My biggest mistake - market timing

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shainy
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My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 7:12 pm

Dear friends,

I am here to seek help from the you all again.
After going through uncertainty in 2015 and part of 2016, my husband was not comfortable in staying market with the fear of losing our principal. So we pulled out all the investments mainly from 401k and 529 accounts and put them all into prime market funds. It turned out t be the biggest mistake of our life so far. We missed out on almost 40% returns since we moved to cash in 2016.

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?

livesoft
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Re: My biggest mistake - market timing

Post by livesoft » Mon Oct 01, 2018 7:15 pm

Let's assume your final asset allocation will be 60% equites and 40% bonds.

I'd put 30% into equities TOMORROW and 40% into bond funds TOMORROW.

The remaining 30%, I would invest at 5% per month starting in November. If there was a really bad day in the market, then I'd put an additional 5% into the market by the end of that day.

Thus I would be all invested in 7 months or less to a 60/40 portfolio. The above is suitable for all conditions. Indeed, since the market tends to go up 2/3rds of the years, it has to spend quite a lot of its time at all-time highs, by definition. One just has to get used to it.
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Dottie57
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Re: My biggest mistake - market timing

Post by Dottie57 » Mon Oct 01, 2018 7:42 pm

OP,

What stage of life are you and what age? I am wondering what compelled your flight from risk? Especially if < 50 yrs old.

The right answer isabouve my response. Put most in now and DCAin the rest.

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vineviz
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Re: My biggest mistake - market timing

Post by vineviz » Mon Oct 01, 2018 7:51 pm

livesoft wrote:
Mon Oct 01, 2018 7:15 pm
Let's assume your final asset allocation will be 60% equites and 40% bonds.

I'd put 30% into equities TOMORROW and 40% into bond funds TOMORROW.

The remaining 30%, I would invest at 5% per month starting in November. If there was a really bad day in the market, then I'd put an additional 5% into the market by the end of that day.
This is great advice.

I would add only that the OP is a poster child for the advantages that a balanced fund can offer. Instead of trying to assemble a portfolio using individual funds, I strongly encourage them to find a balanced fund (either a target date or target risk fund) that matches their risk tolerance and use that as their ONLY investment in tax-advantaged accounts like 401ks, IRAs, 529s, etc.

Morningstar research has found that individual investors who use balanced funds consistently outperform investors who use individual funds.

From FA Online:
Investors in balanced funds experienced a superior “behavior gap,” the difference between a fund’s dollar-weighted and time-weighted returns, which reflects how opportunely investors are timing their investments.
From the Morningstar data:

Image
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Alan S.
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Re: My biggest mistake - market timing

Post by Alan S. » Mon Oct 01, 2018 7:53 pm

shainy wrote:
Mon Oct 01, 2018 7:12 pm
Dear friends,

I am here to seek help from the you all again.
After going through uncertainty in 2015 and part of 2016, my husband was not comfortable in staying market with the fear of losing our principal. So we pulled out all the investments mainly from 401k and 529 accounts and put them all into prime market funds. It turned out t be the biggest mistake of our life so far. We missed out on almost 40% returns since we moved to cash in 2016.

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?

While pulling out of the securities markets was a mistake, it would be a much greater mistake if you also pulled funds out of your 401k and 529 and generated a huge tax bill. From your post it is not clear exactly what you did. A MM fund or equivalent can be either in a tax deferred account or in a taxable account. Please clarify what type of account these MM funds are in.

shainy
Posts: 65
Joined: Thu Jul 19, 2012 9:42 am

Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 7:56 pm

Dottie57 wrote:
Mon Oct 01, 2018 7:42 pm
OP,

What stage of life are you and what age? I am wondering what compelled your flight from risk? Especially if < 50 yrs old.

The right answer isabouve my response. Put most in now and DCAin the rest.
I am in mid 30's and DH is early 40s. My risk tolerance is relatively high. Due to the pressure from DH, i gave in and agreed to convert it to cash.

delamer
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Re: My biggest mistake - market timing

Post by delamer » Mon Oct 01, 2018 7:57 pm

I wouldn’t get back in until you and your husband understand and internalize two things —

1. Stocks are risky. Values go up; values go down. You should only invest in stocks if you believe that over the long-term they provide enough return to compensate for that risk. Therefore,

2. Stocks are long term investments. Buying and selling for short-term reasons leads to bad decisions.

shainy
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Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 7:58 pm

livesoft wrote:
Mon Oct 01, 2018 7:15 pm
Let's assume your final asset allocation will be 60% equites and 40% bonds.

I'd put 30% into equities TOMORROW and 40% into bond funds TOMORROW.

The remaining 30%, I would invest at 5% per month starting in November. If there was a really bad day in the market, then I'd put an additional 5% into the market by the end of that day.

Thus I would be all invested in 7 months or less to a 60/40 portfolio. The above is suitable for all conditions. Indeed, since the market tends to go up 2/3rds of the years, it has to spend quite a lot of its time at all-time highs, by definition. One just has to get used to it.
Livesoft,

Thank you so much for the response.
All our funds in vanguard prime money market funds. Do you suggest any specific funds for equities and bonds at vanguard?

Regards,
Shainy

shainy
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Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 8:04 pm

delamer wrote:
Mon Oct 01, 2018 7:57 pm
I wouldn’t get back in until you and your husband understand and internalize two things —

1. Stocks are risky. Values go up; values go down. You should only invest in stocks if you believe that over the long-term they provide enough return to compensate for that risk. Therefore,

2. Stocks are long term investments. Buying and selling for short-term reasons leads to bad decisions.
Delamer,

Usually i deal with all the finances of our family. I never worry about market ups and downs as we are in the market for long term. In down time, i used to add more money. DH got panicked with the market volatility news from his workplace and watching out mint account daily over 4 months in 2015 when the market was in swings. Just to give him peace of mind, i pulled everything into cash with the intention to enter the market once it settles down a bit.

Now we are in an agreement that we will stay the course no matter what happens to the market and he won't force to make any decisions. Now he feels guilty for making me do it.

z3r0c00l
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Re: My biggest mistake - market timing

Post by z3r0c00l » Mon Oct 01, 2018 8:05 pm

Actually made the mistake twice; pulling out, and now struggling to invest again due to "all time highs" which occur most years.

Consider that you may not have the grit for investing in stocks. There is no harm in that, you may just have to save a bit more or work a bit longer.

HEDGEFUNDIE
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Re: My biggest mistake - market timing

Post by HEDGEFUNDIE » Mon Oct 01, 2018 8:07 pm

z3r0c00l wrote:
Mon Oct 01, 2018 8:05 pm
Actually made the mistake twice; pulling out, and now struggling to invest again due to "all time highs" which occur most years.

Consider that you may not have the grit for investing in stocks. There is no harm in that, you may just have to save a bit more or work a bit longer.
OP appears to have the grit, it’s her husband who does not.

This is not really an investing problem, it’s a relationship problem.

shainy
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Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 8:10 pm

HEDGEFUNDIE wrote:
Mon Oct 01, 2018 8:07 pm
z3r0c00l wrote:
Mon Oct 01, 2018 8:05 pm
Actually made the mistake twice; pulling out, and now struggling to invest again due to "all time highs" which occur most years.

Consider that you may not have the grit for investing in stocks. There is no harm in that, you may just have to save a bit more or work a bit longer.
OP appears to have the grit, it’s her husband who does not.

This is not really an investing problem, it’s a relationship problem.
HEDGEFUNDIE,

You got it right. It's not an investing problem, but a relationship problem :(

shainy
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Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 8:12 pm

Alan S. wrote:
Mon Oct 01, 2018 7:53 pm
shainy wrote:
Mon Oct 01, 2018 7:12 pm
Dear friends,

I am here to seek help from the you all again.
After going through uncertainty in 2015 and part of 2016, my husband was not comfortable in staying market with the fear of losing our principal. So we pulled out all the investments mainly from 401k and 529 accounts and put them all into prime market funds. It turned out t be the biggest mistake of our life so far. We missed out on almost 40% returns since we moved to cash in 2016.

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?

While pulling out of the securities markets was a mistake, it would be a much greater mistake if you also pulled funds out of your 401k and 529 and generated a huge tax bill. From your post it is not clear exactly what you did. A MM fund or equivalent can be either in a tax deferred account or in a taxable account. Please clarify what type of account these MM funds are in.
Alan,

I didn't take the withdrawal from 401k /529 accounts. We got out of equities/bonds and moved to prime money market funds in 401k/529.

livesoft
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Re: My biggest mistake - market timing

Post by livesoft » Mon Oct 01, 2018 8:15 pm

shainy wrote:
Mon Oct 01, 2018 7:58 pm
All our funds in vanguard prime money market funds. Do you suggest any specific funds for equities and bonds at vanguard?

Regards,
Shainy
I also like the suggestion of using an All-in-One fund for your tax-advantaged accounts. So LifeStrategy Moderate Growth works if you have it available in your 401(k) and 529 plans. For a taxable account, I would just use Vanguard Total Stock Market Index fund (VTSAX, VTSMX/VTI). Just don't let hubby see the taxable account. :twisted:

Also, one should expect to lose money. If one has the requirement not to lose 20% or 30%, then forget about investing, reduce your expenses, and save even more money in that money market fund.
Last edited by livesoft on Mon Oct 01, 2018 8:17 pm, edited 1 time in total.
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JW-Retired
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Re: My biggest mistake - market timing

Post by JW-Retired » Mon Oct 01, 2018 8:15 pm

shainy wrote:
Mon Oct 01, 2018 7:56 pm
I am in mid 30's and DH is early 40s. My risk tolerance is relatively high. Due to the pressure from DH, i gave in and agreed to convert it to cash.
Cash saving isn't likely to give you a comfortable retirement, but in the near term market losses are quite possible. What's going to be different next time this happens? If you get back into the market with some moderate amount in stocks what will DH force you to do when he gets nervous?

Is it possible for you to keep your investments separate and manage them differently?
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delamer
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Re: My biggest mistake - market timing

Post by delamer » Mon Oct 01, 2018 8:18 pm

shainy wrote:
Mon Oct 01, 2018 8:04 pm
delamer wrote:
Mon Oct 01, 2018 7:57 pm
I wouldn’t get back in until you and your husband understand and internalize two things —

1. Stocks are risky. Values go up; values go down. You should only invest in stocks if you believe that over the long-term they provide enough return to compensate for that risk. Therefore,

2. Stocks are long term investments. Buying and selling for short-term reasons leads to bad decisions.
Delamer,

Usually i deal with all the finances of our family. I never worry about market ups and downs as we are in the market for long term. In down time, i used to add more money. DH got panicked with the market volatility news from his workplace and watching out mint account daily over 4 months in 2015 when the market was in swings. Just to give him peace of mind, i pulled everything into cash with the intention to enter the market once it settles down a bit.

Now we are in an agreement that we will stay the course no matter what happens to the market and he won't force to make any decisions. Now he feels guilty for making me do it.
The first thing I’d do is come to a mutual agreement about asset allocation. This should not be the same for your 401(k) retirement accounts as it is for your 529 plans, since the time horizons are so different.

These allocations should not be so aggressive as to tempt your husband to bail out if he gets worried again.

Then I’d develop a plan to become fully invested at your preferred allocation over the next 3 to 6 months.

shainy
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Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 8:24 pm

livesoft wrote:
Mon Oct 01, 2018 8:15 pm
shainy wrote:
Mon Oct 01, 2018 7:58 pm
All our funds in vanguard prime money market funds. Do you suggest any specific funds for equities and bonds at vanguard?

Regards,
Shainy
I also like the suggestion of using an All-in-One fund for your tax-advantaged accounts. So LifeStrategy Moderate Growth works if you have it available in your 401(k) and 529 plans. For a taxable account, I would just use Vanguard Total Stock Market Index fund (VTSAX, VTSMX/VTI). Just don't let hubby see the taxable account. :twisted:

Also, one should expect to lose money. If one has the requirement not to lose 20% or 30%, then forget about investing, reduce your expenses, and save even more money in that money market fund.
Livesoft,

thank you for the suggestion again. My husband won't look at any of the accounts. That's the promise he made to himself to stop worrying should the situation happens again.

3funder
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Re: My biggest mistake - market timing

Post by 3funder » Mon Oct 01, 2018 8:25 pm

shainy wrote:
Mon Oct 01, 2018 7:56 pm
Dottie57 wrote:
Mon Oct 01, 2018 7:42 pm
OP,

What stage of life are you and what age? I am wondering what compelled your flight from risk? Especially if < 50 yrs old.

The right answer isabouve my response. Put most in now and DCAin the rest.
I am in mid 30's and DH is early 40s. My risk tolerance is relatively high. Due to the pressure from DH, i gave in and agreed to convert it to cash.
Given your age, you should decide on a reasonable AA and allocate your assets accordingly. The bulk of your retirement savings should not be parked in a cash-like instrument.

RickBoglehead
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Re: My biggest mistake - market timing

Post by RickBoglehead » Mon Oct 01, 2018 8:44 pm

OP stated that's exactly what they did.

sambb
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Re: My biggest mistake - market timing

Post by sambb » Mon Oct 01, 2018 8:54 pm

To the OP: Resist the temptaiton with 3 fund portoflios, etc. I would invest in a 60/40 portfolio and you'll be ok. Although you missed a 40% runup, it could end in a year and be down. I think a 60/40 folio keeps jitters away. Think about vanguard balanced index, or lifestrategy moderate growth. Set it, forget it, and enjoy life.

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arcticpineapplecorp.
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Re: My biggest mistake - market timing

Post by arcticpineapplecorp. » Mon Oct 01, 2018 9:01 pm

Have your husband read the following article by Larry Swedroe entitled "It's better to face the correction":
https://www.etf.com/sections/index-inve ... nopaging=1

and remember the words of Warren Buffett:
in his 1991 annual report to shareholders, legendary investor Warren Buffett told investors: “We continue to make more money when snoring than when active,” and “Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.” Later, in his 1996 annual report, Buffett added: “Inactivity strikes us as intelligent behavior.”

source: https://www.etf.com/sections/index-inve ... nopaging=1
and Peter Lynch:
Legendary investor Peter Lynch offered yet another example. He pointed out that an investor who followed a passive investment strategy and stayed fully invested in the S&P 500 over the 40-year period beginning in 1954 would have achieved an 11.4% rate of return.

If that investor missed just the best 10 months (2% of them), his return fell 27%, to 8.3%. If the investor missed the best 20 months (or 4% of them), his return dropped 54%, to 6.1%. Finally, if the investor missed the best 40 months (or just 8% of them), his return declined 76%, all the way to 2.7%.

In a September 1995 interview with Worth magazine, Lynch put it this way: “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”

source: source: https://www.etf.com/sections/index-inve ... nopaging=1
and have him read this too ("Stock Performance Before, During & After Recessions" by Ben Carlson):

https://awealthofcommonsense.com/2015/0 ... ecessions/

and this ("Think you can time the stock market? Look at this chart first "):

https://www.marketwatch.com/story/think ... 2017-12-08
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: My biggest mistake - market timing

Post by lazylarry » Mon Oct 01, 2018 9:09 pm

3funder wrote:
Mon Oct 01, 2018 8:25 pm
shainy wrote:
Mon Oct 01, 2018 7:56 pm
Dottie57 wrote:
Mon Oct 01, 2018 7:42 pm
OP,

What stage of life are you and what age? I am wondering what compelled your flight from risk? Especially if < 50 yrs old.

The right answer isabouve my response. Put most in now and DCAin the rest.
I am in mid 30's and DH is early 40s. My risk tolerance is relatively high. Due to the pressure from DH, i gave in and agreed to convert it to cash.
Given your age, you should decide on a reasonable AA and allocate your assets accordingly. The bulk of your retirement savings should not be parked in a cash-like instrument.
Yes I'd agree with this. As loath as I am to say this...if you and husband decide that mostly cash is good, I'd recommend an investment advisor. Mostly because even though they do take more fees on earnings from increased cost basis, cash doesn't make you anything. Learning from this forum and life...the psychological impacts of investing often outweigh the actual financial impacts and are more important to consider.
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Taylor Larimore
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Re: My biggest mistake - market timing

Post by Taylor Larimore » Mon Oct 01, 2018 9:18 pm

All our funds in vanguard prime money market funds. Do you suggest any specific funds for equities and bonds at vanguard?
Shainy:

The key to staying-the-course is to structure a suitable asset-allocation plan. This Vanguard Questionnaire will help:

https://personal.vanguard.com/us/FundsI ... unds/tools

Once you have selected your personal asset-allocation, consider The Three-Fund Portfolio.

Best wishes
Taylor
Last edited by Taylor Larimore on Mon Oct 01, 2018 9:20 pm, edited 1 time in total.
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watchnerd
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Re: My biggest mistake - market timing

Post by watchnerd » Mon Oct 01, 2018 9:20 pm

shainy wrote:
Mon Oct 01, 2018 7:12 pm
Dear friends,

I am here to seek help from the you all again.
After going through uncertainty in 2015 and part of 2016, my husband was not comfortable in staying market with the fear of losing our principal. So we pulled out all the investments mainly from 401k and 529 accounts and put them all into prime market funds. It turned out t be the biggest mistake of our life so far. We missed out on almost 40% returns since we moved to cash in 2016.

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?
Figure out how much of that 600k you'd be comfortable being in the red for an unknown of years.

20%? 30%?

If you take that number and multiply it by 2, that's your risk tolerance for a stock market loss of 50% that stays that way for a while. In other words, if you say you're comfortable with a 10% loss to ride out indefinitely, then you can allocate about 20% to stocks and still "be fine" even with a 50% stock market loss.
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

shainy
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Re: My biggest mistake - market timing

Post by shainy » Mon Oct 01, 2018 9:35 pm

Thank you everyone for your time and valuable replies. It's been so helpful.

To just give you more clarity on the time horizon on the accounts,

401k/ Rollover IRA:

We have about 25 years to withdraw money from 401k accounts and can take more risk.


529:

We have both prepaid / traditional 529 to cover the college expenses for 2 kids.
My eldest is 5 years away from college, so I want to play safe and have moderate risk with the money in 529 accounts. We live in Texas, got the prepaid tuition to college cost just in case if market goes into red. We are pretty much covered if the kids decide to go to college in Texas.

We have Utah and Vanguard (Neveda 529) to cover the boarding and additional education expenses and have about $150k in these accounts.


I will look into all the resources mentioned in the thread and come up with AA and stick to it.
I know i will stay the course once I enter the market, but the question of when to enter the market is dreading me.

TheAccountant
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Re: My biggest mistake - market timing

Post by TheAccountant » Mon Oct 01, 2018 9:46 pm

You guys need an advisor or someone who knows what they are doing to manage your money.

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watchnerd
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Re: My biggest mistake - market timing

Post by watchnerd » Mon Oct 01, 2018 10:55 pm

shainy wrote:
Mon Oct 01, 2018 9:35 pm

I know i will stay the course once I enter the market, but the question of when to enter the market is dreading me.
If you have the right asset allocation, you don't need to worry about timing it right because you will be fine with even the worst possible outcome.
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

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stemikger
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Re: My biggest mistake - market timing

Post by stemikger » Mon Oct 01, 2018 11:15 pm

sambb wrote:
Mon Oct 01, 2018 8:54 pm
To the OP: Resist the temptaiton with 3 fund portoflios, etc. I would invest in a 60/40 portfolio and you'll be ok. Although you missed a 40% runup, it could end in a year and be down. I think a 60/40 folio keeps jitters away. Think about vanguard balanced index, or lifestrategy moderate growth. Set it, forget it, and enjoy life.
+1

Good Advice. Balanced Index and you won't need to do anything else. It rebalances for you.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

gotester2000
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Re: My biggest mistake - market timing

Post by gotester2000 » Mon Oct 01, 2018 11:55 pm

OP,

Invest in a total stock and total bond portfolio per your asset allocation starting today.
You have to learn a very difficult art - the art of forgetting. Forget you have a notional loss of 40% and start afresh.
And if your husband cannot handle volatility then do not invest in stocks.

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watchnerd
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Re: My biggest mistake - market timing

Post by watchnerd » Tue Oct 02, 2018 12:03 am

gotester2000 wrote:
Mon Oct 01, 2018 11:55 pm
OP,

Invest in a total stock and total bond portfolio per your asset allocation starting today.
You have to learn a very difficult art - the art of forgetting. Forget you have a notional loss of 40% and start afresh.
And if your husband cannot handle volatility then do not invest in stocks.
It's not even a notional loss.

It's a fictional opportunity missed.

By that measure, we should all being pining that we weren't 100% AMZN starting a few years ago.

Image

I can't believe I lost out on 500% growth!
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

applejack123
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Re: My biggest mistake - market timing

Post by applejack123 » Tue Oct 02, 2018 12:10 am

Well said watchnerd. Well said.

And OP, I did the same exact thing and even worse, I jumped out in 2012, and for pride, wouldn’t get back in for a loss-as small as it would have been at the time. I too am on the sidelines at moment, waiting to “jump” back in. I just can’t do it yet, lol(like I said, stubborn). Good luck. The advice here seems really sound, and these people know way more than me, which is why I came here and asked questions...finally.

rbslos36
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Re: My biggest mistake - market timing

Post by rbslos36 » Tue Oct 02, 2018 7:54 am

OP,

Your situation is perfect for using a Vanguard advisor. It will add a seasoned person to the mix who will handle your husband’s fears, improper impulses and questions. Yes, you can do it on your own, but why have this issue create possible divisiveness in your marriage?

I started using a VG advisor because my wife had no interest in learning how to invest. It’s just not how her brain works. However, her impulses are usually spot on. When the market tanked in 2008 she said: Shouldn’t we buy more stock? It’s on sale!
Having an advisor is an insurance policy for her.

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Re: My biggest mistake - market timing

Post by Fallible » Tue Oct 02, 2018 8:53 am

shainy wrote:
Mon Oct 01, 2018 7:12 pm
Dear friends,
I am here to seek help from the you all again.
After going through uncertainty in 2015 and part of 2016, my husband was not comfortable in staying market with the fear of losing our principal. So we pulled out all the investments mainly from 401k and 529 accounts and put them all into prime market funds. It turned out t be the biggest mistake of our life so far. ...
You have good advice on how to get money back into the market, but it appears the bigger question is how to get you and your husband back into it and stay in it. Reconciling differences in personal risk tolerance could begin by an overall understanding of your need, ability, and willingness (risk tolerance) to take risk. If you haven’t looked into that before deciding on an asset allocation, here they are from Larry Swedroe (and more on AA and risk tolerance in the wiki):

https://www.bogleheads.org/wiki/Asset_allocation
https://www.bogleheads.org/wiki/Risk_tolerance

https://www.cbsnews.com/news/asset-allo ... -you-take/

https://www.cbsnews.com/news/asset-allo ... tolerance/

https://www.cbsnews.com/news/asset-allo ... -you-need/
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magicrat
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Re: My biggest mistake - market timing

Post by magicrat » Tue Oct 02, 2018 9:21 am

Make sure that your husband knows that if you invest in cash the real value of your portfolio is likely to decline by ~40-50% over the next 20-25 years.

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goingup
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Re: My biggest mistake - market timing

Post by goingup » Tue Oct 02, 2018 9:30 am

You might really benefit from using a Vanguard Personal Advisor. Expert help. Someone else holds the reins when the Markets crater (which is inevitable).
Couples who have different risk tolerances can off-load that dilemma to an advisor, who serves buffer and bulwark.

Finridge
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Re: My biggest mistake - market timing

Post by Finridge » Tue Oct 02, 2018 8:54 pm

shainy wrote:
Mon Oct 01, 2018 8:04 pm
delamer wrote:
Mon Oct 01, 2018 7:57 pm
I wouldn’t get back in until you and your husband understand and internalize two things —

1. Stocks are risky. Values go up; values go down. You should only invest in stocks if you believe that over the long-term they provide enough return to compensate for that risk. Therefore,

2. Stocks are long term investments. Buying and selling for short-term reasons leads to bad decisions.
Delamer,

Usually i deal with all the finances of our family. I never worry about market ups and downs as we are in the market for long term. In down time, i used to add more money. DH got panicked with the market volatility news from his workplace and watching out mint account daily over 4 months in 2015 when the market was in swings. Just to give him peace of mind, i pulled everything into cash with the intention to enter the market once it settles down a bit.

Now we are in an agreement that we will stay the course no matter what happens to the market and he won't force to make any decisions. Now he feels guilty for making me do it.
Treat your cash as a windfall. See https://www.bogleheads.org/wiki/Managing_a_windfall This will talk about the pros and cons of lump-summing vs. piece-mealing. Lump-summing is the more advantageous choice statistically, but is psychologically harder. You can do a combination of both. In an analogous situation, I piece-mealed just enough to psychologically "dip my toe in the pool" and then, when with the psychological comfort provided by that, I fully plunged in, lump-summing the rest.

I recommend a 3-fund portfolio. But before investing, determine your asset allocation--how much in stock, and how much in bonds? This is your most crucial decision. See these links for some guidance:

https://personal.vanguard.com/us/FundsInvQuestionnaire

https://personal.vanguard.com/us/insigh ... ns?lang=en

Do NOT link your accounts to Mint, and do not watch them. The more you can "forget" them and not pay attention on them on a day-to-day basis the better. Remember them only to invest more money. Or better, automate new investments so some of your earnings are deposited monthly.

You say that DH is on board for "staying the course." I'm sure that this is true--today, with the markets at an all time high after one of the longest bull markets in history. But given his past response to volatility, you can expect him to respond similarly in the future. It's not his fault--we all are who we are. So take this in account in setting the asset allocation. Expect him to have a very low tolerance for volatility and downturns. A more conservative portfolio (more bonds, less stocks) is probably better.

Given the big difference in your and DH's risk tolerance (based on past history, not what you are thinking now), you should at least consider having "his" and "hers" accounts with different asset allocations. You can still manage both, but this way if later he decides he wants to "pull the plug" on equities again, you have more flexibility. It's just a mental trick, I know, similar to mental accounting. But it can be a useful mental trick.

tampaite
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Re: My biggest mistake - market timing

Post by tampaite » Tue Oct 02, 2018 10:32 pm

shainy wrote:
Mon Oct 01, 2018 7:12 pm

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?
Well, if market had tanked 40% in 2017 or after your withdrawal, wouldn't you be glad?

No one has Crystal ball so you did what's best for you under those circumstance.

I would take $10k or $15k or $ you are comfy with on the 1st of every month and invest in a Target fund (say 2030) and continue until you fully invest $600k and yes it will take years but at least you are spreading it for long period.

sman09
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Re: My biggest mistake - market timing

Post by sman09 » Tue Oct 02, 2018 11:03 pm

tampaite wrote:
Tue Oct 02, 2018 10:32 pm

Well, if market had tanked 40% in 2017 or after your withdrawal, wouldn't you be glad?

No one has Crystal ball so you did what's best for you under those circumstance.

Well said - your post offers an excellent perspective for all of us!

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dogagility
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Re: My biggest mistake - market timing

Post by dogagility » Wed Oct 03, 2018 5:24 am

sman09 wrote:
Tue Oct 02, 2018 11:03 pm
tampaite wrote:
Tue Oct 02, 2018 10:32 pm
Well, if market had tanked 40% in 2017 or after your withdrawal, wouldn't you be glad?
No one has Crystal ball so you did what's best for you under those circumstance.
Well said - your post offers an excellent perspective for all of us!
I beg to differ. What the OP/husband did was classic market timing and heavily frowned upon by the Boglehead style of investing, and the OP/husband were burned as a result.

OP, you've been given excellent advice by many people in this thread. You and your husband have been doing well to save money over the years. Don't let this blip in your investing strategy get you down.

I would suggest you and your husband think hard about why and how you are investing and put this in writing as an Investment Policy Statement (https://www.bogleheads.org/wiki/Investm ... _statement). When the noise from all the talking heads starts to give your husband the heebie-jeebies, pull out your IPS and read it together. Better yet, don't interact with the talking heads at all.
Taking "risk" since 1995.

daheld
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Re: My biggest mistake - market timing

Post by daheld » Wed Oct 03, 2018 8:11 am

Once a month or so, someone around here asks about Vanguard PAS and the usual chorus of DIY hardliners comes out to chastise the mere thought of paying anyone for anything at any point. Ever.

I had similar inclinations as your husband at the exact same time. I wanted to leave our extra cash that we'd recently combined after getting married (not a small sum) out of the market in about October 2016. I anticipated waiting a few months after the election and then re-entering the market. I have zero doubt if I'd followed through on this I'd still be waiting for the "right" time. It wasn't solely PAS that swayed my decision, but talking with our advisor helped convince me of all the things I already knew ("time IN the market, not TIMING the market, etc.). This is why I say it's been the best 0.3% I've spent.

All this to say, OP, I'd consider using PAS or something similar. It provides a distance from your assets that keeps you from making hasty, foolish decisions. You come up with a plan and a neutral, third party helps you stick to that plan. It sounds like you might benefit from this.

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bottlecap
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Re: My biggest mistake - market timing

Post by bottlecap » Wed Oct 03, 2018 9:06 am

sman09 wrote:
Tue Oct 02, 2018 11:03 pm
tampaite wrote:
Tue Oct 02, 2018 10:32 pm

Well, if market had tanked 40% in 2017 or after your withdrawal, wouldn't you be glad?

No one has Crystal ball so you did what's best for you under those circumstance.

Well said - your post offers an excellent perspective for all of us!
This is not true. Just because somebody does something doesn't mean it was what was best for them.

I'm not beating up on the OP, but this distinction is important.

Simply choosing an AA that was appropriate to their risk tolerance would have been what was best for the OP then. It is the best thing now.

It doesn't sound like that's what the OP did then and it doesn't sound is it's where they are now.

The question is how to get there now. If it were me, I'd just rip off the band-aid and let the chips fall where they may.

JT

WhiteMaxima
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Re: My biggest mistake - market timing

Post by WhiteMaxima » Wed Oct 03, 2018 11:08 am

You didn't market timing correctly in 2016 when interest rate is still near zero and oil price is at $60/barrel. And you shouldn't market timing wrong now when short term interest converge to long term interest at 3%, oil price is ascend toward to $80/barrel. trade war intensifing. Stay put and you might be suprised 100% in money market is not a bad idea. You have been timing wrong once and you shouldn't timing wrong twice. Stay in course and be happy you are 100% in USD now. With Fed tight balance sheet and raise interest. There is a shortage of USD. Just look at Bank CD offering. 3 to 4% CD rate is now far reach. QE and zero interest has done too much for asset bubble and time to come to undo it.
Last edited by WhiteMaxima on Wed Oct 03, 2018 11:15 am, edited 1 time in total.

LiterallyIronic
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Re: My biggest mistake - market timing

Post by LiterallyIronic » Wed Oct 03, 2018 11:14 am

WhiteMaxima wrote:
Wed Oct 03, 2018 11:08 am
You didn't market timing correctly in 2016 when interest rate is still near zero and oil price is at $60/barrel. And you shouldn't market timing wrong now when short term interest converge to long term interest at 3%, oil price is ascend toward to $80/barrel. trade war intensifing. Stay put and you might be suprised 100% in money market is not a bad idea.
No. OP market timed in 2016 and happened to get it wrong. Even if it ended up being correctly timed, it was a bad idea to market time. You're suggesting that OP not "market time wrong" now, when OP should market time at all. Regardless of oil prices or "trade warring', staying put waiting for a crash is just market timing again. Don't do it.

Carol88888
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Re: My biggest mistake - market timing

Post by Carol88888 » Wed Oct 03, 2018 11:38 am

Don't beat yourself up about this. It's a real gift of an opportunity to learn something so that you will do much, much better in future.

And I know a very smart person - a registered financial advisor no less - who made a similar mistake in 2015-2016. I think smart people often fall into errors because they are smart and therefore feel they need to do something instead of just sitting still which feels "too passive".

Personally, I like Bogle's advice that when one is really scared and nervous, to sell just a tiny amount just to get down to the "sleeping point". Maybe, set a limit of say 5%-10%. That way you get to scratch the itch and that might be all you ( or rather your husband) needs to do.

TheOscarGuy
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Re: My biggest mistake - market timing

Post by TheOscarGuy » Wed Oct 03, 2018 12:02 pm

shainy wrote:
Mon Oct 01, 2018 7:12 pm

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?
How sure are you that this is the top? NO ONE can guarantee what it will do next. Your time horizon is long enough that in your shoes I would invest all today. And then forget about it for next (atleast ) couple of decades.

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mrspock
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Re: My biggest mistake - market timing

Post by mrspock » Wed Oct 03, 2018 12:50 pm

Carol88888 wrote:
Wed Oct 03, 2018 11:38 am
Personally, I like Bogle's advice that when one is really scared and nervous, to sell just a tiny amount just to get down to the "sleeping point". Maybe, set a limit of say 5%-10%. That way you get to scratch the itch and that might be all you ( or rather your husband) needs to do.
+1 on this advice.

The mistake too many people make is thinking too “all or nothing”, you have a huge range of AA choices and that’s the beauty of Boglehead style investing. The next time the market turns, and you have the itch, don’t just consider selling everything or keeping everything... if you can’t sleep it’s time to adjust your AA, anything from 80/20 to 60/40 isn’t going to harm your retirement prospects a great deal, there’s a big range of choices between those numbers. Is it perfect Boglehead strategy? (e.g. waiting for rebalancing bands to hit) Probably not, but it’s still far better than what most of your peers will be doing (*cough* panic selling *cough*).

Same goes for getting money reinvested, don’t think all or nothing, sit down make a plan together (write it down!) and then execute it.

H-Town
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Re: My biggest mistake - market timing

Post by H-Town » Wed Oct 03, 2018 12:54 pm

shainy wrote:
Mon Oct 01, 2018 7:12 pm
Dear friends,

I am here to seek help from the you all again.
After going through uncertainty in 2015 and part of 2016, my husband was not comfortable in staying market with the fear of losing our principal. So we pulled out all the investments mainly from 401k and 529 accounts and put them all into prime market funds. It turned out t be the biggest mistake of our life so far. We missed out on almost 40% returns since we moved to cash in 2016.

With the market at peak level, i am not sure when to enter into the market. We have about 600k sitting in cash now.
What would you do if you were in my shoes?
Let me try a different approach. I would try to fix the issue from the root. The fear of losing capital won't go away overnight. How would you deal with this? What will prevent this from happening again? What if next month we enter a bear market for 2 years and stock losing 50% value, what would prevent you from going to all cash again?

shainy
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Re: My biggest mistake - market timing

Post by shainy » Wed Oct 03, 2018 6:31 pm

Thank you everyone for your valuable responses. I really appreciate it.

For those who are asking me "what if the market has gone down in the last two years and how would have been my response?"

We started investing in 2012 from scratch. Started our investing journey with $0 after stumbling upon bogleheads. I was so fortunate to found it . Now the current balance $600k is not just our contributions. We had market gains during 2012-2016. Again market had its ups and downs during that period too. I was just adding more money when the market was down. I never got panicked. Especially given my age and i knew for sure that we were in the market for a longer period. I would have done the same (adding more money )even if the market went down during the last two years.

DH is a really nice guy, gives me complete freedom to invest our monies. That was the only time he insisted me to come out of market and stay in cash. I explained him about staying the course and that we should look at it in long term as we were no where close to retirement. I felt that he was not convinced and I gave in as a matter of respect for him. I never thought i would wait this long to re-enter.

We sat together over the weekend and reflected on what we did and agreed on what to do going forward. Given his nature, he promised me not to look at the accounts ever again, especially when the market is in red and to ignore the noise about the market. I trust him.

I am coming up with AA of 70/30 and adjust it if my risk tolerance changes. But I am sure that I won't repeat this mistake ever again.

Thank you to each one of you for pouring your thoughts.

ponyboy
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Re: My biggest mistake - market timing

Post by ponyboy » Wed Oct 03, 2018 6:44 pm

I hate to say this but this is one of those times that you need a financial adviser. Not because you do not have the ability to invest the money. You guys do not have the ability to stomach the market by yourselves. Or your husband I should say.

The market is at an all time high right now...a week from now it may be at an all time high...same with a month/year from now. What if it goes up for the next 6 years? That will be a new market high. Everyone will keep whispering that a correction...or the more hip/catchy phrase is a "crash" is coming. Then what? Is he going to listen to those rumors again?

Get a financial adviser.

On a positive note...you guys have $600k at a young age. Not the end of the world. You're way ahead of the curve.

JW-Retired
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Re: My biggest mistake - market timing

Post by JW-Retired » Wed Oct 03, 2018 7:24 pm

shainy wrote:
Wed Oct 03, 2018 6:31 pm
We sat together over the weekend and reflected on what we did and agreed on what to do going forward. Given his nature, he promised me not to look at the accounts ever again, especially when the market is in red and to ignore the noise about the market. I trust him.

I am coming up with AA of 70/30 and adjust it if my risk tolerance changes. But I am sure that I won't repeat this mistake ever again.
Agree that's a good decision, but can I suggest you get to your 70/30 AA by investing something like 16% per month over a 6 month period, or whatever rate might seem right for you? This will mean that, either way the market happens to go, you will be able to tell husband that at least we got some of the money in at a good price. :wink:

Seriously, it's psychologically win/win.
JW
Retired at Last

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