I have a retirement account with TIAA-CREF and a personal brokerage account with Tradeking. Back in late 2007 and early 2008, after seeing the market react to bad news, the Fed cutting rates, and reading as much as I could, I was conflicted on how I should manage both accounts. The retirement account was nearly 100% in stocks just like the personal account.
Unable to decide one way or the other, I chose to leave my personal account alone and make some serious allocation changes with my retirement account. In March 2008, I shifted the allocation away from stocks and into the money market, fixed income, and TIAA’s guaranteed. Then in mid-December I changed my allocation yet again and now I am 70% in stocks, 15% money market, and 15% guaranteed. With this allocation shifting, my retirement account only suffered a 6.9% loss for 2008. Quite good considering everything that happened.
Unfortunately, I did not do this with my personal account. It suffered losses similar to everyone else.
Looking back, I want to try to understand why I did two different things. I should not have treated my personal account any differently from my retirement account. I had worked hard to accumulate the money that I deposited into both accounts, but I still treated my personal account almost as if it was money I had won with a lottery ticket. Also, acting in such a way seems to be indecisive. Or maybe I was just hedging my bets?
As I’ve been studying value investing and value investors, nearly all have said that efforts to predict the future are wasted. The same goes for trying to time the market. The same goes for trying to understand macro events. But timing the market and taking into consideration macro events are exactly what I did when I made a drastic reallocation of my retirement account.
I’ll definitely have to do some more reflection on this.
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