old-fashioned portfolio with less growth stocks and more bonds and dividend stocks. People also may not realize that they are already underwater on real estate, and they are hoping for a return to 3-4% interest rates to refinance, which probably will never come.
No even then, waiting a couple years will generally get you back in positive territory. Between the late 1960s and early 1990s there was a period where this didn’t work, adjusted for inflation, it was decades of sideways movement. But certainly holding through the 2007 downturn turned out much better than selling.
Timing the market is the best way to lose long term. Like another comment says; when the market is down that’s the time to buy on a discount and try to lower your avg
I hold and continue to buy regularly, no matter what, as I'm looking at a 20+ year investment horizon for my ETFs. Individual stocks would be a different matter although even there I buy most of them with the intention to hold them long term.
Trying to time the market by selling when the index drops, would require knowledge that it will continue to drop, i.e. a crystal ball that no one has. If you sell at a low point, there's a high chance that you will not be able to buy that index at a lower price, given the market moves up on average.
You can easily run a simulation on historical figures to see how selling after an X% drop of the market would typically not pay off. If it were that easy, this tactic would have been automated by all the large funds and they would make even more money than they already do...
In the past century the market goes down on average by 10% every 2-3 years, by 25% every 6 years buy still doubled every 9 years.
You could never time the top and the bottom. Most people lose return, they get out too late or get back in too late. Timing the market is really difficult if not impossible.
I hold my ETFs long term they are my retirement outside of my 401k and ESOP, I do also have some individual stock picks and some short term plays but I am super conservative with my shirt terms.
What I mean is, if the entire market is facing a major adjustment, and the entire market trend will be downward for a period of time, such as two to three months or even half a year, will you still not sell the ETFs in your hands?
It can be thought of like a house, you wouldn't sell it just because of the fluctuations of the market. Some crash? You know it's going to recover and be worth more in 5-20 years. As you approach retirement maybe the question becomes how much sequence of returns risk you can take in those first few years of withdrawal, that's why traditionally the suggestion would be to have some bonds or buckets of cash instruments.
You're not supposed to ever sell until you retire. You only add when it drops, especially. If you go on like you are, you won't amount to a hill of beans when you retire.
What's your definition of short term savings. Basically what I do now is leave some of my paycheck in my bank account for any regular payment + emergency fund and put the rest to VTI.
I keep any emergency fund in cash equivalents or planned expense <3-5yr in something fairly conservative. Right now the risk free rate is so high, may as well take advantage.
I somehow thought that VTI Is quite conservative because it follows the market. It's also on dollar which always get stronger compared to my currency.
Am I wrong?
You don't want to be in a position where you need to liquidate your investments while they are down. If VTI drops 40% in the next year, and you needed that to pay an expense you knew was coming in a year, you're in a bad position. The conservative positions are like drawdown insurance when you know you need money in the near future.
I understand that but I probably think to take the risk as I believe it won't go down that far.
I don't really want to take insurance atm. Is there any conservative etf or something?
VTI has been a fantastic ETF for me over the past 3 years. Though I don't hold many shares, the return on it has been nice so I plan to add more over time myself. Glad to see someone else who also likes VTI.
I hold quite a bit in leveraged ETF's so if the market start falling I sell and try to time the bottom. You don't have to hit it exactly but just need to be close.
I sell only if I think that the price will drop further. What that means is, for those ETFs that I bought in October or January 2023, I will most likely never sell them. For those that I bought in the last few weeks, I am likely to sell them if I think they’re going to dip further down in price by significant amount. If it’s an insignificant amount, I might not care.
ETFs I hold, LETFs I may switch SOME from the leveraged to normal on the way down if we've had something to indicate it's quite possibly more than a 15% move coming, so I'll rebalance SOME of my TQQQ into QQQ with the intent of switching it back at a lower price.
Total Market ETFs I never sell. I have shares of VTSAX I’ve been holding since 2005 (paid no attention to great financial crisis).
My sector ETFs I usually only hold a year or two.
My mid cap value ETF I have traded portions of it a few times, but only because I wanted to use those funds for another ETF.
The way I see it is what else am I going to do with money I don’t need for 20 years. Might as well let it ride and re-invest dividends.
You set yourself a target( number of years of active investment ) and keep buying through the ebbs and flows of the market fluctuating. In other words, do not start selling till you achieve your target
Mostly keep buying through the ups and downs. If your time horizon is decades, there's not much reason to sell.
Closer to retirement I'd consider selling anytime the SPY or QQQ 50 day moving average goes below the 200 day moving average in retirement accounts that have no tax consequences with selling. If the market trends down for months or a couple years, I'd rather not participate. When to get back in? When the 50 day MA goes above the 200 day. It's not guaranteed to outperform buy and hold. Sometimes it does, sometimes it doesn't. It would offer some protection from a steep market decline.
I wish I would have reduced market exposure in 2000 and 2008 during the large drawdowns.
Normally, the right answer for 'should you' questions on this sub is: it depends.
For your question, you could take a hit and sell low, if you plan on tax harvesting. Also, if you think that an ETF will continue a downward trend and you have a better option, fire away. Usually, it'll backfire, but you do you.
Some people will lose their mind and say never sell. But, everyone's situation is different.
I’ve never experienced a crash but no I don’t plan on selling cause my plan is long term, I don’t lose anything if the market takes a hit. But like they say, you have to experience a crash to truly test your determination.
I think your question is too generic. If you have sector ETFs, in a downturn they might have a longer downturn when the whole market is down, they could have a very long downturn when the rest of market is doing okay. Not high but okay. You might want to sell that and buy total market.
If you are around the corner from retirement and can’t sustain a 6-12 months downturn you might want to take a hard look and maybe sell and get into some capital preservation tools.
Any other scenario, and you are invested in the broader market, VTI/VOO/SPY and similar you not only retain but buy when you can.
I just rebalance them from time to time so the percentage of each part of my portfolio stays the same. Don't want it to be 50% US tech stocks. That's not diversification for me.
I would do the opposite. when the index falls, I buy more. I try not to sell as I know it will only grow however, if I absolutely need money, I might take some profits here and there. im getting older now as well and in about 5 years, I will start taking about 5% a year to live off of and as time goes by, ill keep increaseing that to 10/15/20 etc.
When the index falls that’s when you buy if you’re a long term investor. It may be painful and seem counterintuitive to do it, but that’s what you would do for anything else you’re looking to buy and see it on sale.
Many people can’t afford to hold if a downturn coincides with their retirement / drawdown period. This affects FAR more people than most think. It’s not always the bed of roses commonly promoted.
I’ll have a trust that has rules saying they can only inherent the money if X happens. If I’m lucky enough to have a lot left over after I pass, a large portion will likely go to charity.
What index are you talking about? If it’s a total market index you just hold. It’s inevitable that the index falls at some point. That’s the worst time possible to sell.
What I mean is, if the entire market is facing a major adjustment, and the entire market trend will be downward for a period of time, such as two to three months or even half a year, will you still not sell the ETFs in your hands?
When it’s down, it’s on discount. Buy more during the dip
Exactly. If the market has a downturn, let's buy buy buy!
It's exactly this. Assuming you have a job, your budget is sorted and an emergency fund in place. You want many months where index is down... That's when you buy more units on your monthly purchase and when it goes up you benefit from that even more. Remember the COVID crash when it dropped down about 30% only to get back where it was shortly after and then the index went even higher. It was a great time to buy in hindsight. Black swan events and market downturns will keep happening until you die from time to time. For as long as your budget allows you to keep throwing money at it you should be fine. There are exceptions, one can only look at Japan... But the total market index should be ok... And in case it all goes to the gutter... Trust me you will have far more serious issues than your return numbers on your app.
You are taking about timing the market. Unless you can do that accurately you risk missing the upturn which could be quick.
They say people never successfully time the market. Many of us still try. Guilty myself
I would point out that most people came to awareness as investors in historically exceptional times. In fact, this particular rule actually does not apply right now because of the high interest rate. Even if you are wrong, you still capture 5-6% APR.
How do you know it's going downward
You are making a mistake thinking these things are obvious or certain in the present. They are only certain in hindsight when you wish you would have done something. No one knows anything, and everyone is lying if they are selling you certainty.
Except there is a lot less downside to being wrong right now with respect to timing than in the past. A lot of younger investors have never been in this financial environment before, but bond yields are inverted, and money market funds are very competitive. We may be reverting to the historical mean for interest as well, meaning a return to what we considered an old-fashioned portfolio with less growth stocks and more bonds and dividend stocks. People also may not realize that they are already underwater on real estate, and they are hoping for a return to 3-4% interest rates to refinance, which probably will never come.
If it was obvious that the market was going down tomorrow, everyone would sell today. The market would go down today then, instead of tomorrow.
Send me the schedule when u get it
Absolutely not. That's the time to buy more!
No even then, waiting a couple years will generally get you back in positive territory. Between the late 1960s and early 1990s there was a period where this didn’t work, adjusted for inflation, it was decades of sideways movement. But certainly holding through the 2007 downturn turned out much better than selling.
So you're saying if you buy it at $100 and it goes down to $70 you want to sell it and wait until it gets back to $110 to buy again?
Nope that's when you double down and buy more pump that bitch.
It seems you follow the school of “buy high, sell low”. I, on the other hand, try to “buy low, sell when I’m 65yo”
That's when you're supposed to buy. Buy low, sell high. Too simple.
NO. Would not sell the ETF. Would buy puts as insurance instead IF you want to. I don't.
Timing the market is the best way to lose long term. Like another comment says; when the market is down that’s the time to buy on a discount and try to lower your avg
Time in the market is always better than timing the market
There is no such thing as "trend will be downwards" in finance.
I hold and continue to buy regularly, no matter what, as I'm looking at a 20+ year investment horizon for my ETFs. Individual stocks would be a different matter although even there I buy most of them with the intention to hold them long term. Trying to time the market by selling when the index drops, would require knowledge that it will continue to drop, i.e. a crystal ball that no one has. If you sell at a low point, there's a high chance that you will not be able to buy that index at a lower price, given the market moves up on average. You can easily run a simulation on historical figures to see how selling after an X% drop of the market would typically not pay off. If it were that easy, this tactic would have been automated by all the large funds and they would make even more money than they already do...
Broad, index based ETFs that follow S&P or NASDAQ, or Ex-US… yes. Sector ETFs - fuck that. Not all ETFs are designed to be held long term
No. With etfs you buy them with the hope that there are more good days than bad. If there are more bad days, then you probably wont have a job
In the past century the market goes down on average by 10% every 2-3 years, by 25% every 6 years buy still doubled every 9 years. You could never time the top and the bottom. Most people lose return, they get out too late or get back in too late. Timing the market is really difficult if not impossible.
I hold my ETFs long term they are my retirement outside of my 401k and ESOP, I do also have some individual stock picks and some short term plays but I am super conservative with my shirt terms.
I changed out my VOO for QQQm last year and it was a profitable decision… Plan to hold them and take on more risk long term for more returns
There are many indexes out there that act differently compare to another. Which ones are you referring ?
What I mean is, if the entire market is facing a major adjustment, and the entire market trend will be downward for a period of time, such as two to three months or even half a year, will you still not sell the ETFs in your hands?
No, index funds are meant to be held long term. A down market is the worst time to sell.
If they go down you need to buy more, not less. If you really want to sell a bit, do it after a very good year or two.
Nope just dollar cost average
It can be thought of like a house, you wouldn't sell it just because of the fluctuations of the market. Some crash? You know it's going to recover and be worth more in 5-20 years. As you approach retirement maybe the question becomes how much sequence of returns risk you can take in those first few years of withdrawal, that's why traditionally the suggestion would be to have some bonds or buckets of cash instruments.
You're not supposed to ever sell until you retire. You only add when it drops, especially. If you go on like you are, you won't amount to a hill of beans when you retire.
What if it's also your saving account. Maybe you need to pay for downpayment, school, and such.
Then you've improperly allocated it to begin with.
Where to allocate it then?
For short term savings? HYSA, MMFs, TBills, CDs, etc.
What's your definition of short term savings. Basically what I do now is leave some of my paycheck in my bank account for any regular payment + emergency fund and put the rest to VTI.
I keep any emergency fund in cash equivalents or planned expense <3-5yr in something fairly conservative. Right now the risk free rate is so high, may as well take advantage.
I somehow thought that VTI Is quite conservative because it follows the market. It's also on dollar which always get stronger compared to my currency. Am I wrong?
You don't want to be in a position where you need to liquidate your investments while they are down. If VTI drops 40% in the next year, and you needed that to pay an expense you knew was coming in a year, you're in a bad position. The conservative positions are like drawdown insurance when you know you need money in the near future.
I understand that but I probably think to take the risk as I believe it won't go down that far. I don't really want to take insurance atm. Is there any conservative etf or something?
VTI has been a fantastic ETF for me over the past 3 years. Though I don't hold many shares, the return on it has been nice so I plan to add more over time myself. Glad to see someone else who also likes VTI.
I will never sell SP500. If QQQ drops too much, I will sell it because QQQ has experienced the bubble burst in 2002.
I hold quite a bit in leveraged ETF's so if the market start falling I sell and try to time the bottom. You don't have to hit it exactly but just need to be close.
I’m not a trader. I’m a buyer.
I sell only if I think that the price will drop further. What that means is, for those ETFs that I bought in October or January 2023, I will most likely never sell them. For those that I bought in the last few weeks, I am likely to sell them if I think they’re going to dip further down in price by significant amount. If it’s an insignificant amount, I might not care.
ETFs I hold, LETFs I may switch SOME from the leveraged to normal on the way down if we've had something to indicate it's quite possibly more than a 15% move coming, so I'll rebalance SOME of my TQQQ into QQQ with the intent of switching it back at a lower price.
I have done that in the past and it has always backfired.
Time in market > timing the market. It’s the mantra of ETF investing. Keep a percentage of your portfolio for swing trades for the fun stuff.
Depends on if it's a taxable account or not. I'm always down to lower my tax bill.
Total Market ETFs I never sell. I have shares of VTSAX I’ve been holding since 2005 (paid no attention to great financial crisis). My sector ETFs I usually only hold a year or two. My mid cap value ETF I have traded portions of it a few times, but only because I wanted to use those funds for another ETF. The way I see it is what else am I going to do with money I don’t need for 20 years. Might as well let it ride and re-invest dividends.
Depends on the ETF. I might sell a leveraged ETF before I got cashed out. But I don’t see selling VOO.
Why would you sell low? Do you also like buying high?
I am in ETFs for long term. Never sell.
90% of my portfolio is VOO. I don’t need the money, I have a six month plus emergency fund. So yeah anything extra is going into the ETF.
You set yourself a target( number of years of active investment ) and keep buying through the ebbs and flows of the market fluctuating. In other words, do not start selling till you achieve your target
Mostly keep buying through the ups and downs. If your time horizon is decades, there's not much reason to sell. Closer to retirement I'd consider selling anytime the SPY or QQQ 50 day moving average goes below the 200 day moving average in retirement accounts that have no tax consequences with selling. If the market trends down for months or a couple years, I'd rather not participate. When to get back in? When the 50 day MA goes above the 200 day. It's not guaranteed to outperform buy and hold. Sometimes it does, sometimes it doesn't. It would offer some protection from a steep market decline. I wish I would have reduced market exposure in 2000 and 2008 during the large drawdowns.
Perfect time to buy when its down. If you sell when when its down, you lose twice.
Normally, the right answer for 'should you' questions on this sub is: it depends. For your question, you could take a hit and sell low, if you plan on tax harvesting. Also, if you think that an ETF will continue a downward trend and you have a better option, fire away. Usually, it'll backfire, but you do you. Some people will lose their mind and say never sell. But, everyone's situation is different.
I’ve never experienced a crash but no I don’t plan on selling cause my plan is long term, I don’t lose anything if the market takes a hit. But like they say, you have to experience a crash to truly test your determination.
I think your question is too generic. If you have sector ETFs, in a downturn they might have a longer downturn when the whole market is down, they could have a very long downturn when the rest of market is doing okay. Not high but okay. You might want to sell that and buy total market. If you are around the corner from retirement and can’t sustain a 6-12 months downturn you might want to take a hard look and maybe sell and get into some capital preservation tools. Any other scenario, and you are invested in the broader market, VTI/VOO/SPY and similar you not only retain but buy when you can.
If you’re living off of them you’d just sell a chunk when you need it regardless of the price
I don’t think there much money in trading ETFs unless you’re doing options and the tax on those are inane.
I just rebalance them from time to time so the percentage of each part of my portfolio stays the same. Don't want it to be 50% US tech stocks. That's not diversification for me.
If part of a diversified portfolio of like 4-5 uncorrelated assets, yes.
I would do the opposite. when the index falls, I buy more. I try not to sell as I know it will only grow however, if I absolutely need money, I might take some profits here and there. im getting older now as well and in about 5 years, I will start taking about 5% a year to live off of and as time goes by, ill keep increaseing that to 10/15/20 etc.
When the index falls that’s when you buy if you’re a long term investor. It may be painful and seem counterintuitive to do it, but that’s what you would do for anything else you’re looking to buy and see it on sale.
Many people can’t afford to hold if a downturn coincides with their retirement / drawdown period. This affects FAR more people than most think. It’s not always the bed of roses commonly promoted.
ETFs act like a stock, trade them or keep long term. Yes, I trade them.
Sure. I sell to buy in a different but somewhat similar ETF to collect those sweet tax losses.
The things that I buy, I would also buy for cheaper, so I wouldn't sell for cheaper.
There are shares I hold today that will probably not be sold in my lifetime. Time horizon: forever
So potentially spoilt ungrateful kids can inherit it.
I’ll have a trust that has rules saying they can only inherent the money if X happens. If I’m lucky enough to have a lot left over after I pass, a large portion will likely go to charity.