Markets - Minor Correction? (Edit: Question Answered)

DairyQueen

Audaxer said:

I'm also interested in when people make the decision to sell capital for income when they are not taking natural income. After such a good year I would think retirees looking to drawdown from Total Return, should have drawn down income for the coming year when they rebalanced at the year end? I wouldn't like to be in the position of needing to sell capital for income at this time when most funds seem to be losing value.

Our financial year will be based on the tax year so, if we were in drawdown now, annual withdrawal and rebalance would be scheduled for April. Plan is to stay fully invested from year 5 onward and to suspend using unwrapped back-up cash any year when SIPP return is -ve. Not at all sure about timing of rebalancing in -ve years. Will I have the cojones to buy equities in bear markets and to a prescribed schedule? Proof of the pudding.

ffacoffipawb

I dread to think what the Dow would do if just one American caught the virus. Goodnight Vienna probably.

MarkCarnage

I dread to think what the Dow will do if when quite a few Americans catch the virus. Goodnight Trump maybe?

Sorted that for you....

eastcorkram

ffacoffipawb said:

I dread to think what the Dow would do if just one American caught the virus. Goodnight Vienna probably.

I don't think you'll have to wait long to find out.

Username999

Over 50 cases in the USA already.

https://www.cnbc.com/2020/02/25/coronavirus-latest-updates.html

ColdIron

DairyQueen said:

ffacoffipawb said:

Just cutting my drawdown from 3.5% to 3% to conserve capital. 2 years drawdown gone in 2 days. Easy come easy go i suppose.

i did a -40% stress test and the numbers still work at 3.5% drawdown, but temporarily reducing to 3% as a precaution.

Thanks for posting. I am interested in how those in drawdown are responding.

I am doing nothing with regard to drawdown. My strategy is to take the natural yield, this will be far less volatile than the share or unit price. The value of my income investments are maybe £13,000 less today than they were on Friday but I doubt that my dividend income will vary by more than a few pecent over the coming year

DairyQueen said:

Are you using any specific strategy? Selling bonds? Switching to cash reserve?

I am in my first 4 years of drawdown and selling off capital has never appealed. The idea of regular sales would give me goosebumps. A healthy cash reserve at the outset should go some way to distance you and your plans from short term, or longer, market movements

DairyQueen said:

Do you have specific triggers for suspending/reducing drawdown?

No. Keep calm and carry on

Thrugelmir

Username999 said:

Over 50 cases in the USA already.

https://www.cnbc.com/2020/02/25/coronavirus-latest-updates.html

A fair number of these are the cruise ship passengers from Japan. 
If the virus spreads to Africa and India then containment is going to prove extremely challenging. 

Username999

DairyQueen said:
I am interested in how those in drawdown are responding. 

I'm in drawdown, using natural yield and 18 months worth of cash.
This "correction" has no effect on my plan, it's to be expected.
 

redpete

As I've just initiated consolidation of 3 of my pension accounts into ii it's going to be interesting to see how the timing works out between the fund sales in the old accounts and the fund purchases in the ii account.

bowlhead99

Audaxer said:
I'm also interested in when people make the decision to sell capital for income when they are not taking natural income. After such a good year I would think retirees looking to drawdown from Total Return, should have drawn down income for the coming year when they rebalanced at the year end?

It doesn't seem very intuitive to rebalance at some arbitrary date like a calendar year end - few people will target December 31 as their last day of work before retiring and think in blocks of time from that day. Their households may think in other chunks such as academic years of their offspring, or base their tax planning on something more practical like the Apr-Apr tax year.  So, if they did drawdown income for 'the coming year' being a tax year, they would now be coming to an end of it and needing a top up, and a late February / March crash would be most unwelcome.

You're right it's not great to need to sell capital at any time when markets aren't buoyant. A stockpile of cash or lower risk assets fed by some level of natural income is quite normal, topping up from capital before it starts looking low but being willing to reduce, defer or partially defer the encashment from capital to the stockpile if markets are well off the boil.