Hacker News Reader

Comment by DailyHN | Hacker News Reader

Is now the time to opt for the "higher risk" option in your retirement portfolio?

IMO, now is the time to compare your existing portfolio with your target portfolio. I.e. you have a preferred amount of stocks/bonds, and given recent market events that is likely not in alignment. So sell your winners and buy more losers.

The first part I definitely agree with. Many peoples' portfolios may be wildly unbalanced as a result of the market movements.

They call this "trying to catch a falling knife". Good luck.

Without a doubt, you’re better off buying now than when markets were 50% higher a few months ago.

It's a fire sale though. So you can also protect your capital as best you can and get in there. Establish a rule to sell the stock if it falls another N%, and jump on the stock sale. HN is generally super risk-averse but there are ways to moderate risk with finer-grained control than "don't try to catch a falling knife."

You don't buy all at once, though - you can "dollar cost average" into the market by buying index funds in small chunks when there are big dips, and stop buying when it stops falling.

You won't predict the bottom, and you might not get all of your money in in time, but you'll still wind up ahead when the markets recover.

And they will recover, unless we somehow get to a point where the entire monetary system collapses. The only question is whether it will take a few weeks, months, years, or decades.

Pick your starting point depending on how long you can wait. Buying early makes you less likely to miss the dip, but it might take longer to start seeing green numbers. Buying late means that you stand to gain more in the short term, but you might not get all of your money in in time.

Personally, I think we're still straddling the "early" line around now, but your guess is as good as mine. This is what they call a 'roller coaster' :)

Only if you are far enough from retirement, or have enough assets, that you can handle the risk. Same as any other period.

20+ years to retirement

For reference the typical advice for risky allocations is at least 10 years, but longer is better.

+ you are sure your job is secure enough that you won't need the extra cash as cushion before being able to find another job.

This shouldn't matter at all, since there are huge penalties associated with taking money out of your retirement funds before you're 59 and a half years old.

If your job is not secure, you should account for that by increasing your emergency funds (typically a savings or money market account).

There's not always penalties. Look up what's called the Section 72(t) distribution. This is a "retire early" option, where you can start taking a monthly distribution at any age, without penalty (income tax still applies), as long as you maintain that distribution for the longer of five years or until age 59.5.

I think what is scaring the market is the perspective of a lockdown (and its economic impact). I don't see anything in the news now and for the foreseeable future that would reverse that.

As long as you've got the stomach to keep stuff there in the face of high volatility.

One approach that gives up some of the return but escapes the most volatile time:

https://mebfaber.com/timing-model/

No, because higher risk means buying more stocks. Nobody has a magic eight-ball, but given how the economic changes that we'll be seeing have barely started, I strongly doubt that:

1. We are close to having hit the bottom.

2. Once we do hit the bottom, there will be a magical, fantastic, quick recovery, that you will miss out on if you don't act quick.

If either one of these is true, then buying stocks right now is jumping the gun. If both of them is false, you should buy everything you can.

If you want to be safe, liquidate, and sit on cash. If you want to be greedy, the best play may also be to liquidate and to sit on cash.

Reply on news.ycombinator.com