$50,000: Should I buy now or wait for the market to drop further?

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Sophia1884
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$50,000: Should I buy now or wait for the market to drop further?

Post by Sophia1884 » Sat Oct 13, 2018 11:10 pm

Hello all,

Currently we have an AA of 90/10, with all of the bonds being in Wellington. The goal is going 80/20 or 70/30 in the next few years when we get closer to military retirement.

We have just received $50,000.

I was going to start buying more bonds in the next 6 months but as the stock prices are down, I feel like buying Total Stock or Wellington would be a good idea.

Thoughts?

Edit: Should I start buying Wellington to start bringing up the bonds ratio or Total Stock to potentially make more in returns?

If I place an order today, how long will it take for Vanguard to act on it?

Thank you!!
Last edited by Sophia1884 on Sat Oct 13, 2018 11:46 pm, edited 1 time in total.

The Wizard
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by The Wizard » Sat Oct 13, 2018 11:29 pm

Assuming you already have a checking account linked to your Vanguard account, you'll get the next closing price on mutual fund buys. Meaning 4 pm ET Monday...
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sksbog
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by sksbog » Sat Oct 13, 2018 11:38 pm

Why not divide $50,000 into 12 months and buy each month according to your AA? That way you are not market timing.

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FiveK
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by FiveK » Sat Oct 13, 2018 11:42 pm

Checked with a well known financial advisor and was told "Yes - definitely".

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Sophia1884 » Sat Oct 13, 2018 11:48 pm

sksbog wrote:
Sat Oct 13, 2018 11:38 pm
Why not divide $50,000 into 12 months and buy each month according to your AA? That way you are not market timing.
I feel like that is so obvious I didn't even think about it :) That'll be the strategy.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by stocknoob4111 » Sat Oct 13, 2018 11:48 pm

who said it is dropping further?

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by FIREchief » Sat Oct 13, 2018 11:56 pm

sksbog wrote:
Sat Oct 13, 2018 11:38 pm
Why not divide $50,000 into 12 months and buy each month according to your AA? That way you are not market timing.
The best time to buy stocks is "now." The best time to sell stocks is "never." So, buy now!
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by l1am » Sun Oct 14, 2018 12:06 am

Sophia1884 wrote:
Sat Oct 13, 2018 11:48 pm
sksbog wrote:
Sat Oct 13, 2018 11:38 pm
Why not divide $50,000 into 12 months and buy each month according to your AA? That way you are not market timing.
I feel like that is so obvious I didn't even think about it :) That'll be the strategy.
All that does is minimize variance at the cost of some EV. If it's better for you psychologically, that's worth something though.

Market correction/crash could happen in 13 months. We don't know.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by The Wizard » Sun Oct 14, 2018 12:10 am

stocknoob4111 wrote:
Sat Oct 13, 2018 11:48 pm
who said it is dropping further?
The crash is coming, from what I've heard...
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ge1
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by ge1 » Sun Oct 14, 2018 12:25 am

Please realize that you (and anybody else) have no idea what the market will be doing. Just because stocks went down a bit, that doesn’t mean they can’t go down much, much more (think 40-50%) - or the bull market can continue.

There isn’t enough information in your post, but given you want to make your AA more conservative “in a few years” and just received cash, why wouldn’t you buy bonds with that cask to go into the right direction? If you put the whole 50k in bonds, how would that change your AA?

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by CurlyDave » Sun Oct 14, 2018 12:26 am

sksbog wrote:
Sat Oct 13, 2018 11:38 pm
Why not divide $50,000 into 12 months and buy each month according to your AA? That way you are not market timing.
Stocks are on sale right now. Whether the sale will last one month, one day or one week is unknown.

Every single time I have divided up a large sum and averaged it into he market, I have done worse than if I had just bought in all at once.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Sophia1884 » Sun Oct 14, 2018 12:55 am

ge1 wrote:
Sun Oct 14, 2018 12:25 am
There isn’t enough information in your post, but given you want to make your AA more conservative “in a few years” and just received cash, why wouldn’t you buy bonds with that cask to go into the right direction? If you put the whole 50k in bonds, how would that change your AA?

This was exactly my thought process but right now, we only hold Bonds in Wellington (65/35) which is, unfortunately, mostly in taxable. My long term project would be to figure out how to add to the Wellington or add the Wesley but make it more tax efficient vs. buying Total Bonds. The market drop makes buying Total Stock easy and using future money to bump up the bonds once I figure out a strategy.

Also, my understanding is that when stocks drop, bonds increase in price?

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Scott S » Sun Oct 14, 2018 12:57 am

Sophia1884 wrote:
Sat Oct 13, 2018 11:10 pm
Hello all,

Currently we have an AA of 90/10, with all of the bonds being in Wellington. The goal is going 80/20 or 70/30 in the next few years when we get closer to military retirement.

We have just received $50,000.

I was going to start buying more bonds in the next 6 months but as the stock prices are down, I feel like buying Total Stock or Wellington would be a good idea.

Thoughts?

Edit: Should I start buying Wellington to start bringing up the bonds ratio or Total Stock to potentially make more in returns?

If I place an order today, how long will it take for Vanguard to act on it?

Thank you!!
Unless your next egg is huge, 90/10 strikes me as a pretty aggressive AA for someone who also puts "retirement" and "next few years" in the same sentence. ;)

I think most people here would approve a shift into a more conservative AA, and if I were in that boat, I would buy bonds immediately. Don't try to guess what the market will do, just formulate a sensible plan, act on it, and stick with it. :sharebeer
Last edited by Scott S on Sun Oct 14, 2018 12:57 am, edited 1 time in total.
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by WhiteMaxima » Sun Oct 14, 2018 12:57 am

Dollar cost average.

Sophia1884
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Sophia1884 » Sun Oct 14, 2018 1:08 am

Scott S wrote:
Sun Oct 14, 2018 12:57 am
I would buy bonds immediately. Don't try to guess what the market will do, just formulate a sensible plan, act on it, and stick with it. :sharebeer

Ah, yes, well,...but that's the kicker...no plan or strategy yet for how to get those bonds up. Tossing cash into VTSAX has been so straight forward that we've just started thinking about how to do the same with the bonds. That's the next bogleheads questions :) I don't want to buy Total Bonds when I'm thinking that in the future I'd like to have Wesley and Wellington as our main holdings. I'm reserving some of the cash to invest in whatever bonds vehicle we decide on.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Scott S » Sun Oct 14, 2018 1:18 am

Sophia1884 wrote:
Sun Oct 14, 2018 1:08 am
Scott S wrote:
Sun Oct 14, 2018 12:57 am
I would buy bonds immediately. Don't try to guess what the market will do, just formulate a sensible plan, act on it, and stick with it. :sharebeer
Ah, yes, well,...but that's the kicker...no plan or strategy yet for how to get those bonds up. Tossing cash into VTSAX has been so straight forward that we've just started thinking about how to do the same with the bonds. That's the next bogleheads questions :) I don't want to buy Total Bonds when I'm thinking that in the future I'd like to have Wesley and Wellington as our main holdings. I'm reserving some of the cash to invest in whatever bonds vehicle we decide on.
I don't think there's anything really special about Wellesley or Wellington these days, apart from their pedigree. If you wanted to keep everything in those funds, just buying one or the other would increase your bond allocation from what you have now. I won't pry as to your total nest egg, but it's pretty simple math to figure out how to invest that $50,000 to steer your portfolio to 80/20 or 70/30. :)
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

ge1
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by ge1 » Sun Oct 14, 2018 1:41 am

A few thoughts on bonds:

- Bonds come in all shapes and sizes and certainly don’t always go up when stocks go down. Bond prices react to two things: Changes in interest rates and changes in credit spread.

- Interest Rates: As bonds are paying fixed interest rates, any increase in rates will decrease the price of bonds and decrease in rates will increase the price. Lots of nuances but let’s keep it simple.

- Credit spreads: This reflects the risk that the bond issuer won’t be able to pay you back. With US Treasuries this risk is minimal, it increases as the quality of the borrower decreases. So let’s say you own High Yield Bonds, I.e. bonds of companies with a low credit rating. Should lenders for whatever reason become more cautious lending to the companies (for example in a recession), credit spreads widen, these companies have to pay a higher interest rate and the price of existing bonds go down.

So, important to understand what you are buying with bonds.

Btw, there is also no harm in leaving your cash in a money market fund earning over 2% while you figure this out...

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by aqan » Sun Oct 14, 2018 1:47 am

ge1 wrote:
Sun Oct 14, 2018 1:41 am
Btw, there is also no harm in leaving your cash in a money market fund earning over 2% while you figure this out...
that's what I would do too. No one knows if market is going to drop or go up.. but no harm in waiting for a few days to let the dust settle down if you're unsure. DCA would be a good option.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Fishing50 » Sun Oct 14, 2018 2:40 am

Sophia1884 wrote:
Sat Oct 13, 2018 11:10 pm
Hello all,

Currently we have an AA of 90/10, with all of the bonds being in Wellington. The goal is going 80/20 or 70/30 in the next few years when we get closer to military retirement.

We have just received $50,000.
G Fund in TSP is a terrific bond option. If you cannot afford monthly deductions to TSP, live off the $50K while you make TSP contributions for the next couple years.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

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BeBH65
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by BeBH65 » Sun Oct 14, 2018 2:58 am

Standaard answer for investing new money: invest the new money according to the Asset Allocation of your investment plan.
Commen advise for Managing_a_windfall is to set the money aside for one year on a fdic insured high yield savings account.

It looks like you are due for a revision of the plan to include the switch to add more bonds.

So what about:
- set the money aside in the savings account for a year.
- meanwhile update your investment plan to include the glide path to bonds.
- next year: invest the money according to your investment plan.
Last edited by BeBH65 on Sun Oct 14, 2018 10:03 am, edited 2 times in total.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Peculiar_Investor » Sun Oct 14, 2018 9:07 am

Sophia1884 wrote:
Sat Oct 13, 2018 11:48 pm
sksbog wrote:
Sat Oct 13, 2018 11:38 pm
Why not divide $50,000 into 12 months and buy each month according to your AA? That way you are not market timing.
I feel like that is so obvious I didn't even think about it :) That'll be the strategy.
Whenever faced with this type of question I always find it helpful to review Vanguard's paper Dollar-cost averaging just means taking risk later because it covers the tactical as well as the behavioural concerns that should be considered.
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.
I haven't seen it summarized any better and would suggest the OP might want to read all 8 pages of the paper to gain a better understand of the questions to ask themselves.

Don't have time to read the whole paper? Then try this page How to invest a lump sum of money | Vanguard
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by retiredjg » Sun Oct 14, 2018 9:18 am

Invest money when you have it. If it is now time to increase bonds, buy stocks with your $50k and increase the bonds in your tax-advantaged accounts.

Wellington is not a good choice for a taxable account unless you are in a very low tax bracket.

alwayshedge
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by alwayshedge » Sun Oct 14, 2018 9:38 am

The correct answer is to buy now according to your asset allocation. Anything else is market timing. Dollar cost averaging is just another form of market timing.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Sophia1884 » Sun Oct 14, 2018 9:47 am

These are all great suggestions-I really appreciate the feed back. I also see why including more vs less information is important.

We are currently maxing out all of are tax exempt options: TSP, His/Her Roth. We have no debt and have an emergency fund. That's why the itch to do something with the windfall while the opportunity is there.

I've sent some of the cash aside and will funnel it to bonds in the next week once I ask my bond strategy questions :)

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by dknightd » Sun Oct 14, 2018 9:52 am

I'll tell you what we did when my MIL passed and left us about $50k.
We used some to pay taxes on it.
We gave some as tax free gifts to her grand children.
We put some in a Roth IRA at our usual AA.
We put the balance in MM. We would have liked use it for a trip that we'll recognize as her gift to us. In reality most of that has been spent so my wife could could go back and visit a few times. We'll probably just leave it in Emergency fund in case we want to visit another parent who might die at any time.
Frankly it was a pleasant surprise. The leftover allowed us to bring our "emergency" fund back up to where it was.

edit: and her grankids really appreciated a little extra money

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by 2015 » Sun Oct 14, 2018 11:25 am

It just so happens I have $50K now which I will be dropping lump sum into the market next week (it will be nice if the sale is still going on). Investing is about luck versus skill (read Annie Duke's latest book along with a host of others). The more one attempts to be clever in an open, complex adaptive luck-based system such as investing the more likely one is to go careening down the stairs of their own blind spots and frail human decision-making apparatus.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Fishing50 » Sun Oct 14, 2018 2:41 pm

Sophia1884 wrote:
Sun Oct 14, 2018 9:47 am
These are all great suggestions-I really appreciate the feed back. I also see why including more vs less information is important.

We are currently maxing out all of are tax exempt options: TSP, His/Her Roth. We have no debt and have an emergency fund. That's why the itch to do something with the windfall while the opportunity is there.

I've sent some of the cash aside and will funnel it to bonds in the next week once I ask my bond strategy questions :)
Buy VTSAX now with the entire $50,000...tax loss harvest if timing wasn't good. Equities in taxable is tax efficient.
Make an interfund transfer to G Fund in TSP for more bonds.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by samuck » Sun Oct 14, 2018 2:59 pm

In my experience, whenever I attempt to do something clever in the stockmarket, things turn against me in unexpected ways :oops:. So if I had an extra 50k, I’d just invest it now according to your standard asset allocation, maybe DCA a little.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by LadyGeek » Sun Oct 14, 2018 9:59 pm

andy2012 has a question which I've moved into a stand-alone post. See: [Nuveen bonds in CA - thoughts?]
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by lostdog » Sun Oct 14, 2018 10:03 pm

Time in the market is better than timing the market.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by wootwoot » Sun Oct 14, 2018 10:05 pm

lostdog wrote:
Sun Oct 14, 2018 10:03 pm
Time in the market is better than timing the market.
+1

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Carol88888 » Mon Oct 15, 2018 3:21 pm

If I understood you correctly you are considering buying into the Wellington fund. Since that fund holds 65% stocks and 35% bonds I would think it would be okay to buy immediately whatever you have allocated to it.

It's a conservative fund. You can't get too badly hurt and I like others believe there is an advantage to getting quickly invested since the market mostly goes up.

Then you could dollar cost average the rest. This way you minimize regret both ways. If it goes up you're happy you invested quickly into Wellington and if it does down you're happy because you have some left to dollar cost average.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by tennisplyr » Tue Oct 16, 2018 7:10 am

I'm not greedy, I would do it now....in 10 years none of this will have mattered anyway. Think long term.
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by mptfan » Tue Oct 16, 2018 7:34 am

Sophia1884 wrote:
Sun Oct 14, 2018 12:55 am
Also, my understanding is that when stocks drop, bonds increase in price?
From where did you get that understanding?

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Tamalak » Tue Oct 16, 2018 8:57 am

The best time to invest in the market is 40+ years ago. So get it in now so you can get to that point.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by David Jay » Tue Oct 16, 2018 9:41 am

Fishing50 wrote:
Sun Oct 14, 2018 2:40 am
Sophia1884 wrote:
Sat Oct 13, 2018 11:10 pm
Hello all,

Currently we have an AA of 90/10, with all of the bonds being in Wellington. The goal is going 80/20 or 70/30 in the next few years when we get closer to military retirement.

We have just received $50,000.
G Fund in TSP is a terrific bond option. If you cannot afford monthly deductions to TSP, live off the $50K while you make TSP contributions for the next couple years.
^^^ This!
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by WhiteMaxima » Tue Oct 16, 2018 10:54 am

DCA into a balanced index fund. yes you will only get average return, probably 4~5% long term. But It will be a much smooth ride.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Beach » Tue Oct 16, 2018 3:52 pm

Dow up 500 today....

I want to market time too, but then days like this happen.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by DanMahowny » Tue Oct 16, 2018 4:05 pm

If you're at 90/10 today, and anticipate retirement in the "next few years", I'd keep the $50k in cash, or short-term treasuries.
Funding secured

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by stocknoob4111 » Tue Oct 16, 2018 5:30 pm

I would not DCA based on the advise of a lot of experts. The reason being that in the market the majority of gains are concentrated at certain small intervals which could amount to days, if you miss those intervals you fare worse and in many cases MUCH worse. It's better to expose all the capital to the market from the very beginning - as they say maximize TIME IN the market.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by LadyGeek » Wed Oct 17, 2018 3:24 pm

andy2012 has a question which I've moved into a stand-alone thread: [Help with Market-linked CD]
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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by oldcomputerguy » Wed Oct 17, 2018 3:30 pm

Sophia1884 wrote:
Sat Oct 13, 2018 11:10 pm
I was going to start buying more bonds in the next 6 months but as the stock prices are down, I feel like buying Total Stock or Wellington would be a good idea.
Seems to me that this statement strongly implies that you're letting emotions rule your investing.

What does your IPS say? What is your desired asset allocation? Do you have a plan?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Sophia1884 » Wed Oct 17, 2018 10:36 pm

oldcomputerguy wrote:
Wed Oct 17, 2018 3:30 pm
[quote=Sophia1884 post_id=4164897 time=<a href="tel:1539490258">1539490258</a> user_id=46621]
I was going to start buying more bonds in the next 6 months but as the stock prices are down, I feel like buying Total Stock or Wellington would be a good idea.
Seems to me that this statement strongly implies that you're letting emotions rule your investing.

What does your IPS say? What is your desired asset allocation? Do you have a plan?
[/quote]

At a market down turn, one feels like (I feel like) an opportunity is presented. The question for me was HOW to best take advantage of said opportunity with the resources and information available at the time. As I mentioned, if I had a strategy and a better understanding of bonds, I would have focused on bonds as I am looking to change the AA. As things stood, I did not have the knowledge/understanding so purchasing Total Stock was a better action than no action. Now, I’ll be constructing a new strategy to address the new desired allocation.

I appreciated everyone’s thoughts- as always, had to look up some concepts and jot down ideas for future questions/research :)

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Re: $50,000: Should I buy now or wait for the market to drop further?

Post by Fishing50 » Thu Oct 18, 2018 1:55 am

Over the past couple years, we've developed a strategy for military retirement in about 3yrs:
- Cornerstone is tax efficient placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Keep total market index and total international index funds in taxable with dividends paid in cash. Bonds are in TSP G Fund.

- Military members need less emergency funds due to reliable income stream for life.

- Retirement at 50yrs old, we've settled on 70 equities/30 bonds to maintain growth for long retirement horizon. 100% equities (and a guaranteed pension) got us here, but we don't need that level of risk anymore.

-Tax loss harvesting offers opportunities: https://www.bogleheads.org/wiki/Tax_loss_harvesting :beer
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

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