Portfolio Advice - Jumping in when the market is high

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RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 4:20 am

First, I'd like to thank everyone - I've spent quite awhile reading through numerous posts and have learned a lot! I would now love other's perspectives on my portfolio. I'm kicking myself for not addressing this sooner and investing with fire until now.

I started Roth IRAs for my wife and I several years ago but unfortunately only made small contributions. I've been a professional student for the past decade on a single income with three kids. Now, I currently have a steady income and have dedicated time assessing our finances and learning about investing. That prompted me to move our small IRAs (currently about $20,000 each) from USAA to Vanguard last year (their funds seem to perform better and have lower expense ratios). During this transition and as I learned more about investing, the stock market took off - which has me uneasy. I know you can't time the market, but I'd hate to really start investing right at the top of a major correction. Therefore, my internal struggle is what is the proper allocation at this time (i.e. aggressive 80/20 or 70/30 versus being heavier on bonds/cash to ride out a sudden dip then transition those to stocks after the correction). Hence the odd allocations I have right now. I started off cautious with STAR fund, then aimed to utilize the 'three fund portfolio' (started reading John Bogle and Rick Ferri) but stayed heavy in cash with hopes the correction would come and I could jump into an aggressive allocation. (See question below.)


Emergency funds: We have three to six months of expenses cash in savings for easy access
Debt: No debt
Tax Filing Status: Married Filing Jointly with three Dependent Children (between ages 8-2)
Tax Rate: 15% Federal, 0% State
State of Residence: Texas
Age: 36
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 10-15% of stocks?

Portfolio size: mid five-figures


Current retirement assets

Taxable - 6.54% of portfolio
6.54% Wealthfront (risk setting 8; mix of ETFs) (current ER 0.09)


His TSP/401k - 3.06% of portfolio
2.44% G Fund
0.15% F Fund (ER 0.03%)
0.16% C Fund (ER 0.03%)
0.16% S Fund (ER 0.03%)
0.16% I Fund (ER 0.03%)
No company match


His Roth IRA at Vanguard - 43.6% of portfolio
8.1% Vanguard Total Stock Fund (VTSMX) (ER 0.15)
7.7% Vanguard Total International Stock Fund (VGTSX) (ER 0.18)
7.71% Vanguard Total Bond Fund (VBMFX) (ER 0.15)
7.7% Vanguard STAR Fund (VGTSX) (ER 0.32)
12.2% Vanguard Money Market Fund (VMFXX) (ER 0.11)


Her Roth IRA at Vanguard - 46.79% of portfolio
15.82% Vanguard Total Stock Fund (VTSMX) (ER 0.15)
7.82% Vanguard Total International Stock Fund (VGTSX) (ER 0.18)
7.71% Vanguard Total Bond Fund (VBMFX) (ER 0.15)
15.81% Vanguard Money Market Fund (VMFXX) (ER 0.11))


Contributions

New annual Contributions
$8,000 his TSP/401k (no employer matching contributions; monthly allocations set for: 20% each in C, S, I, F, and G funds but can adjust)
$5,500 his Roth IRA
$5,500 her Roth IRA
$2,000 taxable


Questions:
1. TSP - I've only begun contributing to this for a few months (kicking myself for not doing it earlier). I'll increase contributions over time if possible. I've read that it is better to focus on the C, S, and I funds. However, would that change people's perspective prior to a possible correction? Would you recommend an L-fund at first to keep something balanced? Although, those seem to have higher weight on I, and G funds than I think would be desired. Regardless of knowing what the market is doing, I think my allocation should be 40% C fund, 20% S fund, 20% I fund, and 20% F fund. Thoughts? I have 13 more years to contribute to this account.

2. Roth IRA - Is it best to balance each IRA or look at a couple as one portfolio? If we look at things as a whole we can utilize Vanguard's Admiral shares, however, (until the accounts grow enough to own Admiral shares in both funds) one IRA will be heavy in U.S. stocks and the other in international stock and bonds. Also, what are people's thoughts on RIck Ferri's Core-4 portfolio? (https://www.bogleheads.org/wiki/Lazy_po ... portfolios) How aggressive would you be as a 36-year old starting out right at the cusp of a possible large correction? (i.e. would you start high in bonds/cash in 2018 to see if you can prevent a loss or would you jump in to a 80/20 or 70/30 AA and don't look back?) Would you utilize managed funds of funds like Vanguard's STAR fund or Lifestrategy conservative growth (VSCGX) and Balanced Index (VBINX) for a conservative mix in the short-term?

3. Taxable account - I started dabbling with Wealthfront. It is a nice interface and seems to be allocating things well. Is this a reasonable vehicle? Would you suggest just having a brokerage account somewhere (like Vanguard)? If so, would you balance the taxable account separately? Would you max out the 401k limits before contributing to a taxable account? Or is it better to have some more liquid assets (I may have just answered my own question)? If you were starting a taxable account from scratch right now, would you be more conservative (i.e. more bonds/money market) to invest in stocks after a correction? Or just go for gusto and hold on for the ride? (I think I know the answer, just want confirmation... :shock: )


Thank you - I look forward to other's insight. Sorry for all of the silly questions.

sksbog
Posts: 168
Joined: Wed Jun 20, 2012 9:14 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by sksbog » Mon Jan 15, 2018 8:00 am

For retirement accounts, I would stay the course. It's probably going to be untouched for more than 30 years, so i don't even think about market timing.
For taxable accounts, if money is not needed for long time ; > 5 years; I would dollar cost average . Divide the money into 24 months ( or 36 or whichever comfortable ) and start investing monthly.

sksbog
Posts: 168
Joined: Wed Jun 20, 2012 9:14 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by sksbog » Mon Jan 15, 2018 8:00 am

For retirement accounts, I would stay the course. It's probably going to be untouched for more than 30 years, so i don't even think about market timing.
For taxable accounts, if money is not needed for long time ; > 5 years; I would dollar cost average . Divide the money into 24 months ( or 36 or whichever comfortable ) and start investing monthly.

livesoft
Posts: 60426
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by livesoft » Mon Jan 15, 2018 8:07 am

1. Ditch Wealthfront like many people on this forum already have. It is just eye candy and don't get trapped in it.

2. Use only a single fund in each Roth IRA for now.

3. Use the TSP for all rebalancing and adjusting of asset allocation.
Wiki This signature message sponsored by sscritic: Learn to fish.

Life Is Good
Posts: 18
Joined: Thu Sep 08, 2016 7:35 am

Re: Portfolio Advice - Jumping in when the market is high

Post by Life Is Good » Mon Jan 15, 2018 9:36 am

Yeah, I would simplify the Roth accounts. You've already paid tax on the money so let it grow! I'd dump the money market and bonds and reallocate that in other accounts. Just Total Stock in one, and Total Stock and International (if desired) in the other. Bonds in a Roth only if you have no Traditional accounts to put them in (401k or Traditional IRA).
Is it best to balance each IRA or look at a couple as one portfolio?
One portfolio.

SimplicityNow
Posts: 412
Joined: Fri Aug 05, 2016 10:31 am

Re: Portfolio Advice - Jumping in when the market is high

Post by SimplicityNow » Mon Jan 15, 2018 3:26 pm

RamblinDoc wrote:
Mon Jan 15, 2018 4:20 am
First, I'd like to thank everyone - I've spent quite awhile reading through numerous posts and have learned a lot! I would now love other's perspectives on my portfolio. I'm kicking myself for not addressing this sooner and investing with fire until now.

I started Roth IRAs for my wife and I several years ago but unfortunately only made small contributions. I've been a professional student for the past decade on a single income with three kids. Now, I currently have a steady income and have dedicated time assessing our finances and learning about investing. That prompted me to move our small IRAs (currently about $20,000 each) from USAA to Vanguard last year (their funds seem to perform better and have lower expense ratios). During this transition and as I learned more about investing, the stock market took off - which has me uneasy. I know you can't time the market, but I'd hate to really start investing right at the top of a major correction. Therefore, my internal struggle is what is the proper allocation at this time (i.e. aggressive 80/20 or 70/30 versus being heavier on bonds/cash to ride out a sudden dip then transition those to stocks after the correction). Hence the odd allocations I have right now. I started off cautious with STAR fund, then aimed to utilize the 'three fund portfolio' (started reading John Bogle and Rick Ferri) but stayed heavy in cash with hopes the correction would come and I could jump into an aggressive allocation. (See question below.)


Emergency funds: We have three to six months of expenses cash in savings for easy access
Debt: No debt
Tax Filing Status: Married Filing Jointly with three Dependent Children (between ages 8-2)
Tax Rate: 15% Federal, 0% State
State of Residence: Texas
Age: 36
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 10-15% of stocks?

Portfolio size: mid five-figures


Current retirement assets

Taxable - 6.54% of portfolio
6.54% Wealthfront (risk setting 8; mix of ETFs) (current ER 0.09)


His TSP/401k - 3.06% of portfolio
2.44% G Fund
0.15% F Fund (ER 0.03%)
0.16% C Fund (ER 0.03%)
0.16% S Fund (ER 0.03%)
0.16% I Fund (ER 0.03%)
No company match


His Roth IRA at Vanguard - 43.6% of portfolio
8.1% Vanguard Total Stock Fund (VTSMX) (ER 0.15)
7.7% Vanguard Total International Stock Fund (VGTSX) (ER 0.18)
7.71% Vanguard Total Bond Fund (VBMFX) (ER 0.15)
7.7% Vanguard STAR Fund (VGTSX) (ER 0.32)
12.2% Vanguard Money Market Fund (VMFXX) (ER 0.11)


Her Roth IRA at Vanguard - 46.79% of portfolio
15.82% Vanguard Total Stock Fund (VTSMX) (ER 0.15)
7.82% Vanguard Total International Stock Fund (VGTSX) (ER 0.18)
7.71% Vanguard Total Bond Fund (VBMFX) (ER 0.15)
15.81% Vanguard Money Market Fund (VMFXX) (ER 0.11))


Contributions

New annual Contributions
$8,000 his TSP/401k (no employer matching contributions; monthly allocations set for: 20% each in C, S, I, F, and G funds but can adjust)
$5,500 his Roth IRA
$5,500 her Roth IRA
$2,000 taxable


Questions:
1. TSP - I've only begun contributing to this for a few months (kicking myself for not doing it earlier). I'll increase contributions over time if possible. I've read that it is better to focus on the C, S, and I funds. However, would that change people's perspective prior to a possible correction? Would you recommend an L-fund at first to keep something balanced? Although, those seem to have higher weight on I, and G funds than I think would be desired. Regardless of knowing what the market is doing, I think my allocation should be 40% C fund, 20% S fund, 20% I fund, and 20% F fund. Thoughts? I have 13 more years to contribute to this account.

2. Roth IRA - Is it best to balance each IRA or look at a couple as one portfolio? If we look at things as a whole we can utilize Vanguard's Admiral shares, however, (until the accounts grow enough to own Admiral shares in both funds) one IRA will be heavy in U.S. stocks and the other in international stock and bonds. Also, what are people's thoughts on RIck Ferri's Core-4 portfolio? (https://www.bogleheads.org/wiki/Lazy_po ... portfolios) How aggressive would you be as a 36-year old starting out right at the cusp of a possible large correction? (i.e. would you start high in bonds/cash in 2018 to see if you can prevent a loss or would you jump in to a 80/20 or 70/30 AA and don't look back?) Would you utilize managed funds of funds like Vanguard's STAR fund or Lifestrategy conservative growth (VSCGX) and Balanced Index (VBINX) for a conservative mix in the short-term?

3. Taxable account - I started dabbling with Wealthfront. It is a nice interface and seems to be allocating things well. Is this a reasonable vehicle? Would you suggest just having a brokerage account somewhere (like Vanguard)? If so, would you balance the taxable account separately? Would you max out the 401k limits before contributing to a taxable account? Or is it better to have some more liquid assets (I may have just answered my own question)? If you were starting a taxable account from scratch right now, would you be more conservative (i.e. more bonds/money market) to invest in stocks after a correction? Or just go for gusto and hold on for the ride? (I think I know the answer, just want confirmation... :shock: )


Thank you - I look forward to other's insight. Sorry for all of the silly questions.
I'm just going to address the part of your post that I highlighted in red.

I think you need to do more reading and more educating yourself. The reason I say this is because of phrases like:

"You can't time the market, BUT" You were correct until you added the but. You can't time the market. Don't try. It usually ends badly.

"I'd hate to invest at the top of a major correction"Sure you wouldn't. Who would? The problem is no one knows when a correction is coming. You aren't going to either.

"aggressive 80/20 or 70/30 versus being heavier on bonds/cash to ride out a sudden dip then transition those to stocks after the correction"How will you know when the correction is over so you know when to invest? You won't. If the market going up made you nervous how are you going to react when the market goes down? Like way down? Most likely what you will do is sell not buy.

"stayed heavy in cash with hopes the correction would come and I could jump into an aggressive allocation" From that you have written, you don't seem the type who should have an aggressive allocation.

My recommendations:

1) Read a book on asset allocation so you can pick one that is right for you based on your risk tolerance and your need and ability to take risk.
2) Read a book on behavioral finance (Jason Zweig, Your Money and Your Brain is a good one) so you will learn why people make bad decisions investing and to try and avoid those mistakes.
3) Realize that no one knows (not TV pundits, commentators, experts, Warren Buffet, Jack Bogle, etc.) which way the market is headed, whether we will get a correction tomorrow, next week, next year or 5 years from now.

Good luck.

delamer
Posts: 4408
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by delamer » Mon Jan 15, 2018 3:35 pm

SimplicityNow wrote:
Mon Jan 15, 2018 3:26 pm
RamblinDoc wrote:
Mon Jan 15, 2018 4:20 am
First, I'd like to thank everyone - I've spent quite awhile reading through numerous posts and have learned a lot! I would now love other's perspectives on my portfolio. I'm kicking myself for not addressing this sooner and investing with fire until now.

I started Roth IRAs for my wife and I several years ago but unfortunately only made small contributions. I've been a professional student for the past decade on a single income with three kids. Now, I currently have a steady income and have dedicated time assessing our finances and learning about investing. That prompted me to move our small IRAs (currently about $20,000 each) from USAA to Vanguard last year (their funds seem to perform better and have lower expense ratios). During this transition and as I learned more about investing, the stock market took off - which has me uneasy. I know you can't time the market, but I'd hate to really start investing right at the top of a major correction. Therefore, my internal struggle is what is the proper allocation at this time (i.e. aggressive 80/20 or 70/30 versus being heavier on bonds/cash to ride out a sudden dip then transition those to stocks after the correction). Hence the odd allocations I have right now. I started off cautious with STAR fund, then aimed to utilize the 'three fund portfolio' (started reading John Bogle and Rick Ferri) but stayed heavy in cash with hopes the correction would come and I could jump into an aggressive allocation. (See question below.)


Emergency funds: We have three to six months of expenses cash in savings for easy access
Debt: No debt
Tax Filing Status: Married Filing Jointly with three Dependent Children (between ages 8-2)
Tax Rate: 15% Federal, 0% State
State of Residence: Texas
Age: 36
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 10-15% of stocks?

Portfolio size: mid five-figures


Current retirement assets

Taxable - 6.54% of portfolio
6.54% Wealthfront (risk setting 8; mix of ETFs) (current ER 0.09)


His TSP/401k - 3.06% of portfolio
2.44% G Fund
0.15% F Fund (ER 0.03%)
0.16% C Fund (ER 0.03%)
0.16% S Fund (ER 0.03%)
0.16% I Fund (ER 0.03%)
No company match


His Roth IRA at Vanguard - 43.6% of portfolio
8.1% Vanguard Total Stock Fund (VTSMX) (ER 0.15)
7.7% Vanguard Total International Stock Fund (VGTSX) (ER 0.18)
7.71% Vanguard Total Bond Fund (VBMFX) (ER 0.15)
7.7% Vanguard STAR Fund (VGTSX) (ER 0.32)
12.2% Vanguard Money Market Fund (VMFXX) (ER 0.11)


Her Roth IRA at Vanguard - 46.79% of portfolio
15.82% Vanguard Total Stock Fund (VTSMX) (ER 0.15)
7.82% Vanguard Total International Stock Fund (VGTSX) (ER 0.18)
7.71% Vanguard Total Bond Fund (VBMFX) (ER 0.15)
15.81% Vanguard Money Market Fund (VMFXX) (ER 0.11))


Contributions

New annual Contributions
$8,000 his TSP/401k (no employer matching contributions; monthly allocations set for: 20% each in C, S, I, F, and G funds but can adjust)
$5,500 his Roth IRA
$5,500 her Roth IRA
$2,000 taxable


Questions:
1. TSP - I've only begun contributing to this for a few months (kicking myself for not doing it earlier). I'll increase contributions over time if possible. I've read that it is better to focus on the C, S, and I funds. However, would that change people's perspective prior to a possible correction? Would you recommend an L-fund at first to keep something balanced? Although, those seem to have higher weight on I, and G funds than I think would be desired. Regardless of knowing what the market is doing, I think my allocation should be 40% C fund, 20% S fund, 20% I fund, and 20% F fund. Thoughts? I have 13 more years to contribute to this account.

2. Roth IRA - Is it best to balance each IRA or look at a couple as one portfolio? If we look at things as a whole we can utilize Vanguard's Admiral shares, however, (until the accounts grow enough to own Admiral shares in both funds) one IRA will be heavy in U.S. stocks and the other in international stock and bonds. Also, what are people's thoughts on RIck Ferri's Core-4 portfolio? (https://www.bogleheads.org/wiki/Lazy_po ... portfolios) How aggressive would you be as a 36-year old starting out right at the cusp of a possible large correction? (i.e. would you start high in bonds/cash in 2018 to see if you can prevent a loss or would you jump in to a 80/20 or 70/30 AA and don't look back?) Would you utilize managed funds of funds like Vanguard's STAR fund or Lifestrategy conservative growth (VSCGX) and Balanced Index (VBINX) for a conservative mix in the short-term?

3. Taxable account - I started dabbling with Wealthfront. It is a nice interface and seems to be allocating things well. Is this a reasonable vehicle? Would you suggest just having a brokerage account somewhere (like Vanguard)? If so, would you balance the taxable account separately? Would you max out the 401k limits before contributing to a taxable account? Or is it better to have some more liquid assets (I may have just answered my own question)? If you were starting a taxable account from scratch right now, would you be more conservative (i.e. more bonds/money market) to invest in stocks after a correction? Or just go for gusto and hold on for the ride? (I think I know the answer, just want confirmation... :shock: )


Thank you - I look forward to other's insight. Sorry for all of the silly questions.
I'm just going to address the part of your post that I highlighted in red.

I think you need to do more reading and more educating yourself. The reason I say this is because of phrases like:

"You can't time the market, BUT" You were correct until you added the but. You can't time the market. Don't try. It usually ends badly.

"I'd hate to invest at the top of a major correction"Sure you wouldn't. Who would? The problem is no one knows when a correction is coming. You aren't going to either.

"aggressive 80/20 or 70/30 versus being heavier on bonds/cash to ride out a sudden dip then transition those to stocks after the correction"How will you know when the correction is over so you know when to invest? You won't. If the market going up made you nervous how are you going to react when the market goes down? Like way down? Most likely what you will do is sell not buy.

"stayed heavy in cash with hopes the correction would come and I could jump into an aggressive allocation" From that you have written, you don't seem the type who should have an aggressive allocation.

My recommendations:

1) Read a book on asset allocation so you can pick one that is right for you based on your risk tolerance and your need and ability to take risk.
2) Read a book on behavioral finance (Jason Zweig, Your Money and Your Brain is a good one) so you will learn why people make bad decisions investing and to try and avoid those mistakes.
3) Realize that no one knows (not TV pundits, commentators, experts, Warren Buffet, Jack Bogle, etc.) which way the market is headed, whether we will get a correction tomorrow, next week, next year or 5 years from now.

Good luck.
Seconded. Keep in mind that there will be many more market highs over the course of your lifetime. At some point, you will likely look back and wish you could have invested more in the market today because prices are so low relatively.

quantAndHold
Posts: 1701
Joined: Thu Sep 17, 2015 10:39 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by quantAndHold » Mon Jan 15, 2018 3:47 pm

The other thing I would add is that you’re still young, and your human capital (future earnings) is by far your biggest asset. So any money you lose in a correction/crash will be dwarfed by the future earnings that you will be investing.

So just pick an allocation, invest what you have available, and stay the course.

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 4:53 pm

sksbog wrote:
Mon Jan 15, 2018 8:00 am
For retirement accounts, I would stay the course. It's probably going to be untouched for more than 30 years, so i don't even think about market timing.
For taxable accounts, if money is not needed for long time ; > 5 years; I would dollar cost average . Divide the money into 24 months ( or 36 or whichever comfortable ) and start investing monthly.
Thank you - that makes sense. Regarding taxable accounts: I have a small amount of cash that is just sitting in a savings account with no purpose. Thinking of putting it into a money market fund then dollar cost averaging it into stocks/bonds. Would you just use index funds for taxable accounts as well (with whatever AA you are comfortable with)? Or stick with a single fund for taxable accounts that are balanced/managed?

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 4:56 pm

livesoft wrote:
Mon Jan 15, 2018 8:07 am
1. Ditch Wealthfront like many people on this forum already have. It is just eye candy and don't get trapped in it.

2. Use only a single fund in each Roth IRA for now.

3. Use the TSP for all rebalancing and adjusting of asset allocation.
Thanks!

Do you have a Vanguard fund that you'd recommend if I pursue the single fund in each Roth?

What are your thoughts about TSP funds? Some swear by C, S, I. Others re-balance via L-funds. Some give weight to F and G funds.

livesoft
Posts: 60426
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by livesoft » Mon Jan 15, 2018 5:01 pm

RamblinDoc wrote:
Mon Jan 15, 2018 4:56 pm
Do you have a Vanguard fund that you'd recommend if I pursue the single fund in each Roth?

What are your thoughts about TSP funds? Some swear by C, S, I. Others re-balance via L-funds. Some give weight to F and G funds.
Without a significant taxable account, I don't see why you do not invest in a Target Retirement or Target Date fund in all your Roths and in your TSP.
Wiki This signature message sponsored by sscritic: Learn to fish.

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:04 pm

Life Is Good wrote:
Mon Jan 15, 2018 9:36 am
Yeah, I would simplify the Roth accounts. You've already paid tax on the money so let it grow! I'd dump the money market and bonds and reallocate that in other accounts. Just Total Stock in one, and Total Stock and International (if desired) in the other. Bonds in a Roth only if you have no Traditional accounts to put them in (401k or Traditional IRA).

Thanks! Will look at both Roth's as one portfolio.

I don't have a traditional IRA, so will put bonds in the Roth to keep it somewhat diversified.

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:16 pm

livesoft wrote:
Mon Jan 15, 2018 5:01 pm
RamblinDoc wrote:
Mon Jan 15, 2018 4:56 pm
Do you have a Vanguard fund that you'd recommend if I pursue the single fund in each Roth?

What are your thoughts about TSP funds? Some swear by C, S, I. Others re-balance via L-funds. Some give weight to F and G funds.
Without a significant taxable account, I don't see why you do not invest in a Target Retirement or Target Date fund in all your Roths and in your TSP.

Interesting thought. Do you think that manged target/retirement funds under-perform compared to self-allocated portfolios (i.e. a mix of index funds)?

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:17 pm

quantAndHold wrote:
Mon Jan 15, 2018 3:47 pm
The other thing I would add is that you’re still young, and your human capital (future earnings) is by far your biggest asset. So any money you lose in a correction/crash will be dwarfed by the future earnings that you will be investing.

So just pick an allocation, invest what you have available, and stay the course.

Thanks for the comforting reminder!

cantos
Posts: 199
Joined: Tue Dec 20, 2016 11:25 am

Re: Portfolio Advice - Jumping in when the market is high

Post by cantos » Mon Jan 15, 2018 5:20 pm

It was high in 2011. I invested everything.
It was high in 2012. I invested everything.
It was high in 2012. I invested everything.
It was high in 2012. I invested everything.
It was high in 2012. I invested everything.

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:21 pm

SimplicityNow wrote:
Mon Jan 15, 2018 3:26 pm

I'm just going to address the part of your post that I highlighted in red.

I think you need to do more reading and more educating yourself. The reason I say this is because of phrases like:

"You can't time the market, BUT" You were correct until you added the but. You can't time the market. Don't try. It usually ends badly.

"I'd hate to invest at the top of a major correction"Sure you wouldn't. Who would? The problem is no one knows when a correction is coming. You aren't going to either.

"aggressive 80/20 or 70/30 versus being heavier on bonds/cash to ride out a sudden dip then transition those to stocks after the correction"How will you know when the correction is over so you know when to invest? You won't. If the market going up made you nervous how are you going to react when the market goes down? Like way down? Most likely what you will do is sell not buy.

"stayed heavy in cash with hopes the correction would come and I could jump into an aggressive allocation" From that you have written, you don't seem the type who should have an aggressive allocation.

My recommendations:

1) Read a book on asset allocation so you can pick one that is right for you based on your risk tolerance and your need and ability to take risk.
2) Read a book on behavioral finance (Jason Zweig, Your Money and Your Brain is a good one) so you will learn why people make bad decisions investing and to try and avoid those mistakes.
3) Realize that no one knows (not TV pundits, commentators, experts, Warren Buffet, Jack Bogle, etc.) which way the market is headed, whether we will get a correction tomorrow, next week, next year or 5 years from now.

Good luck.

Thanks for keeping me honest!

You confirmed the voice of reason in my head.

cantos
Posts: 199
Joined: Tue Dec 20, 2016 11:25 am

Re: Portfolio Advice - Jumping in when the market is high

Post by cantos » Mon Jan 15, 2018 5:21 pm

It was high in 2011. I invested everything as per my investment plan & allocation.
It was high in 2012. I invested everything as per my investment plan & allocation.
It was high in 2013. I invested everything as per my investment plan & allocation.
It was high in 2014. I invested everything as per my investment plan & allocation.
It was high in 2015. I invested everything as per my investment plan & allocation.
It was high in 2016. I invested everything as per my investment plan & allocation.
It was high in 2017. I invested everything as per my investment plan & allocation..

Same thing this year.

So far so good. Bull market go. Lol.

Stay the course a la Jack Bogle.

RamblinDoc
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Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:22 pm

delamer wrote:
Mon Jan 15, 2018 3:35 pm

Seconded. Keep in mind that there will be many more market highs over the course of your lifetime. At some point, you will likely look back and wish you could have invested more in the market today because prices are so low relatively.

Thanks for the wise perspective.

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by livesoft » Mon Jan 15, 2018 5:23 pm

RamblinDoc wrote:
Mon Jan 15, 2018 5:16 pm
Interesting thought. Do you think that manged target/retirement funds under-perform compared to self-allocated portfolios (i.e. a mix of index funds)?
No, I don't think so. I keep track of this for myself. I think most people actually underperform the Target Retirement funds with the same asset allocation because of their behavioral mistakes, such as not investing when the market is high.
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RamblinDoc
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Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:24 pm

cantos wrote:
Mon Jan 15, 2018 5:21 pm
It was high in 2011. I invested everything as per my investment plan & allocation.
It was high in 2012. I invested everything as per my investment plan & allocation.
It was high in 2013. I invested everything as per my investment plan & allocation.
It was high in 2014. I invested everything as per my investment plan & allocation.
It was high in 2015. I invested everything as per my investment plan & allocation.
It was high in 2016. I invested everything as per my investment plan & allocation.
It was high in 2017. I invested everything as per my investment plan & allocation..

Same thing this year.

So far so good. Bull market go. Lol.

Stay the course a la Jack Bogle.

Nice!

RamblinDoc
Posts: 117
Joined: Sun Jan 14, 2018 2:26 pm

Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:28 pm

livesoft wrote:
Mon Jan 15, 2018 5:23 pm
RamblinDoc wrote:
Mon Jan 15, 2018 5:16 pm
Interesting thought. Do you think that manged target/retirement funds under-perform compared to self-allocated portfolios (i.e. a mix of index funds)?
No, I don't think so. I keep track of this for myself. I think most people actually underperform the Target Retirement funds with the same asset allocation because of their behavioral mistakes, such as not investing when the market is high.

That makes sense.

Would it be prudent to stagger the target dates among the two Roths and the TSP (to cover a 10-20 year period of possible retirement)? Or would you work all of them equally aggressive now then stagger them as retirement nears?

quantAndHold
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Re: Portfolio Advice - Jumping in when the market is high

Post by quantAndHold » Mon Jan 15, 2018 5:37 pm

RamblinDoc wrote:
Mon Jan 15, 2018 5:17 pm
quantAndHold wrote:
Mon Jan 15, 2018 3:47 pm
The other thing I would add is that you’re still young, and your human capital (future earnings) is by far your biggest asset. So any money you lose in a correction/crash will be dwarfed by the future earnings that you will be investing.

So just pick an allocation, invest what you have available, and stay the course.

Thanks for the comforting reminder!
I know this by experience. I was in my early 40’s in 2008. 2008 was uncomfortable at the time, but it actually helped me to retire early, because I was working, and able to put a bunch of new money into the market as it came back up from that bottom. At the time I was just staying the course.

Actually, there might have been a slight increase in my 401k contributions in early 2009, because I looked at my account balance and realized I was never going to be able to retire at the present rate, and panicked...

RamblinDoc
Posts: 117
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Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 5:40 pm

RamblinDoc wrote:
Mon Jan 15, 2018 5:28 pm
livesoft wrote:
Mon Jan 15, 2018 5:23 pm
RamblinDoc wrote:
Mon Jan 15, 2018 5:16 pm
Interesting thought. Do you think that manged target/retirement funds under-perform compared to self-allocated portfolios (i.e. a mix of index funds)?
No, I don't think so. I keep track of this for myself. I think most people actually underperform the Target Retirement funds with the same asset allocation because of their behavioral mistakes, such as not investing when the market is high.

That makes sense.

Would it be prudent to stagger the target dates among the two Roths and the TSP (to cover a 10-20 year period of possible retirement)? Or would you work all of them equally aggressive now then stagger them as retirement nears?
To add to that. Although it was written a few years ago, what do you think of this article and study?

https://www.forbes.com/sites/janetnovac ... 2aa671785d

http://bit.ly/I3tDfE

It discusses that Target Retirement funds lose out versus even a 50:50 balanced portfolio throughout one's life. I assume the gliding 're-balances' during a recession realize losses.

livesoft
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Re: Portfolio Advice - Jumping in when the market is high

Post by livesoft » Mon Jan 15, 2018 5:51 pm

I think those articles are not what people really do. You can select the Target Date fund that matches the allocation that you want. In tax-advantaged accounts, you can switch at any time without tax consequences. You will probably change your mind several times over the course of your investing life anyways. Target Date funds would seem ideal for you at this point in your life.
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RamblinDoc
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Re: Portfolio Advice - Jumping in when the market is high

Post by RamblinDoc » Mon Jan 15, 2018 6:18 pm

livesoft wrote:
Mon Jan 15, 2018 5:51 pm
I think those articles are not what people really do. You can select the Target Date fund that matches the allocation that you want. In tax-advantaged accounts, you can switch at any time without tax consequences. You will probably change your mind several times over the course of your investing life anyways. Target Date funds would seem ideal for you at this point in your life.
Thank you for your insight.

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