Canadian Money Forum banner

1 - 20 of 26 Posts

·
Registered
Joined
·
17,610 Posts
Discussion Starter #1
I'm currently invested according to my asset allocation, and am very happy with the whole thing. Among my various accounts, I have a pension-like account in a foreign country, and need to bring the money to Canada urgently. I met with my tax expert and I basically have to start the ball rolling on a cash transfer (can't be moved as securities) within the next ~ 4 weeks. This is because of potential delays, paperwork, COVID complications, etc.

This foreign account must be liquidated, so I'm going to end up selling and being out of the market for some period of time. I can't immediately reinvest it. I will still have market exposure through various other accounts, so it's a partial disruption to my allocations but I would call this a significant amount (about 10% of my total investments). Taxes are not an issue; everything is sheltered.

This account contains about half and half of S&P 500 and gold. It's up roughly 30% over the last year, and up roughly 20% YTD. New highs daily! There are two choices here:

(a) sell NOW. At least I know I'll be "selling high" with everything up, selling gold at a historic high
(b) or, wait a few more weeks to minimize time out of the market

I am leaning towards (a) because I would be selling at a very high point in absolute terms. The risk of doing this is that I extend the time that I am out of the market. If both stocks & gold keep rallying like crazy over the next few weeks, then I am forced to buy back into them at an even higher level, when I re-establish these positions later.

What would you do?
 

·
Registered
Joined
·
10,361 Posts
I would do (a) because you know the result and it is a good one. The other choice could be nothing better than a flip of the coin, equal chances of being up or down. I rarely turn down a good result. No brainer in my opinion.
 

·
Registered
Joined
·
454 Posts
If you want to sell within the next 4 weeks, then I'd say :

S&P 500 : Sell within the next 2 weeks, maximum. Before the end of next week may be the best. Reason - about to drop a bit, maybe in the next 1-4 days.
Gold : Sell as soon as possible. Reason - recent bull run, currently overbought, lock in the profits.

Basically, option (a)
 

·
Registered
Joined
·
991 Posts
Since it is a small portion of your portfolio (10%) you probably could maintain the exposure by either selling some bonds in another account and going long SPY and GLD, or you if you don't want to sell bonds, buy SPY and GLD on margin for the short period of time needed. If you have access to futures, you could go long an appropriate number of futures contracts with a low implied interest cost.

Another choice would be to buy calls to lock in the price. There would be a premium to pay of course. My preference would be to sell puts or put spreads, so as to at least pocket the premium, understanding that SPY and gold may keep soaring.

If you would like to go long SPY and gold without borrowing (which entails an interest expense) and don't want to sell bonds either, you could sell appropriate numbers of puts and buy similar numbers of calls at the same strike, which would be a synthetic long. There is a cost to doing this too.

Otherwise, I would be more inclined to sell at the last moment, given you are happy with your allocation now.
 

·
Registered
Joined
·
34 Posts
I know you won't like this but sell now and re-buy when prices have dropped - they almost certainly will - even Gold. I've been doing this for 30-40 years, usually win but occasionally accept 1-2% drop. Wait time can be few days to several months - so what?
 

·
Registered
Joined
·
786 Posts
Could you sell it all now and at the same time buy the same securities & gold here but in another account?. You may need to borrow or buy the securities on margin. As its only 10% of your portfolio I wouldn't be too concerned with whatever you decide.
 

·
Registered
Joined
·
17,610 Posts
Discussion Starter #7
Since it is a small portion of your portfolio (10%) you probably could maintain the exposure by either selling some bonds in another account and going long SPY and GLD, or you if you don't want to sell bonds, buy SPY and GLD on margin for the short period of time needed.
. . .
Otherwise, I would be more inclined to sell at the last moment, given you are happy with your allocation now.
I'm not comfortable with options, since I don't have options expertise, but margin could work. There would be some interest cost of course, with the borrowing cost at 4% annually. I wonder if this is worth it, though?

Could you sell it all now and at the same time buy the same securities & gold here but in another account?. You may need to borrow or buy the securities on margin. As its only 10% of your portfolio I wouldn't be too concerned with whatever you decide.
Yes I think it's feasible. Using some non-reg money + margin, I could put those positions mostly back in place.
 

·
Registered
Joined
·
17,610 Posts
Discussion Starter #8
Thanks everyone for the replies, there are some good alternatives here and it's got me thinking...

I would do (a) because you know the result and it is a good one. The other choice could be nothing better than a flip of the coin, equal chances of being up or down. I rarely turn down a good result. No brainer in my opinion.
True, it's a guaranteed good result: keeping a massive gain.

How do you think this option (to sell and just have reduced exposures for a while) compares to the other idea raised above of using some margin elsewhere to buy back the positions immediately? Margin at 4% is pretty cheap, if we're talking ~ 2 months. So other than a bit of interest expense, this adds some temporary positions. I would probably use ZSP and CGL.C if I went that route.

I guess it comes down to: how important is it to remain fully in one's asset allocation -- as opposed to seeing a few positions reduced for the span of a few months?

With such a short interruption on the other of a few months, maybe it's not too big a deal to just have reduced exposure. It's not like I'm selling at a low; I would clearly be selling at a high.
 

·
Registered
Joined
·
10,361 Posts
I suppose using options is an option (no pun intended). If I were to do anything other than a straight 'sell now' and be out of the market for up to 2 months with 10% of my portfolio, options would be the way to offset the FOMO. In reality, that is what it really is... FOMO.

Another way of looking at selling now, is you would be increasing your current cash position by an additional 10%. I don't know what your cash component on your overall portfolio is today, but whatever it is, perhaps only a few percent, is going an additional 10% really so bad in a 'frothy equity market'?
 

·
Registered
Joined
·
991 Posts
I wonder if this is worth it, though?
It really depends. If you would have rebalanced anyway, then going to cash would be a good choice. You could buy back in when your asset allocation dictates to do so. If you want to buy them back when the funds are transferred, then you may be buying at a higher or lower price. There is no guarantee.

If you'd like to time the market, we are at that time of the year when oftentimes volatility spikes...
 

·
Registered
Joined
·
2,801 Posts
I echo AltaRed's position. I would sell now at market highs. You are getting good value and will probably kick yourself more if they drop than if they go up another 4-5%. I have been above my weight in equities and am looking for ways to lower my equity component now that we are pretty close to all time highs.

I intentionally raised equity % in March and April because of the drop and I think it's time to return to more of a historic weighting. Basically I went from a 70-30 equity/fixed income model to a 100-0 model. And most of my accounts are now up 10% year to date and above the all-time highs of Feb 20-21. Probably, the risks are to the downside now, especially with things like the US election and a historically volatile period.
 

·
Registered
Joined
·
456 Posts
take 5% of current domestic portfolio or could go with 3.33% & put it into a leveraged ETF. If go with 2x leverage go with 5% If you go with 3x leveraged go with 3.3%
 

·
Registered
Joined
·
17,610 Posts
Discussion Starter #13
Thanks, I agree with the logic and @doctrine that's a good point about what will make me kick myself more.

@Topo interesting point about rebalancing. I should run some numbers and see what my effective allocations would be if I were to sell and go to cash.

In reality, that is what it really is... FOMO.
That's a good observation. You're right, the only thing that makes me consider remaining long (even though it involves extra work) is my fear of missing out, in case these asset prices keep shooting to the moon.
 

·
Registered
Joined
·
17,610 Posts
Discussion Starter #14
Asset allocation target weights are 30% stocks, 50% fixed income, 20% gold. Here are today's weights, then re-calculated with this account is removed from the picture (liquidated and removed)

My current allocations are: 30% stocks, 48% fixed income, 22% gold
If this account is liquidated: 28% stocks, 53% fixed income, 19% gold

Well I guess I have my answer now. Apparently, because this account was only 1/10 of the total, removing it doesn't have that much of an impact. I just end up slightly underweight the 'risk assets'.

Selling it now and just waiting a few months is both the simplest thing to do, and doesn't disrupt my asset allocation much. I can probably even move some XBB into ZSP (a small bond position inside my TFSA) to improve those weights very slightly.
 

·
Registered
Joined
·
2,827 Posts
James the decision to sell early is the one where you are engaging in market timing, not the other way round...

1. You are happy with your asset allocation
2. You are being forced engage in this sell-rebuy transaction for external reasons
3. ???
4. Do the thing that is least disruptive to your investment plan. i.e. sell and switch at the last moment necessary.
 

·
Registered
Joined
·
17,610 Posts
Discussion Starter #17
Thanks again everyone. I decided to pull the trigger and sell today, so I liquidated the S&P 500 and gold positions in this account (about 10% of my overall investments). Inside my TFSA, to compensate a bit, I sold XBB and bought ZSP. But I think that's as far as I will go for "compensating" the positions... no margin. I decided I will keep it simple.

This ended up leaving my asset allocation more or less intact. After these trades, I'm now at
20465


If stocks and gold rally another 20% by the time I can redeploy the funds... so be it.

Time for a drink :)
 

·
Registered
Joined
·
454 Posts
You sold S&P 500 at its 6-month peak and only -1.2% below its previous 52-week all-time high.
You sold gold at its all-time high and about +10% higher than its previous 10-year all-time high.

You can definitely drink to that. Don't bother what happens in the next weeks, you just locked-in profits at their all-time high and that's awesome.
 
1 - 20 of 26 Posts
Top