The theme this week on the One Minute Retirement Tip is “I Sold All My Stocks In 2020...Now What?!”

So far this week, I’ve been addressing some of the big problems with getting out of the stock market and almost without fail its a losing strategy that can have devastating consequences on your long-term portfolio returns, and by extension, your life and lifestyle in retirement. 

Today and tomorrow, I want to discuss how to move forward from here. If you sold in 2020 and are still parked in cash or even if you’re just underweight stocks, where do you go from here? 

The first thing you need to do is determine your ideal asset allocation. For most of you listening close to retirement, that’s anywhere from 40% stocks to 70% stocks. By the way, if you want some guidance here, I have our age-based asset allocation cheat sheet I can send you that provides the recommended asset allocations we recommend for clients based on age. It’s a great starting point to figuring out your ideal mix and then you can go higher or lower depending on your tolerance for the ups and downs of the market, which was the topic of yesterday’s podcast. 

Anyways, if you want that asset allocation cheat sheet, just send me an email at [email protected] and I’ll send it to you. That’s [email protected]. 

So let’s assume that you have a $1 million portfolio and right now you’re 20% in stocks, when you really need to be 60% in stocks. That’s $400,000 to move into the stock market to get up to your ideal 60% allocation. 

How are you going to move that $400,000 into the stock market? Certainly not right now when the stock market is at it’s all-time high. You feel a little silly and foolish even for considering buying at the top. After all - buy low and sell high - not the opposite, right? 

The most common suggestion I have for someone who has too little in stocks and needs to move a lot or even a little back into the market is to do so gradually. That could be a period of 3 months, 6 months, 9 months, 12 months. 

I usually don’t recommend going past 12 months until you’re fully invested at your ideal allocation again, but the important point here is that you decide on the timeframe you’re comfortable with. Deciding in advance is important so that you put the reinvestment on auto-pilot after that. 

In this example of needing to move $400,000 back into the stock market, I might recommend to a client 6 months seems prudent. So I might move ⅓ or even ½ back in now, since the likelihood is that the stock market will continue moving higher over the next 6 months (that’s not my opinion - that's statistical fact). The sooner you can get back invested, the better usually. So we might move ½ now and then move the other $200,000 back in over the next 6 months - that’s $33,000 a month that’s moving back into the stock market. 

That money that’s being moved over into stock each month is done robotically with this strategy - the same day every month, like clockwork it’s moved over. Doesn’t matter if the stock market is up, down or sideways that day or week...we’re moving money back into the market. 

So that’s my preferred strategy - determine your ideal % of stocks in your portfolio, then determine your timeframe (not more than 12 months) for being fully invested at that ideal % allocation, then put it on autopilot to get reinvested so you don’t have to think about it or abandon your strategy. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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