"Timing the Market" / Deciding when to make along term purchase

[Mtangler25]

Hello all,

I have posted a few times on here and I have been thrilled by the amount of knowledge and support from all of you! so THANK you!

some background info: I was struggling to decide between schwab and vanguard. Since I already have a schwab account and I am pleased with their customer service, I decided to stick with them. I have $3,000 cash to start investing for retirement. I currently only own Apple but I want to buy either an S&P 500 mutual fund or ETF. I am also considering putting some of that cash into a sector based ETF, particullary XLV and XLK.

The main question is, should I wait for a market pull back before taking the plunge? Invest in blocks, or just buy it all right now?

Thanks in advance!

[Avo]

Well your buy list shows that you've already rejected the investing advice you would have gotten here, so I don't know why you want more ... but here goes:

If you can buy commission free, do whatever feels good.

If you cannot buy commission free, make a single purchase.

Good luck!

[Mtangler25]

I'm not sure I understand when you say I have rejected the investing advice I have recieved?

[Avo]

We don't recommend holding single stocks. We don't recommend sector funds. We prefer total-market funds over an S&P500 fund. We don't recommend market timing.

[CnC]

For 3,000 the psychological downsides of lump sum investing are not as bad as $300,000.

I would go ahead and deposit it.


The majority of the time you are best off investing it as soon as you can.

If you wait for a pull back the new vally may very well be higher than the current market.


My advice would change if it were a significant portion of savings for a significant portion of time, such as a windfall or sale of a house.

Then the risk of losing so much money may make you choose to take your money back out for a loss.

[Mtangler25]

Thank you for clearing that up.

For the record, I have owned my apple position for over a year now.

[CnC]

We don't recommend holding single stocks. We don't recommend sector funds. We prefer total-market funds over an S&P500 fund. We don't recommend market timing.

...don't say we don't recommend s&p 500 funds


I would say well over half the people I have seen on these forums do not only hold total market funds.

What is recommended is diversified and low fees. If the only advise was total market funds there really wouldn't be much point in having forums to begin with.

Luckily I found much more friendly members when I first started looking at these forums or else I would have never given them a second look.

[Frank Grimes]

You say it's a long term purchase? Then I'd invest it all at once, and now.

[JBTX]

Hello all,

I have posted a few times on here and I have been thrilled by the amount of knowledge and support from all of you! so THANK you!

some background info: I was struggling to decide between schwab and vanguard. Since I already have a schwab account and I am pleased with their customer service, I decided to stick with them. I have $3,000 cash to start investing for retirement. I currently only own Apple but I want to buy either an S&P 500 mutual fund or ETF. I am also considering putting some of that cash into a sector based ETF, particullary XLV and XLK.

The main question is, should I wait for a market pull back before taking the plunge? Invest in blocks, or just buy it all right now?

Thanks in advance!

For $3000 I would put it all in one total market index fund or etf all at once. Down the road if it grows over time and hopefully you continue to save and invest when the amount gets larger (I'd say over $100k minimum ) then if you want to play around with some diversification then fine but even then I'd keep it pretty simple and avoid sector and single stock investing.

[CantPassAgain]

Down the road if it grows over time and hopefully you continue to save and invest when the amount gets larger (I'd say over $100k minimum ) then if you want to play around with some diversification then fine but even then I'd keep it pretty simple and avoid sector and single stock investing.

Do you mean diversify into fixed income or international stocks? Because buying sector funds and individual stocks is not diversifying a total US stock portfolio.

[F150HD]

S&P 500 mutual fund or ETF.

Schwab 500 - SWPPX ER 0.03%

Schwab Total/Broad Market ETF - SCHB

worth noting that SCHB doesn't hold the 'total market' like VTSAX does, so unsure why its called 'Total Market' on their site in a few places.

[Mtangler25]

What about SWTSX? is that a suitable choice?

[Mtangler25]

S&P 500 mutual fund or ETF.

Schwab 500 - SWPPX ER 0.03%

Schwab Total/Broad Market ETF - SCHB

worth noting that SCHB doesn't hold the 'total market' like VTSAX does, so unsure why its called 'Total Market' on their site in a few places.

What about SWTSX? is that a suitable choice?

[Avo]

We prefer total-market funds over an S&P500 fund.

...don't say we don't recommend s&p 500 funds

I didn't say that. I said that we prefer total market funds.

And we do!

E.g., from the wiki: "the funds that are best for a three-fund portfolio are: Vanguard Total Stock Market Index Fund (VTSMX), ..."
https://www.bogleheads.org/wiki/Three-fund_portfolio

[Avo]

What about SWTSX? is that a suitable choice?

Yes! Very low 0.03% expense ratio, tracks the entire US market.

[F150HD]

What about SWTSX? is that a suitable choice?

http://portfolios.morningstar.com/fund/ ... ture=en-US

SWTSX Stock Holdings(Long)
2,339

http://portfolios.morningstar.com/fund/ ... ture=en-US

VTSAX Stock Holdings(Long)
3,588

Maybe someone whose in the know can comment on why the holdings are different...

[F150HD]

What about SWTSX? is that a suitable choice?

Yes! Very low 0.03% expense ratio, tracks the entire US market.

See post above.

[Avo]

I believe they track different indices, which might have different small-cap cutoffs. Or they might use different sampling methods to replicate the index. Performance has been very close to identical; compare them on M* charts.

[arcticpineapplecorp.]

What about SWTSX? is that a suitable choice?

http://portfolios.morningstar.com/fund/ ... ture=en-US

SWTSX Stock Holdings(Long)
2,339

http://portfolios.morningstar.com/fund/ ... ture=en-US

VTSAX Stock Holdings(Long)
3,588

Maybe someone whose in the know can comment on why the holdings are different...

different companies track slightly different from each other but close enough. Both are charted below. Can you tell a difference? There are actually two lines there (one in blue is schwab swtsx and the orange is vanguard vtsax).

If you look at how both did back to as early as I can go with morningstar 5/28/1999 (inception date for swtsx?) they're pretty darn close. Vanguard came out slightly ahead by $527.16...on a $10,000 investment. Would be even less on a $3000 investment. Seems close enough. Don't let the perfect be the enemy of the good enough.

welcome to the forum. It's time in the market, not timing the market that counts. Don't buy sector funds. If you do, you're making bets. That's gambling. If you buy a sector fund it could underperform the market as a whole. Own the whole market and own all sectors that way and never have to worry about whether you will underperform the market.



source: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

[nedsaid]

Assuming you are relatively young and starting to invest for retirement, I would put the whole $3,000 into a Vanguard Target Date Retirement fund and buy the fund whose date most closely matches your projected retirement date. You will get a portfolio that is well diversified all over the world.

[H-Town]

Hello all,

I have posted a few times on here and I have been thrilled by the amount of knowledge and support from all of you! so THANK you!

some background info: I was struggling to decide between schwab and vanguard. Since I already have a schwab account and I am pleased with their customer service, I decided to stick with them. I have $3,000 cash to start investing for retirement. I currently only own Apple but I want to buy either an S&P 500 mutual fund or ETF. I am also considering putting some of that cash into a sector based ETF, particullary XLV and XLK.

The main question is, should I wait for a market pull back before taking the plunge? Invest in blocks, or just buy it all right now?

Thanks in advance!

I think you ask the wrong question... What do you really want? If you want to try it out and play around, use that $3,000 to buy funds/ETFs you want.

If you want to save for retirement, the right question is how much should I save a month and how soon can I do it?

Some illustration for you...
Case 1: If you save $1,000 every month now and put it in S&P 500 fund or Total Stock fund. In 30 years, your portfolio is projected to be at $1,200,000.
Case 2: If you save $200 every month now and put it in S&P 500 fund or Total Stock fund. In 30 years, your portfolio is projected to be at $250,000.

Looking at the end game and your saving goals, $3,000 does not matter much in the grand scheme, does it?

[F150HD]

Assuming you are relatively young and starting to invest for retirement, I would put the whole $3,000 into a Vanguard Target Date Retirement fund and buy the fund whose date most closely matches your projected retirement date. You will get a portfolio that is well diversified all over the world.

Per post #1, OP has this $$ at Schwab. They'd need to pay $76 to buy a VG fund at Schwab.

[nedsaid]

Assuming you are relatively young and starting to invest for retirement, I would put the whole $3,000 into a Vanguard Target Date Retirement fund and buy the fund whose date most closely matches your projected retirement date. You will get a portfolio that is well diversified all over the world.

Per post #1, OP has this $$ at Schwab. They'd need to pay $76 to buy a VG fund at Schwab.

I would not be shocked if Schwab had similar Target Date options. Just looked it up, yes they do. I would buy the Schwab version of the Target Fund and be done with it.

[selters]

$3,000 as a percentage of your projected lifetime contributions is very low. Lump sum right now, I'd say.

[jbolden1517]

What about SWTSX? is that a suitable choice?

http://portfolios.morningstar.com/fund/ ... ture=en-US

SWTSX Stock Holdings(Long)
2,339

http://portfolios.morningstar.com/fund/ ... ture=en-US

VTSAX Stock Holdings(Long)
3,588

Maybe someone whose in the know can comment on why the holdings are different...

The answer below about tracking different indexes is likely correct. My guess they track different indexes:
SWTSX ER .03, cap: $6b = $1.8m to fund operations
VTSAX ER .04, cap $170b = $68m to fund operations

Once you cap weight the market the small stuff doesn't really do much of anything anyway. Why spend money you don't have?

[F150HD]

I would not be shocked if Schwab had similar Target Date options. Just looked it up, yes they do. I would buy the Schwab version of the Target Fund and be done with it.

sure, it'd be useful for the OP to see the info you are referring to (?)

For someone new, this page (below) might be confusing.

http://www.schwab.com/public/schwab/inv ... rget_funds

This is one reason I don't like Schwab- you have to scroll well over 1/2 way down the page just to get to the actual info one wants. The top of the page is littered with a huge meaningless photo and a solicitation to call them for help (a # at right under the photo).

Scroll, scroll, scroll.....super tiny font.....finally....

At the bottom of the page there are TWO sets of Target Date Funds. If one didn't read carefully, they might select the one w/ the much higher expense ratio. Note the one w/ the much higher expense ratio is on their 'select list'. These are the ones they push and come up easier in searches (I have a Schwab account this has been my experience)

Note this is on the 'Select List' and has the much higher ER


while this one is not:


At Fidelity 'institutional shares' are restricted to huge minimum account balances, though I don't see that restriction here on the 2nd funds page. In further reading it looks like a $100,000 minimum is needed for the latter fund? See Part C at link:
http://www.schwab.com/public/schwab/nn/ ... asses.html

Institutional share classes (a subset of Transaction Fee Funds) = $100,000 investment minimum.

Which would force one into the first fund w/ the higher ER. Geez....lotsa hoops.

[F150HD]

duplicate post by mitake. Deleted.

[F150HD]

I would not be shocked if Schwab had similar Target Date options. Just looked it up, yes they do. I would buy the Schwab version of the Target Fund and be done with it.

sure, it'd be useful for the OP to see the info you are referring to (?)

For someone new, this page (below) might be confusing.

http://www.schwab.com/public/schwab/inv ... rget_funds

This is one reason I don't like Schwab- you have to scroll well over 1/2 way down the page just to get to the actual info one wants. The top of the page is littered with a huge meaningless photo and a solicitation to call them for help (a # at right under the photo).

Scroll, scroll, scroll.....super tiny font.....finally....

At the bottom of the page there are TWO sets of Target Date Funds. If one didn't read carefully, they might select the one w/ the much higher expense ratio. Note the one w/ the much higher expense ratio is on their 'select list'. These are the ones they push and come up easier in searches (I have a Schwab account this has been my experience)

Note this is on the 'Select List' and has the much higher ER


while this one is not on the 'select list':


At Fidelity 'institutional shares' are restricted to huge minimum account balances, though I don't see that restriction here on the 2nd funds page. In further reading it looks like a $100,000 minimum is needed for the latter fund? See Part C at link:
http://www.schwab.com/public/schwab/nn/ ... asses.html

Institutional share classes (a subset of Transaction Fee Funds) = $100,000 investment minimum.

Which would force one into the first fund w/ the higher ER. (unless that is waived for this particular index target date fund).

[BolderBoy]

The main question is, should I wait for a market pull back before taking the plunge? Invest in blocks, or just buy it all right now?

Do you know when the next pull back is coming, specifically? What if it takes years to pull back; are you willing to sit out of the market that long?

Put it all in NOW.

[nedsaid]

This is puzzling about Schwab's Index Target Date Funds, it looks like they want you to go through an advisor to get them. It seemed like in the past that they had very low cost index funds available with low minimums. My best guess is that they want to push their advisory service and they realize that investors have figured out that they can get much the same thing through a Target Date Fund at lower cost.

I like Target Date funds for this situation as you get instant diversification with one purchase. As the account balance gets larger, you can often purchase the individual funds cheaper than you can through the Target Date fund. Target Date funds are good "one decision" funds for smaller account balances.

If the original poster is young and only has $3,000 and if it is too clunky to buy a Target Date fund, I would probably just go with a US Total Stock Market Index fund or a Total World Stock Index fund.

[Jack FFR1846]

As a Schwab client, I'm going to chime in.

Take that $3000 and buy SCHB. With this level of investment, asset allocation doesn't matter. Keep investing in SCHB until you hit $100k. At that point, look at ETFs that will give you international and US bond exposure.

Could you do something similar at Vanguard or TDAmeritrade, starting with VTI? Sure.

Could you do something similar at Fidelity with whatever ishares total US stock ETF they sell (I don't use Fidelity for ETFs so don't know)? Sure.

But Schwab is a great platform with low cost and great support 24/7.

[Lobster]

Hello all,

I have posted a few times on here and I have been thrilled by the amount of knowledge and support from all of you! so THANK you!

some background info: I was struggling to decide between schwab and vanguard. Since I already have a schwab account and I am pleased with their customer service, I decided to stick with them. I have $3,000 cash to start investing for retirement. I currently only own Apple but I want to buy either an S&P 500 mutual fund or ETF. I am also considering putting some of that cash into a sector based ETF, particullary XLV and XLK.

The main question is, should I wait for a market pull back before taking the plunge? Invest in blocks, or just buy it all right now?

Thanks in advance!

Welcome Mtangler!
I've heard many people express that they are very happy with Schwab and I expect they will treat you well.

Regarding where to put your initial $3,000 investment, I highly recommend taking some time to continue educating yourself. I'll wager that the time you spend reading a boglehead recommended book might be the most valuable investment you could make as you start investing. Check out the resources on the wiki, in particular the investing startup kit.

It's valuable to understand why boglehead's recommend a low cost, broadly diversified portfolio. There are good reasons for it, and taking the time to understand the 'why' behind the advice will help you build a solid plan and succeed over the long haul.

Regarding your question about whether you should wait for a pull back, see Taylor Larimore's Quotes on Market Timing.

Good luck!

[delamer]

Remember that about one-third of the total return in the S&P is dividends. So the longer you are out of the market, the more dividends you are missing.