Newbie nervous and just invested 55k with Vanguard

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jackolantern4
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Newbie nervous and just invested 55k with Vanguard

Post by jackolantern4 »

So after reading several books including "The Boglehead's Guide To Investing" and "A Random Walk". I have invested 55k into a Vanguard account. I understand the philosphy of not trying market timing but i can't help but feel nervous having invested this at a time of such peak market performance. My portfolio is as follows:

49% $26,950.00
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) international legend
21% $11,550.00
Vanguard Total International Stock Index Fund Investor Shares (VGTSX) bond legend
24% $13,200.00
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) international bond legend
6% $3,300.00
Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

I have another chunk of money that is about 40k i plan to invest at a later time simply because i feel putting my money in all at once and now could be disasterous with an upcoming inevitable correction. I just wanted some insight as to what other alternatives Vanguard offers should i want out of the market. I'm 38 years old and in good health. I plan on keeping this money for a long term investment but i don't see what the rush was to get into the market at a time like this. (I understand that timing is counterintuitive to Boglehead philsophy).
Should i continue toworry, what does one suggest i do? Keep in mind i have another 40k i plan to invest at some point when i i feel prices are more reasonable. Also regarding this supposed correction looming, i suppose it depends on the nature of the correction and how it will affect each asset category but surely it cannot look good at the prices i just bought into. It's a long-term investment so yes im not actively worried over next years activity but doesn't common sense say to just wait a bit until prices drop?

My investment goal for the 55k was long term like at least 10 years. The 40k short term and the rest is cash and Ibonds.
Any advice would be greatly appreciated as i'm having a hard time tuning out noise.
Lafder
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Re: Newbie nervous and just invested 55k with Vanguard

Post by Lafder »

Congratulations! You did good!

The most important thing I can suggest is that if there is a market correction, do not panic and sell. You invested for the long haul for a reason. The steps to take will be one or several of these:
1) do nothing
2) rebalance per your plan
3) buy more stock funds with the cash you have not yet invested

Do you have a written investment plan? How often do you plan to rebalance? Or will you rebalance if your stocks/bonds get beyond a certain asset allocation %?

Put your plan in writing so you do not have "selective memory" about what your plan was if you are under stress.

And if in doubt come post here about what you are planning to do.

2/3 of the time lump sum is an advantage. You are doing a combination of both by putting only about half in at once. Do you have a plan of how you will continue to invest what you have left? You might want to put that in writing or make it automatic.

Don't watch financial news. They are always making it sound like there was a significant change.

You may even try checking your balances as seldom as you can stand to do so there is less to stress about.

Rather than checking financial news, come to this sight so you can get support from people who are not panicking and are being more rational than most.

best wishes
lafder
livesoft
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Re: Newbie nervous and just invested 55k with Vanguard

Post by livesoft »

You are asking about emotions and psychology and not really about investing. I think the only way past these thoughts is to lose a lot of money and then have everything recover over the next few years. So, to that end (losing a lot of money), I think you need to invest the $40K tomorrow as soon as you can.

Don't forget, investing is all about losing money. There really is no way around that fact.
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in_reality
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Re: Newbie nervous and just invested 55k with Vanguard

Post by in_reality »

jackolantern4 wrote: I'm 38 years old and in good health... Also regarding this supposed correction looming, i suppose it depends on the nature of the correction and how it will affect each asset category but surely it cannot look good at the prices i just bought into. It's a long-term investment so yes im not actively worried over next years activity but doesn't common sense say to just wait a bit until prices drop?

My investment goal for the 55k was long term like at least 10 years.
Any advice would be greatly appreciated as i'm having a hard time tuning out noise.
Wait until prices drop? When is that?

PE10 is high now perhaps. But that doesn't mean a correction is coming. It means lower expected returns.

So really we could have 10 years of terrible returns (say 4-5%). Would you be any better buying in 3 years at 12% higher prices?

Or maybe we will have a 20% correction followed by nice juicy looking rebound returns and see and average of 10 years of terrible returns (say 4-5%).

I know what you want to do is buy right after the correction, but ....

I see the 55k having about a 30 year time frame (38+30 = 68 or about when you'll start using the money from stocks). Ok you will start using retirement money before 68 but the bonds portion will be fine in 25 so maybe 30 before you will have to start selling the stocks you just purchased. Long term, tell me what what returns better than stocks? What?

You just made the best purchase you could possible have made! There was no offer on the table for a 10% savings after an upcoming correction - was there?

see this -- > http://awealthofcommonsense.com/worlds- ... ket-timer/

I understand your fear but look at it this way too. You are also facing the risk of having an underfunded retirement.
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Toons
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Re: Newbie nervous and just invested 55k with Vanguard

Post by Toons »

Whats to worry about,you should be thankful you had the money to invest and now have put the compounding machine to work for you ,,,daily market gyrations are meaningless,,,,check back in 20 years. :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
investor1
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Re: Newbie nervous and just invested 55k with Vanguard

Post by investor1 »

You're talking about emotions rather than sound investment strategy. Asset allocation is the tool used to keep your emotions in check. Identify your goal (retirement, buying a house in ten years, etc.) and your time horizon, then pick an AA that you are comfortable with. From there, rebalance as you go and shift your AA as the horizon shortens.
i have another 40k i plan to invest at some point when i i feel prices are more reasonable
LOL, maybe you'll learn when you see the price has gone up. I mean, I get the worry about lump sum investing, but the alternative is dollar cost averaging (read the wiki) rather than just two lump sums.

You did well with the first $55k. I assume this is a taxable account??? You might want to read the wiki on tax efficient fund placement. You might not want those bond funds in that particular account. Acheive your AA across your portfolio. You can do that by either acheiving the same AA in each account or by holding certain asset types in specific accounts and acheiving your AA in the overall portfolio.

Is the $40k pegged for the same purpose as the $55k? If so, just invest it according to your AA. If not, identify the time horizon and pick an AA you are comfortable with, then grab the same funds according to that AA, rebalance, and shift as you go.
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cfs
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Re: Newbie nervous and just invested 55k with Vanguard

Post by cfs »

Welcome aboard.

Jack, I am not part of the welcoming committee but I want to give you a personal welcome aboard. Forget about the noise, you are doing fine, don't panic when the market go down--not if but when--and please mark your calendar and on 24 August 2034 drop by again and give us a SITREP or a situation report.

Thanks for reading.
~ Member of the Active Retired Force since 2014 ~
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villars
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Re: Newbie nervous and just invested 55k with Vanguard

Post by villars »

Congratulations on investing. You did the right thing. Now hang in there and do not sell.

I had similar misgivings when I invested 60K into the same funds ( VTSAX and VTIAX ) at peak of market on 12/31/2013 (the SP500 was at 1850 and had just gained 30% for the year ) .

The market is up 6% since then. Maybe it will drop soon , but maybe not. It may stay flat. It may go back to 1850 . Who knows. But one think I know for sure, I got almost $600 in dividends in June :D , and that is money that would not be in the bank if I had waited for the market to drop.

BTW, your amounts should qualify you for Admiral shares ( > 10,000) on the stock portions.
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Regal 56
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Re: Newbie nervous and just invested 55k with Vanguard

Post by Regal 56 »

I began investing in 2007. The stock market eked out a small gain that year. After that was 2008. Oh what a year that was. I’m still here, and my portfolio weathered the storm. Yes, it would’ve been nice to avoid the crash of 2008. But I also rode the bull that followed.

It’s unlikely your timing will be worse than mine. You’ve got time to ride out any downturns. And believe it, there will be downturns. The determining factor in your success won’t be in how well you time your entries and exits. Rather, your success will be determined by how disciplined you are when the various financial tsunamis hit over the course of your investment life. People do badly because they panic and sell at the bottom. It sounds obviously stupid, but it’s not so easy to avoid when it’s your own money on the line.

You got the first half correct: you didn’t try to time your entry. Now you can wait to see if you have the stomach to wait out a crash. After you’ve been through one, it gets a bit easier. Well actually, it doesn’t. But at least you’ll know you can handle it.
dickenjb
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Re: Newbie nervous and just invested 55k with Vanguard

Post by dickenjb »

Your portfolio is very sensible. I would however switch to Admiral shares where possible.

Now for the hard part - DON'T PEEK. Don't go online every day or every week or every month to check your balance. Maybe look at your statements quarterly.

Let the markets do their work.
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Leif
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Re: Newbie nervous and just invested 55k with Vanguard

Post by Leif »

If the markets takes a big drop then by all means sell everything in your taxable account...

And buy a similar but not identical replacement. Or you can wait 31 days and buy back the original fund. It is called tax loss harvesting. I did that in the 2007-9 decline (not just once, but several times). I'm still using those losses to offset gains in funds I purchased in 2009. Not to mention $3,000/year from my income (which is taxed at a higher rate then the 20% cap gains rate). And my funds have more then recovered in that time.
Topic Author
jackolantern4
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Re: Newbie nervous and just invested 55k with Vanguard

Post by jackolantern4 »

First off i wanted to thank each of you all for your enthuastic support. I have thoroughly and thoughtfully read each response. I'm 38 no wife, no kids, no house, no debt. I have limited goals in terms of material wealth other than to have a little bit of money on the side to insulate me from the outside world. I'm somewhat of a miser you could say hence this emotional roller coaster since i placed the order on Friday.
It's pretty wild how emotions work with the market. While reading Jack Bogle's guide and other investment strategies, i felt secure and level-headed. I placed the order on Friday... then looked at the S&P chart, then wondered whether to pull out, started reading Big 6 media financial news, i even thought my sex drive caused me to make a foolish move. My brain scanned the spectrum of possibilities, outcomes, scenarios all in an effort to find an answer. I feel i foolishly wasted my weekend thinking of this. It feels great to log on and see there is a community of support.
I'm going to call Vanguard about the Admiral Share status. Unfortunately this will be a taxable account. Good news is, i'm in a low tax bracket. Yay for being poor. I will devise a written plan so there is a concrete objective agenda in play. I'm doing this lump sum now and later dollar cost approach with the remaining 40k. I'm tuning out the noise and will tune into the forum from now on. I think when i add the other 40k i will wind up doing some rebalancing by default of the objectives for that 40k. I don't have the 40k yet but will soon. Interesting information about the tax-loss harvesting also.

My overall idea is layering:
55k for long term
40k for intermediate term (in case i need to convert to cash in the next 10 years)
Cash and I-bonds for short term

Again thank you for the support as this gives me what i need to be focused on investment strategy.
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Regal 56
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Re: Newbie nervous and just invested 55k with Vanguard

Post by Regal 56 »

You’ve probably noticed that buried in the fine print of a mutual fund prospectus is something like this:
“Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.”
Well that’s nice to know, but it’s far too wishy-washy. The blunt truth is that you’ll lose money in the short run. Maybe not today, but it’ll happen. And those losses may extend for months, or even years. Because of my bad timing it took two years for me to break even. Further, another downturn two years later wiped out all my gains. So that was four years of disciplined saving and investing rewarded with precisely nothing. At that point, I’d have done better burying my money in the back yard.

You’ve begun a long term strategy. You must clearly understand that losses over a few years won’t break you. When the inevitable bad times hit, continue feeding your portfolio. Keeping your head when others are losing theirs will pay off in the long run.

The financial industry likes to portray investing as a steady ascent to wealth. The reality is that it’s more like a roller coaster ride—albeit one that ends higher than where it started. When things go bad, be sure to pop in to this forum for a confidence booster. Then hold on to your hat and try to enjoy the ride.
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in_reality
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Re: Newbie nervous and just invested 55k with Vanguard

Post by in_reality »

jackolantern4 wrote: I'm going to call Vanguard about the Admiral Share status. Unfortunately this will be a taxable account. Good news is, i'm in a low tax bracket. Yay for being poor.
Your not thinking your have to sell them are you? Don't even think you need to call. See this:

https://personal.vanguard.com/us/insigh ... ons-112013
The Wizard
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Re: Newbie nervous and just invested 55k with Vanguard

Post by The Wizard »

Admiral share status is just a matter of having $10,000 or more (usually) in a fund. Some managed funds are $50k.

And where are your IRAs, either Roth or traditional?
Even with low tax bracket, would be better to have your bond funds in a trad IRA. Open them at Vanguard today...
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dickenjb
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Re: Newbie nervous and just invested 55k with Vanguard

Post by dickenjb »

The first rule I gave you was don't check your balance every day or week or month.

The second rule I will give you is don't listen to CNBC or read Money magazine or listen to any of the pundits. None of them know anything but they will get your knickers in a twist.
chuppi
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Re: Newbie nervous and just invested 55k with Vanguard

Post by chuppi »

I understand your concern. Market can drop big after you invest. It is a terrible feeling to think that you would have saved money if you had not invested. Unfortunately there is no easy way to go about it. The market may never drop in the short term and so you may end up waiting forever to enter.

As someone suggested check out the dollar cost averaging information on wiki. http://www.bogleheads.org/wiki/Dollar_cost_averaging Instead of investing lump sum, you invest over a period of a year or two years depending on the amount you have. You have invested 55K now. I would invest the remaining 40K, in chunks of 10K every quarter. If market has to drop significantly, the average won't look as bad.

Going forward if you plan to invest every month, you shouldn't have any concern. If the market drops, you can rebalance and take advantage of the situation.
Cheers and have fun investing.
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Abe
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Re: Newbie nervous and just invested 55k with Vanguard

Post by Abe »

You've already done the hardest part. As time goes on it should get easier although you may second guess yourself from time to time. This is natural. Everything in life is a tradeoff. Investing is no exception. You are taking some risk now with your money in order to have more later. I promise you will be glad you did. Remember, think long term.
Slow and steady wins the race.
rjm_cali
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Re: Newbie nervous and just invested 55k with Vanguard

Post by rjm_cali »

By way of comparison I was in a similar situation to you. In my case it was about 200K from a house sale and I ummed and aahhed about DCA or all in and was it the <whisper> right time or should I wait.
Having sold a business, moved to the US from the UK and got married - well this was just another bold step into the unknown :-)

I put all but about 20K in straight away using a pretty conventional AA between bonds and stocks . I knew I had no idea *when* to put it in so I just put it in and expected a ride of sorts... Only this morning have I put the final tranche in - into TBM as I decided I could not decode the variety of advice on where to put it bonds/long/shorterm/international etc. I know TBM might be too cautious and I know rates will rise but as I don't think *anyone* really knows what is going to happen I stuck it in there as it's better than the crap% I'm getting in cash. Time will tell.

Record of the last three months ?

First month - up $2K - oh I like this investing lark
Second month - down $2.5K - boo-hoo - not going to check my balance as often
Third month - up $2K - well it won't last - just normal volatility

Thing is - I'm becoming more sanguine about it now - the money's all in and I will leave it to do it's thing. I just need to wean myself off checking the balance :oops:

Have I made the right decision ? Compared with the risks of leaving it in cash - seems like a no brainer. Did I chose the right AA (65/35) ? probably OK for me. Did I choose the funds ? Who can tell - I certainly can't and I don't want to spend all my time working it out with no guarantee that my worked out answer will be any different to the default sort of three fund solution I have.

Best of luck - doing something is the thing (but not too much)
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FelixTheCat
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Re: Newbie nervous and just invested 55k with Vanguard

Post by FelixTheCat »

A big part of being a Boglehead is turning off the noise and staying the course. You did well with your investments. Be proud of yourself!

Try to think long term. Get your mind off things by helping others on this board. You will do just fine.
Felix is a wonderful, wonderful cat.
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FelixTheCat
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Re: Newbie nervous and just invested 55k with Vanguard

Post by FelixTheCat »

dickenjb wrote:The second rule I will give you is don't listen to CNBC or read Money magazine or listen to any of the pundits. None of them know anything but they will get your knickers in a twist.
I kicked reading the news for three months. I was happy not seeing the daily turmoil. Too bad I'm reading the news again. :D
Felix is a wonderful, wonderful cat.
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