Assuming you have at least 10yrs to retirement, that isn’t necessarily a sensible move. Ok - so you’ve gotten out of equities to limit risk in the short-mid term. Great, you will lose less than if you were more exposed to equities.
If you believe that the economy will recover, as it has every time a recession has hit, then you will need to get back into equities. That requires calling the bottom correctly. If you do not continue DCAing into equities as they fall and/or do not re-buy at less than you sold for, you will not benefit from the recovery. Essentially, you are solidifying your losses and potentially missing out on future gains - which can come at extremely unpredictable times.
It makes more sense to ensure you’re at your target allocation, then DCA like you always should be doing all the way down. Then you are at your accepted risk level and get to benefit from the economic recovery - which will come eventually. If you dont need the money soon, the best thing you can do (historically speaking) is hold on to your investments and just keep investing.
That’s definitely possible, but unlikely. And, with a long enough timeline to retirement, you’d still come out ahead if your asset allocation was correct.
In the Great Depression, the market recovered to its 1929 peak in under 30 years. So, theoretically, if we had another great depression right now, people under 35 or so would be OK even if they were 100% in equities. The older you are and more overleveraged toward equities, obviously the worse off you’d be. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
Assuming we will have another black swan event of the same magnitude as the Great Depression is a longshot. Could it happen? Yeah. Is it a safe bet to stake your retirement on? No.
I am not a financial advisor, and this is not financial advice, but making drastic moves based on stock market fluctuations is generally not a good idea. What is a good idea is managing your risk exposure and diversifying your investment vehicles.
Assuming you have at least 10yrs to retirement, that isn’t necessarily a sensible move. Ok - so you’ve gotten out of equities to limit risk in the short-mid term. Great, you will lose less than if you were more exposed to equities.
If you believe that the economy will recover, as it has every time a recession has hit, then you will need to get back into equities. That requires calling the bottom correctly. If you do not continue DCAing into equities as they fall and/or do not re-buy at less than you sold for, you will not benefit from the recovery. Essentially, you are solidifying your losses and potentially missing out on future gains - which can come at extremely unpredictable times.
It makes more sense to ensure you’re at your target allocation, then DCA like you always should be doing all the way down. Then you are at your accepted risk level and get to benefit from the economic recovery - which will come eventually. If you dont need the money soon, the best thing you can do (historically speaking) is hold on to your investments and just keep investing.
The assumption is a recession.
The reality is Trump may straight up lead y’all to a depression. Or just straight up balkanization fracture.
That’s definitely possible, but unlikely. And, with a long enough timeline to retirement, you’d still come out ahead if your asset allocation was correct.
In the Great Depression, the market recovered to its 1929 peak in under 30 years. So, theoretically, if we had another great depression right now, people under 35 or so would be OK even if they were 100% in equities. The older you are and more overleveraged toward equities, obviously the worse off you’d be. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
Assuming we will have another black swan event of the same magnitude as the Great Depression is a longshot. Could it happen? Yeah. Is it a safe bet to stake your retirement on? No.
I am not a financial advisor, and this is not financial advice, but making drastic moves based on stock market fluctuations is generally not a good idea. What is a good idea is managing your risk exposure and diversifying your investment vehicles.