Scared to Invest
- investorguy1
- Posts: 543
- Joined: Mon Nov 24, 2014 6:13 pm
Scared to Invest
I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
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Re: Scared to Invest
Does your "more diversified" portfolio include bonds? If not, please spend some time to consider an asset allocation (mix of stocks and bonds) that you'll be comfortable holding through all market conditions.
See Investment Planning:
http://www.bogleheads.org/forum/viewtopic.php?t=6211
See Investment Planning:
http://www.bogleheads.org/forum/viewtopic.php?t=6211
Re: Scared to Invest
Shipmate Investor, not enough information provided. What is your current allocation (and please, do not post dollar amounts, just percentages). Have a Merry Christmas.Investerguy wrote:I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
~ Member of the Active Retired Force since 2014 ~
Re: Scared to Invest
DCA is most useful in a declining market. And some people question it all together. I have no opinion on it myself.
I can see why you are gun shy - 2000 was a terrible time to start out. Boglehead style investing is a long-game so you need to not get too alarmed by the up and downs - they just happen. Choose an allocation, choose your investments, and then stay away from it. "Stay the course" as they say around here.
I can see why you are gun shy - 2000 was a terrible time to start out. Boglehead style investing is a long-game so you need to not get too alarmed by the up and downs - they just happen. Choose an allocation, choose your investments, and then stay away from it. "Stay the course" as they say around here.
Kolea (pron. ko-lay-uh). Golden plover.
Re: Scared to Invest
I don't blame you Investerguy, my first comment is that 100% stocks will do that to you. You will need to diversify to soften the blow of a crash. As an example but not advice, I have a taxable account that I want secure without the big declines and I used 30% S&P 500 index, 30% long bond(VUSTX), 30% 5 year treasury, 10% Gold and it did not even go negative in 08. There are 100 ways you can slice and dice based on how you want the portfolio to perform in a downturn. There is also a backtesting tool you can find on this site to see how your proposed portfolio would do in different environments. Keep in mind that nothing is a guarantee but at least you can check against what would happen again in that same crash with a different asset allocation. You will probably get alot of responses from good people with educational materials available on this site but it will mostly come down to how much you allocate to bonds and how much to stocks. Do some reading on this site and try a different allocation.Investerguy wrote:I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average?
- ChicagoMedStudent
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Re: Scared to Invest
By no fault of your own, you were very unlucky and began investing at the beginning of a terrible 10 year run. But we do need more information on your current AA. How are you diversified? How much do you have and how much can you put in at what intervals?Investerguy wrote:I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
Passions are the only orators which always persuade. - François de La Rochefoucauld
- saltycaper
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Re: Scared to Invest
2000-2009 has been referred to as "the lost decade" for many aspects of the American economy. Don't let it discourage you to the point where you never invest again.
Quod vitae sectabor iter?
- investorguy1
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Re: Scared to Invest
I'll give some more detail.
in 2009 I took my money out from the broker and switched to a 50/50 portfolio. In around 2010 I broke even again and since have done well. I am now invested 50%stock/40% bond/10%Cash. If Market drops 20% I'll be back at around 0 gain. If I wait and let the cash pile up either I could buy in low at some point or risk buying even higher.
Thank you everyone for your sympathy!
in 2009 I took my money out from the broker and switched to a 50/50 portfolio. In around 2010 I broke even again and since have done well. I am now invested 50%stock/40% bond/10%Cash. If Market drops 20% I'll be back at around 0 gain. If I wait and let the cash pile up either I could buy in low at some point or risk buying even higher.
Thank you everyone for your sympathy!
Re: Scared to Invest
Te absolute best thing you can do is set a reasonable Asset Allocation (AA) and invest in it systematically (periodically) as soon as you have the money from your salary or other income.Investerguy wrote:I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
DCA is when you have a chunk of cash and choose not to invest it according to your AA. That is a bad idea. For one thing, it does not reduce your risk in the way you might imagine. It (DCA) makes the Sharpe Ratio lower, so your risk-adjusted return goes down with DCA.
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Scared to Invest
You are not alone. But your logic not to DCA is bass-ackwards. People that don't have the income to sustain a market downturn should only DCA. Long sustained systematic investing is the best way to achieve wealth. It has served me well. Good luck in overcoming your fears.Investerguy wrote:Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
- ChicagoMedStudent
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Re: Scared to Invest
+1. It sounds like your allocation in more conservative now. If you're comfortable with it, you should stick with it and invest regularly. I don't know how many more years you have to invest and/or what your timeline is like, but the most important thing is to not back out. If you invest, there will be times when you lose money. But not investing at all is worse.Leeraar wrote: Te absolute best thing you can do is set a reasonable Asset Allocation (AA) and invest in it systematically (periodically) as soon as you have the money from your salary or other income.
Passions are the only orators which always persuade. - François de La Rochefoucauld
Re: Scared to Invest
Quite possibly, the problem was the fees being charged by your broker.Investerguy wrote:I'll give some more detail.
in 2009 I took my money out from the broker and switched to a 50/50 portfolio. In around 2010 I broke even again and since have done well. I am now invested 50%stock/40% bond/10%Cash. If Market drops 20% I'll be back at around 0 gain. If I wait and let the cash pile up either I could buy in low at some point or risk buying even higher.
Thank you everyone for your sympathy!
I don't understand your arithmetic. On Dec 31 2009, the adjusted close of VTSMX was 25.16. Today, it is 51.77, more than double. (Yahoo finance.) How is it possible that a 20% drop in the market would wipe out that gain? It would need to be a 50% drop.
Are you investing in individual stocks?
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
- investorguy1
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Re: Scared to Invest
Thank you all for your great advice and thoughts. Here is what I am thinking but I don't really like either option much.
1. dollar cost average. The risk here is that I will face another long period of flat returns.
2. Wait for the market to drop 10% put in half and then the other half after another 10% drop. (I know this is market timing and the market could go up 10% before it goes down) but maybe this would lower my chances of another 10 years of zero return?
1. dollar cost average. The risk here is that I will face another long period of flat returns.
2. Wait for the market to drop 10% put in half and then the other half after another 10% drop. (I know this is market timing and the market could go up 10% before it goes down) but maybe this would lower my chances of another 10 years of zero return?
- ChicagoMedStudent
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Re: Scared to Invest
Personally I don't think either of these ideas are a good way to go. (2) especially - I don't see how this would lower your chances of a long period of zero return. Can you tell us what funds you're invested in?Investerguy wrote:Thank you all for your great advice and thoughts. Here is what I am thinking but I don't really like either option much.
1. dollar cost average. The risk here is that I will face another long period of flat returns.
2. Wait for the market to drop 10% put in half and then the other half after another 10% drop. (I know this is market timing and the market could go up 10% before it goes down) but maybe this would lower my chances of another 10 years of zero return?
Passions are the only orators which always persuade. - François de La Rochefoucauld
Re: Scared to Invest
Shipmate Investor, waiting for the market to drop 10% in order to invest is not a good plan. Quick, when was the last time the market dropped 10%?Investerguy wrote:Thank you all for your great advice and thoughts. Here is what I am thinking but I don't really like either option much.
1. dollar cost average. The risk here is that I will face another long period of flat returns.
2. Wait for the market to drop 10% put in half and then the other half after another 10% drop. (I know this is market timing and the market could go up 10% before it goes down) but maybe this would lower my chances of another 10 years of zero return?
~ Member of the Active Retired Force since 2014 ~
- investorguy1
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Re: Scared to Invest
I went from 100% stocks to 50% stocks. So when stocks were doing well I had half as much as before. Also it took a couple weeks to get the money from my broker and re invest it so I lost a bit of upside there. And now I have been adding over the past couple of years so I have more money invested now than I did then. So it is a combination of those factors. I have made about 10% over my cost basis. As far as fund selection goes I have a lot of index funds and my active funds mostly in fixed income have done a lot better than the market.Leeraar wrote:
I don't understand your arithmetic. On Dec 31 2009, the adjusted close of VTSMX was 25.16. Today, it is 51.77, more than double. (Yahoo finance.) How is it possible that a 20% drop in the market would wipe out that gain? It would need to be a 50% drop.
Are you investing in individual stocks?
L.
- investorguy1
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Re: Scared to Invest
The point of waiting for a 10% drop would be to lower my cost basis compared to buying at todays prices.
So what option am I left with DCA and live with a drop and flat returns for another 5 years?
So what option am I left with DCA and live with a drop and flat returns for another 5 years?
- investorguy1
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Re: Scared to Invest
Probably around 4 years ago? on average i think it does so every 12 months.cfs wrote: Quick, when was the last time the market dropped 10%?
- ChicagoMedStudent
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Re: Scared to Invest
I think if any valuable, concrete advice is to be given, we need some specifics about your investments. You may want to check out the suggested formatting for asking portfolio advice here http://www.bogleheads.org/forum/viewtop ... f=1&t=6212.Investerguy wrote: As far as fund selection goes I have a lot of index funds and my active funds mostly in fixed income have done a lot better than the market.
Passions are the only orators which always persuade. - François de La Rochefoucauld
Re: Scared to Invest
I would just go ahead and invest without DCAing.Investerguy wrote:The point of waiting for a 10% drop would be to lower my cost basis compared to buying at todays prices.
So what option am I left with DCA and live with a drop and flat returns for another 5 years?
DCAing is a good strategy if you have income coming in regularly that you want to invest from (compared to saving up large chunks to invest later).
You get two benefits:
1) You don't have money sitting around uninvested while you save up a large chunk
2) Due to the nature of DCAing, you will naturally buy fewer shares when the price is higher, and more shares when the price is lower.
However, if you already have a large chunk of money, you are better off just investing it.
Do you often hear of people selling all their investments and then slowly dribbling their money back in via DCAing? (How often would they do so? Every 5 years sell everything and then DCA it back in over 5 years, then sell it all and repeat?)
I don't often hear of this. The reason is that it won't increase your expected returns to do so.
The effect on your investment returns is no different if you have a chunk of money you are planning to invest, and dribble it in slowly. Just as most people don't regularly sell all their investments and then dribble them back into the market, you shouldn't just dribble in when you already have the money to invest.
Leaving a bunch of money uninvested while you DCA it into the market will get you less expected return than just investing the chunk. If you are concerned about the market dropping, then you should allocate more to bonds, not keep money uninvested.
NOTE: By allocate more to bonds, I mean on a permanent basis. Don't change your allocation based on the market, or how you feel about the market; pick an allocation you can stick with across all market conditions. If you constantly switch allocations (or even every couple years switch allocations), it is probably not a good idea.
Last edited by Morik on Fri Dec 19, 2014 5:56 pm, edited 2 times in total.
Re: Scared to Invest
You said you went to 50% stocks in 2010. Since then, stocks have doubled. You say a 20% drop in stocks will wipe out your gains. Are these taxable or tax-advantaged?Investerguy wrote:I went from 100% stocks to 50% stocks. So when stocks were doing well I had half as much as before. Also it took a couple weeks to get the money from my broker and re invest it so I lost a bit of upside there. And now I have been adding over the past couple of years so I have more money invested now than I did then. So it is a combination of those factors. I have made about 10% over my cost basis. As far as fund selection goes I have a lot of index funds and my active funds mostly in fixed income have done a lot better than the market.Leeraar wrote:
I don't understand your arithmetic. On Dec 31 2009, the adjusted close of VTSMX was 25.16. Today, it is 51.77, more than double. (Yahoo finance.) How is it possible that a 20% drop in the market would wipe out that gain? It would need to be a 50% drop.
Are you investing in individual stocks?
L.
I think you need to shoot some dogs. From the little you have told us, it seems the problem is your investments, not the market.
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
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Re: Scared to Invest
I think the problem is you're trying to fix everything, constantly.
Starting in 2000 was just bad luck- not your fault at all. But even a lump some in 2000 has gotten some return, whether you were 100% stocks or 50/50. If you added little amounts each year, you've done better.
Try the backtest of the two portfolios (100/0 and 50/50) in a lump sum of 10,000 in 2000:
http://portfoliovisualizer.com/backtest ... sisResults
100/0: ending balance: $17,835
50/50: ending balance: $21,039
Try again as if you invested a lump sum of $10,000 in 2000 and contributed a little, $1000 each year:
100/0: ending balance: $46,909
50/50: ending balance: $46,756
I admit that these aren't great returns, but it's no tragedy either. Pick any asset allocation and don't get in and out. Selling during every downturn to find a new AA locks in your losses.
Starting in 2000 was just bad luck- not your fault at all. But even a lump some in 2000 has gotten some return, whether you were 100% stocks or 50/50. If you added little amounts each year, you've done better.
Try the backtest of the two portfolios (100/0 and 50/50) in a lump sum of 10,000 in 2000:
http://portfoliovisualizer.com/backtest ... sisResults
100/0: ending balance: $17,835
50/50: ending balance: $21,039
Try again as if you invested a lump sum of $10,000 in 2000 and contributed a little, $1000 each year:
100/0: ending balance: $46,909
50/50: ending balance: $46,756
I admit that these aren't great returns, but it's no tragedy either. Pick any asset allocation and don't get in and out. Selling during every downturn to find a new AA locks in your losses.
Re: Scared to Invest
Dollar cost averaging is a specific term meaning investing a large amount of cash. Do you have a large amount of cash to invest, or are you talking about not contributing to retirement now and are wondering when you should start contributing from income.
What is the difference of making no returns with invested money and making no returns by staying out of the market? The way you are thinking about share price is incorrect. Share price is always going to fluctuate, but it is total number of shares you accumulate that is important now. Also, you are making several classic behavioral errors. See if you can identify with any of them.
http://www.bogleheads.org/wiki/Behavioral_pitfalls
Paul
What is the difference of making no returns with invested money and making no returns by staying out of the market? The way you are thinking about share price is incorrect. Share price is always going to fluctuate, but it is total number of shares you accumulate that is important now. Also, you are making several classic behavioral errors. See if you can identify with any of them.
http://www.bogleheads.org/wiki/Behavioral_pitfalls
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Scared to Invest
Assuming that you have several decades until you retire that is exactly what would be best for you since you could be accumulating less expensive stock.Investerguy wrote:Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return.
Re: Scared to Invest
I don't know why you received any replies on this. No age, income, current AA, target AA, reasons, IPS, nothing. I feel you have been over privileged to
get responses, I know they wouldn't do that for me!
On a lighter note it has been said never to invest what you cannot stand to see fluctuate (down) by around 50%!
get responses, I know they wouldn't do that for me!
On a lighter note it has been said never to invest what you cannot stand to see fluctuate (down) by around 50%!
Re: Scared to Invest
Checking the S&P 500, there was a 10% (actually 10.4%) correction from May 1 to June 4, 2012 (1,405.82 - 1,278.04), also per Goldman Sachs the 5% "corrections" happen a few times a year, a 10-15% correction every 1-2 years, and 20% declines every 3-5 years (on average), but we should not wait for "corrections" to invest our money because we have no idea on when those corrections are going to happen (average years are just average).Investerguy wrote:Probably around 4 years ago? on average i think it does so every 12 months.cfs wrote: Quick, when was the last time the market dropped 10%?
~ Member of the Active Retired Force since 2014 ~
Re: Scared to Invest
There was a "correction" in 2011 larger than any fluctuation in 2012.cfs wrote:Checking the S&P 500, there was a 10% (actually 10.4%) correction from May 1 to June 4, 2012 (1,405.82 - 1,278.04), also per Goldman Sachs the 5% "corrections" happen a few times a year, a 10-15% correction every 1-2 years, and 20% declines every 3-5 years (on average), but we should not wait for "corrections" to invest our money because we have no idea on when those corrections are going to happen (average years are just average).Investerguy wrote:Probably around 4 years ago? on average i think it does so every 12 months.cfs wrote: Quick, when was the last time the market dropped 10%?
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
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Re: Scared to Invest
There might indeed be a 10% correction in the future but that correction might not get any lower than it is right now.
Re: Scared to Invest
+1ChicagoMedStudent wrote:I think if any valuable, concrete advice is to be given, we need some specifics about your investments. You may want to check out the suggested formatting for asking portfolio advice here http://www.bogleheads.org/forum/viewtop ... f=1&t=6212.Investerguy wrote: As far as fund selection goes I have a lot of index funds and my active funds mostly in fixed income have done a lot better than the market.
What do you own and what are the ERs? Plus all the other information listed in the link. I guarantee you will gain a lot from doing this exercise as well as get more useful suggestions.
Re: Scared to Invest
OP and I are probably similar in age. I also started investing back then (actually started my first job in 1996 but didn't really have any money to invest until 1999 and it has more or less been flat). My only saving grace is that I have made decent money over the years and have been able to save but had I just put money into a savings account, it would have been roughly the same (or better actually since I was also 100% stock for many years and I invested in the riskiest stocks (some were bought at >$100 and went down literally to $0).
Although many who have the urge to time the market think that the market is at a high point now, most do not think that if we look back to today 5 or 10 or 20 years from now we will say "wow, the peak was in December 2014." In short, just build an asset allocation plan and stick with it.
I still have a good 20+ years to go before I hit retirement age so I'm staying the course...at least that's what I've been taught in the few months I've been here. I also read the boglehead books and that has helped a lot as well.
Although many who have the urge to time the market think that the market is at a high point now, most do not think that if we look back to today 5 or 10 or 20 years from now we will say "wow, the peak was in December 2014." In short, just build an asset allocation plan and stick with it.
I still have a good 20+ years to go before I hit retirement age so I'm staying the course...at least that's what I've been taught in the few months I've been here. I also read the boglehead books and that has helped a lot as well.
Re: Scared to Invest
I'd suggest two things.
1. Imagine a retirement based solely upon the unknowns of social security. Be scared of that.
2. Imagine the retirement of your dreams. Calculate how much money you need to get there. Do everything you can to get there.
1. Imagine a retirement based solely upon the unknowns of social security. Be scared of that.
2. Imagine the retirement of your dreams. Calculate how much money you need to get there. Do everything you can to get there.
Pale Blue Dot
Re: Scared to Invest
My guess is when/if the market drop 10%, you will find a reason not to invest at that time. When the market drop 10% (or more),the forecast will look gloomy and the reasoning is "why invest now and risk loosing more money".Investerguy wrote: 2. Wait for the market to drop 10% put in half and then the other half after another 10% drop. (I know this is market timing and the market could go up 10% before it goes down) but maybe this would lower my chances of another 10 years of zero return?
As a test: did you look at emerging market now since it hasn't return anything compare to the market in the last 3 years - 5 years? Is it time to invest in emerging market or is it dead money for another 10 years?
Re: Scared to Invest
I noticed that the international stock market index did drop by 10% recently. Did you invest more when that happened? If not, why not?Investerguy wrote:2. Wait for the market to drop 10% put in half and then the other half after another 10% drop. (I know this is market timing and the market could go up 10% before it goes down) but maybe this would lower my chances of another 10 years of zero return?
If one is risk averse, then there is no reason to invest in stock funds anyways. One can simply invest in CDs, Treasuries, and TIPS. This works just fine if one saves and invests lots of money.
Re: Scared to Invest
OP,
Please do post your entire portfolio in the formats suggested above and folks can give you more specific advice.
Talking about one piece of investing (dollar cost averaging if 10% drop) in the absence of more information is like talking about buying a house and only discussing the color of the walls in whether to buy that house or not. There are too many other more important variables than that one piece of information.
In general, the responses are that waiting for a 10% drop is a bad strategy, and as pointed out there have been 10% drops, did you act on them?
This sentence is a concern " Also it took a couple weeks to get the money from my broker and re invest it so I lost a bit of upside there" Have you rectified this situation? There is no reason to have a broker as a middleman. As others are pointing out, if you still have a broker, you are losing daily to the fees you are paying. Those fees may be hurting yor returns much more than investing at the perfect time is.
My investments are a few computer clicks away at any time. But there is still a delay of 24-72 hours for sales/purchases depending on when I make the arrangement online. If a market drop that meets your criteria comes along, even without a broker to handle the trades, the market could correct before the transaction goes through.
I do understand being cautious and fearful, I am too. But I try to make a plan and then follow it. I think if you post more info, you can get more helpful info and reassurance. Or, info to help you make a different plan that you feel better about.
Best wishes,
lafder
Please do post your entire portfolio in the formats suggested above and folks can give you more specific advice.
Talking about one piece of investing (dollar cost averaging if 10% drop) in the absence of more information is like talking about buying a house and only discussing the color of the walls in whether to buy that house or not. There are too many other more important variables than that one piece of information.
In general, the responses are that waiting for a 10% drop is a bad strategy, and as pointed out there have been 10% drops, did you act on them?
This sentence is a concern " Also it took a couple weeks to get the money from my broker and re invest it so I lost a bit of upside there" Have you rectified this situation? There is no reason to have a broker as a middleman. As others are pointing out, if you still have a broker, you are losing daily to the fees you are paying. Those fees may be hurting yor returns much more than investing at the perfect time is.
My investments are a few computer clicks away at any time. But there is still a delay of 24-72 hours for sales/purchases depending on when I make the arrangement online. If a market drop that meets your criteria comes along, even without a broker to handle the trades, the market could correct before the transaction goes through.
I do understand being cautious and fearful, I am too. But I try to make a plan and then follow it. I think if you post more info, you can get more helpful info and reassurance. Or, info to help you make a different plan that you feel better about.
Best wishes,
lafder
Re: Scared to Invest
There might also be a 25% correction which brings it 12.87% lower than it is right now!placeholder wrote:There might indeed be a 10% correction in the future but that correction might not get any lower than it is right now.
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Re: Scared to Invest
Indeed there might or a 50% drop but the point is that waiting for that might be an event years in the future and if you look at various indexes you find points where even with the bear markets of 2000 and 2008 that the index has never reached that level again.IPer wrote:There might also be a 25% correction which brings it 12.87% lower than it is right now!placeholder wrote:There might indeed be a 10% correction in the future but that correction might not get any lower than it is right now.
Re: Scared to Invest
My point was yes, and we still invest. So the fact that this "could" happen are not determining factors in my IPS.placeholder wrote:Indeed there might or a 50% drop but the point is that waiting for that might be an event years in the future and if you look at various indexes you find points where even with the bear markets of 2000 and 2008 that the index has never reached that level again.IPer wrote:There might also be a 25% correction which brings it 12.87% lower than it is right now!placeholder wrote:There might indeed be a 10% correction in the future but that correction might not get any lower than it is right now.
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Re: Scared to Invest
And what unknowns are those? Have you read the trustees annual report? The last trustees report indicated you should expect to receive 75% of your anticipated/expected annual benefit beginning in the year 2034 - you have 20 years to prepare. There are unknowns and then there is willful ignorance - so I'd ask the original OP to read the trustees report and figure out a way to bridge the gap between the 25% lost to not having enough assets/contributions into the fund to pay him and then Item #2 with the caveat to do everything you can now to get there.4nursebee wrote:I'd suggest two things.
1. Imagine a retirement based solely upon the unknowns of social security. Be scared of that.
2. Imagine the retirement of your dreams. Calculate how much money you need to get there. Do everything you can to get there.
Good Luck! But don't forget to smell the roses today, while you are above ground.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
- investorguy1
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Re: Scared to Invest
A lot of people asked me for this so here it is!
Emergency fund: 6 months
Debt: None
Tax filing status: married filing jointly
Tax rate: 15%
age: 30
Desired allocation 50%stock/50%bonds
Desired international allocation: 35% stock
Current allocation: 50% stock/40% bonds/10% cash
The asset allocation is for all my investments other than an emergency fund/ checking.
Taxable(80% of assets):
Vanguard
10% money market
25% bnd (half in roth)
5% Vanguard short term investment grade
5% vanguard Tips
5% bndx (vanguard international bond index)
23% -vanguard total stock market index (half in roth)
10%- Mairs & Power Growth Fund (large cap us)
10%- vea (vanguard international developed market index)
7% - vwo (vanguard emerging market index) & Lazard International Strategic Equity Portfolio
Fidelity
10% cash
33%-ITOT (Broad US etf)
17% -Oakix (Oakmark international)
10%-HIINX (Harbor International)
40%- Bonds split between, mwtrx (Metropolitan West Total Return Bond Fund ), pfodx (PIMCO Foreign Bond (US Dollar-Hedged) ), lsbrx (Loomis Sayles Bond Fund ), pondx (Pimco Income fund)
I'm contributing to a 401k at work with expensive index funds and a couple other funds. (I'm just starting there and it is a small amount I'm just doing the match so this isn't really significant part of my portfolio yet. maybe for another post.
Question:
1. After being hit hard twice in 2000 & 2008 I am up 10% above the money I have put in (I believe the reason I had low returns is almost exclusively because of when I put money into the market and not a result of paying high fees). I am concerned of investing more now (then looking back at today as a top) and facing another 10 years of flat returns if there is a market crash. I would be ok with losing up to 20% max. What should I do about it?
2. What should I do with my 10% in cash? When should I do it?
Emergency fund: 6 months
Debt: None
Tax filing status: married filing jointly
Tax rate: 15%
age: 30
Desired allocation 50%stock/50%bonds
Desired international allocation: 35% stock
Current allocation: 50% stock/40% bonds/10% cash
The asset allocation is for all my investments other than an emergency fund/ checking.
Taxable(80% of assets):
Vanguard
10% money market
25% bnd (half in roth)
5% Vanguard short term investment grade
5% vanguard Tips
5% bndx (vanguard international bond index)
23% -vanguard total stock market index (half in roth)
10%- Mairs & Power Growth Fund (large cap us)
10%- vea (vanguard international developed market index)
7% - vwo (vanguard emerging market index) & Lazard International Strategic Equity Portfolio
Fidelity
10% cash
33%-ITOT (Broad US etf)
17% -Oakix (Oakmark international)
10%-HIINX (Harbor International)
40%- Bonds split between, mwtrx (Metropolitan West Total Return Bond Fund ), pfodx (PIMCO Foreign Bond (US Dollar-Hedged) ), lsbrx (Loomis Sayles Bond Fund ), pondx (Pimco Income fund)
I'm contributing to a 401k at work with expensive index funds and a couple other funds. (I'm just starting there and it is a small amount I'm just doing the match so this isn't really significant part of my portfolio yet. maybe for another post.
Question:
1. After being hit hard twice in 2000 & 2008 I am up 10% above the money I have put in (I believe the reason I had low returns is almost exclusively because of when I put money into the market and not a result of paying high fees). I am concerned of investing more now (then looking back at today as a top) and facing another 10 years of flat returns if there is a market crash. I would be ok with losing up to 20% max. What should I do about it?
2. What should I do with my 10% in cash? When should I do it?
- investorguy1
- Posts: 543
- Joined: Mon Nov 24, 2014 6:13 pm
Re: Scared to Invest
Moric – thanks for the advise, taking into account the emotions but staying logical.
leeraar – It's because I have more invested now then I did then. That is why a 20% drop would send me back to 0 return.
Pkcrafter- I'll check out the link
topos- thats why I wanted to set a specific % ie 10% and now just say well if it goes down I'll buy. But Like you say having a plan is one thing doing it is another.
Lafder – I'm no longer with a broker.
leeraar – It's because I have more invested now then I did then. That is why a 20% drop would send me back to 0 return.
Pkcrafter- I'll check out the link
topos- thats why I wanted to set a specific % ie 10% and now just say well if it goes down I'll buy. But Like you say having a plan is one thing doing it is another.
Lafder – I'm no longer with a broker.
Re: Scared to Invest
Investorguy,
You have many years of investing and compounding growth ahead of you. There will be market ups and downs, I am pretty sure of that. Hang in there and try to keep your long term horizon in mind. If you believe in the market, you believe over time it will go up overall. If you do not believe that why are you investing ?
Do you by chance have a mortgage or other debt? You remind me of something a wise person told me. She said someone told her to "always pay yourself first by paying off your house before taking a gamble on the stock market."
I do not strictly follow this advice. I pay extra on my mortgage, and I invest some extra in taxable accounts. But it has always struck me as good advice especially for worriers! The financial markets will go up and down as can real estate prices. But if you have a mortgage, that number is there until you pay it off dollar for dollar (most of the time, I know there are exceptions).
If putting $$ into the market is tough for you, is there anything else you can do that would feel more right ?
lafder
You have many years of investing and compounding growth ahead of you. There will be market ups and downs, I am pretty sure of that. Hang in there and try to keep your long term horizon in mind. If you believe in the market, you believe over time it will go up overall. If you do not believe that why are you investing ?
Do you by chance have a mortgage or other debt? You remind me of something a wise person told me. She said someone told her to "always pay yourself first by paying off your house before taking a gamble on the stock market."
I do not strictly follow this advice. I pay extra on my mortgage, and I invest some extra in taxable accounts. But it has always struck me as good advice especially for worriers! The financial markets will go up and down as can real estate prices. But if you have a mortgage, that number is there until you pay it off dollar for dollar (most of the time, I know there are exceptions).
If putting $$ into the market is tough for you, is there anything else you can do that would feel more right ?
lafder
Re: Scared to Invest
On a lighter note I doubt that 10-20% cash is going to kill you so if that is where your comfort zone is then that is most likely better for you, there is
no sense in overextending and then losing sleep over things. Also, you might want to look of Rick Ferri and what he does with his Emergency Fund and/or
extra cash.
no sense in overextending and then losing sleep over things. Also, you might want to look of Rick Ferri and what he does with his Emergency Fund and/or
extra cash.
-
- Posts: 258
- Joined: Thu Nov 20, 2014 8:36 pm
Re: Scared to Invest
Investerguy wrote: Question:
1. After being hit hard twice in 2000 & 2008 I am up 10% above the money I have put in (I believe the reason I had low returns is almost exclusively because of when I put money into the market and not a result of paying high fees). I am concerned of investing more now (then looking back at today as a top) and facing another 10 years of flat returns if there is a market crash. I would be ok with losing up to 20% max. What should I do about it?
2. What should I do with my 10% in cash? When should I do it?
How is that possible? Only a 10% total return since 2000?
Try the backtest of the two portfolios (100/0 and 50/50) in a lump sum of 10,000 in 2000:
http://portfoliovisualizer.com/backtest ... sisResults
100/0: ending balance: $17,835
50/50: ending balance: $21,039
Try again as if you invested a lump sum of $10,000 in 2000 and contributed a little, $1000 each year:
100/0: ending balance: $46,909
50/50: ending balance: $46,756
You must have sold on the lows at some point, unless I'm missing something. If that's the case, your AA isn't as important as behavior.
"Don't just do something- stand there." Really just pick any allocation that seems reasonable to you and don't make more changes.
Re: Scared to Invest
I am not suggesting that you jump in and do something right now, but one of the few things that you can control is buying funds with low ERs (expense ratios). Most of your Fidelity funds have +0.9 ERs (fees) (bonds over 0.6), according to Morningstar, and several include 12b-1 fees which go elsewhere. Compare these to Fidelity Spartan funds, & some ETFs (your ETF is low-fee). The Mairs & Power Growth Fund and Lazard International Strategic Equity Portfolio also have high ERs at Vanguard. All you really need are 3 funds:
https://www.bogleheads.org/wiki/3-fund_portfolio
Again, I am suggesting you not do anything for now, just study the Wiki, read recommended books, and wait for other suggestions here. Perhaps read online this book by Boglehead, William Bernstein, If You Can: How Millennials Can Get Rich Slowly, which is also on Amazon with reviews.
http://www.etf.com/docs/IfYouCan.pdf
Are there any funds in Roth besides the BND and TSM?
There is nothing wrong with keeping your cash out of investing. I would suggest that you find a (slightly) higher return such as in CDs or I-Bonds.
https://www.bogleheads.org/wiki/3-fund_portfolio
Again, I am suggesting you not do anything for now, just study the Wiki, read recommended books, and wait for other suggestions here. Perhaps read online this book by Boglehead, William Bernstein, If You Can: How Millennials Can Get Rich Slowly, which is also on Amazon with reviews.
http://www.etf.com/docs/IfYouCan.pdf
Are there any funds in Roth besides the BND and TSM?
There is nothing wrong with keeping your cash out of investing. I would suggest that you find a (slightly) higher return such as in CDs or I-Bonds.
In your 401k, look for the word "index" and/or ERs of 0.5% or less. If you post them here, you might get some help picking the best one(s). Sometimes there is a lower cost S&P among a bunch of expensive ones.Vanguard
10% money market
25% bnd (half in roth)
5% Vanguard short term investment grade
5% vanguard Tips
5% bndx (vanguard international bond index)
23% -vanguard total stock market index (half in roth)
10%- Mairs & Power Growth Fund (large cap us)
10%- vea (vanguard international developed market index)
7% - vwo (vanguard emerging market index) & Lazard International Strategic Equity Portfolio
Fidelity
10% cash
33%-ITOT (Broad US etf)
17% -Oakix (Oakmark international)
10%-HIINX (Harbor International)
40%- Bonds split between, mwtrx (Metropolitan West Total Return Bond Fund ), pfodx (PIMCO Foreign Bond (US Dollar-Hedged) ), lsbrx (Loomis Sayles Bond Fund ), pondx (Pimco Income fund)
Re: Scared to Invest
Because he is calculating the return incorrectly?How is that possible? Only a 10% total return since 2000?
I suspect he is only looking at the difference in price from his basis, and ignoring dividends and distributions. (He is only looking at unrealized capital gains.)
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Scared to Invest
Don't be ashamed of experiencing a bit of fear when it comes to the markets. What is worse is to become complacent about the risks of the financial markets. Keep a healthy respect for the volatility of the markets.
Get a plan, Stan and stick to it. You are an excellent candidate for an investment policy statement. That is getting your thoughts about investing and an investment plan down on paper. Develop a set of core beliefs about the markets and investing so that you can stick to your investments when things look really tough.
The fact is that all of us experience nervousness about the markets from time to time. I is normal and indeed healthy for an investor. We all work hard for our money. We invest it and over time, the nest egg grows into a substantial amount of money. It represents a part of our life we had to give up to create that nest egg. So naturally, we will experience nervousness when observing volatile markets. A part of our life is on the line.
Get a plan, Stan and stick to it. You are an excellent candidate for an investment policy statement. That is getting your thoughts about investing and an investment plan down on paper. Develop a set of core beliefs about the markets and investing so that you can stick to your investments when things look really tough.
The fact is that all of us experience nervousness about the markets from time to time. I is normal and indeed healthy for an investor. We all work hard for our money. We invest it and over time, the nest egg grows into a substantial amount of money. It represents a part of our life we had to give up to create that nest egg. So naturally, we will experience nervousness when observing volatile markets. A part of our life is on the line.
A fool and his money are good for business.
- investorguy1
- Posts: 543
- Joined: Mon Nov 24, 2014 6:13 pm
Re: Scared to Invest
Lafder – right now I'm renting. I would like to buy at some point but am not sure where I want to live (now I'm pretty far from work) So I'm going to wait till I get that sorted out. It's funny because with low interest rates in theory you would be better off being invested in stocks then paying off your mortgage. But paying off the mortgage is better than some bonds and cds. And like you said there is the psychological benefit. I do think the market will likely go up over the long term. Although I don't think it “has to happen”. The world could look very different in 30 years from now.
IPR – Ill have to check out Rick Ferry emergency fund. 6 months of cash doing nothing does seem kind of wasteful. I was thinking of putting some in an Ally CD and worst comes to worst if I have to take it out so I would lose out on some interest.
Early Start – I put in lump sum in 2000. then around 2011 I got some more money and put some in then. The past year I've been putting more in every month because I've been in the position to do so before I wasn't able to do that my income was not so consistent.
BL – Most of my investments are in indexes. Except for Bonds I have a lot of active and they have done a lot better than the index. I've been doing it as kind of an experiment of can I pick funds that will do well. In theory I agree indexing is the way to go. Although so far in my experience I've done better with active funds. So thats why I still have some portion in active. Also Vanguard has a lot of pretty good active funds with very low costs. I looked over my 401k the bond index has an expense of 0.8%. A lot of the other indexes have trailed their benchmark by about 1% over the last 3 and 5 years.
Leerer- If I only look at the money I first invested in 2000 it is up more than 10% quite a lot more. But because I have recently been adding more money I am up 10% from all the money I have invested now. I heard about some book that says to use 200% leverage when you are young because you have less dollars to invest and then cut back when you are older. I guess the point is to avoid this part of the problem.
Nedsaid – I've always been careful to save as much as I could since I was a teenager and was under the impression if you invest in stocks you will end up making lots of money down the road because of compounding. I guess folks in Japan may tell you otherwise but thats kind of the idea that I had. I think the idea of a written investment policy kind of like a business plan.
IPR – Ill have to check out Rick Ferry emergency fund. 6 months of cash doing nothing does seem kind of wasteful. I was thinking of putting some in an Ally CD and worst comes to worst if I have to take it out so I would lose out on some interest.
Early Start – I put in lump sum in 2000. then around 2011 I got some more money and put some in then. The past year I've been putting more in every month because I've been in the position to do so before I wasn't able to do that my income was not so consistent.
BL – Most of my investments are in indexes. Except for Bonds I have a lot of active and they have done a lot better than the index. I've been doing it as kind of an experiment of can I pick funds that will do well. In theory I agree indexing is the way to go. Although so far in my experience I've done better with active funds. So thats why I still have some portion in active. Also Vanguard has a lot of pretty good active funds with very low costs. I looked over my 401k the bond index has an expense of 0.8%. A lot of the other indexes have trailed their benchmark by about 1% over the last 3 and 5 years.
Leerer- If I only look at the money I first invested in 2000 it is up more than 10% quite a lot more. But because I have recently been adding more money I am up 10% from all the money I have invested now. I heard about some book that says to use 200% leverage when you are young because you have less dollars to invest and then cut back when you are older. I guess the point is to avoid this part of the problem.
Nedsaid – I've always been careful to save as much as I could since I was a teenager and was under the impression if you invest in stocks you will end up making lots of money down the road because of compounding. I guess folks in Japan may tell you otherwise but thats kind of the idea that I had. I think the idea of a written investment policy kind of like a business plan.
Re: Scared to Invest
A CD Ladder at Ally or another institution is a good idea for a PORTION of the emergency fund or your cash allocation. You should know that the 5 year at Ally is around 2% and there are others that have 2.25% and 2.30% so make sure you look around.
Re: Scared to Invest
If you are scared about investing in stocks, then don't. There is nothing wrong with laddered CDs in my opinion - other than the inflation risk. But I prefer to accept inflation risk rather than having to manage extreme volatility in stocks.
Investerguy wrote:I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell
Re: Scared to Invest
There you go. If you are only prepared to invest in "safe" investments, you should double your savings rate.obgyn65 wrote:If you are scared about investing in stocks, then don't. There is nothing wrong with laddered CDs in my opinion - other than the inflation risk. But I prefer to accept inflation risk rather than having to manage extreme volatility in stocks.
Investerguy wrote:I first started investing in 2000 when I first had enough money worth investing. I was all in stocks by 2007 I broke even before the crash took me till 2010 to break even again. Now I have a more diversified portfolio but am concerned about adding to it and face another 10 years of near zero return. Any suggestions other than Dollar Cost Average? Over that time period I didn't have the income to be able to dollar cost average.
For most people who invest over a career, 1% saved should be expected yield 2% replacement of their salary. If you are not prepared to invest, you should be prepared to save the 2%.
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")