Good time to implement plan?

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just_learning
Posts: 18
Joined: Sat Aug 03, 2019 2:44 pm

Good time to implement plan?

Post by just_learning »

Hello,
A friend has investments that are roughly 35/65 (stock/bonds+CDs). I have prodded him to make a plan and pointed him to resources on this website. He would like the split to be 65/35 or 60/40 (stock/bond+CD).

Question- Although he would like to get the ratio in line with what he would like it to be, he is afraid to pull the trigger at the moment given all the talk about "imminent" stock market downturn and all the "turmoil" in the bond market (record low yields etc.)

What can I tell him? How can he approach it?
Since bonds are at a record high, I suppose now would be a good time to sell them and reduce the Bond portion of the portfolio in line with his requirement....?
And, should he then just go ahead and buy stocks though it seems to be not far from its peak?

Thank you for your time.
livesoft
Posts: 76148
Joined: Thu Mar 01, 2007 8:00 pm

Re: Good time to implement plan?

Post by livesoft »

For someone who is afraid to pull the trigger, I don't think they will change. So if I am standing in front of them, then I tell them directly to their face: "I see you are afraid to pull the trigger, I don't think you will change, so I cannot give you any advice. You gotta do what you gotta do."

Amazingly, they figure it out on their own.
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Small Savanna
Posts: 319
Joined: Sat Feb 09, 2019 2:27 am

Re: Good time to implement plan?

Post by Small Savanna »

Although there are lots of logical arguments against dollar cost averaging, there are emotional arguments for it. If this is too big a step to take all at once, break it into a series of smaller steps.
esteen
Posts: 191
Joined: Thu May 23, 2019 12:31 am

Re: Good time to implement plan?

Post by esteen »

If he wouldn't want to be in a 60/40 portfolio during an economic downturn, he should never be in a 60/40 portfolio. The point of finding the correct AA for an individual is one they are comfortable to stick with in good times and bad.

Sounds like he has some more thinking to do about what he truly wants his ongoing asset allocation to be.
CurlyDave
Posts: 2580
Joined: Thu Jul 28, 2016 11:37 am

Re: Good time to implement plan?

Post by CurlyDave »

Look at a graph of S&P or TSM vs. time.

They are nearly always at their peak. To really demonstrate this, cover the last few years with a piece of paper, and look at what anyone would have thought at some prior time. Then look at what really happened.
MotoTrojan
Posts: 11082
Joined: Wed Feb 01, 2017 8:39 pm

Re: Good time to implement plan?

Post by MotoTrojan »

Maybe find him some articles from 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2018 saying the same thing.
3funder
Posts: 1581
Joined: Sun Oct 15, 2017 9:35 pm

Re: Good time to implement plan?

Post by 3funder »

Domestic stocks and global bonds are indeed expensive right now; however, unless your friend is Nostradamus, and I'd rather doubt he is, he should invest right now according to his preferred asset allocation. If he's still reluctant to do so, he should modify his asset allocation to reflect something more conservative. If he wants to keep his new allocation, he should consider investing in international stocks to mitigate the risk of purchasing new shares at high valuations. This isn't to say he shouldn't invest in domestic stocks; rather, he should invest in international stocks alongside them.
Global stocks, US bonds, and time.
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