Knowing when to invest?

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InvestorNewb
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Knowing when to invest?

Post by InvestorNewb » Wed Nov 28, 2012 1:15 pm

Hello,

I have money set aside in my bank account that is losing value to inflation each year. I've already invested a small sum of it, but I'm having trouble deciding when I should invest the remainder. I know the philosophy around here isn't to market time, but it's a difficult thing to do when you hear talks about the "fiscal cliff" and all that other stuff.

I read the best time to invest is during a bear market, when prices are down. But how do we know if we are in a bear market? Do they typically start with a significant dip in the market?

I'm currently in the 3-fund portfolio for the money that I do have invested. But I would rather "lump sum" my way in as opposed to making weekly or monthly contributions.

My online broker charges $10/trade, so I would be looking at spending $30 each time if I DCA'd my way in.

Thanks
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

chaz
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Re: Knowing when to invest?

Post by chaz » Wed Nov 28, 2012 1:17 pm

Why use a broker?
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

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tludwig23
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Re: Knowing when to invest?

Post by tludwig23 » Wed Nov 28, 2012 1:22 pm

InvestorNewb wrote:...I've already invested a small sum of it, but I'm having trouble deciding when I should invest the remainder. I know the philosophy around here isn't to market time, but it's a difficult thing to do when you hear talks about the "fiscal cliff" and all that other stuff.
Didn't you just ask the same question 4 days ago? Get on with it, man!
InvestorNewb wrote:...For now I will start off with this $300k I am willing to invest. Currently its all liquid in cash in a brokerage account waiting to be invested.... I have been contemplating weather to invest it all now, or wait and invest during a market downturn/crash as the market has been volatile as of late....
That's what I do: I drink, and I know things. --Tyrion Lannister

Grt2bOutdoors
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Re: Knowing when to invest?

Post by Grt2bOutdoors » Wed Nov 28, 2012 1:28 pm

Deleted.
Last edited by Grt2bOutdoors on Wed Nov 28, 2012 1:36 pm, edited 1 time in total.
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tc101
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Re: Knowing when to invest?

Post by tc101 » Wed Nov 28, 2012 1:30 pm

Didn't you just ask the same question 4 days ago? Get on with it, man!
It's a big chunk of money. He is nervous and wants to be careful. Give the guy a break.

My advice is to dollar cost average. I recently got a big chunk of cash from a real estate sale. I will be making fixed monthly investments into stock funds in my taxable accounts. It will take about two years for all the money to be invested. If I change my mind or find a better investment in the next two years I will change my plan. If stocks plumet and I can buy them more cheaply I will be happy. If stocks sky rocket and I missed out at today's prices, I will be sad.
. | The most important thing you should know about me is that I am not an expert.

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InvestorNewb
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Re: Knowing when to invest?

Post by InvestorNewb » Wed Nov 28, 2012 1:33 pm

tludwig23 wrote:Didn't you just ask the same question 4 days ago? Get on with it, man!
InvestorNewb wrote:...For now I will start off with this $300k I am willing to invest. Currently its all liquid in cash in a brokerage account waiting to be invested.... I have been contemplating weather to invest it all now, or wait and invest during a market downturn/crash as the market has been volatile as of late....
Folks, that wasn't me who wrote that. The user bill8902 wrote it:

http://www.bogleheads.org/forum/viewtop ... &p=1537450
Last edited by InvestorNewb on Wed Nov 28, 2012 1:39 pm, edited 2 times in total.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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InvestorNewb
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Re: Knowing when to invest?

Post by InvestorNewb » Wed Nov 28, 2012 1:37 pm

chaz wrote:Why use a broker?
What other way do you suggest?
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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tludwig23
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Re: Knowing when to invest?

Post by tludwig23 » Wed Nov 28, 2012 1:37 pm

InvestorNewb wrote:
tludwig23 wrote:Didn't you just ask the same question 4 days ago? Get on with it, man!
InvestorNewb wrote:...For now I will start off with this $300k I am willing to invest. Currently its all liquid in cash in a brokerage account waiting to be invested.... I have been contemplating weather to invest it all now, or wait and invest during a market downturn/crash as the market has been volatile as of late....
Folks, that wasn't me who wrote that. The user bill8902 wrote it:

http://www.bogleheads.org/forum/viewtop ... &p=1537450
You are correct (obviously). My apologies for the misattributed quote.

My advice would be the same as above. Dollar cost average over a few months. The fiscal cliff could lead to a big market drop, or the lack of a drop could lead to a big gain (from relief), or it could be like Y2K and nothing much at all happens--a big "meh".
That's what I do: I drink, and I know things. --Tyrion Lannister

chaz
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Re: Knowing when to invest?

Post by chaz » Wed Nov 28, 2012 1:42 pm

InvestorNewb wrote:
chaz wrote:Why use a broker?
What other way do you suggest?
Directly with Vanguard or any other fund family. Avoid the transaction fees.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

The Wizard
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Re: Knowing when to invest?

Post by The Wizard » Wed Nov 28, 2012 1:49 pm

chaz wrote:
InvestorNewb wrote:
chaz wrote:Why use a broker?
What other way do you suggest?
Directly with Vanguard or any other fund family. Avoid the transaction fees.
^ checko...
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livesoft
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Re: Knowing when to invest?

Post by livesoft » Wed Nov 28, 2012 2:01 pm

Many brokers have no commissions and no transaction fees for desirable and Boglehead-approved investments. But I digress, since wasn't this thread about Market Timing?

So to help folks with Market Timing, I will announce the next ReallyBadDay(tm) as it happens (if I am near the internet), so that everyone can buy if they wish to.
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The Wizard
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Re: Knowing when to invest?

Post by The Wizard » Wed Nov 28, 2012 2:03 pm

InvestorNewb wrote:Hello,
...I read the best time to invest is during a bear market, when prices are down. But how do we know if we are in a bear market? Do they typically start with a significant dip in the market?
Market Timing, yes, waiting for a bear market...
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nisiprius
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Re: Knowing when to invest?

Post by nisiprius » Wed Nov 28, 2012 2:23 pm

We don't know when we are in a bear market. All statements about what "typically" happens are bogus.

Consider recessions. The National Bureau of Economic Research explicitly refuses to whether we are in a recession. They only declare that recession existed after it has occurred. That's because they are honest. The same thing is true of bear markets. Personally I'm not even sure whether they are real or whether they are just labels we put on patterns that we see after the fact, like constellations in the sky.

In August, 2011 a lot of us were worried that we were in a bear market, not hoping we were in one, but the same considerations apply. At that point, the recent behavior of the market looked like this:

Image

I pointed out that you simply didn't know whether the market would bounce right back, as it did after a very similar drop in 1998:

Image

Or like the 2008-2009 plunge, which also began in much the same way:

Image

And so it goes. Nobody knows. You might just as well invest the same amount periodically, whether the market appears to be up or down. (Which are meaningless terms; up compared to what, down compared to what?).
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

chaz
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Re: Knowing when to invest?

Post by chaz » Wed Nov 28, 2012 2:26 pm

Now is a good time to go all in, unless the market tanks tomorrow.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

DSInvestor
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Re: Knowing when to invest?

Post by DSInvestor » Wed Nov 28, 2012 2:29 pm

chaz wrote:
InvestorNewb wrote:
chaz wrote:Why use a broker?
What other way do you suggest?
Directly with Vanguard or any other fund family. Avoid the transaction fees.
The OP is a Canadian resident so investing with Vanguard directly is not an option. If OP wishes to invest in index funds, there are no load low MER index funds available in Canada. TD's e-series funds a good place to find index funds for US stocks, Canadian stocks, International stocks and Canadian bonds. It would be easy to setup automatic transactions to DCA every month. There would be no transaction fees to purchase TD e-series funds whether they are purchased manually or by automatic transaction.

Here's a list of TD e-series funds:
http://www.tdcanadatrust.com/products-s ... ces-EF.jsp

It is important to have a plan, follow that plan and ignore the noise. Decide on your asset allocation and make a plan to get the money invested over a certain time period. IMO, it is easier to follow the plan if you automate the purchases. From reading OP's other posts, he is investing in ETFs and ETF purchases cannot be automated. It may be difficult to place that ETF trade if you have CNBC in the background which does a good job of hyping things and making investors nervous.
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NateW
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Re: Knowing when to invest?

Post by NateW » Wed Nov 28, 2012 2:31 pm

"My online broker charges $10/trade, so I would be looking at spending $30 each time if I DCA'd my way in."

Why don't you move over to Vanguard, to the land of low-cost index funds and no-cost (in most cases) fund purchases.

I can't advise you as to when to buy in, since I buy on a continual basis (monthly automatic withdrawal from my bank to my Vanguard Roth IRAs and bi-weekly through my 401k participation).

As for bear markets, I think we only know after the fact. True, the definition of a bear is a 20% drop, or more, but is the fall done, or not? Or if you are in a bull market, like in the 1990s, lets say in 1993, do you not buy in because the market went up 40% If so, in that case, you missed out on at least quadrupling your money.

--Nate

hillman
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Re: Knowing when to invest?

Post by hillman » Wed Nov 28, 2012 2:47 pm

chaz wrote:Now is a good time to go all in, unless the market tanks tomorrow.
So, maybe wait until tomorrow, unless. . . :wink:

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EternalOptimist
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Re: Knowing when to invest?

Post by EternalOptimist » Wed Nov 28, 2012 4:03 pm

Don't overcomplicate, overthink or procrastinate. Just dive in--the 3 fund portfolio is good. You would not be in a get rich quick scheme, you're in it for the long haul. I pity people who have all their money in CDs. BTW, you don't need a broker for what you'd be doing.
"When nothing goes right....go left"

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Re: Knowing when to invest?

Post by bertilak » Wed Nov 28, 2012 7:09 pm

chaz wrote:Now is a good time to go all in, unless the market tanks tomorrow.
If the stock goes up tomorrow, buy today. Otherwise wait.

This is based on the Will Rogers strategy, a proven, fail-safe, strategy:
  • "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

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