RetireJapan

Very much not how I have thought about things so far, but our net worth has gone up a stupid amount in the last 12 months and we're still pretty much 100% equities.

At what point does it then become a good idea to take some money off the table?

Just a thought exercise for now, as we are planning to keep working/running our business, but taking some of those gains and just keeping them in cash is starting to seem more attractive.

Thoughts?

The point at which it becomes a good idea, in my view, is the point where that decision makes you feel better than the alternative. Nothing to stop you putting profits back into the market if the market drops and you need more growth. And if the market continues to perform well, you’ll still be heavily invested anyway. Disclaimer that I am more risk averse than most on this board, and realise there are valid reasons to argue the opposite.

I am leaning more towards just putting a bit less in rather than taking out. I'm keeping a bit more cash on hand to either spend as I please, or invest when I feel my investments need a bit of input. Cashing out might make sense if you will use that money soon, or may have to cash some out in a year or two and are worried about a crash in the meantime, but if you already have a bit of a cash buffer and emergency fund, you're was well just leaving it in, I think.

Bucket one is probably cash already, so consider/decide how much of bucket two you'd feel like having in cash.

Bucket three should stay in equities.

goodandbadjapan wrote: ↑Sun Oct 31, 2021 9:55 am I am leaning more towards just putting a bit less in rather than taking out. I'm keeping a bit more cash on hand to either spend as I please, or invest when I feel my investments need a bit of input. Cashing out might make sense if you will use that money soon, or may have to cash some out in a year or two and are worried about a crash in the meantime, but if you already have a bit of a cash buffer and emergency fund, you're was well just leaving it in, I think.

That is probably the sensible approach, and I already started doing it with my wife's accounts. Instead of investing the monthly amount, I just leave it in cash in the broker account. If there's a crash we'll throw it in, if not then she has access to it if she wants to spend it.

I was 100% in equity before Lehman and also lost my job at the time and was not able to take advantage of the drop that occurred
Personally I would not sleep well being 100% in equity these days
I am now doing 60\40 stocks and bonds

Very much not how I have thought about things so far, but our net worth has gone up a stupid amount in the last 12 months and we're still pretty much 100% equities.

At what point does it then become a good idea to take some money off the table?

As you wrote, the market has been ridiculously profitable for the last year or two. It’s almost guilt-inducing. Almost. But surely it cannot go on for too much longer given various China issues, never ending Covid, climate change, etc. I have been locking in profit after my ETFs increase above a certain amount. Sure I have lost some growth but given that I am already retired, I think the security of actual profit trumps potential gain, which may not happen anyway. Again, it’s about one’s stage of investment as well as peace of mind.

RetireJapan wrote: ↑Sun Oct 31, 2021 8:22 am Very much not how I have thought about things so far, but our net worth has gone up a stupid amount in the last 12 months and we're still pretty much 100% equities.

At what point does it then become a good idea to take some money off the table?

Just a thought exercise for now, as we are planning to keep working/running our business, but taking some of those gains and just keeping them in cash is starting to seem more attractive.

Thoughts?

Bonds... Specifically developed country government bonds.

You already have a healthy cash allocation. You want more security and stability. That is the answers.

Some decent products here, hedged and unhedged.

EmaxisSlim Cultist wrote: ↑Sun Oct 31, 2021 12:21 pm Bonds... Specifically developed country government bonds.

That's the textbook answer, but I'm having trouble seeing the advantage of holding bonds over cash yen at the moment.

With current bond yields so low, it seems more likely that interest rates will rise rather than fall further (resulting in bond prices falling). Pair that with the tendency of the yen to appreciate during financial crises, and it seems possible that cash yen would end up more valuable than a bond fund during the next correction.

Very happy to hear the other side of that argument though

It depends on why you want to take money off the table... but if it's in order to reduce risk, then, counterintuitively, staying the course with equity is the way to go. Essentially, equity provides bond-like protection better than actual bonds do over the long term. Combine that with 3 years or so worth of cash and your downside is fully protected.

I posted this research in a separate thread, but I find it very convincing: https://edrempel.com/high-risk-of-bonds/