When to Jump In

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BogleNeophyte
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When to Jump In

Post by BogleNeophyte »

Hello,

I have been reading the Bogleheads forum and have obtained a lot of sound advice on investing. I have a good deal of cash on hand and plan on opening a Vanguard account to invest using (most likely) the 3 Fund Lazy Portfolio. My question has to do with Bogleheads Investment Philosophy Item 5 - Never try to time the market. I know that one never should buy high but with the market where its presently at, how can I avoid this?
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bottlecap
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Re: When to Jump In

Post by bottlecap »

The advice is not never to by "high" because no one knows what "high" is. Today's highs could be the lowest the market ever is.

The basic advice is to pick an asset allocation and jump in.

However, many people can't help but want to wait to see what will happen in the future before committing to investments (that's the trick, now, ain't it?). So you can dollar cost average over a set time period (1 to 5 years, perhaps), investing a fraction of the sum each week, every couple of weeks, or each month.

The choice is yours.

Good luck,

JT
KelVarnsen
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Re: When to Jump In

Post by KelVarnsen »

BogleNeophyte wrote:I know that one never should buy high but with the market where its presently at, how can I avoid this?
I had the same conundrum a month ago, but I went ahead and got my portfolio organized and I'm very glad I did.

We only know where the market is relative to the past, so who knows if we'll look back to today 20 years from now and consider this day a 'low' - I'd say the time to jump in is now. :happy
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Meg77
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Re: When to Jump In

Post by Meg77 »

I too had a lump sum of cash to invest 1-2 years ago, and I did so right before a 10%+ correction. Technically I would have been better off dollar cost averaging over 6-12 months - I ended up being in one of those minority of cases where I invested right before a selloff. But it's all water under the bridge now. It wasn't a huge chunk of my net worth so it wasn't life changing, and I've still made money overall - just not as much as I COULD have. Roughly 8/10 times (depending on which study you read which looks at stocks over which time period) you're better off just investing a lump sum all at once.

I have some RSUs vesting this spring and I plan to sell and invest the lump sum again; it's a similar amount as last time. Hopefully I'll be luckier this go round! But if not I'll continue to invest lum sums throughout my life - inheritances, bonuses, proceeds from real estate sales, etc. I'm confident that overall that is the right thing to do and that over my life I should come out ahead by doing so.
"An investment in knowledge pays the best interest." - Benjamin Franklin
aristotelian
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Re: When to Jump In

Post by aristotelian »

KelVarnsen wrote:
BogleNeophyte wrote:I know that one never should buy high but with the market where its presently at, how can I avoid this?
I had the same conundrum a month ago, but I went ahead and got my portfolio organized and I'm very glad I did.

We only know where the market is relative to the past, so who knows if we'll look back to today 20 years from now and consider this day a 'low' - I'd say the time to jump in is now. :happy
Yeah, but as soon as OP jumps in, you know the market will drop 5%.
wolf359
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Re: When to Jump In

Post by wolf359 »

The market is scary because it's been climbing for a while, it's overvalued, and it's making all-time highs.

Take a look at a 10 year chart of the market.

In March of 2013, the market finally surpassed its pre-crash highs. Every high after that has been a new all-time high. The market has been making new highs for the past 4 years. Even in 2013, it had been climbing for a while, it was overvalued, and it was making all-time highs.

Getting started is scary. Try one of the following paths:

1. Dollar-cost average your way in. That is, divide your investment into parts, and invest them in over time. I'd suggest a short period of time, like 3-6 months.
2. Put your money all-in, but with a high stock/bond ratio. (For example, use 50/50). This gets you into the market, and accustomed to the fluctuations. If the market doesn't crash right away, you get to enjoy some positive returns. If it does crash, then you can learn your risk tolerance, and re-adjust your portfolio to the correct level (this also has the effect of rebalancing.)
3. Put half your money into an all-stock portfolio, and keep half your money in cash. (Keeping your money in cash is what you had planned to do while you're waiting anyways.) As you have new money, put half in cash, half in the market. This preserves your money until you're more comfortable. When ready, move to your final asset allocation. If a crash occurs, you have half your money ready to invest. (BTW, this is almost the same as option 2. It's just stated differently. For some reason, friends I've suggested this to have used this method rather than option 2, even though they're the same thing.)
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BogleNeophyte
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Re: When to Jump In

Post by BogleNeophyte »

Thanks all for your advice. I have been holding a high cash position for way too long. I should have invested much sooner but was lazy and let it build up in the bank earning nothing.
wolf359 wrote:The market is scary because it's been climbing for a while, it's overvalued, and it's making all-time highs.
That's what is making me nervous about jumping in. The money is not needed short term and will be held for retirement. But, I'd rather not lose a sizeable chunk of it in a market correction shortly after it gets invested. Damn, I wish I didn't break my crystal ball! :happy
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bligh
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Re: When to Jump In

Post by bligh »

One option could be to jump in with a portfolio more conservative than your long term goal. Save 50/50 or 40/60 if your long term goal is 60/40. Then adjust your allocation over time. Say by 1% ever 6 months. 51/49, 52/48 and so on.
Silk McCue
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Re: When to Jump In

Post by Silk McCue »

I was out of the market for longer than I want to admit (years) and regret that error. However, in late 2015 I came across bogleheads.org and started getting educated. Prior to a two week cruise in the Caribbean I bought the current version of The Bogleheads Guide to Investing and read it cover to cover. Upon my return from the cruise in February 2016 I became fully invested in my $270k Rollover IRA (after pulling it from my current "financial guy" that only offered Variable Annuities as the answer to everything) and my wife's $103k 457. I utilized Target Date Retirement Funds to keep things simple. That was on February 25, 2016. In April I opened two $6500 ROTH IRA's, one in her name and one in mine. Later in the year after continuing to lurk, read and analyze,I decided that Roth's would be a part of our long term strategy, I executed a $57k Roth Conversion on December 29th 2016 with headroom that was bolstered by paying all of my tithe and other charitable contributions for 2017 in 2016 ( I will use standard deduction for 2017). I have a plan and am working it. My rate of Return last year across all account was about 14.5%. I just put more money in the market today after pulling the funds from a recently inherited taxable account at USAA that was in 13 different funds and invested for the needs of an 80 year old. Today is the current top of the market and I simply had to stick with the plan because the market will either go up or down moderately or wildly but I have no way of knowing that and will never know that except in the rear view mirror. It was hard to pull the trigger last year because the market had risen so far from when I had left. It was easier, but still challenging to pull the trigger today but I simply did it. I don't know what happens if you put the money in the market tomorrow. But your money, my money, and the all bogleheads money will all be in the same market, in an asset allocation that we are comfortable with given our own particular needs. I wish you well.
Topic Author
BogleNeophyte
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Re: When to Jump In

Post by BogleNeophyte »

Thank you Silk McCue. That was well said and made me feel better about taking the leap.
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Toons
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Re: When to Jump In

Post by Toons »

I know that one never should buy high but with the market where its presently at, how can I avoid this?

The Dow was "high" 850 when I started investing around 1980.
It has been high at various points along the ensuing 37 or so years.
Currently it is near 21,000.
I never stopped investing along the way,,,and continue to do so.
With time on your side,
37 years from now
who knows.
Point being,jump in with both feet ASAP and keep on keepin on.
: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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GerryL
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Re: When to Jump In

Post by GerryL »

BogleNeophyte wrote: The money is not needed short term and will be held for retirement. But, I'd rather not lose a sizeable chunk of it in a market correction shortly after it gets invested. Damn, I wish I didn't break my crystal ball! :happy
Remember: You don't "lose" anything until you sell lower than what you paid to get in. Invest. Dollar cost average over a predefined period of time, if that makes you feel better. This money is for your retirement and that is still a long ways off, n'est pas?

Chinese proverb: The best time to plant a tree was 20 years ago. the second best time is today.
aristotelian
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Re: When to Jump In

Post by aristotelian »

bligh wrote:One option could be to jump in with a portfolio more conservative than your long term goal. Save 50/50 or 40/60 if your long term goal is 60/40. Then adjust your allocation over time. Say by 1% ever 6 months. 51/49, 52/48 and so on.
I am not OP, but I like that approach.
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snowshoes
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Re: When to Jump In

Post by snowshoes »

KeithZz
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Re: When to Jump In

Post by KeithZz »

I was thinking and concerning the same thing from 2013, waiting and waiting, guess what, I lost at least 40 percent of potential growth. Luckily I found bogleheads weeks ago. After read and read, think and think, browse Bob's story 100 times :beer
I finally started my chapter from last week. I am in around 55/45 stock/bond right now with around 1/3 of my investment money in market. Rest of those will daily cost average in every week. Its very conservative for my age 32. But this is the percentage can make me sleep better.
3 years of lessons taught me I am not a good market timer, you still hold on your cash proves you are not a good timer neither :D

Wish us best luck.
WinnFlak
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Re: When to Jump In

Post by WinnFlak »

BogleNeophyte wrote:Hello,

I have been reading the Bogleheads forum and have obtained a lot of sound advice on investing. I have a good deal of cash on hand and plan on opening a Vanguard account to invest using (most likely) the 3 Fund Lazy Portfolio. My question has to do with Bogleheads Investment Philosophy Item 5 - Never try to time the market. I know that one never should buy high but with the market where its presently at, how can I avoid this?
Step 1. Put your money in a cheap index fund.

Step 2. Keep putting your money in the index fund.

Step 3. Re-evaluate as you get older.

Time in the market, beats timing the market.
Theseus
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Re: When to Jump In

Post by Theseus »

BogleNeophyte wrote:Thanks all for your advice. I have been holding a high cash position for way too long. I should have invested much sooner but was lazy and let it build up in the bank earning nothing.
wolf359 wrote:The market is scary because it's been climbing for a while, it's overvalued, and it's making all-time highs.
That's what is making me nervous about jumping in. The money is not needed short term and will be held for retirement. But, I'd rather not lose a sizeable chunk of it in a market correction shortly after it gets invested. Damn, I wish I didn't break my crystal ball! :happy
Not sure how many years to retirement you have. But ask yourself a simple question. Do you think that market is going to be higher than today when you retire? If answer is yes then you should invest as anything that happens between now and then is just noise and irrelavant. Invest wisely and stay the course no matter other noise - especially in the retirement account. You can't withdraw that money until you retire anyway. Why not let it work for you?
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blaugranamd
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Re: When to Jump In

Post by blaugranamd »

We all had this debate in January about do you invest your IRA limit all at once or over the year? Here's what has happened so far: those of us who put it all in the beginning of the year have already gained nearly 4% in 2 months on our full IRA value of Total Stock Market money, everyone else only made that progress on 1/12th of their planned investment. Obviously it didn't have to play out that way. Become comfortable with uncertainty and ACCEPT YOUR TIME HORIZON! If you're not going to sell for 10-20 years, who cares what the value is over the next few months?
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---
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