No. of Recommendations: 0
If one owns a considerable amount of muni bonds, but instead wants to replace them with solid high-growth company stocks (to be held long-term) sometime before 12/31/97, what is the best alternative:

(a) Sell all the bonds at one time and re-invest in stocks immediately thereafter; or

(b) Diversify the timing of sale and reinvestment by selling and reinvesting, say, about 1/3 portion each over the next 3 months?

Does the answer depend on if one's outlook is bullish for stocks in the near-term?

Also, if option "a" is recommended, and one's outlook is bullish for the near-term, would it be better to sell and reinvest now rather than closer to the end of the year when stock prices might be even higher?

Possibly one reason why it might be better to hedge the timing risk under option "b" is based on the principle of dollar cost averaging. Option "b" might hedge against the risk of a sudden market movement like what occurred 10 years ago in just one day. However, I believe rayvt said in one of his messages that one might as well invest when the funds become available rather than spreading out the timing risk.

Thanks for your thoughts!

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.