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Comment by shostack | Hacker News Reader

So what should Joe Investor who is not a sophisticated investor, but likely has a ton tied up in say, an Index Fund, be doing right now?

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Stay the course if the investment time horizon is 20+ years. Make sure you have an asset allocation you are comfortable with and aren't taking on too much or too little risk. Do nothing and ignore the noise.

Taking too much risk I understand, but what does it mean taking too little risk in this context?

If you're 30 you probably shouldn't have a bunch of money in govt bonds. If you're 65 it may be a really good idea.

I didn't sell everything, but I did sell a few things to take some profits and dumped a few losers to help offset those capital gains with some losses on things I really wanted to get out of. I'm going to over 75% cash right now. If the market drops 20% then I'm going to slowly start dollar cash averaging in to see if it trends back up. If it doesn't I'm just going to stay cash heavy.

If I had been smart enough to buy Google, Facebook, or Amazon a few years ago I would be taking some or maybe all profits there. If Apple goes below 100 I will start buying again and possibly selling covered calls on it.

My IRA's have a really long time horizon so although I'm still putting cash in them every month I'm not buying anything. I'm not selling anything in there either because I just buy SPY (S&P ETF) and occasionally some down and out sector ETFs every month.

Cash out. Wait for the bust. Buy back in.

And what about if the majority of that is in a 401k?

Same applies. Change allocation to cash. Then change back after crash.

The trouble with switching to cash is then you've got to pay income tax on the capital gains. You'll be buying back in with less (proceeds - taxes).

Investment funds will offer a cash investment option. This invests in currencies. Along with government bonds it's considered low growth low risk investment.

Nobody would advocate actually withdrawing from an investment account. Just move it to safer investment options.

Moving it incurs capital gains taxes.

Even if you passively invest in a mutual fund, the funds internal transactions show up as capital gains that get reported to the IRS, and you have to pay the tax.

Not if it is in a tax deferred retirement account: there are no cap gains incurred by reallocating or NAV distributions unless there's an actual cash withdrawal. This is specific to 401ks & traditional IRAs only.

You are woefully misinformed. I hope you have not been keeping money in a particular 401k fund because you thought you couldn't change the allocation without paying taxes...

Not if it's in a 401k.

I don't necessarily agree with the market falling, but there is no reason you can't move your 401k indexes into a cash position at the brokerage and rebuy later. Not that I think thats a good idea

One thing I've learned from HN over the years - be sure to ignore all financial and medical advice!

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