Are you advising to sell equities right after they've taken a beating? Sounds awfully close to "buy high, sell low".
It's about minimizing risk. Those with high risk tolerance I would advise to buy now, but be prepared to lose everything. If you're close to retirement you lose nothing by pulling out now.
If your risk tolerance can't handle what's happening, your asset allocation was already wrong. Trying to "fix" that now, as a response to this downturn, would very likely be a mistake.
Some treasury notes have dropped by more than 30%. We're years overdue for a cyclical recession. The fed has little room to lower rates. I could go on but the point is this is the closest we've been to a Black swan in decades.
(If your retirement is less than 5-10 years away, you should have diversified away from stocks years ago, and it's a little late now. Most target-date funds and financial advisors do this anyway.)
"put your retirement into bonds and hold on"
facepalm
People should have an asset allocation, and stick to it. Right now, people should be re-balancing by selling off their now overweight bond allocation to buy equities. What you're suggesting is counter-productive.
At this point we have likely entered recession or depression territory. The rebound is unlikely to be instantaneous (unless a convenient cure is found) and when things calm down I can put my money back into the market starting from a 10% locked in gain.
For everyone else not near retirement, most are going to be better served by ignoring the volatility and continuing to invest as usual. Time in the market vs timing the market and all of that jazz.
You don't minimize risk by reacting to daily market fluctuations. You minimize risk by choosing an asset allocation that allows you to ignore those fluctuations.
Bond yields are at an all time low. That means prices are at an all time high.
This is not the time to massively rotate into an asset class at an all-time high price due to fear/risk aversion.
So long as bond yields are positive, they cannot depreciate in value, can they? As in if I pull out X dollars from the market and into bonds, assuming yields stay positive, I'm guaranteed X dollars out?
Or have I totally misunderstood how bonds work?
(All of the below assumes the bonds actually pay as agreed. Actual default risk is something totally different, and still present here.)
When you buy a bond and hold it to maturity, you're sort of right. If you put in $10,000 into buying a coupon bond, you will get the coupons plus the $10,000 back at the end. And if you buy a zero-coupon bond for whatever amount, which will be worth $10,000 at maturity, you'll get the $10,000 back at the end.
In fact, you don't even need to "assum[e] yields stay positive." When you buy individual issues and hold to maturity, you don't really care what everyone else's yields do; you get what you contracted for.
The problem comes if you want to actually sell out of your position, OR to know the true value of your position (essentially equivalent operations) along the way.
If you put in $10,000 into a bond yielding 5% coupon, and the next day yields spike to 10%, nobody will want to buy your bond for $10,000 any more. You most certainly have lost value. "Aha," the naif says, "but I could always hold to maturity and get my principal back!" Sorry. Do the thought experiment where instead of buying the 5% issue on day 1, you instead buy the 10% issue on day 2. Compare the cumulative sum you receive under each scenario. Investing on day 1 (at 5%) is strictly worse than investing on day 2 (at 10%).
Likewise, if yields instead crash from 5% to 1% on day 2, your position will be worth much more. Your $10,000 notional bond yielding 5% will net a buyer so much more than $10,000 spent on a 1% yielding issue that she will pay more than $10,000 for it. You have had a real gain, even if not realized.
The same thing applies to bond funds or indices but with much more smoothing across a portfolio. With bond funds, however, there is not even the illusory "X dollars out" guarantee; since they are marked to market every day you might well never enjoy a breakeven price.
If you're near retirement, you should have already had a large percentage of your allotment in bonds and cash. If you are not near retirement (> 5-10 years) then ride it out.
I am 30+ years from retirement and I don't think this is world ending, so my high-volatility mutual funds will stay right where they are.
If you haven't already, put your retirement into bonds and hold on. Honestly it might be a good idea to grab some cash from the bank to keep at home - bank runs are not outside the realm of possibility, although we have credit cards and other internet based payment methods now so it's probably less of a concern now.
Edit: let me just preface my advice by saying if you have extremely high risk tolerance, now is a good time to buy, but be prepared to lose. If you are near retirement, now is probably the time to pull all of your funds out of the markets and into something safer. Based on the 100 year history of the DJIA, and the fact that the virus is just starting to spread in the U.S., the floor could be much lower.