Will it be a mistake to buy VTSMX today?

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rare_pepe
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Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Thu Apr 13, 2017 6:38 pm

I was thinking about investing into the VTSMX fund soon, but looking at the recent market downturns, will it be a mistake to invest at this moment?

Please provide your expert opinions. Thanks in advance

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LiveSimple
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Re: Will it be a mistake to buy VTSMX today?

Post by LiveSimple » Thu Apr 13, 2017 6:41 pm

Not really, if you have an asset allocation.
You can rebalance according to your asset allocation, later, as needed.

tibbitts
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Re: Will it be a mistake to buy VTSMX today?

Post by tibbitts » Thu Apr 13, 2017 6:42 pm

rare_pepe wrote:I was thinking about investing into the VTSMX fund soon, but looking at the recent market downturns, will it be a mistake to invest at this moment?

Please provide your expert opinions. Thanks in advance
There are no experts here when it comes to predicting the future, so nobody can answer your question.

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DaftInvestor
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Re: Will it be a mistake to buy VTSMX today?

Post by DaftInvestor » Thu Apr 13, 2017 6:43 pm

You won't be able to buy it today since the market is already closed - but tomorrow is fine :)

shiftleft
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Re: Will it be a mistake to buy VTSMX today?

Post by shiftleft » Thu Apr 13, 2017 6:49 pm

It's closed tomorrow too. :wink:

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DaftInvestor
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Re: Will it be a mistake to buy VTSMX today?

Post by DaftInvestor » Thu Apr 13, 2017 7:09 pm

shiftleft wrote:It's closed tomorrow too. :wink:
Ah..yes - banks open but market closed. So the OP has until Monday to decide :)

Artisan
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Re: Will it be a mistake to buy VTSMX today?

Post by Artisan » Thu Apr 13, 2017 7:10 pm

Maybe someone wise, like Nisiprius or Livesoft, could summarize the answer to this question in a sticky because this question seems to come up at least once a day.

The market cannot be effective and consistently timed. It goes up and down and which way it is headed on any given day, week or month is anyone's guess (key word is GUESS).

For what it is worth , in my tax deferred accounts, I automatically just purchased today:

1) the S&P 500 Index, Small Cap Index and the Total International Index funds.

I also transferred funds to my taxable account in order to purchase more VTSAX. Just like I did last month, just like I will do next month.

I know that isn't very exciting.
Last edited by Artisan on Thu Apr 13, 2017 7:16 pm, edited 1 time in total.

KATNYC
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Re: Will it be a mistake to buy VTSMX today?

Post by KATNYC » Thu Apr 13, 2017 7:14 pm

We bought VTSMX this morning, $5,500 in new tIRA as I'm sure lots of other people did given the 4/18 deadline for 2016 contributions.

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JoMoney
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Re: Will it be a mistake to buy VTSMX today?

Post by JoMoney » Thu Apr 13, 2017 7:55 pm

I bought today. I buy at least every other week, sometimes more often. I have no idea if stocks will be cheaper tomorrow, next week, next month, or next year. I'm averaging in over time, I'll get the average price over any particular time period, and I'll be happy about it - it will beat most of those trying pick a better time.
Warren Buffett CNBC interview on 27-Feb-2017 wrote: http://www.cnbc.com/2017/02/27/billiona ... k-box.html

...Well, I would say they don't know, and I don't know. And if there's a game it's very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it-- is a terrible mistake. I don't know anybody that can time markets over the years. A lot of people thought they can. But, if you were buying a farm and you decided that farms were gonna be worth more money ten, or 20, or 30 years from now and that would be a productive asset, go out and buy it unless it was just ... some absurd price. And the best thing with stocks actually is to buy 'em consistently over time. You wanna spread the risk as far as the specific companies you're in by owning a diversified group, and you diversify over time by buying this month, next month, the year after, the year after, the year after. I ... but you ... making a terrible mistake if you stay out of a game that you think is going to be very good over time because you think you can pick a better time to enter it.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

fundseeker
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Re: Will it be a mistake to buy VTSMX today?

Post by fundseeker » Thu Apr 13, 2017 8:03 pm

KATNYC wrote:We bought VTSMX this morning, $5,500 in new tIRA as I'm sure lots of other people did given the 4/18 deadline for 2016 contributions.
Or, they parked their $5,500 in a money market fund within the tIRA or Roth, waiting to buy VTSMX later on, maybe even DCAing.

rare_pepe
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Re: Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Thu Apr 13, 2017 8:06 pm

What are all these talks about a bear market that I have been hearing recently? I am scared :(

aristotelian
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Re: Will it be a mistake to buy VTSMX today?

Post by aristotelian » Thu Apr 13, 2017 8:07 pm

Crystal ball says it's going down on Monday.

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JoMoney
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Re: Will it be a mistake to buy VTSMX today?

Post by JoMoney » Thu Apr 13, 2017 8:14 pm

rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
Don't put money you need this year or next year in the stock market. My suggestion would be to have enough of an emergency fund that you can sleep well knowing your investment outcome isn't going to be based on the returns on any particular date, but an average over time... and have enough in savings to get by through most of the inevitable drops, corrections, and bear markets that will occur at some point.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

rare_pepe
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Re: Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Thu Apr 13, 2017 8:15 pm

aristotelian wrote:Crystal ball says it's going down on Monday.
:shock: :confused :| :? :(

rare_pepe
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Re: Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Thu Apr 13, 2017 8:16 pm

JoMoney wrote:
rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
Don't put money you need this year or next year in the stock market. My suggestion would be to have enough of an emergency fund that you can sleep well knowing your investment outcome isn't going to be based on the returns on any particular date, but an average over time... and have enough in savings to get by through most of the inevitable drops, corrections, and bear markets that will occur at some point.
I do have an emergency fund in place and recently opened a Roth IRA account with Vanguard. Just wondering when I should start buying funds

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Re: Will it be a mistake to buy VTSMX today?

Post by AlohaJoe » Thu Apr 13, 2017 8:18 pm

Artisan wrote:Maybe someone wise, like Nisiprius or Livesoft, could summarize the answer to this question in a sticky because this question seems to come up at least once a day.
The kind of person who asks these kinds of questions don't read stickies.

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JoMoney
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Re: Will it be a mistake to buy VTSMX today?

Post by JoMoney » Thu Apr 13, 2017 8:20 pm

rare_pepe wrote:
JoMoney wrote:
rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
Don't put money you need this year or next year in the stock market. My suggestion would be to have enough of an emergency fund that you can sleep well knowing your investment outcome isn't going to be based on the returns on any particular date, but an average over time... and have enough in savings to get by through most of the inevitable drops, corrections, and bear markets that will occur at some point.
I do have an emergency fund in place and recently opened a Roth IRA account with Vanguard. Just wondering when I should start buying funds
Start working your way in now. You don't have to put it all in on one day, average in over time.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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arcticpineapplecorp.
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Re: Will it be a mistake to buy VTSMX today?

Post by arcticpineapplecorp. » Thu Apr 13, 2017 8:51 pm

I'm no expert and I haven't stayed at a Holiday Inn Express. That being said since you're in your mid 20s (gleaned from viewtopic.php?f=1&t=215985&p=3318555#p3318555) you probably have quite a few decades ahead of you before you need to consider selling any of your investments right? So...

What does it matter what happens 1. tomorrow, 2. next week, 3. next month, 4. next year, 5. 10 years from now, 20 years from now...Get it? If you don't need the money for 40 years (assuming a normal retirement age) then do you really think the market won't bounce back over the following 40 years?

If you invest in individual stocks, you can literally lose money if those companies go bankrupt.
If you invest in the total markets the only way to lose money is:
1. Every single company around the world, of all different sizes, styles and industries go out of business at exactly the same time (how likely do you think that is??)
2. You choose to sell your investments (in the market) AFTER the market has declined.

If neither #1 happens, nor you do #2, then markets generally bounce back. When, nobody knows. That's the rub. Sometimes things bounce back quickly like the flash crash (what went down went back up by the end of the day) or Brexit (the day after the vote Asian and European shares were down 7% and U.S. was down 3% but then was back to where it was right before Brexit by a week later). I believe the crash of 1987 (22% decline in one day, worst one day percentage decline in U.S. history recovered by one year later, maybe not adjusted for inflation). Other declines can take years (but not 20, 30 or 40 years). The Great Recession went from high point (Oct 2007) to low (March 2009) to back up to previous high (March 2012) and then higher thereafter. So you would have had to wait a few years to have recovered from paper/temporary losses. However, they would have been real and permanent had you sold in 2008 or 2009 or any time before March of 2012.

Take a look at the chart below. This will give you some indication of how long recovery took during some of the worst declines on record. If you can wait out in years (and realize your new investments are buying you more shares since the price is now lower. That's a good thing.)

Image

Look at the next chart. See that even during a bull market, any year can experience a loss of 14% ON AVERAGE? So you have to be prepared for declines in every year you invest. Just because there's a decline at some point within a year doesn't mean the year will end negatively. This chart is an example of that. And if you look closely you'll see that even in years which finished lower than it started, the losses were usually less than they had been at some point during the year. Which means that just because there's a decline at some point in the year, 1. losses can erase and become gains, 2. losses can be smaller losses by the end of the year.

Image

Remember what Warren Buffet says. When you're starting out investing in your 20s you should be on your hands and knees praying for a 30 year BEAR market and then when you're ready to retire you should be on your hands and knees praying for a 30 year BULL market. You should WANT the market to go down (not up) so you can buy shares at lower prices (which should lead to higher returns). Paying higher prices for shares tends to lead to lower returns. If the mall goes on sale tomorrow will people flock to the mall or run away? Flock to the mall. It's been said that the stock market is the only market that when the store goes on sale, people head for the exits. Don't. Any of this making sense?
Last edited by arcticpineapplecorp. on Thu Oct 19, 2017 8:39 pm, edited 1 time in total.
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rare_pepe
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Re: Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Thu Apr 13, 2017 9:14 pm

arcticpineapplecorp. wrote:I'm no expert and I haven't stayed at a Holiday Inn Express. That being said since you're in your mid 20s (gleaned from viewtopic.php?f=1&t=215985&p=3318555#p3318555) you probably have quite a few decades ahead of you before you need to consider selling any of your investments right? So...

What does it matter what happens 1. tomorrow, 2. next week, 3. next month, 4. next year, 5. 10 years from now, 20 years from now...Get it? If you don't need the money for 40 years (assuming a normal retirement age) then do you really think the market won't bounce back over the following 40 years?

If you invest in individual stocks, you can literally lose money if those companies go bankrupt.
If you invest in the total markets the only way to lose money is:
1. Every single company around the world, of all different sizes, styles and industries go out of business at exactly the same time (how likely do you think that is??)
2. You choose to sell your investments (in the market) AFTER the market has declined.

If neither #1 happens, nor you do #2, then markets generally bounce back. When, nobody knows. That's the rub. Sometimes things bounce back quickly like the flash crash (what went down went back up by the end of the day) or Brexit (the day after the vote Asian and European shares were down 7% and U.S. was down 3% but then was back to where it was right before Brexit by a week later). I believe the crash of 1987 (22% decline in one day, worst one day percentage decline in U.S. history recovered by one year later, maybe not adjusted for inflation). Other declines can take years (but not 20, 30 or 40 years). The Great Recession went from high point (Oct 2007) to low (March 2009) to back up to previous high (March 2012) and then higher thereafter. So you would have had to wait a few years to have recovered from paper/temporary losses. However, they would have been real and permanent had you sold in 2008 or 2009 or any time before March of 2012.

Take a look at the chart below. This will give you some indication of how long recovery took during some of the worst declines on record. If you can wait out in years (and realize your new investments are buying you more shares since the price is now lower. That's a good thing.)

Image

Look at the next chart. See that even during a bull market, any year can experience a loss of 14% ON AVERAGE? So you have to be prepared for declines in every year you invest. Just because there's a decline at some point within a year doesn't mean the year will end negatively. This chart is an example of that. And if you look closely you'll see that even in years which finished lower than it started, the losses were usually less than they had been at some point during the year. Which means that just because there's a decline at some point in the year, 1. losses can erase and become gains, 2. losses can be smaller losses by the end of the year.

Image

Remember what Warren Buffet says. When you're starting out investing in your 20s you should be on your hands and knees praying for a 30 year BEAR market and then when you're ready to retire you should be on your hands and knees praying for a 30 year BULL market. You should WANT the market to go down (not up) so you can buy shares at lower prices (which should lead to higher returns). Paying higher prices for shares tends to lead to lower returns. If the mall goes on sale tomorrow will people flock to the mall or run away? Flock to the mall. It's been said that the stock market is the only market that when the store goes on sale, people head for the exits. Don't. Any of this making sense?
Thank you for such an insightful post, does clear up things. As you can tell, I am very new to this and still learning :)

harvestbook
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Re: Will it be a mistake to buy VTSMX today?

Post by harvestbook » Thu Apr 13, 2017 9:24 pm

If the market is on the way down, I am a genius because I got them cheaper than they were yesterday. if the market is going up, I am a genius because I bought them before they got all the way up. I can't afford to have gut feelings.
I'm not smart enough to know, and I can't afford to guess.

Artisan
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Re: Will it be a mistake to buy VTSMX today?

Post by Artisan » Thu Apr 13, 2017 9:26 pm

AlohaJoe wrote:
Artisan wrote:Maybe someone wise, like Nisiprius or Livesoft, could summarize the answer to this question in a sticky because this question seems to come up at least once a day.
The kind of person who asks these kinds of questions don't read stickies.
Very true :)

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Re: Will it be a mistake to buy VTSMX today?

Post by inbox788 » Fri Apr 14, 2017 6:30 pm

fundseeker wrote:
KATNYC wrote:We bought VTSMX this morning, $5,500 in new tIRA as I'm sure lots of other people did given the 4/18 deadline for 2016 contributions.
Or, they parked their $5,500 in a money market fund within the tIRA or Roth, waiting to buy VTSMX later on, maybe even DCAing.
That would be me, too. I parked it in January, so if I asked in January, "Will it be a mistake to buy VTSMX today?" and looking at where it is today, the answer is "no, not a mistake". Does that help you? FWIW, I felt the same way OP feels now, and I still feel the same way. I don't think how people feel have all that much to do with market performance. In 5-10 years or when we retire, the answer is most probably going to be "no, not mistake" as well. The mistake is not to buy, which I'm making now, but it's actually hedging some equities I should have sold a while ago, so I'll probably just swap the equities for VTSMX, which should keep AA fairly even.

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Re: Will it be a mistake to buy VTSMX today?

Post by TropikThunder » Fri Apr 14, 2017 6:36 pm

rare_pepe wrote:I was thinking about investing into the VTSMX fund soon, but looking at the recent market downturns, will it be a mistake to invest at this moment?

Please provide your expert opinions. Thanks in advance
Finally, a break from all the "why should I invest at an all time high?" threads! :twisted: Seriously, though, whatever happens this year will be a mere speed bump 20 years from now.

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Re: Will it be a mistake to buy VTSMX today?

Post by tibbitts » Fri Apr 14, 2017 6:47 pm

rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
There are people who should never invest in the stock market. You're one of them. It was better to learn that now than later. It might be that fifty years from now, you'll be ahead of people who do invest in equities. Or not. None of us have any way to know.

rare_pepe
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Re: Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Fri Apr 14, 2017 7:03 pm

tibbitts wrote:
rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
There are people who should never invest in the stock market. You're one of them. It was better to learn that now than later. It might be that fifty years from now, you'll be ahead of people who do invest in equities. Or not. None of us have any way to know.
Someone is having a bad day today :mrgreen: Cheer up dude, it's Friday :sharebeer

Thanks everyone else for bearing with me and my silly questions. As you all can clearly tell, I am very, VERY new to this and learning as I go along.

finite_difference
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Re: Will it be a mistake to buy VTSMX today?

Post by finite_difference » Fri Apr 14, 2017 9:51 pm

In the long run: it's a great idea, and not a mistake.

In the short run: nobody knows.

The above is valid for any day, not just today.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

rgs92
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Re: Will it be a mistake to buy VTSMX today?

Post by rgs92 » Fri Apr 14, 2017 10:00 pm

The answer is No.
The reason is that every day is a good day to invest in the market and every day is a bad day to sell.
Jack Bogle has said many times that the best holding period is forever. That's the best expert advice around.

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badbreath
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Re: Will it be a mistake to buy VTSMX today?

Post by badbreath » Fri Apr 14, 2017 10:13 pm

last year I invested over $X00,000 in VTMSX was it a good time or a bad time to invest I don't know. What I do know is I am investing and that is better then sitting on the side line.

By the way, I am up even in the so called overpriced market of last year.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

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obafgkm
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Re: Will it be a mistake to buy VTSMX today?

Post by obafgkm » Sat Apr 15, 2017 7:30 am

badbreath wrote:last year I invested over $X00,000 in VTMSX was it a good time or a bad time to invest I don't know. What I do know is I am investing and that is better then sitting on the side line.

By the way, I am up even in the so called overpriced market of last year.
Yes, but the discussion was about VTSMX (Vanguard Total Stock Market Index Fund Investor Shares) and not VTMSX (Vanguard Tax-Managed Small Cap Fund Admiral Shares).

:P

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knpstr
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Re: Will it be a mistake to buy VTSMX today?

Post by knpstr » Sat Apr 15, 2017 7:34 am

Any day you buy VTSMX is a good day

:beer
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Re: Will it be a mistake to buy VTSMX today?

Post by dbr » Sat Apr 15, 2017 7:57 am

rare_pepe wrote:
tibbitts wrote:
rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
There are people who should never invest in the stock market. You're one of them. It was better to learn that now than later. It might be that fifty years from now, you'll be ahead of people who do invest in equities. Or not. None of us have any way to know.
Someone is having a bad day today :mrgreen: Cheer up dude, it's Friday :sharebeer

Thanks everyone else for bearing with me and my silly questions. As you all can clearly tell, I am very, VERY new to this and learning as I go along.
Well, the learning point is that there is no way to know what day is a good or bad day to buy an investment. We don't even know if that investment is a good investment or a bad investment for you on any day.

I would suggest going to the "getting started" part of the Wiki and doing more preparation for investing: https://www.bogleheads.org/wiki/Getting_started

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Re: Will it be a mistake to buy VTSMX today?

Post by oldcomputerguy » Sat Apr 15, 2017 8:14 am

rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared :(
Many people are scared by bear markets. You might get some comfort from Nisiprius's excellent post on this subject.

As for whether a bear market is coming, the answer is "yes, definitely". Bear markets are a normal part of investing. It's just that nobody knows when; not the prophets of gloom and doom on the Internet, not the "experts" on cable TV, not even the guys on Bogleheads. The thing is not to let it frighten you into selling and locking in losses. If you're a young investor, with a long time until you need the money, a bear market should be your best friend, it means stocks are on sale! A bear market is only a threat when it comes time to sell.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

PFInterest
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Re: Will it be a mistake to buy VTSMX today?

Post by PFInterest » Sat Apr 15, 2017 9:11 am

put it this way
when my monthly buying date comes up, i cant bear (get it!) the thought of my money sitting at my bank doing absolutely nothing. it gets 0%. i dont care what the market does. im not touching this for decades. ive bought on all time highs. and im sure ill buy at all time lows. either way, im chugging along.

JW-Retired
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Re: Will it be a mistake to buy VTSMX today?

Post by JW-Retired » Sat Apr 15, 2017 9:20 am

rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared.
...........................................
Thanks everyone else for bearing with me and my silly questions. As you all can clearly tell, I am very, VERY new to this and learning as I go along.
Not a silly question at all. Welcome to the forum!

I just want to point out something you seem to have missed. If you are young and just starting out making periodic equity investments in employer plans or IRAs, you should view a long and deep bear market as a lucky thing. It means you will get a lot of your early contributions in at a bargain price! But you can't wait for a bear to start since it may be a long time coming, and when it does happen it's apt to scare you off.

Just set and forget your investment contributions ASAP. I can attest this worked very well for me! Never missed a single bear market investment opportunity because I never stopped investing. :D
JW
Retired at Last

tibbitts
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Re: Will it be a mistake to buy VTSMX today?

Post by tibbitts » Sat Apr 15, 2017 9:26 am

JW-Retired wrote:
rare_pepe wrote:What are all these talks about a bear market that I have been hearing recently? I am scared.
...........................................
Thanks everyone else for bearing with me and my silly questions. As you all can clearly tell, I am very, VERY new to this and learning as I go along.
Not a silly question at all. Welcome to the forum!

I just want to point out something you seem to have missed. If you are young and just starting out making periodic equity investments in employer plans or IRAs, you should view a long and deep bear market as a lucky thing. It means you will get a lot of your early contributions in at a bargain price! But you can't wait for a bear to start since it may be a long time coming, and when it does happen it's apt to scare you off.

Just set and forget your investment contributions ASAP. I can attest this worked very well for me! Never missed a single bear market investment opportunity because I never stopped investing. :D
JW
We hear this a lot, but the OP will probably be unemployed throughout that long and deep bear market. My career has pretty much followed this pattern: I've earned the most and therefore invested the most when the equity markets have performed relatively well, and seen my income drop by half or more during times when investing opportunities were best.

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Re: Will it be a mistake to buy VTSMX today?

Post by Abe » Sat Apr 15, 2017 9:49 am

I bought some a few days ago. Actually it was Admiral shares (VTSAX). I haven"t checked, but I think it's down some since I bought it. As everyone keeps saying, you can't time it. I know personally that it's not an easy thing to do, but you have to look at it long term.
Slow and steady wins the race.

rare_pepe
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Re: Will it be a mistake to buy VTSMX today?

Post by rare_pepe » Sat Apr 15, 2017 9:50 am

I have made the move and invested in VTSMX. Thanks everyone for the words of advice and encouragement. This really is a great forum, excited to be a part of it.

selftalk
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Re: Will it be a mistake to buy VTSMX today?

Post by selftalk » Sat Apr 15, 2017 10:07 am

Get out of cash and buy your index fund. Hold for the long term and protect your purchasing power of your current monies.

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Re: Will it be a mistake to buy VTSMX today?

Post by JW-Retired » Sun Apr 16, 2017 7:50 am

tibbitts wrote:
JW-Retired wrote: Just set and forget your investment contributions ASAP. I can attest this worked very well for me! Never missed a single bear market investment opportunity because I never stopped investing. :D
JW
We hear this a lot, but the OP will probably be unemployed throughout that long and deep bear market. My career has pretty much followed this pattern: I've earned the most and therefore invested the most when the equity markets have performed relatively well, and seen my income drop by half or more during times when investing opportunities were best.
Your experience was different but I think the odds still favor OP keeping his/her job. In a recession the unemployed might go from 5% up to 2 or 3 times that, which still leaves a large majority of workers employed.
JW
Retired at Last

munemaker
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Re: Will it be a mistake to buy VTSMX today?

Post by munemaker » Sun Apr 16, 2017 8:21 am

rare_pepe wrote:I was thinking about investing into the VTSMX fund soon, but looking at the recent market downturns, will it be a mistake to invest at this moment?

Please provide your expert opinions. Thanks in advance
A couple percent off of the all time high is hardly a market downturn. If you are going to invest in the stock market, you have to be able to handle high volatility, because it will eventually happen. No one knows where the market is going, so if you have money to invest, you ought to put it to work.

NewIInvestor
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Re: Will it be a mistake to buy VTSMX today?

Post by NewIInvestor » Thu Oct 12, 2017 9:07 am

Most likely a silly question here but are we all assuming that 401K and IRA are maxed when investing in after tax dollars?

I'm currently investing 10% to 401K
Maxing out ROTH IRA
Contributing healthy chunk to HSA and 529

Would the next step automatically be to max out 401K even if it will take quite a while to get to that point?

Been wanting to invest in VTSMX for a while now but have been told I shouldn't before maxing out 401k.

dbr
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Re: Will it be a mistake to buy VTSMX today?

Post by dbr » Thu Oct 12, 2017 9:18 am

NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am
Most likely a silly question here but are we all assuming that 401K and IRA are maxed when investing in after tax dollars?

I'm currently investing 10% to 401K
Maxing out ROTH IRA
Contributing healthy chunk to HSA and 529

Would the next step automatically be to max out 401K even if it will take quite a while to get to that point?

Been wanting to invest in VTSMX for a while now but have been told I shouldn't before maxing out 401k.
The usual sequence is:

1. Determine your objectives and overall financial plan.
2. From that arrive at asset allocation that best expresses your preference and judgement to balance risk and return (long run and short run).
3. Determine the right strategy for asset location in order to gain best after tax results.
4. Select funds in the various accounts.

From that point of view "wanting to invest in VTSMX" is the last and least important decision and would probably be obvious when you get there.

sjt
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Re: Will it be a mistake to buy VTSMX today?

Post by sjt » Thu Oct 12, 2017 9:19 am

NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am
Most likely a silly question here but are we all assuming that 401K and IRA are maxed when investing in after tax dollars?
Not necessarily - I have a taxable account and I'm not maxing my 401(k) - it depends what you plan to use the money for - Retirement? Future hosue fund? Car fund?
NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am

I'm currently investing 10% to 401K
Maxing out ROTH IRA
Contributing healthy chunk to HSA and 529

Would the next step automatically be to max out 401K even if it will take quite a while to get to that point?

Been wanting to invest in VTSMX for a while now but have been told I shouldn't before maxing out 401k.
Don't confuse accounts with funds - different types of accounts are: taxable, 401(k), IRA. Within the account, you can buy different funds like VTSMX or something else your account offers.

NewIInvestor
Posts: 8
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Re: Will it be a mistake to buy VTSMX today?

Post by NewIInvestor » Thu Oct 12, 2017 9:23 am

sjt wrote:
Thu Oct 12, 2017 9:19 am
NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am
Most likely a silly question here but are we all assuming that 401K and IRA are maxed when investing in after tax dollars?
Not necessarily - I have a taxable account and I'm not maxing my 401(k) - it depends what you plan to use the money for - Retirement? Future hosue fund? Car fund?
NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am

I'm currently investing 10% to 401K
Maxing out ROTH IRA
Contributing healthy chunk to HSA and 529

Would the next step automatically be to max out 401K even if it will take quite a while to get to that point?

Been wanting to invest in VTSMX for a while now but have been told I shouldn't before maxing out 401k.
Don't confuse accounts with funds - different types of accounts are: taxable, 401(k), IRA. Within the account, you can buy different funds like VTSMX or something else your account offers.
SJT,

I should have specified more. I'm speaking specifically about maxing out 401K vs contributing to taxable account.

I'm intrigued by the taxable account as I have a 1 year old daughter and plan on having 2 more children. Taxable account would help with weddings and other miscellaneous expenses 25 years down the road. If needed, i'd rather have the taxable account to take the money out of rather than dig into Roth IRA or look elsewhere.

Thanks for the response.

BW1985
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Joined: Tue Mar 23, 2010 6:12 pm

Re: Will it be a mistake to buy VTSMX today?

Post by BW1985 » Thu Oct 12, 2017 1:41 pm

NewIInvestor wrote:
Thu Oct 12, 2017 9:23 am
sjt wrote:
Thu Oct 12, 2017 9:19 am
NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am
Most likely a silly question here but are we all assuming that 401K and IRA are maxed when investing in after tax dollars?
Not necessarily - I have a taxable account and I'm not maxing my 401(k) - it depends what you plan to use the money for - Retirement? Future hosue fund? Car fund?
NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am

I'm currently investing 10% to 401K
Maxing out ROTH IRA
Contributing healthy chunk to HSA and 529

Would the next step automatically be to max out 401K even if it will take quite a while to get to that point?

Been wanting to invest in VTSMX for a while now but have been told I shouldn't before maxing out 401k.
Don't confuse accounts with funds - different types of accounts are: taxable, 401(k), IRA. Within the account, you can buy different funds like VTSMX or something else your account offers.
SJT,

I should have specified more. I'm speaking specifically about maxing out 401K vs contributing to taxable account.

I'm intrigued by the taxable account as I have a 1 year old daughter and plan on having 2 more children. Taxable account would help with weddings and other miscellaneous expenses 25 years down the road. If needed, i'd rather have the taxable account to take the money out of rather than dig into Roth IRA or look elsewhere.

Thanks for the response.
Roth IRA contributions are available for withdrawal though, I'd rather all those years of growth tax free than taxable.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

The Wizard
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Location: Reading, MA

Re: Will it be a mistake to buy VTSMX today?

Post by The Wizard » Thu Oct 12, 2017 1:56 pm

NewIInvestor wrote:
Thu Oct 12, 2017 9:07 am
Most likely a silly question here but are we all assuming that 401K and IRA are maxed when investing in after tax dollars?
Not for me. Investing in my after tax (taxable) account is about the only option available to me anymore with very little earned income.
I may be doing some part-time work before long, in which case I may be able to shovel $6500 into my Roth IRA.
Otherwise, only place for excess income is my taxable account...
Attempted new signature...

sjt
Posts: 27
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Re: Will it be a mistake to buy VTSMX today?

Post by sjt » Thu Oct 12, 2017 2:43 pm

NewIInvestor wrote:
Thu Oct 12, 2017 9:23 am
I should have specified more. I'm speaking specifically about maxing out 401K vs contributing to taxable account.

I'm intrigued by the taxable account as I have a 1 year old daughter and plan on having 2 more children. Taxable account would help with weddings and other miscellaneous expenses 25 years down the road. If needed, i'd rather have the taxable account to take the money out of rather than dig into Roth IRA or look elsewhere.

If you make enough money, it's advantageous to take advantage of tax-advantage space such as IRA's and 401k's etc. However, depending on your income level and expense level, you might not be able to max that out. Just be sure you're saving enough for retirement - it's different for everyone depending on your lifestyle, how long you wish to work, etc. Have you projected your retirement savings out 30 years from now to see how much you expect to have saved at projected retirement age? Is it enough (using conservative growth estimates)?

I'm not currently maxing my 401k out since preschool for twins is taking up a lot of my cashflow for the next year and a half, but at that time I will start redirecting that to my 401k and it should be plenty for retirement (even early retirement). :beer

limeyx
Posts: 73
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Re: Will it be a mistake to buy VTSMX today?

Post by limeyx » Thu Oct 12, 2017 4:51 pm

rare_pepe wrote:
Sat Apr 15, 2017 9:50 am
I have made the move and invested in VTSMX. Thanks everyone for the words of advice and encouragement. This really is a great forum, excited to be a part of it.
Seems like a decent idea given the price on 4/15 was $53.24 and now its 63.94 :)
Of course who knows what it will be tomorrow

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Abe
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Re: Will it be a mistake to buy VTSMX today?

Post by Abe » Fri Oct 13, 2017 10:48 am

When I look back over the years, it seems I always thought the market was too high to get in. If the market goes way down, I'm inclined to think I'll wait until things get better before I get in. I'm sure I'm not the only one who has experienced this. I finally figured out that I'll never think it's the right time to get in. Sometimes you have to bite the bullet and just do it.
Slow and steady wins the race.

crumbone
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Re: Will it be a mistake to buy VTSMX today?

Post by crumbone » Fri Oct 13, 2017 2:08 pm

Others have given good advice-- ignore the noise (anything the market does until 5-10 years before retirement.)

I'll add that at your age:
1. Your human capital is orders of magnitude higher than your investments.
2. You would LOVE to see a market crash, since you'll be able to buy at fire sale prices and have a better long term return.
3. Buy today. Buy tomorrow. Just keep buying.

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