Is it a good time to invest in S&P 500

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sceptrum
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Is it a good time to invest in S&P 500

Postby sceptrum » Thu May 02, 2013 6:10 pm

Hello,
I have some cash of 50K that I am looking to invest. Can someone clarify if it is a good strategy to buy S&P 500 index fund. I do not have any short term needs with that money.

Looking at the historical values in google finance, someone who invested in S&P 500 at market peaks (in 2000 and 2007) will barely break even today. It is probably wrong to assume that history will repeat. But I am just curious what was the best investment one could have made during the previous market peaks.

patrick
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Re: Is it a good time to invest in S&P 500

Postby patrick » Thu May 02, 2013 6:53 pm

On April 29, 1983 (approximately 30 years ago), the S&P 500 hit a new closing high of 164.43. Buying an S&P 500 index fund then would have been a great choice. If you had bought the S&P 500 then (using the Vanguard 500 index fund) you would have multiplied your investment by a factor of 19.2 over the next 30 years, corresponding to over 10.3% per year.

Of course, the future may not match the past. There's no way to be sure that buying the S&P 500 now will have similar results.

jbourne99
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Re: Is it a good time to invest in S&P 500

Postby jbourne99 » Thu May 02, 2013 7:01 pm

yes...

Johm221122
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Re: Is it a good time to invest in S&P 500

Postby Johm221122 » Thu May 02, 2013 7:03 pm

Welcome to forum,
If you want detailed help
viewtopic.php?t=6212
John

hicabob
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Re: Is it a good time to invest in S&P 500

Postby hicabob » Thu May 02, 2013 7:04 pm

If you have the correct timeframe in mind, almost certainly.

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Equitius
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Re: Is it a good time to invest in S&P 500

Postby Equitius » Thu May 02, 2013 7:24 pm

Absolutely, but your time frame needs to be 10 yrs. or more, IMO. And the rest of your financial house should already be in order.

ProfessorX
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Re: Is it a good time to invest in S&P 500

Postby ProfessorX » Thu May 02, 2013 7:26 pm

It is very hard or impossible for you and me to "time the market."

You are asking the Bogleheads forum on the internet to give you advice on whether or not now is a good time to "time the market". One of the first principles of being a Boglehead is "don't try to time the market."

If you want to invest for a long time frame (e.g. 10-30 or more years) then yes now is a fine time to invest in the S&P 500.

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TimesAWastin
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Re: Is it a good time to invest in S&P 500

Postby TimesAWastin » Thu May 02, 2013 8:23 pm

It might be worth mentioning that although the number beside the S&P's index is larger than the numbers that came before it, when adjusted for inflation, it's not even close to its all-time high. In March 2000, it hit around 1525, and yes it's in the area of 1560 now which is a bigger number. But, adjusted for inflation, it would need to clear 2,000 to reach and all-time high value.

Anyway that's a red herring. The best time to get into the market is when you can afford to and you're comfortable taking the risk. Maybe it crashes tomorrow but if your time horizon is decades down the road it won't matter.. no crystal balls. :moneybag
Stock goes up, stock goes down. Stock goes up, stock goes down. -- Homer J. Simpson (paraphrased)

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Toons
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Re: Is it a good time to invest in S&P 500

Postby Toons » Thu May 02, 2013 8:35 pm

Anytime is a good time to buy an S&P index fund ,as long as you don't need the money in the short term,for me short term is 10 years. Invest it, reinvest the dividends and try not to "peek" too often :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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abuss368
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Re: Is it a good time to invest in S&P 500

Postby abuss368 » Thu May 02, 2013 8:42 pm

sceptrum wrote:Hello,
I have some cash of 50K that I am looking to invest. Can someone clarify if it is a good strategy to buy S&P 500 index fund. I do not have any short term needs with that money.

Looking at the historical values in google finance, someone who invested in S&P 500 at market peaks (in 2000 and 2007) will barely break even today. It is probably wrong to assume that history will repeat. But I am just curious what was the best investment one could have made during the previous market peaks.


There are three tools that are available to an investor as noted in David Swensen's, Yale University CIO, excellent book "Unconventional Success":

1) Asset allocation
2) Market timing
3) Security selection

He has noted research that details Asset Allocation may be responsible for 90% up to 110% of returns. 110%? How could that be? His lecture noted that #2 and #3 may produce negative results against #1.

You question is one of market timing (i.e. now) and security selection (i.e. Index 500 fund only).

Construct a portfolio, set the asset allocation, and then stay the course.

Once the portfolio is constructed, you and put the entire amount to work at once (i.e. as a Vanguard study recommends) or dollar cost average (DCA) over a period of time that you are comfortable with.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + REITs

JW Nearly Retired
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Re: Is it a good time to invest in S&P 500

Postby JW Nearly Retired » Thu May 02, 2013 8:44 pm

sceptrum wrote:Looking at the historical values in google finance, someone who invested in S&P 500 at market peaks (in 2000 and 2007) will barely break even today. It is probably wrong to assume that history will repeat. But I am just curious what was the best investment one could have made during the previous market peaks.

First of all this isn't true. You would have been 10-20% ahead in nominal dollars in both market peak cases. Secondly, how do you know we are at another market peak today? If you have this seers gift, then just wait in cash until we are at a market bottom and invest then. Simple no-brainer way to get rich.
JW
Retired at Last

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abuss368
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Re: Is it a good time to invest in S&P 500

Postby abuss368 » Thu May 02, 2013 9:02 pm

JW Nearly Retired wrote:
sceptrum wrote:Looking at the historical values in google finance, someone who invested in S&P 500 at market peaks (in 2000 and 2007) will barely break even today. It is probably wrong to assume that history will repeat. But I am just curious what was the best investment one could have made during the previous market peaks.

First of all this isn't true. You would have been 10-20% ahead in nominal dollars in both market peak cases. Secondly, how do you know we are at another market peak today? If you have this seers gift, then just wait in cash until we are at a market bottom and invest then. Simple no-brainer way to get rich.
JW



Exactly. The "market timing" note in my post above.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + REITs

otbricki
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Re: Is it a good time to invest in S&P 500

Postby otbricki » Thu May 02, 2013 10:30 pm

Mark Hulbert had an article in Barron's a few weeks ago about trying to time the market and the poor recent results people who tried got.

http://online.barrons.com/article/SB500 ... rticle%3D1

Good luck!

gerrym51
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Re: Is it a good time to invest in S&P 500

Postby gerrym51 » Thu May 02, 2013 10:45 pm

NO! just kidding :mrgreen: if you think the markets going up in general there's no time like the present.

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BrandonBogle
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Re: Is it a good time to invest in S&P 500

Postby BrandonBogle » Fri May 03, 2013 8:47 am

Surprised nobody has asked/mention this yet...

Why would you buy the S&P 500 (presuming an index fund following it like the Vanguard 500) versus buy a total market fund that inherently includes the S&P 500 and a cap-weighted average of all the US Market (except micro-caps)?

Any particular reason the Op is favoring one vs the other?

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bUU
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Re: Is it a good time to invest in S&P 500

Postby bUU » Fri May 03, 2013 8:56 am

"Time is an illusion. Time to invest in something specific, doubly so."

Mill
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Re: Is it a good time to invest in S&P 500

Postby Mill » Fri May 03, 2013 9:20 am

BrandonBogle wrote:Surprised nobody has asked/mention this yet...

Why would you buy the S&P 500 (presuming an index fund following it like the Vanguard 500) versus buy a total market fund that inherently includes the S&P 500 and a cap-weighted average of all the US Market (except micro-caps)?

Any particular reason the Op is favoring one vs the other?


Maybe he wants to tilt towards large caps? To each their own.

jay22
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Re: Is it a good time to invest in S&P 500

Postby jay22 » Fri May 03, 2013 9:21 am

BrandonBogle wrote:Surprised nobody has asked/mention this yet...

Why would you buy the S&P 500 (presuming an index fund following it like the Vanguard 500) versus buy a total market fund that inherently includes the S&P 500 and a cap-weighted average of all the US Market (except micro-caps)?

Any particular reason the Op is favoring one vs the other?

Good point. I wonder how many people tilt towards large cap instead of small ones?

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Peter Foley
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Re: Is it a good time to invest in S&P 500

Postby Peter Foley » Fri May 03, 2013 9:50 am

I would echo other's advice to consider the total stock market fund if it is available in whatever savings vehicle you are using. As to investing in the market now, I would say yes but I would also suggest dollar cost averaging over a period of 6 months. It may not improve your return but it is a good psychological crutch (and I don't mean that in a negative way). If the market does experience a "correction" durring the next six months you might consider lump summing the balance at that point.

Paraphrasing something I read recently:
The right approach is to invest your funds as quickly as possible but not so quickly that you aren't willing to stay committed to the process.

obgraham
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Re: Is it a good time to invest in S&P 500

Postby obgraham » Fri May 03, 2013 12:39 pm

In 1994 when I rolled my PPSPlan into an IRA I could not decide between Index 500 and Total Market. So I split it evenly. I've left it that way ever since, mostly out of laziness.

19 years later the difference in the two funds values is negligible. Total market is a little ahead, in the 1-2% range. So I think in practicality it makes little difference which one chooses.

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Boglenaut
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Re: Is it a good time to invest in S&P 500

Postby Boglenaut » Fri May 03, 2013 12:48 pm

sceptrum wrote:Hello,
I have some cash of 50K that I am looking to invest. Can someone clarify if it is a good strategy to buy S&P 500 index fund. I do not have any short term needs with that money.

Looking at the historical values in google finance, someone who invested in S&P 500 at market peaks (in 2000 and 2007) will barely break even today. It is probably wrong to assume that history will repeat. But I am just curious what was the best investment one could have made during the previous market peaks.


How do you know if this is a peak?

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ofcmetz
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Re: Is it a good time to invest in S&P 500

Postby ofcmetz » Fri May 03, 2013 2:27 pm

Always amuses me when someone takes the time to sign up and then makes one post asking such a simple question with no back ground information. OP, no one can give you an decent answer with the little information that you provided.

I will leave it at this: If you need to invest in large cap US equity to achieve your desired allocation, then now is as good of a time as any to buy your shares. A low cost index fund is probably the best vehicle to achieve this purpose.
NEWS ALERT: Rich cop was caught investing his bribes in low cost index funds.

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Optimistic
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Re: Is it a good time to invest in S&P 500

Postby Optimistic » Fri May 03, 2013 3:42 pm

sceptrum wrote:Is it a good time to invest in S&P 500

Same as it ever was, same as it ever was...

Water dissolving and water removing
There is water at the bottom of the ocean

HurdyGurdy
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Re: Is it a good time to invest in S&P 500

Postby HurdyGurdy » Fri May 03, 2013 10:05 pm

It may be better to follow your own Investment Policy (http://www.bogleheads.org/wiki/Investme ... _Statement).
Jack Bogle deserves the Presidential Medal of Freedom.


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