Getting back into the market
My retirement portfolio consisted of Vanguard index stock and bond mutual funds held in an IRA managed by VG. When the market tanked last week I called a VG adviser to ask what to do. He told me that because my allocations were 50% stock and 50% bond I would be ok – the bonds would hold their value and the stocks would rebound over time. Then I read your piece Beware Of Bonds which was contrary to what the adviser said so I liquidated everything (about 1.5 million) and put the proceeds in a VG Treasury money market fund. I am 71 years old; don’t need to withdraw any money to live on but will have to make RMDs starting next year. Should I stay in the money market safe haven forever or get back into the stock and bond market at some point? If your answer is get back in, what factors should I consider in determining when?
Terry Says
Whew — you liquidated both stocks AND bonds? Were they inside an IRA or other retirement account? First thing you need to do is total up your tax obligation if the sales were made OUTSIDE a retirement fund.
I never advocated selling ALL stocks, but now that you sold stocks it will be very difficult to figure out when to get in – especially after the recent rally. And maybe you don’t really have to buy stocks now, or for a year or two. The economies of the world will be uncertain.
But, I’m glad you sold the bonds. That money can definitely stay safely in “chicken money” short-term investments. BUT if it was as much money as you indicate, you might want to purchase Treasury bills direct from the government. You don’t do that through a broker, so read this column about how to buy Treasury bills. That way you solve the problem of being above the insured deposit limit of %250,000.
Here’s what you’re looking at for the future: All this trillions of dollars being created might lead to inflation down the road. That’s generally good for stocks — but very bad for bonds. Which is why at your stage of life, you don’t need to worry about getting back into bonds!
