Just Starting - Inevitable Bear Market?

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Jaredc
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Just Starting - Inevitable Bear Market?

Post by Jaredc » Fri Mar 23, 2018 2:46 pm

Hello Bogleheads, I've been reading for awhile, but this is my first post.

I'm 29 years old, with a wife and two kiddos under three years old. I recently decided to move our investments (a small taxable account that's mostly bonds gifted to us by my father and a Roth IRA I started for my wife last year) away from Edward Jones (my parents love them) to Vanguard.

Until recently, I've been very comfortable with others managing our money. Whether it was our Ed Jones guy, the people who manage our 401(k)s, or the allocation of funds in the 529 accounts we have started for both kids, I've had a come-what-may attitude. I didn't care (or know) about the excessive fees. The market has been great, but I didn't really think about market. I'm now thinking about it quite a bit.

After reading Jack's Little Book a few months ago, I've decided indexing is my plan for the future. I started a Roth IRA for myself once we moved to Vanguard, and I plan to max out both of our IRAs for 2018. My dilemma is this: While my plan is to put most of our IRA dollars into the Target 2050 or 2055 funds, the current asset allocation of those funds is, understandably, about 90% stock-based. While this bull market still may have some left in the tank, I know a bear market is coming sooner or later. I'm torn between Jack's "stay the course" (even though I haven't even started on the course, really) and the age-old "buy low, sell high." I did sell the American Funds ETF Ed Jones had us in, as the expense ratio was close to 1.5% and now that $4k is sitting in cash. It seems silly to me for us to buy a mostly stock-based fund when stocks are high and we're in the second oldest bull market. But then again, I'm a novice :happy

These are the two options I'm considering with our small IRA portfolios. Hers will only have about $8k in it by the end of the year, and mine hopefully will have the $5.5k max. Any advice would be very much appreciated.

1) Buy the Target 2050/2055 funds anyway, and stay the course.
2) Buy ETFs (I'm thinking around 70/30 BND to VTI) and let the bear market come. Once it's here, sell the ETFs and get into the Target Fund when, theoretically, stocks are low and I'm buying low and then holding.

I plan to buy and hold. I think the biggest reason for my dilemma is that while I'm empowered by my new knowledge, I'm also slightly intimidated by the responsibility. I don't want my first act as CFO of our family to be taking $13k, putting it into stock heavy portfolio, and seeing it decline to $10k or less when the market fluctuates.

Thanks for reading. Sorry for the long post, any ideas are very appreciated.

mhalley
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Re: Just Starting - Inevitable Bear Market?

Post by mhalley » Fri Mar 23, 2018 5:09 pm

No one can time the market with consistency. You have to be right twice, when you sell and then when to buy back in. At your age, a market crash is your friend as you can buy more shares. Read how Bob, the worlds worst market timer, fares over his investing career.
http://awealthofcommonsense.com/2014/02 ... ket-timer/

zuma
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Re: Just Starting - Inevitable Bear Market?

Post by zuma » Fri Mar 23, 2018 5:21 pm

Jaredc wrote:
Fri Mar 23, 2018 2:46 pm
2) Buy ETFs (I'm thinking around 70/30 BND to VTI) and let the bear market come. Once it's here, sell the ETFs and get into the Target Fund when, theoretically, stocks are low and I'm buying low and then holding.
Low compared to what? In your hypothetical scenario where "stocks are low" and you're "buying low" at some indefinite point in the future, VTI might actually be higher than it is today.

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FiveK
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Re: Just Starting - Inevitable Bear Market?

Post by FiveK » Fri Mar 23, 2018 5:53 pm

Jaredc wrote:
Fri Mar 23, 2018 2:46 pm
1) Buy the Target 2050/2055 funds anyway, and stay the course.
That one.

Then, go back to the day job, and ignore the investments for, oh, let's see, maybe ten years, at which time you could re-evaluate. Good luck!

pkcrafter
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Re: Just Starting - Inevitable Bear Market?

Post by pkcrafter » Fri Mar 23, 2018 7:22 pm

Wecome,

Jaredc wrote:
I plan to buy and hold.
Really? Your post is all about not holding. :happy
While this bull market still may have some left in the tank, I know a bear market is coming sooner or later.
We all know a bear market is coming sooner or later, but we hold. You are 29, which means you have 50-60 years to be in the market. You can't go all that time moving in and out of the market because there is no way to get the timing right. People who do play that game end up with less than those who simply hold until withdrawal time approaches.

I would say this, though--your equity allocation at 90% is beyond your tolerance level, so consider something like 70-75% stock and stop thinking about market drops. We don't get a risk premium for nothing. And what we get is mostly an emotional test.


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.

RRAAYY3
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Re: Just Starting - Inevitable Bear Market?

Post by RRAAYY3 » Fri Mar 23, 2018 7:42 pm

once everyone tunes out Washington again and gets over this faux outrage re: Facebook / technology the bull will continue

This Facebook nonsense is absurd

“Boohoo I document and broadcast every aspect of my daily life on various social platforms but omg I like totally want privacy boohoo.”

(Disclaimer: I loathe social media, and this generations attachment to it.)

sambb
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Re: Just Starting - Inevitable Bear Market?

Post by sambb » Fri Mar 23, 2018 7:46 pm

facebook issue could be a big deal
i appreciate the concern of people, as social media is the future, and this is a large US company
its not like an obsolete technology like newspapers or wired telephones
lets see what happens in the next few months

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nedsaid
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Re: Just Starting - Inevitable Bear Market?

Post by nedsaid » Fri Mar 23, 2018 7:49 pm

Jaredc wrote:
Fri Mar 23, 2018 2:46 pm

I plan to buy and hold. I think the biggest reason for my dilemma is that while I'm empowered by my new knowledge, I'm also slightly intimidated by the responsibility. I don't want my first act as CFO of our family to be taking $13k, putting it into stock heavy portfolio, and seeing it decline to $10k or less when the market fluctuates.
Well, markets are volatile. Better to learn that when your portfolio is small than when it is large.

When the US Stock Market crashed on Monday, October 19, 1987, I lost hundreds of dollars in the stock market. I was 28 years old and it seemed that my world had come to an end. The emotional pain was high though my losses were actually low. It seems pretty silly today but the emotional pain was real.
A fool and his money are good for business.

SimplicityNow
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Re: Just Starting - Inevitable Bear Market?

Post by SimplicityNow » Fri Mar 23, 2018 7:56 pm

If you do some reading here you will see that posts like yours are not unique.

As many here have told you already, your plan is flawed. You cannot tell when the market is low and you cannot tell when the market is high.

Unless you count looking in the rear view mirror. You are making judgements based on the constant barrage of financial noise that the financial media puts out in order to convince you that you need financial salesman (aka as advisors).

Right now these amounts seem large to you but in 30 years when you are looking to retire they will seem small.

Educate yourself. Read more books. Many other good ones by Mr. Bogle.

Timing the market (which was your plan) is a losers game.

moneywise3
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Re: Just Starting - Inevitable Bear Market?

Post by moneywise3 » Fri Mar 23, 2018 8:03 pm

Good time to do your buying in a bear market

delamer
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Re: Just Starting - Inevitable Bear Market?

Post by delamer » Fri Mar 23, 2018 8:04 pm

Yes, there is an inevitable bear market. Just like there will be another inevitable bull market after the bear happens.

On a short- and medium-term basis, the market goes up and the market goes down.

You invest in the stock market for the long term. Always remember that.

Someday the prices today will look really cheap, and you’ll wish you’d had another $13,000 to invest back in 2018.

Helo80
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Re: Just Starting - Inevitable Bear Market?

Post by Helo80 » Fri Mar 23, 2018 8:30 pm

Jaredc wrote:
Fri Mar 23, 2018 2:46 pm
1) Buy the Target 2050/2055 funds anyway, and stay the course.


Due that... put as much money as you can towards the Target Retirement fund of your choice, and then do not worry about the noise in the market.

The Chinese would not be buying US Treasuries for a few percentage points of return if they could simply time the market and buy in bear markets and sell in bulls. The same goes for Warren Buffet or Bill Gates --- both of whom are obviously fantastically wealthy and can pay anybody in the world top dollar to manage their fortunes... yet neither have access to a crystal ball of when a market is at the top or bottom.

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Jaredc
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Re: Just Starting - Inevitable Bear Market?

Post by Jaredc » Fri Mar 23, 2018 8:51 pm

Thanks all. I think I knew what I needed to do as soon as I posted it. Appreciate all the feedback :happy

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fortyofforty
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Re: Just Starting - Inevitable Bear Market?

Post by fortyofforty » Fri Mar 23, 2018 9:17 pm

Welcome!

At this stage of your investing "career" you are overthinking things. Just begin, invest, and keep adding to it. Over the course of years, the exact timing of individual purchases will fade into obscurity. Let time in the market work for you. I personally prefer things like the LifeStrategy family within Vanguard, over Target Retirement. I like to be able to know the asset allocation, and know it's relatively stable.
Jaredc wrote:
Fri Mar 23, 2018 2:46 pm
I plan to buy and hold. I think the biggest reason for my dilemma is that while I'm empowered by my new knowledge, I'm also slightly intimidated by the responsibility. I don't want my first act as CFO of our family to be taking $13k, putting it into stock heavy portfolio, and seeing it decline to $10k or less when the market fluctuates.
You do realize that you are an expert market timer, don't you? Just know that, whatever moment you choose to invest will be the top and the market will inevitably decline. :beer If you're like me, know you will do the "wrong" thing, so just accept it. Grin and bear it. This is the time for losses, since you are truly in the early stages of your accumulation phase. :moneybag

Good luck, and stay the course.

P.S. I used to tell DW in advance that I was making our annual IRA purchase, so prepare for the market to decline significantly. Luckily, she has the knowledge to understand that losses are inevitable and the constitution to ride them out.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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