13% time to cash out?

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greenv
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Re: IMPORTANT: Use www.gyroscopicinvesting.com

Post by greenv » Thu Aug 25, 2016 9:41 am

Does it make sense to cash out with a 13% YTD taxable account based on the fact that historically the HBPP seldom yields over 13%. I am happy with 13% but I would pay a huge tax if I cashed out. I am retired and in the PP for the long run so I would have to buy back in Jan 2017. This means I would be timing the Market but I hate to lose the 13%?
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l82start
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13% time to cash out?

Post by l82start » Thu Aug 25, 2016 10:04 am

moved from another thread
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Re: IMPORTANT: Use www.gyroscopicinvesting.com

Post by iwealth » Thu Aug 25, 2016 10:17 am

greenv wrote:Does it make sense to cash out with a 13% YTD taxable account based on the fact that historically the HBPP seldom yields over 13%. I am happy with 13% but I would pay a huge tax if I cashed out. I am retired and in the PP for the long run so I would have to buy back in Jan 2017. This means I would be timing the Market but I hate to lose the 13%?
Why January 2017? Nothing magical happens when you cross into a new year.
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Tyler
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Re: IMPORTANT: Use www.gyroscopicinvesting.com

Post by Tyler » Thu Aug 25, 2016 10:32 am

greenv wrote:Does it make sense to cash out with a 13% YTD taxable account based on the fact that historically the HBPP seldom yields over 13%. I am happy with 13% but I would pay a huge tax if I cashed out. I am retired and in the PP for the long run so I would have to buy back in Jan 2017. This means I would be timing the Market but I hate to lose the 13%?
The best thing is to do absolutely nothing. Cashing out your entire retirement-sized portfolio would be a truly massive tax hit, and doing that every time you experience a decent gain harms the gain. Trying to actively time the markets is a far greater threat to your retirement than the inherent downside risk of the PP.

You're retired, and IMHO are invested in a top-notch retirement portfolio. When you've won the game, stop playing!
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Re: 13% time to cash out?

Post by Reub » Thu Aug 25, 2016 12:34 pm

If you feel obliged to do something then consider rebalancing. The PP is for life and should weather any storms ahead.
greenv
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Re: IMPORTANT: Use www.gyroscopicinvesting.com

Post by greenv » Thu Aug 25, 2016 2:34 pm

Tyler wrote:
greenv wrote:Does it make sense to cash out with a 13% YTD taxable account based on the fact that historically the HBPP seldom yields over 13%. I am happy with 13% but I would pay a huge tax if I cashed out. I am retired and in the PP for the long run so I would have to buy back in Jan 2017. This means I would be timing the Market but I hate to lose the 13%?
The best thing is to do absolutely nothing. Cashing out your entire retirement-sized portfolio would be a truly massive tax hit, and doing that every time you experience a decent gain harms the gain. Trying to actively time the markets is a far greater threat to your retirement than the inherent downside risk of the PP.

You're retired, and IMHO are invested in a top-notch retirement portfolio. When you've won the game, stop playing!
Great logical reply. Thanks.
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buddtholomew
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Re: IMPORTANT: Use www.gyroscopicinvesting.com

Post by buddtholomew » Thu Aug 25, 2016 3:10 pm

greenv wrote:Does it make sense to cash out with a 13% YTD taxable account based on the fact that historically the HBPP seldom yields over 13%. I am happy with 13% but I would pay a huge tax if I cashed out. I am retired and in the PP for the long run so I would have to buy back in Jan 2017. This means I would be timing the Market but I hate to lose the 13%?
I too feel the need to harvest gains before tempting fate for too long. As others have already mentioned, the only logical response is to rebalance to your HB-inspired allocation.

You are not being greedy by staying invested at your target percentages, nor are you fearful and converting to cash with that approach. Keep in mind PP CAGR returns that you see INCLUDE the good years and the mediocre ones ;)
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Kbg
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Re: 13% time to cash out?

Post by Kbg » Fri Aug 26, 2016 11:01 am

Well, if one feels compelled to do this have you looked at the annual returns year by year? Do it. You may have a different take afterward. It is relatively rare for PP to have a down year at all, so why A) hinder compounding and B) hinder it twice by giving some of it to the government. Gains and losses are a maybe, taxes are an always.

From a tax planning perspective, good heavens you want to "cash out" losses not gains. Selling gold and waiting for a month would have been awesome/brilliant the previous three years vis a vis taxes. If you cash out now you just turn XX% over to Uncle Sam.

Super simple: there is a 50/50 chance of the PP gaining or losing going forward (but really it's tilted to more gains historically). There is a 100% guarantee ofpermanent capital loss if you pay taxes.
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Re: 13% time to cash out?

Post by barrett » Fri Aug 26, 2016 11:43 am

Kbg wrote:It is relatively rare for PP to have a down year at all, so why A) hinder compounding and B) hinder it twice by giving some of it to the government. Gains and losses are a maybe, taxes are an always.
The PP does lose money in real terms about one year out of three. We are seeing more nominal down years (small sample size, I realize) because inflation is close to zero. But totally agree about the taxes.

Also, it's instructive to figure out how much even "trimming" winners actually saves an investor even if they are correct and a particular asset goes down on cue. The actual "savings" is generally meager when looked at in percentage terms.

More and more I think of an asset allocation as being good if it allows one to stay invested at all times.
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Kbg
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Re: 13% time to cash out?

Post by Kbg » Fri Aug 26, 2016 11:52 am

barrett wrote:
Kbg wrote:It is relatively rare for PP to have a down year at all, so why A) hinder compounding and B) hinder it twice by giving some of it to the government. Gains and losses are a maybe, taxes are an always.
The PP does lose money in real terms about one year out of three. We are seeing more nominal down years (small sample size, I realize) because inflation is close to zero. But totally agree about the taxes.

Also, it's instructive to figure out how much even "trimming" winners actually saves an investor even if they are correct and a particular asset goes down on cue. The actual "savings" is generally meager when looked at in percentage terms.

More and more I think of an asset allocation as being good if it allows one to stay invested at all times.
Agree on all points. One small quibble. Taxes are always nominal. :-)
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Re: 13% time to cash out?

Post by MediumTex » Fri Aug 26, 2016 9:08 pm

No, it is not time to cash out.

If you must do something, rebalance.
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Re: 13% time to cash out?

Post by AdamA » Sat Aug 27, 2016 11:48 am

MediumTex wrote:No, it is not time to cash out.

If you must do something, rebalance.
Or maybe go for a jog, play a round of gold, or start smoking crack or something.
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