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More On Why I Sold My Vanguard Target Retirement 2050

Posted By Jim On 08/24/2007 @ 2:44 pm In Investing | 10 Comments

My post on why I sold off our Target Retirement 2050 [3] fund received quite a few comments and I wanted to address those individually and in a way that simply can’t be done in chronological comments.

On the topic of not having a plan: There actually was a plan but the plan was bad or wrong or just not well thought out, so there . Usually people recommend that you shouldn’t in stocks unless your plan’s horizon stretches somewhere past 5 years, my plan doesn’t necessarily stretch past five years and I merely wasn’t sure about it. Since I wasn’t sure, that’s basically not much a plan now is it?

One thing I’m grappling with, when it comes to getting the most return for my money, is where should I put funds that I don’t know when I’ll need it? It won’t be this year but what if I want to put it towards real estate in over a year? Should I put it in laddered certificates of deposit (though honestly their returns are not much better than the 5%+ available through Emigrant Direct) or is there another mechanism? Since I didn’t know of any, I simply put it into the TR2050 because that’s where I thought it should’ve been.

On the topic of panic selling or market timing: I didn’t consider it panic selling because I looked at the situation, recognized the short term nature of my “plan” and thought the nature of the environment said it wouldn’t be a bad idea to sell. I only sold the TR2050, I didn’t adjust my 401k (it’s already at max or I would’ve increased it), SEP-IRA or my Roth IRA (where I am also in TR2050). Am I market timing? Sure, you can call it that and I’m okay with it.

On the topic of how subprime was too small to really affect anything: It’s already affected the employees of those companies considering how companies have either folded (American Home Mortgage is the biggest name to go under) or just folded their mortgage departments all together (if you’re curious for names, there are plenty in the news). Bernake and the Fed added additional liquidity to the market and dropped the funds rate half a percent. If Bernanke didn’t reverse course, bend to the market as easily as he did, it would be a totally different story right now (I call bullshit on his whole “you can’t watch the markets, you have to understand the undercurrents and the fundamentals” because he was watching the markets).

Hope that’s enough fodder for now.

The biggest question is what should someone who has a horizon of less than five years be in?


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/more-on-why-i-sold-my-vanguard-target-retirement-2050.html

[3] sold off our Target Retirement 2050: http://www.bargaineering.com/articles/we-liquidated-our-target-retirement-2050-fund.html

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