Investing Advice Needed!

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Frugal Rock
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Joined: Thu Nov 03, 2016 9:27 am

Investing Advice Needed!

Post by Frugal Rock » Thu Nov 03, 2016 9:34 am

To anyone reading,

I just started investing this year. My money is in both Vanguard Total Stock index and Vanguard Total Bond Index (Roughly 80/20 at this point in time). All I hear and see lately is people insisting that the market is due to crash at some point soon, and even more uncertainty around the election in 6 days. I don't have a TON of money invested yet, but I am certainly afraid to lose what I do have in there. I guess im just looking for advice... should I just stay the course? Should I move more to bonds? Should I move some to cash? What are you guys currently doing?

First time posting here on this site, so be kind about my noobness. Any insight is greatly appreciated! Thank you.

Chip
Posts: 1650
Joined: Wed Feb 21, 2007 4:57 am

Re: Investing Advice Needed!

Post by Chip » Thu Nov 03, 2016 1:44 pm

Frugal Rock wrote:I guess im just looking for advice... should I just stay the course? Should I move more to bonds? Should I move some to cash? What are you guys currently doing?


Hi, and welcome!

Yes, stay the course. Your ability to do this now and in the future will be a strong determinant of your ultimate financial independence.

You have a reasonable stock/bond ratio for someone who has just started investing (I assume you are under 30). You bought diversified, low cost index funds. So you're 2 for 2. Stay the course and make it 3 for 3.

I know it seems like a lot of money, and you don't want to lose any of it, but your future savings will dwarf what you have now. And rest assured, at some point you WILL lose some of it. This is a test to see if you have the stomach it takes to be a long term investor.

For what it's worth, NOBODY knows how the market will react to the election. Even if I could tell you who would win, or whether there would be a surprise winner, you STILL couldn't know how the market would react.

Read this eloquent post by nisiprius (and the replies) for a well-rounded view of investment jitters.

pkcrafter
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Re: Investing Advice Needed!

Post by pkcrafter » Thu Nov 03, 2016 3:20 pm

Frugal Rock wrote:To anyone reading,

I just started investing this year. My money is in both Vanguard Total Stock index and Vanguard Total Bond Index (Roughly 80/20 at this point in time). All I hear and see lately is people insisting that the market is due to crash at some point soon

The first thing you need to do is calm down. :happy The market will crash at some time and you cannot avoid all the crashes you will experience in your investing journey. And if you try to avoid downside volatility, you will end up with a much smaller nest egg.

General definition of volatility: Volatility is the trait of being excitable and unpredictable.

In finance it is a statistical measure of the dispersion of returns for a given security or market index. Yep, and the dispersion is unpredictable and it excites investors.


If you have a long time horizon volatility won't have any lasting impact. It's only when you are close to needing the money that it matters. It's the big drops you don't see coming that are the toughest. An election, if it does move the market, will only be short term emotional reaction. Note, that if the market does drop it will be because of investor emotions, not facts or surprise events. So in cases like this election, it can be investor worry that creates the outcome they were worried about.

I don't have a TON of money invested yet, but I am certainly afraid to lose what I do have in there. I guess im just looking for advice... (or support, which you will get here) should I just stay the course? Should I move more to bonds? Should I move some to cash? What are you guys currently doing?

Many of us are doing what we always do--nothing. As John Bogle has said: "Don't do something, just stand there". Stay the course. You will not lose your money. The value will drop, sure, but you will still have the same number of shares. The market, if it goes down, will rebound. The long term trend, with stops and goes, ups and downs, is up. Many new investors and those that are highly risk averse, tend to only see the small picture. Your journey will be littered with market drops, and the way to deal with them is to simply ride them out.

So, once you see this rationally, you must take a good look at your personal risk tolerance. Each investor has his/her own and they vary widely. Your current asset allocation (AA) is high, suggesting you are have an above average tolerance, but your post appears to be in conflict with it. In a case like that (it's common) you may be a lot more comfortable if you drop your AA to 70 or 60% stock. You may find that after experiencing a few drops that you just get used to it.

Here's some information that may help you understand volatility.

between 1950 and 2014, a span of 65 years, the S&P 500 ended the year with a gain 51 times (or in almost 80% of them). Not bad. But in how many of those up years do you think investors would’ve found themselves in a “losing” position at some point in the year. Every. Single. One.

https://blbarnitz4.wordpress.com/2016/0 ... #more-3679

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.

Jack FFR1846
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Re: Investing Advice Needed!

Post by Jack FFR1846 » Thu Nov 03, 2016 3:27 pm

Frugal Rock wrote:What are you guys currently doing?


Personally......as I get $5k chunks of money, I swish it over to Schwab and buy another $5k of SCHB US broad market stock ETF. I'm up to about $40k over the last couple months. This is my first taxable account ever and I'm pretty happy to get it started. I've been selling junk from around the house on eBay and craigslist in order to speed up each of these $5k chunks.

We have early voting, so I voted last Friday, so have been ignoring the clown show going on.
Bogle: Smart Beta is stupid

MrDrinkingWater
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Re: Investing Advice Needed!

Post by MrDrinkingWater » Thu Nov 03, 2016 3:36 pm

I suggest that you look at the wiki for good advice about investing. It might take you a while to think through a few things and come up with your own personalized Investment Policy Statement that will help you stay the course over the next decade or more.

A two or three-fund portfolio made up of low-expense ratio stock and bond index funds is a good start. Do you already have an emergency fund established --- some cash that is not part of the 80% stock fund and 20% bond fund allocation mentioned in your post? Suggest that you might keep a few months worth of basic living expenses in cash.

Good luck and thanks for posting a question that many new investors have. Try to avoid reading through financial porn on the web or watching financial porn on television.

young-ish
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Re: Investing Advice Needed!

Post by young-ish » Thu Nov 03, 2016 3:46 pm

Frugal Rock wrote:
I am certainly afraid to lose what I do have in there.


If you are really afraid to lose what you have invested in stocks, if it's keeping you up at night then your portfolio is too risky. Holding a larger chunk of cash and U.S. Treasury Bonds will allow you to sleep well and stay the course during the next stock market crash.

awizard
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Re: Investing Advice Needed!

Post by awizard » Thu Nov 03, 2016 3:56 pm

Frugal Rock wrote:To anyone reading,

I just started investing this year. My money is in both Vanguard Total Stock index and Vanguard Total Bond Index (Roughly 80/20 at this point in time). All I hear and see lately is people insisting that the market is due to crash at some point soon, and even more uncertainty around the election in 6 days. I don't have a TON of money invested yet, but I am certainly afraid to lose what I do have in there. I guess im just looking for advice... should I just stay the course? Should I move more to bonds? Should I move some to cash? What are you guys currently doing?

First time posting here on this site, so be kind about my noobness. Any insight is greatly appreciated! Thank you.


Read the boglehead wiki. Or for a more brutal approach on the topic of gitter read this guys blog: http://jlcollinsnh.com/stock-series/ Start with Part 1.

You need to toughen up. By nature the stock market will go up and down, but over time the general direction is up. The key is not to sell. Keep in mind that you do not need this money for a long time and keeping it in the market will earn you dividends that add up over time. If you do need the money soon, then you should not be in the market in the first place.

Fallible
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Re: Investing Advice Needed!

Post by Fallible » Thu Nov 03, 2016 4:49 pm

Frugal Rock wrote:To anyone reading,

I just started investing this year. My money is in both Vanguard Total Stock index and Vanguard Total Bond Index (Roughly 80/20 at this point in time). All I hear and see lately is people insisting that the market is due to crash at some point soon, and even more uncertainty around the election in 6 days. I don't have a TON of money invested yet, but I am certainly afraid to lose what I do have in there. I guess im just looking for advice... should I just stay the course? Should I move more to bonds? Should I move some to cash? What are you guys currently doing?

First time posting here on this site, so be kind about my noobness. Any insight is greatly appreciated! Thank you.


Welcome to the forum.

Can you tell us your age and on what basis you decided on 80/20? I agree With pkcrafter that the equity allocation may be too high considering the worries you're expressing. Do check the wiki's "Getting Started" page with its helpful book list and links to asset allocation and risk tolerance.

https://www.bogleheads.org/wiki/Getting_started
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

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Toons
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Re: Investing Advice Needed!

Post by Toons » Thu Nov 03, 2016 4:53 pm

Ignore all the noise.
Keep Investing Consistently for decades.
A down market is your ally.
More shares for your money.
It works.
Believe Me.
:mrgreen:
"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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