First time investing - Invest now or wait?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
tharsha
Posts: 6
Joined: Fri Sep 08, 2017 4:22 pm

First time investing - Invest now or wait?

Post by tharsha » Sat Oct 14, 2017 9:39 am

Hi, here is a snapshot of my financials -

Emergency funds: $20,000 (think it should cover 3 months)
Debt: $0
Tax Filing Status: Single
Tax Rate: 28% federal + NY state & city taxes
State of Residence: New York
Age: 31
Desired Asset Allocation: 70/30 Or 75/25 (stocks/bonds)
Desired Int’l Allocation: not sure, may be 20%
Size of current portfolio: ~ $100k

CURRENT ASSETS

Cash (In bank checking/savings): 49k (includes emergency fund)

High yield saving account (1.5% interest ) - 10k

401k - have 53k in lifepath index fund (.11 expense ratio and 75/25 split)
http://profile.morningstar.com/profile/ ... w=snapshot

(I contribute the max allowed per annum and employee
matches 50%)

I have read bogleheads book of investing and finally thinking of investing in stock market. But I have some questions that have been preventing me from investing so far.

1) The stock market is at all time high! :) I know I should not time the market but what money will I make if I invest now, especially when it is at so high! The market is probably going to be flat or go down in future. But everyday I know that inflation is eating away my money.

2) If I invest in stock market, what if the market is down just before I retire or need money in between?

3) Also another question I have is how much should I put in stock market out of 39k cash? It may be risky to put all of it in stock market? And what do I do with rest given that beating inflation wig CDs, TIPS and T bills is tough.

I am thinking of putting atleast 25k in vanguard life strangely fund with 70/30 split. (Sorry I meant I found vanguard target retirement fund which has 70/30 split)

**I know I could invest in IRA but I don't want to lock down money till I am 60 years as I am uncertain if I will be here or move to a different country. There would be some tax issues. I have discussed this question in a separate thread.

Please let me know your thoughts.

I would really appreciate if you can give me some advice :) Thank you.
Last edited by tharsha on Sat Oct 14, 2017 10:27 pm, edited 3 times in total.

User avatar
Earl Lemongrab
Posts: 2923
Joined: Tue Jun 10, 2014 1:14 am

Re: First time investing - Invest now or wait?

Post by Earl Lemongrab » Sat Oct 14, 2017 4:19 pm

There is no way to predict what the market will do. If you wait, what will you wait for? What happens if in the next 20 years, the market never gets lower than it is now? Will you still be waiting? What about people already in the stock market? If it were good for you to wait, then they should sell everything and wait too.

There have been dozens of threads on "should I invest now or wait" over the past few months. I recommend looking through them.
This week's fortune cookie: "You will do well to expand your horizons." Ow. Passive-aggressive and vaguely ominous.

David Scubadiver
Posts: 522
Joined: Thu Mar 24, 2016 8:40 am

Re: First time investing - Invest now or wait?

Post by David Scubadiver » Sat Oct 14, 2017 4:45 pm

It is hard to put myself back in time to when I was 30 something. But, I am sure the market was at an all time high then as well. You know why? Because the market have been going up from its inception. Yeah, there have been dips, recessions and deprrsssions but if you don’t believe makets will rose over the long term then you will never be able to stomach investing in it. Get your feet wet with some dollar cost averaging until you are more comfortable.

Helo80
Posts: 436
Joined: Sat Apr 29, 2017 8:47 pm

Re: First time investing - Invest now or wait?

Post by Helo80 » Sat Oct 14, 2017 4:49 pm

tharsha wrote:
Sat Oct 14, 2017 9:39 am
2) If I invest in stock market, what if the market is down just before I retire or need money in between?


That's the risk of a market investment. The benefits of mutual and index funds is that your risk is spread across multiple companies versus one. Generally, if you have $25k (or whatever you have) to invest and you're looking to buy a car or house in the next 6 mos to 3 years... the general consensus here is that you should not invest that money in the stock market. However, if you're looking to buy a nice home in say 10-15 year timeframe, I think most here would be okay with the idea of throwing the money in a total stock market or S&P500 fund.

But, you're 31... and I think you need to meet Bob: http://awealthofcommonsense.com/2014/02 ... ket-timer/

Newone88
Posts: 38
Joined: Sat Oct 07, 2017 3:26 pm

Re: First time investing - Invest now or wait?

Post by Newone88 » Sat Oct 14, 2017 4:58 pm

Helo80 wrote:
Sat Oct 14, 2017 4:49 pm
... and I think you need to meet Bob: http://awealthofcommonsense.com/2014/02 ... ket-timer/
I've never met Bob, until now. Thanks for that!

User avatar
Sandtrap
Posts: 2390
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: First time investing - Invest now or wait?

Post by Sandtrap » Sat Oct 14, 2017 5:04 pm

Some helpful links:
Bogle Philosophy
https://www.bogleheads.org/wiki/Boglehe ... philosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... _statement
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
Post format
viewtopic.php?f=1&t=6212

And, yes. Meet Bob.
http://awealthofcommonsense.com/2014/02 ... ket-timer/

Perhaps some of these links will add insight into "market timing" for you.
j

pkcrafter
Posts: 12111
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: First time investing - Invest now or wait?

Post by pkcrafter » Sat Oct 14, 2017 5:23 pm

tharsha wrote:
Sat Oct 14, 2017 9:39 am
Hi, here is a snapshot of my financials -

Emergency funds: $20,000 (think it should cover 3 months)
Debt: $0
Tax Filing Status: Single
Tax Rate: 28% federal + NY state & city taxes
State of Residence: New York
Age: 31
Desired Asset Allocation: 70/30 Or 75/25 (stocks/bonds)

Are you sure about a 70/30 AA?

Desired Int’l Allocation: not sure, may be 20

20% is fine. Suggestions for international usually run from 20-40%


Size of current portfolio: ~ $100k

CURRENT ASSETS

Cash (In bank checking/savings): 49k (includes emergency fund)

High yield saving account (1.5% interest ) - 10k

401k - 53k (contribution at max and employee matches 50%)

What is the 401k invested in now?

I have read bogleheads book of investing and finally thinking of investing in stock market. But I have some questions that have been preventing me from investing so far.

1) The stock market is at all time high! :) I know I should not time the market but what money will I make if I invest now, especially when it is at so high! The market is probably going to be flat or go down in future. But everyday I know that inflation is eating away my money.

2) If I invest in stock market, what if the market is down just before I retire or need money in between?

Money you may need for something in a short time period, say even 5 years, should not be invested in stocks. Investors who are at 70/30 would reduce equity allocation as they approach retirement to avoid a "bad sequence of returns" risk.

3) Also another question I have is how much should I put in stock market out of 39k cash? It may be risky to put all of it in stock market? And what do I do with rest given that beating inflation wig CDs, TIPS and T bills is tough.

That's going to depend on the overall asset allocation of your whole (all accounts marked for retirement) Portfolio. You have a 401k and some taxable money right now, but you have to decide how much of the taxable account will be marked for retirement. You may also be able to open a Roth or traditional IRA (TIRA), but I see you are reluctant to do that.

I am thinking of putting at least 25k in vanguard life strangely fund with 70/30 split.

In taxable it's not really the best choice because the bonds in LS funds are tax-inefficient at your tax level. LS funds also don't come in 70/30. They have fixed allocation of 80,60,40, and 20% bonds. With target Retirement funds you can find one that is close to 70/30, but the TR funds automatically reduce stock allocation over time.

Check out the 3-fund portfolio, which is very close in composition to LS and TR funds.

viewtopic.php?f=10&t=88005


**I know I could invest in IRA but I don't want to lock down money till I am 60 years as I am uncertain if I will be here or move to a different country. There would be some tax issues. I have discussed this question in a separate thread.

Please let me know your thoughts.

I would really appreciate if you can give me some advice :) Thank you.

OK, once you provide a little more information (especially about the 401k and overall AA), we can get more specific on suggestions. If you are totally out of the market, how long have you been out?

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.

User avatar
badbreath
Posts: 589
Joined: Mon Jul 18, 2016 7:50 pm

Re: First time investing - Invest now or wait?

Post by badbreath » Sat Oct 14, 2017 5:29 pm

the one link I think you missed is

https://www.bogleheads.org/wiki/Tax-eff ... _placement

You want to invest tax efficiently and the life strategy is not efficient due to the bonds in the fund. Just put it in the Total Stock Market and keep learning.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

JW-Retired
Posts: 6471
Joined: Sun Dec 16, 2007 12:25 pm

Re: First time investing - Invest now or wait?

Post by JW-Retired » Sat Oct 14, 2017 5:38 pm

tharsha wrote:
Sat Oct 14, 2017 9:39 am

401k - 53k (contribution at max and employee matches 50%)

Please let me know your thoughts.

I would really appreciate if you can give me some advice :) Thank you.
Advice: the $53k sitting there in 401k cash seems to be the main thing to worry about. I would just invest all at once at 70/30 in your best 401k choices (or spread it over a couple of months if it takes that mind trick to get you off the dime.) There will be many many times that $53k invested in your future, so even if this first $53k turns out to be unlucky timing it isn't going to make much difference at all. The key thing is you need to keep investing steadily.

Seems to me the rest of your checking/saving/high yield is a reasonable savings stash & emergency fund amount for a 31 year old. I wouldn't "invest" that at all.
JW
Retired at Last

retire57
Posts: 321
Joined: Fri Oct 28, 2016 3:03 pm

Re: First time investing - Invest now or wait?

Post by retire57 » Sat Oct 14, 2017 5:41 pm

We invested a fat wad right before the 2000 tech bust. And we're doing just fine!

David Scubadiver
Posts: 522
Joined: Thu Mar 24, 2016 8:40 am

Re: First time investing - Invest now or wait?

Post by David Scubadiver » Sat Oct 14, 2017 6:03 pm

Here is what I can tell you from my investing history. From the 90s to the 2000's my 401(k) balance essentially stayed flat. At least, that is my perception and recollection. But, I knew full well that the more money I had invested in the market, the better off I would be. Eventually. Sure, the more you have the more you can lose, but unless you believe that the markets are on a long term downward death spiral, the only rational thing to do is to assume that given enough time, you will eventually make yourself comfortable, if not rich. BUT, you need to have a lot of money invested in the market for this to work, and the only way for that to happen is if you put that money to work for you early and often.

Now, instead of flat earnings, I see my portfolio grow by a $100,000 in what seems like a blink of the eye. Yeah, it is going to hurt a mighty bit when the market corrects. But if it clicks up by enough $100,000 increments I think I'll be okay.

mopman78
Posts: 26
Joined: Fri Jan 06, 2017 2:46 pm

Re: First time investing - Invest now or wait?

Post by mopman78 » Sat Oct 14, 2017 6:06 pm

Imagine a 20%-40% correction that takes five to ten years to come back. Imagine if you wait, trying and time it perfectly so at the breakeven point the market is at the same level as it is today, you catch it on the up swing. You’re no worse off than you are if you invest today and get no return from cash.

Now imagine the same correction but you invest today and continue to invest along the way for the five to ten year downturn. Your original lump sum is in the same spot it would have been but you've also managed to buy stocks while they were “on sale”. You’ve started yourself down the road of investing, you’ve had a plan, and you’ve stuck to it. You’ve learned discipline and patience and it pays off. Your time horizon is long and markets have only gone up over time periods like that.

Long story short, investing today is always better than tomorrow. Wishing you invested yesterday is the worst by far (speaking from experience).

tharsha
Posts: 6
Joined: Fri Sep 08, 2017 4:22 pm

Re: First time investing - Invest now or wait?

Post by tharsha » Sat Oct 14, 2017 10:48 pm

pkcrafter wrote:
Sat Oct 14, 2017 5:23 pm
tharsha wrote:
Sat Oct 14, 2017 9:39 am
Hi, here is a snapshot of my financials -

Emergency funds: $20,000 (think it should cover 3 months)
Debt: $0
Tax Filing Status: Single
Tax Rate: 28% federal + NY state & city taxes
State of Residence: New York
Age: 31
Desired Asset Allocation: 70/30 Or 75/25 (stocks/bonds)

Are you sure about a 70/30 AA?

Desired Int’l Allocation: not sure, may be 20

20% is fine. Suggestions for international usually run from 20-40%


Size of current portfolio: ~ $100k

CURRENT ASSETS

Cash (In bank checking/savings): 49k (includes emergency fund)

High yield saving account (1.5% interest ) - 10k

401k - 53k (contribution at max and employee matches 50%)

What is the 401k invested in now?

I have read bogleheads book of investing and finally thinking of investing in stock market. But I have some questions that have been preventing me from investing so far.

1) The stock market is at all time high! :) I know I should not time the market but what money will I make if I invest now, especially when it is at so high! The market is probably going to be flat or go down in future. But everyday I know that inflation is eating away my money.

2) If I invest in stock market, what if the market is down just before I retire or need money in between?

Money you may need for something in a short time period, say even 5 years, should not be invested in stocks. Investors who are at 70/30 would reduce equity allocation as they approach retirement to avoid a "bad sequence of returns" risk.

3) Also another question I have is how much should I put in stock market out of 39k cash? It may be risky to put all of it in stock market? And what do I do with rest given that beating inflation wig CDs, TIPS and T bills is tough.

That's going to depend on the overall asset allocation of your whole (all accounts marked for retirement) Portfolio. You have a 401k and some taxable money right now, but you have to decide how much of the taxable account will be marked for retirement. You may also be able to open a Roth or traditional IRA (TIRA), but I see you are reluctant to do that.

Thank you! :) I have updated my original comment. I am using my company provided lifepath index fund. I am reluctant about IRA because I am not really certain where I will be. I know I am not taking advantage of tax benefit offered by govt. but once I put money, it's gone until my age is 59.5! Getting out is not easy and has huge penalties. I am investing in 401k because my company is matching my contributions. I admit that I am a bit confused with investing in IRA. There is also a possibility that I won't move at all. So I don't know if I should put in IRA or not. Or may be put it now and deal with it when I really decide to move? Btw, I don't qualify for Roth IRA.

I am thinking of putting at least 25k in vanguard life strangely fund with 70/30 split.

In taxable it's not really the best choice because the bonds in LS funds are tax-inefficient at your tax level. LS funds also don't come in 70/30. They have fixed allocation of 80,60,40, and 20% bonds. With target Retirement funds you can find one that is close to 70/30, but the TR funds automatically reduce stock allocation over time.

Check out the 3-fund portfolio, which is very close in composition to LS and TR funds.

viewtopic.php?f=10&t=88005


Investing in target retirement is only temporary until I have enough money to create my own portfolio using admiral index funds. My plan is to keep moving the funds between different target retirement funds every year to achieve my desired split of 70/30. I don't want to put in ETFs as i am reading everywhere that index funds are preferred over ETFS.


**I know I could invest in IRA but I don't want to lock down money till I am 60 years as I am uncertain if I will be here or move to a different country. There would be some tax issues. I have discussed this question in a separate thread.

Please let me know your thoughts.

I would really appreciate if you can give me some advice :) Thank you.

OK, once you provide a little more information (especially about the 401k and overall AA), we can get more specific on suggestions. If you are totally out of the market, how long have you been out?

Paul


I never investing in the market until now other than the employee provided 401k plan. You can say I was out of market for almost 3 years now.

tharsha
Posts: 6
Joined: Fri Sep 08, 2017 4:22 pm

Re: First time investing - Invest now or wait?

Post by tharsha » Sat Oct 14, 2017 11:33 pm

Thank you for your insights! It was pleasure meeting bob.

User avatar
Ged
Posts: 3292
Joined: Mon May 13, 2013 1:48 pm
Location: Roke

Re: First time investing - Invest now or wait?

Post by Ged » Sat Oct 14, 2017 11:44 pm

You are 31 years old. You are investing for 30+ years. That is not much different than when I started investing at age 28, in 1978. The S&P index at the time was 100 plus or minus.

The TWENTY FOLD increase over the time I held those investments dwarfs by far any short term market fluctuations that I experienced, including some like the 1987 and 2017 upsets.

Since the market generally increases in value over time, and is usually at or near all time highs you are simply not likely to benefit from trying to time the market.

Post Reply