Am I trying to time the market?

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Startinlate
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Am I trying to time the market?

Post by Startinlate » Sat Feb 16, 2019 10:37 am

Hi everyone,

I'm a novice that has recently been reading my Bogelhead book and obsessing on this site. I started an emergency fund with 50k. Also I started dollar-cost indexing biweekly on my pay period into Vanguard VTSAX. I have a company sponsored 401k which I contribute to get my employer match, and this year I will max out my pretax contribution (thanks to this forum). Last year I received a modest inheritance of 225k which I put into a Marcus savings account. Last week I paid off my school loans of 75k (again thanks to the Bogelhead book). Now I have 150k that I was going to put into VTSAX. The more I read, watch CNBC etc. the more I hear that we are headed for a recession or that the market is due for a correction. I was going to wait until we have a significant dip in the market before investing the 150k. My though is that I would get getting more value for my dollar knowing I'm going to hold the fund for at least 20 plus years. Is this trying to time the market or waiting to get a better deal?

Thank you all in advance!
Wealth consists not in having great possessions, but in having few wants. --Epictetus

UpperNwGuy
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Re: Am I trying to time the market?

Post by UpperNwGuy » Sat Feb 16, 2019 10:42 am

Yes, you are.

Thecallofduty
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Re: Am I trying to time the market?

Post by Thecallofduty » Sat Feb 16, 2019 10:42 am

Startinlate wrote:
Sat Feb 16, 2019 10:37 am
Hi everyone,

I'm a novice that has recently been reading my Bogelhead book and obsessing on this site. I started an emergency fund with 50k. Also I started dollar-cost indexing biweekly on my pay period into Vanguard VTSAX. I have a company sponsored 401k which I contribute to get my employer match, and this year I will max out my pretax contribution (thanks to this forum). Last year I received a modest inheritance of 225k which I put into a Marcus savings account. Last week I paid off my school loans of 75k (again thanks to the Bogelhead book). Now I have 150k that I was going to put into VTSAX. The more I read, watch CNBC etc. the more I hear that we are headed for a recession or that the market is due for a correction. I was going to wait until we have a significant dip in the market before investing the 150k. My though is that I would get getting more value for my dollar knowing I'm going to hold the fund for at least 20 plus years. Is this trying to time the market or waiting to get a better deal?

Thank you all in advance!
Don’t worry about the “noise.” Sounds like you know what you are doing now and what you want to do. Just stick with it and invest. There are those that dollar cost average their investment (invest a portion of that 150k every month for a few months) and those that lump sump invest. The latter usually does better.

Good luck.
-thecallofduty

Topic Author
Startinlate
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Re: Am I trying to time the market?

Post by Startinlate » Sat Feb 16, 2019 10:43 am

So just invest it in the fund and forget about it? Thank you.
Wealth consists not in having great possessions, but in having few wants. --Epictetus

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Taylor Larimore
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Re: Am I trying to time the market?

Post by Taylor Larimore » Sat Feb 16, 2019 10:46 am

I was going to wait until we have a significant dip in the market before investing the 150k.
Startinlate:

You are trying to time the market which is impossible. Read this.

Your most important decision is your long-term asset-allocation plan. Once that's decided, invest your entire 150K immediately. The sooner you get to your desired asset-allocation, the better.

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

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MNGopher
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Re: Am I trying to time the market?

Post by MNGopher » Sat Feb 16, 2019 10:46 am

Be aware that CNBC is a commercial network and they have to talk about something all day and argue amongst themselves for the sake of getting ratings. Best to ignore them.

You are market timing, but most of us have been guilty of it from time to time. With a windfall like that you could dollar cost average into the market if that make you feel better. Statistics say you would be better off putting it all in right away at your desired asset allocation, but DCA is not a terrible thing to do, say over the next year.

retiringwhen
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Re: Am I trying to time the market?

Post by retiringwhen » Sat Feb 16, 2019 10:47 am

Startinlate wrote:
Sat Feb 16, 2019 10:37 am
Hi everyone,

I'm a novice that has recently been reading my Bogelhead book and obsessing on this site. I started an emergency fund with 50k. Also I started dollar-cost indexing biweekly on my pay period into Vanguard VTSAX. I have a company sponsored 401k which I contribute to get my employer match, and this year I will max out my pretax contribution (thanks to this forum). Last year I received a modest inheritance of 225k which I put into a Marcus savings account. Last week I paid off my school loans of 75k (again thanks to the Bogelhead book). Now I have 150k that I was going to put into VTSAX. The more I read, watch CNBC etc. the more I hear that we are headed for a recession or that the market is due for a correction. I was going to wait until we have a significant dip in the market before investing the 150k. My though is that I would get getting more value for my dollar knowing I'm going to hold the fund for at least 20 plus years. Is this trying to time the market or waiting to get a better deal?

Thank you all in advance!
Sounds like you are off to a great start and working through lots of stuff in your head.

The market is ALWAYS worried, listening to CNBC is by definition bad for you. Don't do it. Same for Marketwatch, SeekingAlpha and a thousand other financial sites.

Now what do with the long-term investments you want to make from the inheritance?

Read the following white paper on Dollar Cost Averaging vs. Lump Sum investing. You can decide how to make your investment based upon that.

https://personal.vanguard.com/pdf/s315.pdf

Bottom line, set your Asset Allocation, then get yourself invested to match that AA. You can do it slow or you can do it fast. The paper shows the risk-reward trade-off on that choice. The title of the paper kind of gives away the story, but I will share it with you "Dollar-cost averaging just means taking risk later".

BTW, I had a windfall lump-sum to invest last year, essentially put it in the market as soon as possible and saw a not very nice year after that. My investment is back to original value today and could have actually been worse off if I had DCA'd in and been continuing to put money when the market was even higher in the Summer and Early fall.

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RickBoglehead
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Re: Am I trying to time the market?

Post by RickBoglehead » Sat Feb 16, 2019 10:55 am

Yes, you are trying to time the market. CNBC knows nothing. Watch a Jim Cramer show and it's worse, he's frothing at the mouth...

I, and many others, owned stocks in the internet crash of 1999. Lost lots.

Low cost index funds. Invest.
Last edited by RickBoglehead on Sat Feb 16, 2019 12:34 pm, edited 1 time in total.
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MotoTrojan
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Re: Am I trying to time the market?

Post by MotoTrojan » Sat Feb 16, 2019 10:56 am

Research tax-loss harvesting and have a plan ready to execute. If/when the market goes down after your large investment, it will provide you with some comfort (works for me at least).

Read about Bob too: https://awealthofcommonsense.com/2014/0 ... ket-timer/

Time in the market, not timing the market. Invest as much as you can as soon as you can.

IPS&IPA
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Re: Am I trying to time the market?

Post by IPS&IPA » Sat Feb 16, 2019 10:57 am

Startinlate wrote:
Sat Feb 16, 2019 10:37 am

... the more I hear that we are headed for a recession or that the market is due for a correction. I was going to wait until we have a significant dip in the market before investing the 150k. My though is that I would get getting more value for my dollar knowing I'm going to hold the fund for at least 20 plus years. Is this trying to time the market or waiting to get a better deal?
I have been in this position before as well and invested per my AA which was pretty aggressive.
When the downturn came I sold some for a loss and discovered my real AA I was comfortable with.
That is the important part, understanding your tolerance level and having your AA match that.
Elwood: It's 106 miles to Chicago, we got a full tank of gas, half a pack of cigarettes, it's dark... and we're wearing sunglasses. Jake: Hit it.

pdavi21
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Re: Am I trying to time the market?

Post by pdavi21 » Sat Feb 16, 2019 10:59 am

Yes. The best way to avoid risk is to invest in a diversified portfolio, immediately. Investing it all in VTSAX seems risky to me. Avoiding the market will lose you money most of the time. If you are worried about regret, DCA into the market, but you will likely lose money.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

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Wiggums
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Re: Am I trying to time the market?

Post by Wiggums » Sat Feb 16, 2019 12:33 pm

RickBoglehead wrote:
Sat Feb 16, 2019 10:55 am
Yes, you are trying to time the market. CNBC knows nothing. Watch a Jim Cramer show and it's worse, he's frothing at the mouth...

I, and many others, owned stocks in the internet crash of 1999. Lots lots.

Low cost index funds. Invest.
I agree.

I don’t know if those shows are for entertainment or are one big commercial. The guests are there only to talk up their companies. TV show hosts have no way of predicting the market direction and yet they have a lot to say. The computer driven trades adds to the volatility. Low cost, index funds are the way to go. There’s nothing to do because you always get market returns.

livesoft
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Re: Am I trying to time the market?

Post by livesoft » Sat Feb 16, 2019 1:28 pm

There was just "a significant dip", so you missed it.

Wait a minute!

I see that emerging markets small-cap asset class as tracked by the etf DGS is still down about 12% from a year ago, so that's a significant dip to sink your teeth (if not your money) into.
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nix4me
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Re: Am I trying to time the market?

Post by nix4me » Sat Feb 16, 2019 1:44 pm

RickBoglehead wrote:
Sat Feb 16, 2019 10:55 am
Yes, you are trying to time the market. CNBC knows nothing. Watch a Jim Cramer show and it's worse, he's frothing at the mouth...

I, and many others, owned stocks in the internet crash of 1999. Lost lots.

Low cost index funds. Invest.
The only people who lost money in 99 or 01 or 08 were the ones who panicked and sold. The rest of us never lost a dime. In fact, quite the opposite. Our regularly scheduled buys resulted in great value!

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RickBoglehead
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Re: Am I trying to time the market?

Post by RickBoglehead » Sat Feb 16, 2019 2:00 pm

nix4me wrote:
Sat Feb 16, 2019 1:44 pm
RickBoglehead wrote:
Sat Feb 16, 2019 10:55 am
Yes, you are trying to time the market. CNBC knows nothing. Watch a Jim Cramer show and it's worse, he's frothing at the mouth...

I, and many others, owned stocks in the internet crash of 1999. Lost lots.

Low cost index funds. Invest.
The only people who lost money in 99 or 01 or 08 were the ones who panicked and sold. The rest of us never lost a dime. In fact, quite the opposite. Our regularly scheduled buys resulted in great value!
Note the word "stocks".

I owned, among other things, some stocks that were the "backbone" of the internet. 3COM, AOL, Amerindo Fund, Beyond.com, Compaq, EToys, ... The list goes on. Nobody keeping those "recovered".
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Fallible
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Re: Am I trying to time the market?

Post by Fallible » Sat Feb 16, 2019 2:07 pm

Startinlate wrote:
Sat Feb 16, 2019 10:37 am
Hi everyone,
I'm a novice that has recently been reading my Bogelhead book and obsessing on this site. I started an emergency fund with 50k. Also I started dollar-cost indexing biweekly on my pay period into Vanguard VTSAX. I have a company sponsored 401k which I contribute to get my employer match, and this year I will max out my pretax contribution (thanks to this forum). Last year I received a modest inheritance of 225k which I put into a Marcus savings account. Last week I paid off my school loans of 75k (again thanks to the Bogelhead book). Now I have 150k that I was going to put into VTSAX. The more I read, watch CNBC etc. the more I hear that we are headed for a recession or that the market is due for a correction. I was going to wait until we have a significant dip in the market before investing the 150k. My though is that I would get getting more value for my dollar knowing I'm going to hold the fund for at least 20 plus years. Is this trying to time the market or waiting to get a better deal?

Thank you all in advance!
Welcome to the forum!

You have a good time horizon, so now:

-Forget CNBC, forget market forecasting, forget market timing.

-Decide whether to lump sum or dollar-cost average (which will at least get you in).

-Keep reading those Boglehead books from the wiki's reading list: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews
John Bogle on his often bumpy road to low-cost indexing: "When a door closes, if you look long enough and hard enough, if you're strong enough, you'll find a window that opens."

dcw213
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Re: Am I trying to time the market?

Post by dcw213 » Sat Feb 16, 2019 4:07 pm

Because you are new to investing and seem to be tuned into the daily headlines and market movements, my advice would be to plug in something like $10k per month into the total market fund over the next year plus. If we do see a downturn you may have a hard time psychologically if your entire investment was bought at a recent market high. Of course, there is no guarantee that dollar cost averaging will mitigate this risk (the market could go sideways for a year and then crash) but to m it is more gradual and you won’t be hanging onto the outcome of that large lot.

This is coming from experience - at the advice of many, I plugged in all my liquid money at once in 2007 when I was early in my career. For me it was a large amount of money at the time. I watched in horror as it dropped by nearly 60% in the next year and a half. For a long time I felt fear, regret, and mistrust of the system and those that gave me the advice. I have since gotten comfortable with my risk tolerance but this blow made it take some time for things to click for me.

tibbitts
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Re: Am I trying to time the market?

Post by tibbitts » Sun Feb 17, 2019 12:04 pm

Even people with lots of experience try to time the market. I did just last week, and have lost (so far.)

I needed to take $18k out of my 457 to pay for pension service sometime next month (whenever the paperwork goes through - I don't have control over the date.) I had only $2k in stable value and wanted to have the funds take from stable value so that it would get pulled out on the worst possible day (my usual luck.) So, when the market had a good day last week decided to move $16k from a combination of small index and international index into stable value. I could have compensated on the small side by moving some taxable money (about half the total amount) but only moved $1k. It would have been more difficult to easily compensate for the other transfer (the international index.) Of course the run-up continued so I've lost my bet (so far) that I would be able to buy back in later at a lower level. The amount involved is less than 1% of my total investments but it's still annoying.

student
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Re: Am I trying to time the market?

Post by student » Sun Feb 17, 2019 12:11 pm

I would dollar average it over 12 months, for psychological reasons. (Research shows that lump sum investment is usually better.)

BoggledHead2
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Re: Am I trying to time the market?

Post by BoggledHead2 » Sun Feb 17, 2019 3:52 pm

Startinlate wrote:
Sat Feb 16, 2019 10:37 am
Hi everyone,
The more I read, watch CNBC etc. the more I hear that we are headed for a recession or that the market is due for a correction. I was going to wait until we have a significant dip in the market before investing the 150k. My though is that I would get getting more value for my dollar knowing I'm going to hold the fund for at least 20 plus years. Is this trying to time the market or waiting to get a better deal?

Thank you all in advance!
Read your own quote out loud.

1. Yes, this is market timing ... but you already knew that.
2. Only invest money you don’t need for 5+ years in equity

If it were me, I’d put 50k into total us / 50k into total international index funds tomorrow and then dollar cost average the remaining 50K from a high yield savings account ... or dump 100K into the market and the rest in a CD for guaranteed return.

Gotta be honest about your risk tolerance ... (i was similarity scared 2 years ago - needed up buying at the market’s all time high ... 2 years later I’m still up a nice amount despite the brutal December 2018)

Short version: If you don’t need this money soon (debt, house, etc.) invest it and forget it. You’ll likely be rewarded handsomely in 20 years when you check the balance

Momus
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Re: Am I trying to time the market?

Post by Momus » Sun Feb 17, 2019 3:58 pm

Your mind will confirm whatever bias you have if you keep watching/reading the news. Pick an asset allocation and dump all your money in there.

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