Thought Bubble

Imagine you had $1 Million in the stock market at present (ETF, LICm, Individual Stocks)

Should you sell everything now and re-enter the market at a different time?

It's no different a question to, I have $1 Million saved or via inheritance,, should I invest now or enter the market at a different time?

Choosing to invest a lump sum now, is exactly the same as choosing not to sell now

 

No it’s not.

What is your capital gain position?

 

What is this sell word you speak of

 

I did just that. (but with $100k not $1 Million.)

Sold everything at the peak just before the GFC. A mixture of direct shares and managed funds (including a geared share fund....you should have seen the return on that baby!). Thought I was the next Warren Buffet.
Problem is I left my re-entry too late and missed a lot of the rebound. I did some figures and despite my perfect timing on the sell I would have been in front now had I just left everything where it was and rode it out. I realised that I wasn't Warren Buffet and that I just got lucky.
My strategy now is to stay invested for the long term but always have some powder dry to buy on a downturn when the opportunity presents itself.

They say that time in the market is more important than timing the market. I used to think this was made up by financial planners to protect their trailing commissions but after my experience with timing I think it has merit.

Willy

 

Can’t agree. Need to add in another decision rule. Younger with plenty of human capital left vs near / in retirement. Think of approaching or in early stage of retirement and you lob your $1 Mil (most of your net wealth) into the current market including plenty of International which is what so called experts keep pushing. You’re unlucky experiencing a Nasty crash with protracted drawn out bear market. How well do you think that retiree is coping not just financially but EMOTIONALLY (that is if their partner hasn’t already killed them).

In a nutshell lump sum investing is much less riskier for an accumulator.

 

This is an interesting question. I wonder if selling just before a GFC type crash and buying in at the bottom would be a good strategy. However, there are just way too many risks involved:
- CGT on what you have made - this is one advantage of the higher yielding LICs, their capital appreciation is less.
- Timing the market both on the sell and buy side - one of my fundamental assumptions is that no-one knows what will happen next. That makes the timing impossible without dumb luck. I'm not a gambler. Remember that the market may go up after selling.

My strategy is to increase my dry powder as the indicators say that the market is more overvalued. Hopefully my algorithm for buy-in during the downturn means I don't miss the bottom, but once again, it will require some luck.

The only time I will consider selling is as I approach retirement and want to reduce volatility (this is to reduce sequence risk) by buying more lower risk assets - E.g bonds / cash. Obviously I will stop buying into equities at the same time but I may not be able to get my risk free allocation high enough without selling some equities.

When I think about selling, I just slap myself and take a cold shower.

Not advice.

 

Thanks all, it was a thought bubble and there are additional considerations as per above