am I crazy to do a lump sum investment with my entire retirement in this current stock market?

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SierraG
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Joined: Tue Jan 23, 2018 7:17 pm

am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by SierraG » Tue Jan 23, 2018 7:40 pm

Hello,

I am new to investing. I am 35 yr old and my husband and I are both high-earners. I'd like to retire early... maybe go part-time in the next few years after we are done paying off our home, car, solar panels.

This is the money I have to invest:
$75,000 in retirement in a Fidelity money market as a Roth Brokerage Link account.
$20,000 cash in the bank that we'd also like to invest.

I have been reading some magazines like Money magazine and they warn that the stock market will collapse in the next year or two, even worse than in 2008. We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it. Of course the market can produce much better gains but with an imminent collapse, I'm not sure it's wise to invest in market right now.

So my question is:
Should I wait until the market collapses to invest? I realize this could be considered trying to "timing the market" though and maybe I should just invest it all now and trust that "time IN the market" will not fail me? After all, the market may continue to go way up for the next year or two before it falls. And if I stratify my assets according to risk-tolerance, I would be fine anyway, right? So maybe I should just dump it all in now but I'm nervous and it just seems so risky. :)

Thanks in advance :)

I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing. I originally planned on fundamental analysis and bought a whole bunch of books like The Intelligent Investor but it sounds like all that work is not really needed if I just get a diversified index fund. This forum is a great resource that I just discovered after months of sporadically spending hours poring through various investment blogs. Thank you to all the people who offer their time and talent here! I very much appreciate you.

-Sierra

dbr
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by dbr » Tue Jan 23, 2018 8:14 pm

Why not think about your plan for saving and investing over the next 25 years? This lump sum you have today is merely the beginning of a long term plan. It is not your "entire retirement." That doesn't mean you should just willy-nilly take all that cash and invest it in stocks. It does mean you should not be basing decisions on reading somewhere that "the stock market is going to collapse."

Better advice is to read material that provides a solid background for investing. Don't do anything until you have learned more.

fmzip
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by fmzip » Tue Jan 23, 2018 8:15 pm

Sierra...

I was in your shoes with the exact same headlines....

I bought at the peak, the very top....

viewtopic.php?p=3731794#p3731794

Doctor Rhythm
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Doctor Rhythm » Tue Jan 23, 2018 9:15 pm

Hi Sierra - I'm also new to the forum, but had been following most of the same strategy that's advocated here for several years.

It would be helpful to know a little more about your situation.
1. Does your husband have a separate retirement portfolio beyond the $95,000 that you've saved up in cash? And if so, how is that allocated?
2. You say you want to retire early - how soon will you stop adding and start taking money out of your retirement savings?

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Alexa9
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Alexa9 » Tue Jan 23, 2018 9:19 pm

Nothing wrong with investing very conservatively (higher bond allocation). You can even put some of your money in a CD Ladder if you are worried. No one can predict the future accurately or consistently. However, I admit this has been a long bull run and I think people should probably scale back a little. You might read about tactical asset allocation although it's considered market timing.

Mors
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Mors » Tue Jan 23, 2018 9:24 pm

Invest in an 60/40 stocks/bonds portfolio. As Vanguard points out in its 2018 economic outlook report, It is a portfolio that is never the worst choice no matter the economic conditions.

https://personal.vanguard.com/pdf/ISGVEMO.pdf

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fortfun
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by fortfun » Tue Jan 23, 2018 9:28 pm

I believe the research shows that you are better off putting it all in sooner than later. As long as you plan to have it in the market for a long period of time. In Warren Buffet's famous experiment, he deposited all the money right before the last collapse, he still came out way ahead. Of course, this all depends on whether you believe the stock market will go up (it always has).

JBTX
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by JBTX » Tue Jan 23, 2018 9:45 pm

Nobody knows if or when the market will crash. It could stay at this level for years. You could be waiting for years. So what is the crash threshold? Will you buy at a 10% dip? 20%? It could go up 25% then back down 20. Or it may be that the market goes to long term low/mid single digit returns. I’d agree with others that go ahead and invest it all but go with a 60/40 allocation fund, or perhaps a conservative vanguard life strategy allocation fund.

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Taylor Larimore
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Taylor Larimore » Tue Jan 23, 2018 10:02 pm

SierraG:

Welcome to the Bogleheads Forum!
I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing.
Read any one of these books and you will have reliable answers to most of your questions.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

BogleMelon
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by BogleMelon » Tue Jan 23, 2018 10:13 pm

The evidence is very clear that professional mutual fund managers cannot predict the stock market. For example, in his famous book “A Random Walk down Wall Street,” Burton Malkiel cited a Goldman Sachs study that examined mutual funds’ cash holdings for the period 1970 through 1989.

In their efforts to time the market, fund managers raise cash holdings when they believe the market will decline and lower cash holdings when they become bullish. The study found that, over the period it examined, mutual fund managers miscalled all nine major turning points.
http://www.etf.com/sections/index-inves ... nopaging=1
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

jadedfalcons
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by jadedfalcons » Tue Jan 23, 2018 10:14 pm

SierraG wrote:
Tue Jan 23, 2018 7:40 pm
We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it.
NO!

hang on, let me rephrase that...

NO!

The easy money has been made in that space. Increasing competition is driving down returns, plus defaults have been on the rise, so returns are down doubly. You'll be lucky to do much better than an intermediate bond fund at this point, if that, and you'll have a lot more time invested in it.

SierraG
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by SierraG » Tue Jan 23, 2018 10:25 pm

Thanks for your insights everyone. Thanks to everyone's encouragement, I plan on reading those books I mentioned in my original post over the next few weeks and figure out an investment strategy while doing so. It sounds like I won't need to waste money on a financial adviser after all. :)
fmzip wrote:
Tue Jan 23, 2018 8:15 pm
Sierra...

I was in your shoes with the exact same headlines....

I bought at the peak, the very top....

viewtopic.php?p=3731794#p3731794
@fmzip, your story is very encouraging! Thanks for the link to your old post. :)


Doctor Rhythm wrote:
Tue Jan 23, 2018 9:15 pm
Hi Sierra - I'm also new to the forum, but had been following most of the same strategy that's advocated here for several years.

It would be helpful to know a little more about your situation.
1. Does your husband have a separate retirement portfolio beyond the $95,000 that you've saved up in cash? And if so, how is that allocated?
2. You say you want to retire early - how soon will you stop adding and start taking money out of your retirement savings?
@Doctor Rhythm, my husband has some retirement also, maybe $100,000 or so. He has maybe 75% of it in a self-directed Roth IRA that he uses to issue personal loans (the borrowers being coworkers and their acquaintances), and the rest in his employer-sponsored 401K. He hasn't been reading all the info on the stock market that I have and he does not trust the market after the 2008 crash. I'm hoping that he will come around eventually but I need to get knowledgeable enough to allocate my money before I can prod him. :) As for when we will stop contributing to our retirement, that is a good question that we have yet to determine. A few weeks ago we talked about retirement plans and discussed issuing personal loans privately or via Lending Club and just living off the interest payments. I believe we calculated that we'd need $500,000 in loans at 10% interest in order to meet our daily expenses. We plan on investing about $6,000/month right away so that would take us about 7 years if all goes well.

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Rowan Oak
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Rowan Oak » Tue Jan 23, 2018 10:29 pm

Taylor Larimore wrote:
Tue Jan 23, 2018 10:02 pm
SierraG:

Welcome to the Bogleheads Forum!
I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing.
Read any one of these books and you will have reliable answers to most of your questions.

Best wishes.
Taylor
I would add one more book to that excellent list:

"Little Book of Common Sense Investing--10th Anniversary Edition"

Also, when you're ready, consider the simplicity of the The Three-Fund Portfolio.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

SierraG
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by SierraG » Tue Jan 23, 2018 10:35 pm

jadedfalcons wrote:
Tue Jan 23, 2018 10:14 pm
SierraG wrote:
Tue Jan 23, 2018 7:40 pm
We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it.
NO!

hang on, let me rephrase that...

NO!

The easy money has been made in that space. Increasing competition is driving down returns, plus defaults have been on the rise, so returns are down doubly. You'll be lucky to do much better than an intermediate bond fund at this point, if that, and you'll have a lot more time invested in it.
:o Thanks for the heads up! As they say, the stock market is the most reliable path to creating wealth.
Rowan Oak wrote:
Tue Jan 23, 2018 10:29 pm
Taylor Larimore wrote:
Tue Jan 23, 2018 10:02 pm
SierraG:

Welcome to the Bogleheads Forum!
I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing.
Read any one of these books and you will have reliable answers to most of your questions.

Best wishes.
Taylor
I would add one more book to that excellent list:

"Little Book of Common Sense Investing--10th Anniversary Edition"

Also, when you're ready, consider the simplicity of the The Three-Fund Portfolio.
Thanks for the welcome and book recommendations! I look forward to learning from these books. There is so much complicated info out there on the market and I think the Bogleheads really simplify it for everyone who is interested in learning.

Agggm
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Agggm » Tue Jan 23, 2018 10:39 pm

SierraG wrote:
Tue Jan 23, 2018 7:40 pm
Hello,

I am new to investing. I am 35 yr old and my husband and I are both high-earners. I'd like to retire early... maybe go part-time in the next few years after we are done paying off our home, car, solar panels.

This is the money I have to invest:
$75,000 in retirement in a Fidelity money market as a Roth Brokerage Link account.
$20,000 cash in the bank that we'd also like to invest.

I have been reading some magazines like Money magazine and they warn that the stock market will collapse in the next year or two, even worse than in 2008. We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it. Of course the market can produce much better gains but with an imminent collapse, I'm not sure it's wise to invest in market right now.

So my question is:
Should I wait until the market collapses to invest? I realize this could be considered trying to "timing the market" though and maybe I should just invest it all now and trust that "time IN the market" will not fail me? After all, the market may continue to go way up for the next year or two before it falls. And if I stratify my assets according to risk-tolerance, I would be fine anyway, right? So maybe I should just dump it all in now but I'm nervous and it just seems so risky. :)

Thanks in advance :)

I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing. I originally planned on fundamental analysis and bought a whole bunch of books like The Intelligent Investor but it sounds like all that work is not really needed if I just get a diversified index fund. This forum is a great resource that I just discovered after months of sporadically spending hours poring through various investment blogs. Thank you to all the people who offer their time and talent here! I very much appreciate you.

-Sierra
Pick an asset allocation and dump it all in. We're just getting the market return for better or worse 😱😂

Katietsu
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Katietsu » Tue Jan 23, 2018 10:46 pm

[quote=SierraG post_id=3738764 time=1516764321 user_id=129917


A few weeks ago we talked about retirement plans and discussed issuing personal loans privately or via Lending Club and just living off the interest payments. I believe we calculated that we'd need $500,000 in loans at 10% interest in order to meet our daily expenses. We plan on investing about $6,000/month right away so that would take us about 7 years if all goes well.
There are two problems with this:
1) If you spend all the interest, then the amount you have to lend never increases. Then the $50,000 income at 10% stays the same forever. Over time, your expenses go up with inflation but your income stays the same. This is not a good thing.
2) It is very unlikely that you will be able to make $500,000 in loans charging 10% and not have defaults. In other words, there will be some people who do not pay you back. So instead of $50000 a year in income with a constant $500000, you must plan for the inevitable people who get behind on their payments. Even loan sharks with strong arm tactics don’t have 100% collection rates.

SierraG
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by SierraG » Tue Jan 23, 2018 11:13 pm

Katietsu wrote:
Tue Jan 23, 2018 10:46 pm
[quote=SierraG post_id=3738764 time=1516764321 user_id=129917


A few weeks ago we talked about retirement plans and discussed issuing personal loans privately or via Lending Club and just living off the interest payments. I believe we calculated that we'd need $500,000 in loans at 10% interest in order to meet our daily expenses. We plan on investing about $6,000/month right away so that would take us about 7 years if all goes well.
There are two problems with this:
1) If you spend all the interest, then the amount you have to lend never increases. Then the $50,000 income at 10% stays the same forever. Over time, your expenses go up with inflation but your income stays the same. This is not a good thing.
2) It is very unlikely that you will be able to make $500,000 in loans charging 10% and not have defaults. In other words, there will be some people who do not pay you back. So instead of $50000 a year in income with a constant $500000, you must plan for the inevitable people who get behind on their payments. Even loan sharks with strong arm tactics don’t have 100% collection rates.

@Katietsu, you're right, this is best-case scenario and we haven't planned for defaults nor inflation yet. :)

stocknoob4111
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by stocknoob4111 » Tue Jan 23, 2018 11:14 pm

SierraG wrote:
Tue Jan 23, 2018 7:40 pm
Should I wait until the market collapses to invest?
No..one of my biggest mistakes was timing the market due to ignorance about long term investing. However, there is so much ridiculous mis-information in the press and just hearing others that I don't blame you for thinking this way as I thought this way as well. Long term investing is much different than day trading. With long term investing you ride out the cycles knowing full well that there are going to be valleys and peaks.

Is it going to correct, of course it will as all markets correct but if you look at market historicals there are many more up years than down years so the aggregate is quite a bit up.

And I have heard this since 2012, that they market is imminently about to crash, seriously, every single year someone predicts a catastrophe. 2008 was a once in a lifetime meltdown, yet people have recovered nicely since then in record time.

DC3509
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by DC3509 » Tue Jan 23, 2018 11:19 pm

You can read through some of my prior posts -- I was helping my parents invest a lump sum last summer and I worried about the same thing -- we are dumping a ton of money into what everyone is saying is a high point. Eventually, I ignored that line of thinking, followed what several suggested here, and invested the money accordingly with my parents. It is up 11% in less than 7 months in a basic three-fund portfolio. There is NO way to time the market, and waiting on the sidelines means that you can be missing out on great returns in the interim.

TG2
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by TG2 » Tue Jan 23, 2018 11:22 pm

There is so much complicated info out there on the market and I think the Bogleheads really simplify it for everyone who is interested in learning.
One of my favorite quotes, which I picked up from a financial advisor/author on a PBS special 25-30 years ago:

"Good financial planning is very simple stuff. It's the stuff that DOESN'T work that's complicated."

limeyx
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by limeyx » Wed Jan 24, 2018 1:17 am

jadedfalcons wrote:
Tue Jan 23, 2018 10:14 pm
SierraG wrote:
Tue Jan 23, 2018 7:40 pm
We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it.
NO!

hang on, let me rephrase that...

NO!

The easy money has been made in that space. Increasing competition is driving down returns, plus defaults have been on the rise, so returns are down doubly. You'll be lucky to do much better than an intermediate bond fund at this point, if that, and you'll have a lot more time invested in it.
Indeed. I've had some in LC and Prosper etc. for about 9 years now. The last two years have been super bad and I've slowly gotten out of most of it
Until recently LC was still doing ~7%/yr but that's dropped to ~3-5% and I only have around $9K left so slowly maturing this out

It was decent while it lasted but I can get equivalent returns in a regular portfolio with more liquidity and have fewer accounts to deal with

Slowtraveler
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Slowtraveler » Wed Jan 24, 2018 3:03 am

I was in your shoes years ago. Wish I hadn't held so much cash... I now keep a few months of expenses on me since I work and realize that's enough.

Lending Club is not safe. I had some in there at first. If you're scared like that, go with Wellesley or Vanguard Retirement Income Fund. LC is horribly tax inefficient, illiquid ( took over a year to sell all my notes and that was at a loss, I had to weekly drop the sell price since nobody wanted them), and has had crappy returns. Indexing had kicked butt for me but I think Wellesley or a 3 fund portfolio or some combination is a better choice than all in the stock market even if it had a lower CAGR. What helps you sleep at night yet still produces enough returns is a good choice.

I vote for investing now but not all in on total stock market or even 100% equity. Have some total bond or Wellesley to smooth things out.

Valuethinker
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Valuethinker » Wed Jan 24, 2018 3:51 am

SierraG wrote:
Tue Jan 23, 2018 7:40 pm
Hello,

I am new to investing. I am 35 yr old and my husband and I are both high-earners. I'd like to retire early... maybe go part-time in the next few years after we are done paying off our home, car, solar panels.

This is the money I have to invest:
$75,000 in retirement in a Fidelity money market as a Roth Brokerage Link account.
$20,000 cash in the bank that we'd also like to invest.

I have been reading some magazines like Money magazine and they warn that the stock market will collapse in the next year or two, even worse than in 2008. We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it. Of course the market can produce much better gains but with an imminent collapse, I'm not sure it's wise to invest in market right now.

So my question is:
Should I wait until the market collapses to invest? I realize this could be considered trying to "timing the market" though and maybe I should just invest it all now and trust that "time IN the market" will not fail me? After all, the market may continue to go way up for the next year or two before it falls. And if I stratify my assets according to risk-tolerance, I would be fine anyway, right? So maybe I should just dump it all in now but I'm nervous and it just seems so risky. :)

Thanks in advance :)

I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing. I originally planned on fundamental analysis and bought a whole bunch of books like The Intelligent Investor but it sounds like all that work is not really needed if I just get a diversified index fund. This forum is a great resource that I just discovered after months of sporadically spending hours poring through various investment blogs. Thank you to all the people who offer their time and talent here! I very much appreciate you.

-Sierra
Hi

There's good advice here, you need an asset allocation.

The best asset allocation is neither 100% equities, nor 0% equities (except in very specific circumstances).

William Bernstein's books are good on this, as is Bogleheads Guide to Investing.

My guess? You should go 60% equities (US Total Stock Market or TSM + up to 25% international/ 35% US) and 40% high quality bonds (Vanguard Total Bond Market, or Intermediate term US Treasuries).

If we have a terrible crash you might lose half your equities, and it might take you 10 years to recover that-- from 2000 when I invested a large lump sum, it took me to 2013 to get it back. However your bonds will keep ticking over at c. 2.5% pa return in that period.

Franco Modigliani, an MIT professor who helped create modern finance theory and won the Nobel Prize in economics for it, was half in bonds and half in equities. That was his conclusion given the incredible uncertainties of markets.

CurlyDave
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by CurlyDave » Wed Jan 24, 2018 3:59 am

fortfun wrote:
Tue Jan 23, 2018 9:28 pm
I believe the research shows that you are better off putting it all in sooner than later. As long as you plan to have it in the market for a long period of time. In Warren Buffet's famous experiment, he deposited all the money right before the last collapse, he still came out way ahead. Of course, this all depends on whether you believe the stock market will go up (it always has).
+1

Way back when, I once had a lump sum to invest. I divided it into 3 equal portions and put 1/3 into the market each month. Came out a little worse than if I had put it all in at once, but I felt better about it and was able to do it instead of dithering for months or years.

TwstdSista
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by TwstdSista » Wed Jan 24, 2018 5:06 am

Have you read about Bob? The World's worst market timer

viewtopic.php?t=166730

Always passive
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Always passive » Wed Jan 24, 2018 5:25 am

SierraG wrote:
Tue Jan 23, 2018 7:40 pm
Hello,

I am new to investing. I am 35 yr old and my husband and I are both high-earners. I'd like to retire early... maybe go part-time in the next few years after we are done paying off our home, car, solar panels.

This is the money I have to invest:
$75,000 in retirement in a Fidelity money market as a Roth Brokerage Link account.
$20,000 cash in the bank that we'd also like to invest.

I have been reading some magazines like Money magazine and they warn that the stock market will collapse in the next year or two, even worse than in 2008. We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it. Of course the market can produce much better gains but with an imminent collapse, I'm not sure it's wise to invest in market right now.

So my question is:
Should I wait until the market collapses to invest? I realize this could be considered trying to "timing the market" though and maybe I should just invest it all now and trust that "time IN the market" will not fail me? After all, the market may continue to go way up for the next year or two before it falls. And if I stratify my assets according to risk-tolerance, I would be fine anyway, right? So maybe I should just dump it all in now but I'm nervous and it just seems so risky. :)

Thanks in advance :)

I plan on reading Boglehead's Guide to Investing, Boglehead's Guide to Retirement and White Coat Investing. I originally planned on fundamental analysis and bought a whole bunch of books like The Intelligent Investor but it sounds like all that work is not really needed if I just get a diversified index fund. This forum is a great resource that I just discovered after months of sporadically spending hours poring through various investment blogs. Thank you to all the people who offer their time and talent here! I very much appreciate you.

-Sierra
Why not, if this is a long term investment, it will make no difference, just diversify globally!!!!

Dudley
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Dudley » Wed Jan 24, 2018 5:42 am

Personally I think you could be viewed as a little reckless dumping all in the US stock market at this time. Don't get too greedy. You need to asses your risk tolerance (I assume you did not experience 2008 invested).
Why not 60:40 stocks/bonds (the old adage of your age in bonds) and split the stocks 50:50 (the market weight) between a US total index and an ex-US total index. i.e. 3 fund portfolio. Then leave it alone (rebalance aside) and try avoid greed and fear. And save obsessively.

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Strayshot
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Strayshot » Wed Jan 24, 2018 7:58 am

SierraG wrote:
Tue Jan 23, 2018 10:25 pm
my husband has some retirement also, maybe $100,000 or so. He has maybe 75% of it in a self-directed Roth IRA that he uses to issue personal loans (the borrowers being coworkers and their acquaintances), and the rest in his employer-sponsored 401K. He hasn't been reading all the info on the stock market that I have and he does not trust the market after the 2008 crash.
This to me sounds like a fusion of the two worst ideas ever: direct personal lending to people you know and care about and counting on personal lending as an “investment” for your retirement. I have seen people destroy relationships via personal lending, and I have seen people destroy retirements via bad investment choices, but bundling them together is a first! :oops:

Just wow........

Leemiller
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Leemiller » Wed Jan 24, 2018 8:43 am

I think you and your husband could benefit greatly from reading the Bogleheads books and the free info posted on the wiki page. I also think hiring a flat fee based financial advisor would be well worth your money. Your husband is giving unsecured loans using 401k money? What is he going to do if they declare bankruptcy or just don’t pay? Lending club as your main investment vehicle - numerous issues. Wanting 10% returns?

As for 2008, it is sad how many people have missed out on the years that followed. If you were following finance at all in the 2008 period there were obvious issues - the problem was none can really call the bottom or the top. Hence the best advice being, come up with a plan (including an asset allocation) and stick to it.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by LarryAllen » Wed Jan 24, 2018 9:43 am

I would say you are a very long way from retiring early unless you can live on next to nothing. Focus on long term investing not get rich quick schemes. If it seems to good to be true....

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by ryman554 » Wed Jan 24, 2018 9:51 am

Here's a stunning thought.

I lump sum my retirement (and other) funds EVERY SINGLE DAY, even in this stock market because I don't sell them for cash.

Read it again and internalize it.
SierraG wrote:
Tue Jan 23, 2018 7:40 pm
I am new to investing. I am 35 yr old and my husband and I are both high-earners. I'd like to retire early... maybe go part-time in the next few years after we are done paying off our home, car, solar panels.
I'm surprised nobody has caught onto this: focus on personal finance first. By all means, continue taking whatever space you have tax-advantaged (gotta do research here! Think 401(k), IRA) and invest appropriately. However, you have car loans and solar(!?) -- which means you have a lot of debt. Ignoring the home, for now, use the rest of your $20k in cash to pay off that debt. Holding cash while you are holding debt is a bad idea.
Should I wait until the market collapses to invest? I realize this could be considered trying to "timing the market" though and maybe I should just invest it all now and trust that "time IN the market" will not fail me? After all, the market may continue to go way up for the next year or two before it falls. And if I stratify my assets according to risk-tolerance, I would be fine anyway, right? So maybe I should just dump it all in now but I'm nervous and it just seems so risky. :)
Who cares if the market tanks? What's the worst that will happen?

1. It doesn't tank. You win. Enjoy the 6%ish growth.
2. It corrects and recovers. Oh well, you could have gotten an extra 10%, but that's peanuts in the long run. You don't lose anything until you sell, and since you're 35, it's a long time until yo have to. You still get to enjoy the 6% ish growth.
3. It tanks (think 2008) and recovers. You've probably lost your job, in that case, too. So make sure you have an adequate emergency fund to cover your monthly expenses for ~6 months. That's why I suggest getting out of debt before investing. Debt adds to your monthly needs, and you don't want to be selling when the market is down. Lots of folks are in trouble, so make sure you have as little ballast as possible and hang in there.
4. It tanks and never recovers. Maybe economy completely changes. Doesn't matter what you did in 2018, except getting your own house in order first. Have fun.

Here's a little secret. In the long run, historically the market is the *safest* place for your money to be. Not the riskiest. The future may be different, but are we really that different than the past 100+ years?

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Crisium » Wed Jan 24, 2018 10:17 am

Dollar Cost Average (DCA) it in if you are nervous. Combined with the amount you will be investing ($6,000 a month?) it really shouldn't matter if there is a correction soon. You'll be buying the highs, lows, and the averages. Lump sum beats DCA 2/3 of the time, but it's usually not the biggest deal either way.

Time in the market beats timing the market
DCA beats "sitting on cash, waiting for a crash"

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Jack FFR1846 » Wed Jan 24, 2018 10:32 am

Mr. Money Mustache got into Lending Club early. I followed him with an opposite strategy. He bought mostly risky investments, looking to capitalize on the high percentage interest rate notes. I bought great credit worthy notes (A, B mostly). Maybe a year ago, he updated his blog to warn that these guys were circling down the toilet. He's got more charge offs than paying loans at this point. Negative returns are the rule these days. You're too late. I've sold all my notes.

The blog with his accounting: http://www.mrmoneymustache.com/the-lend ... xperiment/

Honestly, you're not talking about a lot of money at this point. Put it all into US market premium and be done with it for a couple years.
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by PatrickA5 » Wed Jan 24, 2018 10:34 am

Strayshot wrote:
Wed Jan 24, 2018 7:58 am
SierraG wrote:
Tue Jan 23, 2018 10:25 pm
my husband has some retirement also, maybe $100,000 or so. He has maybe 75% of it in a self-directed Roth IRA that he uses to issue personal loans (the borrowers being coworkers and their acquaintances), and the rest in his employer-sponsored 401K. He hasn't been reading all the info on the stock market that I have and he does not trust the market after the 2008 crash.
This to me sounds like a fusion of the two worst ideas ever: direct personal lending to people you know and care about and counting on personal lending as an “investment” for your retirement. I have seen people destroy relationships via personal lending, and I have seen people destroy retirements via bad investment choices, but bundling them together is a first! :oops:

Just wow........
Need to get hubby on board with an investment strategy. Loaning his retirement money to friends hoping they will pay him back is not the way to build a secure retirement. If he doesn't want to invest in the stock market, he'd still be better off investing in some kind of bonds, stable value fund, CD's - anything but loaning money to co-workers.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by sperry8 » Wed Jan 24, 2018 10:34 am

fmzip wrote:
Tue Jan 23, 2018 8:15 pm
Sierra...

I was in your shoes with the exact same headlines....

I bought at the peak, the very top....

viewtopic.php?p=3731794#p3731794
I too bought at the top in 2007. Went all in, lump sum. Worst timing ever.

Some things I learned:

1- Mathematically lump sum investing is the right call. However, it's not 100% and in my case the math didn't help.
2- I thought I would be OK emotionally knowing the math was on my side. Watching my retirement portfolio drop 56% in a year after lump sum was a tough pill to swallow. Depression was close and I couldn't sleep.
3- In hindsight I set my AA incorrectly. While lump sum may have been the correct decision I put too much in the market (80% equities). I wasn't prepared emotionally to see that drop 50%+).

Luckily I never sold or pulled out (in part due to Bogleheads telling me to stay the course). I even bought a little more at the bottom with my spare cash. It was terribly hard to do.

Today, I am up quite a bit of money. Of course had I timed or DCA'd in I would be up more. But that does not keep me up at night. I have learned I have no ability to time the market whatsoever. So I just stay in and do my best not to trade at all. However I've learned that setting my AA is more important than whether I lump sum or not. As other posters have noted my retirement monies are decades away. What I didn't get at the time is not the math, but rather my ability to stay the course with a 50% drop (or more). Now I've identified my ability to take risk and have found that 70% equities is the most I can tolerate. At this level I don't care what the market does. Up, down, sideways. I'm able to sleep and depression does not attempt wake me up with hello each morning or say goodnight when it gets dark.

Likely when you look back at your decision 20-30 years from now, you'll be up and not recall your initial decision to LS or DCA as there has never been a down period of 30 years incl dividends (or even 20 I think). What will be important is that whatever you choose to do you must "stay the course". And therein lies the rub. It's hard to know oneself before you start investing and see REAL losses. That's why I should've DCA'd. Not because it was the right mathematical thing to do for returns. It's not. But because it would've given me time to monitor my emotions and identify whether I could "stay the course". It would have allowed me time to get my Asset Allocation right for my risk tolerance. And that is the true decision that matters. Because one can Lump Sum in (correct decision historically) but if they cannot stay the course through the next downturn, then they have not truly Lump Summed in. There are in actuality two decisions to be made today. Deciding on DCA or LS is only one. The other is ensuring you can stay the course with your AA. If you are sure you can... then LS. If you are unsure or haven't lived through a correction or bear, then DCA becomes an option.
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by quantAndHold » Wed Jan 24, 2018 10:46 am

You’re 35 and high earners. A few years from now, you’ll wonder why you were worrying about such a small amount of money.

Read the recommended books. Dump it into the market. If you’re having trouble choosing, pick the Vanguard Target Retirement fund that fits your goals the best. Forget about it for 20 years while you’re living life.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by TSR » Wed Jan 24, 2018 11:11 am

At your age, I think you guys should be at around 70/30 stocks/bonds (but only you can make this determination). I have no crystal ball regarding the stock market, but I think it is pretty plausible that there will be a major correction within the next couple of years. Why don't you just put all of your money in at 50/50 Total Stock/Total Bond, and then set all future contributions over the next year or two into total stock until you hit 70/30 (or your allocation of choice)? That way, all of your money is "working for you," but you will be able to sleep at night about the prospect of a major correction shortly after going in.

Lastly, please recognize that your $100k or so is small potatoes compared with what you will ultimately be working with, so don't get too caught up in the daily ups and downs of the market.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by rbaldini » Wed Jan 24, 2018 11:37 am

Every day I lump sum my current savings into a mixture of stock and bonds.

That is, I do the equivalent of that, which is to keep all of my invested money in the market.

Try to think of it like that. Try to think: if I were already invested now, would I pull my money out? If the answer is "no", then put all your money in now. If "yes"... well, I'd still recommend that you do invest, because I don't think timing the market is a good strategy (nor do most others here). Instead, I'd recommend a higher bond allocation. In fact, I recommend that regardless of your answer, especially if you are feeling jittery right now. Check out what Vanguard's target retirement funds suggest for your age, for example.

EDIT: Looks like ryman554 already made this point.
Last edited by rbaldini on Wed Jan 24, 2018 11:51 am, edited 1 time in total.

Mr.BB
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Mr.BB » Wed Jan 24, 2018 11:43 am

Do you have an emergency fund already set up? If you don't, you should use part of that money specifically for that.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Earl Lemongrab » Wed Jan 24, 2018 2:18 pm

If you look at any of the stock indexes, you will find many points where it was an all-time high and the market has never been that low again. That is, if you wait there is no guarantee that a future "crash" will get this low. Or it might get much lower. I should know, I set up my portfolio and dumped 200k of cash into the market in 2007.

Other than taxes, there's no difference between not buying stocks with cash you have and selling stocks you have for cash. Most people are not dumping their stocks to wait for a crash.

Market timing has been demonstrated to be an ineffective strategy. What you propose is market timing.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by jadedfalcons » Wed Jan 24, 2018 6:22 pm

limeyx wrote:
Wed Jan 24, 2018 1:17 am
jadedfalcons wrote:
Tue Jan 23, 2018 10:14 pm
SierraG wrote:
Tue Jan 23, 2018 7:40 pm
We were thinking about Lending Club as as safe alternative to the stock market but haven't done enough research on it.
NO!

hang on, let me rephrase that...

NO!

The easy money has been made in that space. Increasing competition is driving down returns, plus defaults have been on the rise, so returns are down doubly. You'll be lucky to do much better than an intermediate bond fund at this point, if that, and you'll have a lot more time invested in it.
Indeed. I've had some in LC and Prosper etc. for about 9 years now. The last two years have been super bad and I've slowly gotten out of most of it
Until recently LC was still doing ~7%/yr but that's dropped to ~3-5% and I only have around $9K left so slowly maturing this out

It was decent while it lasted but I can get equivalent returns in a regular portfolio with more liquidity and have fewer accounts to deal with
I watched mine go from 10+ to the 7-8 range. I would have been find there, because I liked it, even though it's not tax efficient, but when the bad loans mounted and I went sub 4, I figured I could do just as well with an intermediate bond fund without having to be hands on. Ended up negative briefly, but climbed back to a whopping 2.26%.

ulrichw
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by ulrichw » Wed Jan 24, 2018 6:36 pm

OP - you presented 3 facts:
1. You & husband are high-earners
2. You have about $95,000 to invest
3. You think you can retire on $500,000 (and are assuming you can get a 10% annual return)

I'll start with #3 - I believe you're significantly underestimating how much you need to save. The general rule of thumb is that the amount you can safely withdraw from your retirement fund is 4% of the initial amount, adjusted for inflation each year.

Reading between the lines, you estimate your retirement expenses to be around $50,000 - this means your minimum retirement nest egg should be around $1.25M

The 4% rule was based on a retirement longevity of 30 years - since you plan to retire early you might want to be more conservative.

I'm guessing you didn't account for taxes in your spending estimate - that will raise the amount you need to save by even more.

I'd say you'll want something between $1.5M and $2.0M of investable assets (i.e., not counting your home, car, etc.) before you can safely retire.

Now let's take #1 and #2.

You're high earners, meaning you have the capability to be significant savers.
You have only $95,000 to invest right now.
These facts combined tell me that the amount you have to invest right now is a small proportion of the overall money you'll invest - it feels like a big amount now, but given the millions you'll need to retire, it's not much.

I'd say invest as a lump sum now - even if there's a crash, you can expect the market to pick up again before you need to cash out any of this investment.

On Lendingclub: It's not a panacea - I've had an account since 2010 and my returns have been steadily declining - the current annualized rate is 5.5% for a mix of mostly mid-grade loans (and this number is overstated due to the way Lendingclub accounts for write-offs) There's no such thing as a free lunch - most investment opportunities have risk-adjusted returns in the same ballpark - particularly over the long term.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Peculiar_Investor » Wed Jan 24, 2018 7:25 pm

The OP might want to read the topic Lump Sum or Dollar Cost Averaging Investing? for some further thoughts and ideas.

I don't have an answer to the question as generally answering it depends on your circumstances and risk tolerance. What I can offer is something I previously posted in that linked topic, which comes a Vanguard research paper that is a worthwhile addition to your reading list.
Peculiar_Investor wrote:
Fri Dec 11, 2015 4:21 pm
One of the wiki links is to Vanguard's paper Dollar-cost averaging just means taking risk later
Vanguard wrote:We conclude that if an investor expects such trends to continue, is satisfied with his or her target asset allocation, and is comfortable with the risk/return characteristics of each strategy, the prudent action is investing the lump sum immediately to gain exposure to the markets as soon as possible. But if the investor is primarily concerned with minimizing downside risk and potential feelings of regret (resulting from lump-sum investing immediately before a market downturn), then DCA may be of use. Of course, any emotionally based concerns should be weighed carefully against both (1) the lower expected long-run returns of cash compared with stocks and bonds, and (2) the fact that delaying investment is itself a form of market-timing, something few investors succeed at.
The wiki link I mention is Dollar cost averaging, which is another useful read.
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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by ksleo » Wed Jan 24, 2018 10:51 pm

Yes, Lending Club is "fixed income" technically speaking. However, if the stock market crashes it will probably not save your portfolio. When the stock market crashes it is usually accompanied by layoffs, high unemployment, etc. Thus the people you had loaned money to via LC would probably be more likely to default on you.

I would only recommend investing in LC with speculative money.
Actions have consequences.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by sreynard » Wed Jan 24, 2018 11:23 pm

Besides the other recommendations above, you may want to read "If You Can: How Millennials Can Get Rich Slowly" by William Bernstein. It is very short and easy to read. You can probably google it to find a free pdf version. It is meant for younger people that are just getting started.

You can also look at the Vanguard Target Retirement funds. They may not be exactly optimal for you, but they are a good place to start with while you try to figure everything out. For some of us, they're not a bad place to end up either. :D

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Doctor Rhythm » Thu Jan 25, 2018 12:59 am

Thanks for posting the additional information. The reason I requested it was that the initial information you posted didn't seem to add up: the idea of retiring early but only having $95K saved up and being a high earner. As others have said, you'll probably need to save much more than $500,000 to retire securely and comfortably, especially if you don't have a pension or other reliable income stream - which I wouldn't consider to include collecting interest on personal loans. Some folks here recommended saving essentially 25x your annual expenses for a 4% drawdown per year. Fidelity recommends having 10x your highest pre-retirement income saved up. So if your household income were $100K, you would consider saving upwards of $1M. But a lot of these rules-of-thumb assume you are retiring in your 60s. Early retirement is going to require an even greater cushion. I don't know if you have (or will have) children, but their upbringing and education expenses may be a substantial extra cost. So, while your plans aren't impossible to achieve, I think they may be more difficult to achieve than you think.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by RRAAYY3 » Thu Jan 25, 2018 8:31 am

If it’s money you don’t “need” now, or in the near future, dive in

The market may crash, but it may also do so after another 20% rise

Think of this long term, and today’s prices / conditions will pretty much be irrelevant

* I posted something similar last March, bought on a day the market literally reached an all time high. I’m up 20% since then.

Time in, not timing.

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Re: am I crazy to do a lump sum investment with my entire retirement in this current stock market?

Post by Cardinalsfan » Thu Jan 25, 2018 9:40 am

Mr Larrimore has a selection of excellent reads here https://www.bogleheads.org/wiki/Taylor_ ... tment_Gems
I also follow http://jlcollinsnh.com/stock-series/. The Stock series is very well written, organized and left me way better prepared with questions like this

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