Lots of cash .. Scared to put it to work now

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Topic Author
Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Wed Mar 06, 2019 9:13 am

Rus In Urbe wrote:
Wed Mar 06, 2019 8:59 am
Shoulda Woulda Coulda, as my Wall Street investment-guy uncle taught me.

I say it whenever I look back and it makes me turn around and look forward again.
Buy when there there is fear and sell when there is greed . Where are we closer to now ?
I know .. long term ..

Independent George
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Re: Lots of cash .. Scared to put it to work now

Post by Independent George » Wed Mar 06, 2019 9:19 am

Geoffrey9 wrote:
Wed Mar 06, 2019 8:57 am
Im leaning toward this, but having a hard time getting my AA locked in . The other thing in the back of my mind is that I will likely have an inheritance in the future north of $2mm 2019 dollars ( its just reality and should be planned for) . Now one could argue that this allows me to take even more risk on my nest egg , however Its not "my" money and I still have a difficult time when looking at a chart from 2008-2019 and putting a large part of said nest egg to work. I know there will be backlash telling me not to time the market , but I also believe its easier for that crowd to make noise as they have been periodically investing ( as I will do in the future ) vs having a lump sump to put to work in 2019. My thought process is , should I have a conservative AA ( 50/50) at first and put all/ most of the money to work, slowly adding equity on dips over time and yes we will have them and no the market doesn't go straight up forever or should I set my AA ( call it 70/30) and work the money in incrementally or perhaps 50% now and the rest monthly ? Once Im done thinking this through (almost there) there is no looking back , but the plan/jump is the hardest part .
If you are having trouble starting, I would suggest moving 4% into equities per month over the next 12 months (bringing you to 48/52 without accounting for market shifts), and then decide from there whether or not you want more equity exposure. This gives you 12 months to decide what you really want to do, while also gradually easing you out of cash.

You have the advantage of really not needing a lot of appreciation. There's nothing wrong with going slowly.

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gmaynardkrebs
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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Wed Mar 06, 2019 9:23 am

Geoffrey9 wrote:
Wed Mar 06, 2019 8:57 am
I know there will be backlash telling me not to time the market
When you come to BH, you are going to get that advice. I very much respect the views of BHers, but there is also an aspect of "To a hammer, every problem looks like a nail" that must be acknowledged. 10 years of a huge bull market will tend to do that. It is simply a fact that by most measures, stock valuations are at the 90th percentile historically. Trepidation at jumping in with both feet seems wise to me. Since the embedded, but unspoken belief here is that stocks will almost always go up over time, you should be able to get in 5 years from now and still do well. And if you are "lucky," you might get a chance to buy in at a 40% off sale well before that.

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TheTimeLord
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Re: Lots of cash .. Scared to put it to work now

Post by TheTimeLord » Wed Mar 06, 2019 9:26 am

gmaynardkrebs wrote:
Wed Mar 06, 2019 9:03 am
TN_Boy wrote:
Tue Mar 05, 2019 11:17 pm
pascalwager wrote:
Sun Mar 03, 2019 9:43 pm
I was 100% cash from 1981 to 1995. The return over inflation was 3.08% for that overall period. Then, in 1995, I lump-summed $400k into an 85/15 portfolio.

stuff deleted ...
I have to ask ... you stayed 100% cash during most of the biggest bull market in US history? Wasn't that ... really painful?
Looks to me like he timed it pretty damn well. Even though the stock market doubled between 1980 and 1995, interest rates on cash/bonds were exceptionally high though most of that period, and even cash did quite well, with no risk. Then, just when he got back in, the stock market took off like a rocket. Between Jan 1 1995 and January of 2000, when the Dow peaked at 11,000+, stocks nearly tripled in just 5 years. Doesn't sound too painful to me.
From 1981 to 2011 (30 years) the 20 year bond outperformed equities as represented by the S&P 500. I believe this is the only 30 year period in history where this has happened.

https://www.cbsnews.com/news/bonds-beat ... s-so-what/
For the period October 1981-September 2011, the S&P 500 Index returned an annualized 10.8 percent, compared to the 11.5 percent annualized return on long-term (20-year) Treasury bonds.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Rus In Urbe
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Re: Lots of cash .. Scared to put it to work now

Post by Rus In Urbe » Wed Mar 06, 2019 9:28 am

Rus In Urbe wrote: ↑Wed Mar 06, 2019 8:59 am
Shoulda Woulda Coulda, as my Wall Street investment-guy uncle taught me.
I say it whenever I look back and it makes me turn around and look forward again.

Geoffrey9
Buy when there there is fear and sell when there is greed . Where are we closer to now ?
I know .. long term ..

No, you are still asking the wrong question----and you can't seem to help yourself.

Focus on your AA, as so many have told you upthread.
There.
Nothing more to be said. It's on you.
I'd like to live as a poor man with lots of money. ~Pablo Picasso

Topic Author
Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Wed Mar 06, 2019 9:33 am

Rus In Urbe wrote:
Wed Mar 06, 2019 9:28 am
Rus In Urbe wrote: ↑Wed Mar 06, 2019 8:59 am
Shoulda Woulda Coulda, as my Wall Street investment-guy uncle taught me.
I say it whenever I look back and it makes me turn around and look forward again.

Geoffrey9
Buy when there there is fear and sell when there is greed . Where are we closer to now ?
I know .. long term ..

No, you are still asking the wrong question----and you can't seem to help yourself.

Focus on your AA, as so many have told you upthread.
There.
Nothing more to be said. It's on you.
As i just said , Im having a difficult time locking in my AA in the meantime. I ll get there ..

KingRiggs
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Re: Lots of cash .. Scared to put it to work now

Post by KingRiggs » Wed Mar 06, 2019 9:34 am

If you are certain that you will be coming into $2M and are sitting on $900k in cash, you have already won the game...

Topic Author
Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Wed Mar 06, 2019 9:40 am

KingRiggs wrote:
Wed Mar 06, 2019 9:34 am
If you are certain that you will be coming into $2M and are sitting on $900k in cash, you have already won the game...
Probability is high, but you never really know what can happen . I also don't want to "count" on that completely and hope to continue building out my plan/ executing for the future on my own sweat n tears as Ive been doing . Plus the more to spend in retirement the better :)

Wanderingwheelz
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Re: Lots of cash .. Scared to put it to work now

Post by Wanderingwheelz » Wed Mar 06, 2019 9:50 am

gmaynardkrebs wrote:
Wed Mar 06, 2019 9:23 am
Geoffrey9 wrote:
Wed Mar 06, 2019 8:57 am
I know there will be backlash telling me not to time the market
When you come to BH, you are going to get that advice. I very much respect the views of BHers, but there is also an aspect of "To a hammer, every problem looks like a nail" that must be acknowledged. 10 years of a huge bull market will tend to do that. It is simply a fact that by most measures, stock valuations are at the 90th percentile historically. Trepidation at jumping in with both feet seems wise to me. Since the embedded, but unspoken belief here is that stocks will almost always go up over time, you should be able to get in 5 years from now and still do well. And if you are "lucky," you might get a chance to buy in at a 40% off sale well before that.
Those are my feelings exactly. Right now the house has a pretty big edge (if history is any guide), so making big bets is riskier at this point. I don’t subscribe to the notion that stocks are due for a 40% dive, but by many measures this market is so richly valued that averaging money into the market makes a lot of sense.

I’d even contemplate easing some money out of the stock market right here if my bond percentage is less than my age. Money flows from those who mismanage it to those who do not. Be wise, take your time.

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corn18
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Re: Lots of cash .. Scared to put it to work now

Post by corn18 » Wed Mar 06, 2019 9:57 am

I'm still cornfused. I have $1M in the market today @ 60/40. I didn't lump sum it in, but every day, I make the decision to leave it in. Mechanically, isn't that the same as lump summing in every day? Seems to me this is a mental exercise and not a quantitative decision. As others have said, looking back is the wrong view.
Don't do something, just stand there!

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dratkinson
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Re: Lots of cash .. Scared to put it to work now

Post by dratkinson » Wed Mar 06, 2019 10:06 am

gmaynardkrebs wrote:
Tue Mar 05, 2019 4:02 pm
dratkinson wrote:
Tue Mar 05, 2019 1:58 pm
Is $900K cash a lot of money? Relatively: yes, for now. Absolutely: no, for retirement. Why? It is not self-sustaining because it's eroded by inflation.
However well intended, I find it hard to take seriously the advice of someone who mentions inflation without at least acknowledging the availability of TIPS. This investor could buy 30 year TIPS and be guaranteed to have $900K + $358K interest for a total of $1.26M in 2019 dollars.
Agreed. TIPS offset inflation. But that only means $900K today will be worth ~$900K tomorrow... no matter the terminal amount when OP retires.



See topic "Evaluating the tax efficiency of TIPS": viewtopic.php?t=185150

Bottom line. TIPS are slightly more tax-efficient than TBM (total bond market index fund) since they are state tax exempt. But TBM is not recommended if in 25%+ fed tax bracket.

So depending upon OP’s retirement tax bracket, TIPS may not be the best choice.



Had to go back and refresh my memory. OP....
--Travels a ton, but back in US.
--Currently rents out his paid-for condo.
--Will eventually buy something, settle down, marry....
--Current $900K in savings is 75% taxable/25% TA (translated into equivalent future value, if TIPS used).
--Over next 20yrs, hopes to add $50K/yr to retirement nest egg.
--Was told he can use "backdoor Roth" to get around restriction on Roth IRA direct contribution.
--Expects small pension.
--Can assume ~$30K/yr SS benefit (translated into equivalent future value, if SS remains unchanged),
--Unknown current cost of living.
--Unknown retirement cost of living.


Given that OP expect to contribute ~$50K/yr over the next 20yrs ($1.9M = $900K + ($50K/yr * 20yrs)), this means he will be working harder to grow his retirement nest egg than an investment in TIPS.


And I now have enough information to wag OP’s CRNE (calculated retirement nest egg). :)

Since Vanguard believed a 50/50 AA returns 8.4%/yr (last time I checked/recorded in my offline notes) then 7% seems a conservative wag. So...

$5.6M = FV(.07,20,-50000,-900000)



Disclosure. In my beginning, I followed the forum's safe advice and bought TIPS (VIPSX) in my Roth IRA (more tax-efficient).

Long story short. The very-safe low-yield TIPS bored me to tears within ~5years. During that time I was learning about myself and investing.

After considering the return and tax-efficiency of TIPS, I sold my TIPS, turned my relatively small Roth into a shoot-for-the-moon 100%-equities play money account, and bought municipal bond funds in my taxable account.

Why?
--TIPS are safe but lower yield. Muni funds are less safe but higher yield.
--The TIPS state tax benefit is worth less than munis fed tax benefit (+ state benefit, if single-state).
--The combination causes munis to produce more after-tax income than TIPS in the 25% tax bracket.

In retirement, I'm in the new 22% tax bracket, have…
--Small pension,
--SS,
--Low cost of living,
--50/50 AA, Roth skewed toward growth, taxable skewed toward munis and tax-efficient stock funds.
--I may be more risk tolerant than OP.


If I'm in the new 22% tax bracket (10yr sunset) in retirement, then expect OP to be in >=25% tax bracket in retirement. In which case, I believe 100% TIPS is a safe solution for OP, but don't believe it is the best solution. Why?

Because:
--The market is expected to work harder than OP ($5.6M vs $1.9M),
--OP is expected to work harder than TIPS ($1.9M vs $1.3M).

And since TSM (>90% QDI) + TISM (>60% QDI + FTC) + munis (100% fed tax exempt) are both higher yielding and more tax efficient than TIPS, then he'll have more yearly after-tax income---to reinvest now, and spend in retirement.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

Topic Author
Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Wed Mar 06, 2019 10:11 am

corn18 wrote:
Wed Mar 06, 2019 9:57 am
I'm still cornfused. I have $1M in the market today @ 60/40. I didn't lump sum it in, but every day, I make the decision to leave it in. Mechanically, isn't that the same as lump summing in every day? Seems to me this is a mental exercise and not a quantitative decision. As others have said, looking back is the wrong view.
I guess you like corn ?

So when did you start this process of DCA ? I assume your CB is significantly lower than todays would be ? Yes, we want to try and think about where we are going and not where we are today , but again if we are to look at a chart from 2009-2019 you cant help but be a bit queasy about putting a lump sum to work today vs say 2011.. at least I am . Sure in the grand scheme it probably won't matter and we ll never know but ...

Regardless we are now beating a dead horse so thanks all BH for their input !

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gmaynardkrebs
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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Wed Mar 06, 2019 10:25 am

dratkinson wrote:
Wed Mar 06, 2019 10:06 am

Agreed. TIPS offset inflation. But that only means $900K today will be worth ~$900K tomorrow... no matter the terminal amount when OP retires.

Since Vanguard believed a 50/50 AA returns 8.4%/yr (last time I checked/recorded in my offline notes) then 7% seems a conservative wag. So...

$5.6M = FV(.07,20,-50000,-900000)
Agree, TIPS are not for everyone. Couple of minor points though. 30 year TIPS currently pay 1.1% interest plus CPI, so the the holder also receives an additional $358K. Total is therefore $1.28M next egg, not $950K in real purchasing power.

The Vanguard figure and the 7% are nominal returns. Subtract at least 2% for inflation if you want to compare apples to apples. Also, IIRC, Vanguards recent estimates are substantially below that for a 50/50 portfolio.

COKyle
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Re: Lots of cash .. Scared to put it to work now

Post by COKyle » Wed Mar 06, 2019 10:31 am

I’m a big fan of Process Diversification coupled with Asset Diversification. If Vanguard says in their research it’s better to invest lump sum 2/3rds of the time. Great, take $594k and lump sum that into a broad base 3 fund portfolio and then dollar cost average the remaining $306k every week, month, year or whatever you are most comfortable with given your risk preference and time horizon. If you don’t like 2/3rds, you can increase or reduce that lump sum amount to fit your comfort level.

Independent George
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Re: Lots of cash .. Scared to put it to work now

Post by Independent George » Wed Mar 06, 2019 10:36 am

COKyle wrote:
Wed Mar 06, 2019 10:31 am
I’m a big fan of Process Diversification coupled with Asset Diversification. If Vanguard says in their research it’s better to invest lump sum 2/3rds of the time. Great, take $594k and lump sum that into a broad base 3 fund portfolio and then dollar cost average the remaining $306k every week, month, year or whatever you are most comfortable with given your risk preference and time horizon. If you don’t like 2/3rds, you can increase or reduce that lump sum amount to fit your comfort level.
That's not what the 2/3 statistic means...

COKyle
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Re: Lots of cash .. Scared to put it to work now

Post by COKyle » Wed Mar 06, 2019 10:42 am

Independent George wrote:
Wed Mar 06, 2019 10:36 am
COKyle wrote:
Wed Mar 06, 2019 10:31 am
I’m a big fan of Process Diversification coupled with Asset Diversification. If Vanguard says in their research it’s better to invest lump sum 2/3rds of the time. Great, take $594k and lump sum that into a broad base 3 fund portfolio and then dollar cost average the remaining $306k every week, month, year or whatever you are most comfortable with given your risk preference and time horizon. If you don’t like 2/3rds, you can increase or reduce that lump sum amount to fit your comfort level.
That's not what the 2/3 statistic means...
I understand that it’s not saying 2/3rds of your investment but it’s an easy reminder about what the research is stating. Comment was more about exploring lump sum and DCA rather than just one or the other.

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corn18
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Re: Lots of cash .. Scared to put it to work now

Post by corn18 » Wed Mar 06, 2019 10:47 am

Geoffrey9 wrote:
Wed Mar 06, 2019 10:11 am
corn18 wrote:
Wed Mar 06, 2019 9:57 am
I'm still cornfused. I have $1M in the market today @ 60/40. I didn't lump sum it in, but every day, I make the decision to leave it in. Mechanically, isn't that the same as lump summing in every day? Seems to me this is a mental exercise and not a quantitative decision. As others have said, looking back is the wrong view.
I guess you like corn ?

So when did you start this process of DCA ? I assume your CB is significantly lower than todays would be ? Yes, we want to try and think about where we are going and not where we are today , but again if we are to look at a chart from 2009-2019 you cant help but be a bit queasy about putting a lump sum to work today vs say 2011.. at least I am . Sure in the grand scheme it probably won't matter and we ll never know but ...

Regardless we are now beating a dead horse so thanks all BH for their input !
You do realize during that time we had 2 "bear" markets? It wasn't all rainbows and unicorns.

Image
Don't do something, just stand there!

Topic Author
Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Wed Mar 06, 2019 10:54 am

corn18 wrote:
Wed Mar 06, 2019 10:47 am
Geoffrey9 wrote:
Wed Mar 06, 2019 10:11 am
corn18 wrote:
Wed Mar 06, 2019 9:57 am
I'm still cornfused. I have $1M in the market today @ 60/40. I didn't lump sum it in, but every day, I make the decision to leave it in. Mechanically, isn't that the same as lump summing in every day? Seems to me this is a mental exercise and not a quantitative decision. As others have said, looking back is the wrong view.
I guess you like corn ?

So when did you start this process of DCA ? I assume your CB is significantly lower than todays would be ? Yes, we want to try and think about where we are going and not where we are today , but again if we are to look at a chart from 2009-2019 you cant help but be a bit queasy about putting a lump sum to work today vs say 2011.. at least I am . Sure in the grand scheme it probably won't matter and we ll never know but ...

Regardless we are now beating a dead horse so thanks all BH for their input !
You do realize during that time we had 2 "bear" markets? It wasn't all rainbows and unicorns.

Image
Realize.
Happy 10 year bull market !

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corn18
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Re: Lots of cash .. Scared to put it to work now

Post by corn18 » Wed Mar 06, 2019 11:12 am

Geoffrey9 wrote:
Wed Mar 06, 2019 10:54 am
corn18 wrote:
Wed Mar 06, 2019 10:47 am
Geoffrey9 wrote:
Wed Mar 06, 2019 10:11 am
corn18 wrote:
Wed Mar 06, 2019 9:57 am
I'm still cornfused. I have $1M in the market today @ 60/40. I didn't lump sum it in, but every day, I make the decision to leave it in. Mechanically, isn't that the same as lump summing in every day? Seems to me this is a mental exercise and not a quantitative decision. As others have said, looking back is the wrong view.
I guess you like corn ?

So when did you start this process of DCA ? I assume your CB is significantly lower than todays would be ? Yes, we want to try and think about where we are going and not where we are today , but again if we are to look at a chart from 2009-2019 you cant help but be a bit queasy about putting a lump sum to work today vs say 2011.. at least I am . Sure in the grand scheme it probably won't matter and we ll never know but ...

Regardless we are now beating a dead horse so thanks all BH for their input !
You do realize during that time we had 2 "bear" markets? It wasn't all rainbows and unicorns.

Image
Realize.
Happy 10 year bull market !
I forgot to answer your questions. I started investing in 2014. My cost basis is not significantly lower than today's value.
Don't do something, just stand there!

pkcrafter
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Re: Lots of cash .. Scared to put it to work now

Post by pkcrafter » Wed Mar 06, 2019 12:53 pm

Geoffrey writes:
... having a hard time getting my AA locked in . The other thing in the back of my mind is that I will likely have an inheritance in the future north of $2mm 2019 dollars ( its just reality and should be planned for) . Now one could argue that this allows me to take even more risk on my nest egg , however Its not "my" money
You are correct, it is not your money, so forget about it. It has no bearing on your asset allocation now.
I still have a difficult time when looking at a chart from 2008-2019 and putting a large part of said nest egg to work. I know there will be backlash telling me not to time the market
That's right!, DO NOT time the market because you can't do it with any sort of assurance your prediction or analysis, etc will be even close to being right. It just does not work.
but I also believe its easier for that crowd to make noise as they have been periodically investing ( as I will do in the future ) vs having a lump sump to put to work in 2019.
If you are referring to the Bogleheads, no it's not any easier. We also have varying opinions and suggestions and we have been trying to offer something you can work with, but you firmly reject all suggestions and end up with no plan or action.

You have a lot of cash and you asked for suggestions. There are only two options:

1. Settle on an asset allocation and put the 900k in it
2. Settle on an asset allocation and work toward meeting it over some amount of time, i.e. dollar cost averaging.

With either method, you will have no guarantee that what you do will be the best choice. The stock market is unpredictable and risky, especially in any shorter term period of time.
Once Im done thinking this through (almost there) there is no looking back , but the plan/jump is the hardest part.
Yes, this is what you are struggling with, but your thinking is not workable. No. 1 is no, you don't buy on dips. How will you know if a 5% or 10% % dip isn't just the start of a 20% dip? Wait for a 20% dip? How will you know the market will fall by 20%, plus if it did you would never add money because you are very risk averse. You can't optimize entry points, so the strategy must be based on time, not dips.
My thought process is, should I have a conservative AA ( 50/50) at first and put all/ most of the money to work, slowly adding equity on dips over time and yes we will have them and no the market doesn't go straight up forever or should I set my AA ( call it 70/30) and work the money in incrementally or perhaps 50% now and the rest monthly?
You should not choose an asset allocation of 70/30, it won't hold. Maybe 50/50 if you can make a resolution to not ness with it. If 50/50 is not comfortable, then go 40/60. It's far better to have a plan that you can stick with then to try for higher returns and back out in tough times, and there will be tough times.

Don't overthink this, it won't produce better results. Create a workable plan, write it down (investment policy statement-IPS) and move on.

https://www.bogleheads.org/wiki/Investm ... _statement


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Wed Mar 06, 2019 1:29 pm

pkcrafter wrote:
Wed Mar 06, 2019 12:53 pm
Geoffrey writes:
... having a hard time getting my AA locked in . The other thing in the back of my mind is that I will likely have an inheritance in the future north of $2mm 2019 dollars ( its just reality and should be planned for) . Now one could argue that this allows me to take even more risk on my nest egg , however Its not "my" money
You are correct, it is not your money, so forget about it. It has no bearing on your asset allocation now.
I still have a difficult time when looking at a chart from 2008-2019 and putting a large part of said nest egg to work. I know there will be backlash telling me not to time the market
That's right!, DO NOT time the market because you can't do it with any sort of assurance your prediction or analysis, etc will be even close to being right. It just does not work.
but I also believe its easier for that crowd to make noise as they have been periodically investing ( as I will do in the future ) vs having a lump sump to put to work in 2019.
If you are referring to the Bogleheads, no it's not any easier. We also have varying opinions and suggestions and we have been trying to offer something you can work with, but you firmly reject all suggestions and end up with no plan or action.

You have a lot of cash and you asked for suggestions. There are only two options:

1. Settle on an asset allocation and put the 900k in it
2. Settle on an asset allocation and work toward meeting it over some amount of time, i.e. dollar cost averaging.

With either method, you will have no guarantee that what you do will be the best choice. The stock market is unpredictable and risky, especially in any shorter term period of time.
Once Im done thinking this through (almost there) there is no looking back , but the plan/jump is the hardest part.
Yes, this is what you are struggling with, but your thinking is not workable. No. 1 is no, you don't buy on dips. How will you know if a 5% or 10% % dip isn't just the start of a 20% dip? Wait for a 20% dip? How will you know the market will fall by 20%, plus if it did you would never add money because you are very risk averse. You can't optimize entry points, so the strategy must be based on time, not dips.
My thought process is, should I have a conservative AA ( 50/50) at first and put all/ most of the money to work, slowly adding equity on dips over time and yes we will have them and no the market doesn't go straight up forever or should I set my AA ( call it 70/30) and work the money in incrementally or perhaps 50% now and the rest monthly?
You should not choose an asset allocation of 70/30, it won't hold. Maybe 50/50 if you can make a resolution to not ness with it. If 50/50 is not comfortable, then go 40/60. It's far better to have a plan that you can stick with then to try for higher returns and back out in tough times, and there will be tough times.

Don't overthink this, it won't produce better results. Create a workable plan, write it down (investment policy statement-IPS) and move on.

https://www.bogleheads.org/wiki/Investm ... _statement


Paul

I firmly reject the suggestions ? Not sure where you are getting that from . Im simply working up to my AA while I get the account open and other accts consolidated . The vanguard advisors are pushing toward 80/20 as long as I put in the portion of the assets that are absolutely earmarked for long term ,do not touch . That % AA I decide on will be for long term ,so I don't mind taking some risk with that portion. I will be more conservative with the maybe I might need it in 5 years % .

TN_Boy
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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Wed Mar 06, 2019 1:43 pm

gmaynardkrebs wrote:
Wed Mar 06, 2019 9:03 am
TN_Boy wrote:
Tue Mar 05, 2019 11:17 pm
pascalwager wrote:
Sun Mar 03, 2019 9:43 pm
I was 100% cash from 1981 to 1995. The return over inflation was 3.08% for that overall period. Then, in 1995, I lump-summed $400k into an 85/15 portfolio.

stuff deleted ...
I have to ask ... you stayed 100% cash during most of the biggest bull market in US history? Wasn't that ... really painful?
Looks to me like he timed it pretty damn well. Even though the stock market doubled between 1980 and 1995, interest rates on cash/bonds were exceptionally high though most of that period, and even cash did quite well, with no risk. Then, just when he got back in, the stock market took off like a rocket. Between Jan 1 1995 and January of 2000, when the Dow peaked at 11,000+, stocks nearly tripled in just 5 years. Doesn't sound too painful to me.
Wow. I find "Looks to me like he timed it pretty damn well" an astounding, almost surreal comment. Here is one spreadsheet with relevant returns:

http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html

It shows the returns of the S&P 500, t-bills and 10 year bonds from 1928 to 2018, including compounded returns (starting with $100 in each in 1928).

We were up to $512.73 in t-bills as of 1981. The corresponding value of stocks in 1981 was $7,561.16.

Okay, so what happened from 81 to 95? The $7,561.16 in stocks grew to $61,838.19. The t-bills grew to $ 1,245.15. Hmm. I think that is an okay 142% increase in the bills, but I'd a lot rather have the 717%* increase in stocks. Especially if they were about to continue on a big run.

The 10 year bonds did better going from $484.91 in 1981 to $2,477.55, a very good 410% .... but still much less than the equity returns. And the question was cash, not 10 year bonds, because that's what pascalwager was in, and cash is what you are saying was "good timing."

Did I get the math wrong or something??

It's hard to see even the most ardent market timer claiming that being out of equities in the 80s and 90s was good strategy or outcome.

*note the market from 81 to 95 did a lot better than mere doubling.

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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Wed Mar 06, 2019 1:47 pm

pascalwager wrote:
Wed Mar 06, 2019 8:55 am
TN_Boy wrote:
Tue Mar 05, 2019 11:17 pm
pascalwager wrote:
Sun Mar 03, 2019 9:43 pm
I was 100% cash from 1981 to 1995. The return over inflation was 3.08% for that overall period. Then, in 1995, I lump-summed $400k into an 85/15 portfolio.

stuff deleted ...
I have to ask ... you stayed 100% cash during most of the biggest bull market in US history? Wasn't that ... really painful?
No pain. I knew nothing about investing then. The stock market was only on the very fringes of my consciousness. To me, the cash (T-Bills) was simply a solid way of saving. Finally, in 1995, another E.E. at work, who happened to be a CFP, learned what I was doing, set up a meeting with me and proposed an investment plan using stock funds and short-term bond funds. He became my sub-advisor and my portfolio was comprised of DFA funds managed by an investment company. Otherwise, I might have kept stashing T-Bills forever. I guess, after the computer became commonplace, I would have been exposed to investment marketing information and would have finally ventured into using higher-risk assets. I guess, but who knows.

I just now ran some curves using PV for that 15-year period and yes, the stock market really did take off. But, in those days, most stock funds were high-fee, active type, and I probably wouldn't have been investing very efficiently anyway. And the DIY investing books hadn't been written yet so there's just no way I would have had the nerve to jump into the stock market without some assistance.

Anyway, $2.5 million later, the end results were probably adequate.
Oh sure, a lot of us have learned a lot about investing over the years. I pointed this out mostly as an example of the potential damage from not being in the market, though I don't think today's market is going to make us happy like the 1981 and later years did.

I'm sure you find the results adequate now, but obviously, depending on how much you started with in the early 80s, you've have a good deal more now had you owned a decent slug of equities back then -- even high fee active funds worked in the 80s and 90s, the market was so hot.

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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Wed Mar 06, 2019 1:50 pm

TN_Boy wrote:
Wed Mar 06, 2019 1:43 pm
*note the market from 81 to 95 did a lot better than mere doubling.
All of my comparisons are in real dollars. It doubled in real dollars.

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Re: Lots of cash .. Scared to put it to work now

Post by pkcrafter » Wed Mar 06, 2019 1:57 pm

Geoffrey9 wrote:
Wed Mar 06, 2019 1:29 pm
pkcrafter wrote:
Wed Mar 06, 2019 12:53 pm
Geoffrey writes:
... having a hard time getting my AA locked in . The other thing in the back of my mind is that I will likely have an inheritance in the future north of $2mm 2019 dollars ( its just reality and should be planned for) . Now one could argue that this allows me to take even more risk on my nest egg , however Its not "my" money
You are correct, it is not your money, so forget about it. It has no bearing on your asset allocation now.
I still have a difficult time when looking at a chart from 2008-2019 and putting a large part of said nest egg to work. I know there will be backlash telling me not to time the market
That's right!, DO NOT time the market because you can't do it with any sort of assurance your prediction or analysis, etc will be even close to being right. It just does not work.
but I also believe its easier for that crowd to make noise as they have been periodically investing ( as I will do in the future ) vs having a lump sump to put to work in 2019.
If you are referring to the Bogleheads, no it's not any easier. We also have varying opinions and suggestions and we have been trying to offer something you can work with, but you firmly reject all suggestions and end up with no plan or action.

You have a lot of cash and you asked for suggestions. There are only two options:

1. Settle on an asset allocation and put the 900k in it
2. Settle on an asset allocation and work toward meeting it over some amount of time, i.e. dollar cost averaging.

With either method, you will have no guarantee that what you do will be the best choice. The stock market is unpredictable and risky, especially in any shorter term period of time.
Once Im done thinking this through (almost there) there is no looking back , but the plan/jump is the hardest part.
Yes, this is what you are struggling with, but your thinking is not workable. No. 1 is no, you don't buy on dips. How will you know if a 5% or 10% % dip isn't just the start of a 20% dip? Wait for a 20% dip? How will you know the market will fall by 20%, plus if it did you would never add money because you are very risk averse. You can't optimize entry points, so the strategy must be based on time, not dips.
My thought process is, should I have a conservative AA ( 50/50) at first and put all/ most of the money to work, slowly adding equity on dips over time and yes we will have them and no the market doesn't go straight up forever or should I set my AA ( call it 70/30) and work the money in incrementally or perhaps 50% now and the rest monthly?
You should not choose an asset allocation of 70/30, it won't hold. Maybe 50/50 if you can make a resolution to not ness with it. If 50/50 is not comfortable, then go 40/60. It's far better to have a plan that you can stick with then to try for higher returns and back out in tough times, and there will be tough times.

Don't overthink this, it won't produce better results. Create a workable plan, write it down (investment policy statement-IPS) and move on.

https://www.bogleheads.org/wiki/Investm ... _statement


Paul
I firmly reject the suggestions ? Not sure where you are getting that from . Im simply working up to my AA while I get the account open and other accts consolidated .


Working up to your AA? Have you decided what it will be?
The vanguard advisors are pushing toward 80/20 as long as I put in the portion of the assets that are absolutely earmarked for long term ,do not touch . That % AA I decide on will be for long term ,so I don't mind taking some risk with that portion. I will be more conservative with the maybe I might need it in 5 years % .
With all the uncertainty you have shown, I would have to conclude that an 80/20 portfolio is not going to work for you. Much too aggressive. You are right about money needed in the next 5 years, that should not be in equities. When you do decide on a comprehensive plan, write it down.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Wed Mar 06, 2019 1:57 pm

TheTimeLord wrote:
Wed Mar 06, 2019 9:26 am
gmaynardkrebs wrote:
Wed Mar 06, 2019 9:03 am
TN_Boy wrote:
Tue Mar 05, 2019 11:17 pm
pascalwager wrote:
Sun Mar 03, 2019 9:43 pm
I was 100% cash from 1981 to 1995. The return over inflation was 3.08% for that overall period. Then, in 1995, I lump-summed $400k into an 85/15 portfolio.

stuff deleted ...
I have to ask ... you stayed 100% cash during most of the biggest bull market in US history? Wasn't that ... really painful?
Looks to me like he timed it pretty damn well. Even though the stock market doubled between 1980 and 1995, interest rates on cash/bonds were exceptionally high though most of that period, and even cash did quite well, with no risk. Then, just when he got back in, the stock market took off like a rocket. Between Jan 1 1995 and January of 2000, when the Dow peaked at 11,000+, stocks nearly tripled in just 5 years. Doesn't sound too painful to me.
From 1981 to 2011 (30 years) the 20 year bond outperformed equities as represented by the S&P 500. I believe this is the only 30 year period in history where this has happened.

https://www.cbsnews.com/news/bonds-beat ... s-so-what/
For the period October 1981-September 2011, the S&P 500 Index returned an annualized 10.8 percent, compared to the 11.5 percent annualized return on long-term (20-year) Treasury bonds.
I think this is probably true (haven't looked it up though I know long bonds were good during that span) but it seems to be only partly related to the quoted posts.

For one thing, pascalwager was truly in cash (t-bills per a later post), not 20 year bonds, which had a much higher return.

For another, 81 to 2011 is seriously cherry picking dates (as you note), the endpoint being only a little after a second big crash in 10 years, but doesn't match 81 to 95 anyway.

And third, of course, it would have been pretty good bond market timing to know to get into long bonds in the early 80s and stay there. Among other things, long bonds have a fair amount of risk themselves; very different animals than t-bills, being extremely sensitive to interest rate changes (which was a good place to be, of course, as interest rates trended down all those years).

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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Wed Mar 06, 2019 2:07 pm

gmaynardkrebs wrote:
Wed Mar 06, 2019 1:50 pm
TN_Boy wrote:
Wed Mar 06, 2019 1:43 pm
*note the market from 81 to 95 did a lot better than mere doubling.
All of my comparisons are in real dollars. It doubled in real dollars.
Could you point me to where you get your numbers?

Yes, I showed the growth in nominal terms. But the inflation calculators I see on the web show inflation from 81 to 95 as being about 67%; i.e. $100 -> $167.

This website: http://www.moneychimp.com/features/market_cagr.htm

Shows the market growth in real dollars from 81 to 95 as about 450%. A lot more than "doubling."

Which of the data sources that I'm using do you think are wrong?

Edited to add: I should note that looking at more "inflation adjusted returns of S&P 500" I do see different answers. For example,

https://dqydj.com/sp-500-return-calculator/

Shows the inflation adjusted return of the S&P 500 as 384% from Jan 1 1981 to Jan 1 1996

Maybe I should look up the inflation numbers and take a crack at computing this myself .... that said, I continue to believe the market return was more than 200% in real terms over the period 1/81 to 12/95.

Not that it really affects the point of my post .... you had a lot more money in 1995 if you invested it in stocks than if you invested it in t-bills. I didn't think people doubted that.

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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Wed Mar 06, 2019 4:08 pm

TN_Boy wrote:
Wed Mar 06, 2019 2:07 pm
gmaynardkrebs wrote:
Wed Mar 06, 2019 1:50 pm
TN_Boy wrote:
Wed Mar 06, 2019 1:43 pm
*note the market from 81 to 95 did a lot better than mere doubling.
All of my comparisons are in real dollars. It doubled in real dollars.
Could you point me to where you get your numbers?

Yes, I showed the growth in nominal terms. But the inflation calculators I see on the web show inflation from 81 to 95 as being about 67%; i.e. $100 -> $167.

This website: http://www.moneychimp.com/features/market_cagr.htm

Shows the market growth in real dollars from 81 to 95 as about 450%. A lot more than "doubling."

Which of the data sources that I'm using do you think are wrong?

Edited to add: I should note that looking at more "inflation adjusted returns of S&P 500" I do see different answers. For example,

https://dqydj.com/sp-500-return-calculator/

Shows the inflation adjusted return of the S&P 500 as 384% from Jan 1 1981 to Jan 1 1996

Maybe I should look up the inflation numbers and take a crack at computing this myself .... that said, I continue to believe the market return was more than 200% in real terms over the period 1/81 to 12/95.

Not that it really affects the point of my post .... you had a lot more money in 1995 if you invested it in stocks than if you invested it in t-bills. I didn't think people doubted that.
I got the number from the third edition of irrational exuberance. It in the text in the chapter The Stock market in historical Perpective or something like that. I was surprised that t bills did not do better. They were yielding 15% nominal during the volker push in the early 80s. I guess they went lower pretty quickly.

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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Wed Mar 06, 2019 8:03 pm

gmaynardkrebs wrote:
Wed Mar 06, 2019 4:08 pm
TN_Boy wrote:
Wed Mar 06, 2019 2:07 pm
gmaynardkrebs wrote:
Wed Mar 06, 2019 1:50 pm
TN_Boy wrote:
Wed Mar 06, 2019 1:43 pm
*note the market from 81 to 95 did a lot better than mere doubling.
All of my comparisons are in real dollars. It doubled in real dollars.
Could you point me to where you get your numbers?

Yes, I showed the growth in nominal terms. But the inflation calculators I see on the web show inflation from 81 to 95 as being about 67%; i.e. $100 -> $167.

This website: http://www.moneychimp.com/features/market_cagr.htm

Shows the market growth in real dollars from 81 to 95 as about 450%. A lot more than "doubling."

Which of the data sources that I'm using do you think are wrong?

Edited to add: I should note that looking at more "inflation adjusted returns of S&P 500" I do see different answers. For example,

https://dqydj.com/sp-500-return-calculator/

Shows the inflation adjusted return of the S&P 500 as 384% from Jan 1 1981 to Jan 1 1996

Maybe I should look up the inflation numbers and take a crack at computing this myself .... that said, I continue to believe the market return was more than 200% in real terms over the period 1/81 to 12/95.

Not that it really affects the point of my post .... you had a lot more money in 1995 if you invested it in stocks than if you invested it in t-bills. I didn't think people doubted that.
I got the number from the third edition of irrational exuberance. It in the text in the chapter The Stock market in historical Perpective or something like that. I was surprised that t bills did not do better. They were yielding 15% nominal during the volker push in the early 80s. I guess they went lower pretty quickly.
I have the 2nd edition of that book. I don't see anywhere in the text of chapter one a specific description of the growth from the years 81 to 95 (though I'm only skimming, and this is the 2nd edition). Figure 1.1 shows an inflation corrected index graph, but you really can't pick out the specific years 81 to 95 very well, and he says (and the graph is labeled) that it's a *price* index.

The website I linked to (which seems reputable, but I haven't cross checked) has a "growth of X dollars" column with dividends re-invested.

http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html


Growth with dividends reinvested will look a lot bigger than just the change of a price index.

I was surprised at the t-bill number on that website also (the low return during that period), but note that it shows 3 month t-bills, and you can get 6 month and 1 years t-bills. Those probably did better than the 3 month.

I also probably have a math error in my computations; I should have started with the 1980 end values and I started with the 1981 values. Which will reduce the S&P returns a bit, and increase the t-bill and 10 bond returns. That won't really affect the relative differences, but the numbers are a little better for the bonds.

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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Wed Mar 06, 2019 9:47 pm

TN_Boy wrote:
Wed Mar 06, 2019 8:03 pm
gmaynardkrebs wrote:
Wed Mar 06, 2019 4:08 pm
TN_Boy wrote:
Wed Mar 06, 2019 2:07 pm
gmaynardkrebs wrote:
Wed Mar 06, 2019 1:50 pm
TN_Boy wrote:
Wed Mar 06, 2019 1:43 pm
*note the market from 81 to 95 did a lot better than mere doubling.
All of my comparisons are in real dollars. It doubled in real dollars.
Could you point me to where you get your numbers?

Yes, I showed the growth in nominal terms. But the inflation calculators I see on the web show inflation from 81 to 95 as being about 67%; i.e. $100 -> $167.

This website: http://www.moneychimp.com/features/market_cagr.htm

Shows the market growth in real dollars from 81 to 95 as about 450%. A lot more than "doubling."

Which of the data sources that I'm using do you think are wrong?

Edited to add: I should note that looking at more "inflation adjusted returns of S&P 500" I do see different answers. For example,

https://dqydj.com/sp-500-return-calculator/

Shows the inflation adjusted return of the S&P 500 as 384% from Jan 1 1981 to Jan 1 1996

Maybe I should look up the inflation numbers and take a crack at computing this myself .... that said, I continue to believe the market return was more than 200% in real terms over the period 1/81 to 12/95.

Not that it really affects the point of my post .... you had a lot more money in 1995 if you invested it in stocks than if you invested it in t-bills. I didn't think people doubted that.
I got the number from the third edition of irrational exuberance. It in the text in the chapter The Stock market in historical Perpective or something like that. I was surprised that t bills did not do better. They were yielding 15% nominal during the volker push in the early 80s. I guess they went lower pretty quickly.
I have the 2nd edition of that book. I don't see anywhere in the text of chapter one a specific description of the growth from the years 81 to 95 (though I'm only skimming, and this is the 2nd edition). Figure 1.1 shows an inflation corrected index graph, but you really can't pick out the specific years 81 to 95 very well, and he says (and the graph is labeled) that it's a *price* index.

The website I linked to (which seems reputable, but I haven't cross checked) has a "growth of X dollars" column with dividends re-invested.

http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html


Growth with dividends reinvested will look a lot bigger than just the change of a price index.

I was surprised at the t-bill number on that website also (the low return during that period), but note that it shows 3 month t-bills, and you can get 6 month and 1 years t-bills. Those probably did better than the 3 month.

I also probably have a math error in my computations; I should have started with the 1980 end values and I started with the 1981 values. Which will reduce the S&P returns a bit, and increase the t-bill and 10 bond returns. That won't really affect the relative differences, but the numbers are a little better for the bonds.
I don't have the book with me now, but I am pretty sure it was not with dividends reinvested.

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Re: Lots of cash .. Scared to put it to work now

Post by pascalwager » Thu Mar 07, 2019 3:52 am

TN_Boy wrote:
Wed Mar 06, 2019 1:47 pm
pascalwager wrote:
Wed Mar 06, 2019 8:55 am
TN_Boy wrote:
Tue Mar 05, 2019 11:17 pm
pascalwager wrote:
Sun Mar 03, 2019 9:43 pm
I was 100% cash from 1981 to 1995. The return over inflation was 3.08% for that overall period. Then, in 1995, I lump-summed $400k into an 85/15 portfolio.

stuff deleted ...
I have to ask ... you stayed 100% cash during most of the biggest bull market in US history? Wasn't that ... really painful?
No pain. I knew nothing about investing then. The stock market was only on the very fringes of my consciousness. To me, the cash (T-Bills) was simply a solid way of saving. Finally, in 1995, another E.E. at work, who happened to be a CFP, learned what I was doing, set up a meeting with me and proposed an investment plan using stock funds and short-term bond funds. He became my sub-advisor and my portfolio was comprised of DFA funds managed by an investment company. Otherwise, I might have kept stashing T-Bills forever. I guess, after the computer became commonplace, I would have been exposed to investment marketing information and would have finally ventured into using higher-risk assets. I guess, but who knows.

I just now ran some curves using PV for that 15-year period and yes, the stock market really did take off. But, in those days, most stock funds were high-fee, active type, and I probably wouldn't have been investing very efficiently anyway. And the DIY investing books hadn't been written yet so there's just no way I would have had the nerve to jump into the stock market without some assistance.

Anyway, $2.5 million later, the end results were probably adequate.
Oh sure, a lot of us have learned a lot about investing over the years. I pointed this out mostly as an example of the potential damage from not being in the market, though I don't think today's market is going to make us happy like the 1981 and later years did.

I'm sure you find the results adequate now, but obviously, depending on how much you started with in the early 80s, you've have a good deal more now had you owned a decent slug of equities back then -- even high fee active funds worked in the 80s and 90s, the market was so hot.
TN,

I thought I made it clear. I was an IGNORAMUS between 1981 and 1995. I should have been investing, but I was only saving. My results were adequate, but could have been much better. I agree with you 100%. I'm an object lesson about uninformed money management and my heirs will pay the price.

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Re: Lots of cash .. Scared to put it to work now

Post by remomnyc » Thu Mar 07, 2019 7:53 am

A handful of people with $ on the sidelines (accumulating and waiting for dips to buy, cashed out years ago expecting another crash that didn't come) have asked me how to get back in. I always tell them to figure out what ultimate asset allocation they want and put 50% into the market today and DCA the remainder over a time period not greater than two years, using the DCA to rebalance to that asset allocation. When the ~20% draw down occurred last year, I emailed each of them and suggested if they still had money sitting on the sidelines, now may be a good time to put it to work. Not one invested at that point, paralyzed by the expectation of further drops. The only thing most of them have managed to do is to invest the initial 50% into the market. That's the biggest problem with DCA. People tend not to follow through because the same problem that caused them to end up with a big lump sum sitting in cash continues to rule their behavior.

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Thu Mar 07, 2019 8:04 am

remomnyc wrote:
Thu Mar 07, 2019 7:53 am
A handful of people with $ on the sidelines (accumulating and waiting for dips to buy, cashed out years ago expecting another crash that didn't come) have asked me how to get back in. I always tell them to figure out what ultimate asset allocation they want and put 50% into the market today and DCA the remainder over a time period not greater than two years, using the DCA to rebalance to that asset allocation. When the ~20% draw down occurred last year, I emailed each of them and suggested if they still had money sitting on the sidelines, now may be a good time to put it to work. Not one invested at that point, paralyzed by the expectation of further drops. The only thing most of them have managed to do is to invest the initial 50% into the market. That's the biggest problem with DCA. People tend not to follow through because the same problem that caused them to end up with a big lump sum sitting in cash continues to rule their behavior.
Understandable. I’m not worried about my ability to follow through and stay the course once the decision is made by early next week... I have after all managed to spend a good part of the last 6 years living in China- go try that. What keeps my mind in overdrive is my AA given the 10 year bull run. And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement. Again , vanguard is pushing me to 80/20 which I could do w the retirement piece however I’m not comfortable with the entire amount at those levels. Where is the error in my thinking and what would you advise ? Thx

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Re: Lots of cash .. Scared to put it to work now

Post by remomnyc » Thu Mar 07, 2019 8:11 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
Understandable. I’m not worried about my ability to follow through and stay the course once the decision is made by early next week... I have after all managed to spend a good part of the last 6 years living in China- go try that. What keeps my mind in overdrive is my AA given the 10 year bull run. And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement. Again , vanguard is pushing me to 80/20 which I could do w the retirement piece however I’m not comfortable with the entire amount at those levels. Where is the error in my thinking and what would you advise ? Thx
If there is a portion that you need short term, I would segregate that portion in CDs or Treasuries, and then apply your desired asset allocation to the remaining money. If your situation changes 2-3 years from now, you can take those CDs/Treasuries and invest them into your desired asset allocation.

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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Thu Mar 07, 2019 8:15 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement.
You might have mentioned that little fact in your first post. There are now 4 pages of posts from people who were trying to help you based on an entirely different premise.

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Thu Mar 07, 2019 8:30 am

gmaynardkrebs wrote:
Thu Mar 07, 2019 8:15 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement.
You might have mentioned that little fact in your first post. There are now 4 pages of posts from people who were trying to help you based on an entirely different premise.
Things change. My sister is asking me to invest in some property with her. Btw nobody is telling you that you must reply to this post .

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Thu Mar 07, 2019 8:31 am

remomnyc wrote:
Thu Mar 07, 2019 8:11 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
Understandable. I’m not worried about my ability to follow through and stay the course once the decision is made by early next week... I have after all managed to spend a good part of the last 6 years living in China- go try that. What keeps my mind in overdrive is my AA given the 10 year bull run. And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement. Again , vanguard is pushing me to 80/20 which I could do w the retirement piece however I’m not comfortable with the entire amount at those levels. Where is the error in my thinking and what would you advise ? Thx
If there is a portion that you need short term, I would segregate that portion in CDs or Treasuries, and then apply your desired asset allocation to the remaining money. If your situation changes 2-3 years from now, you can take those CDs/Treasuries and invest them into your desired asset allocation.
Probably would need duration no longer than one year for that allocation , just in case... where could I squeeze the most out of ? Thx

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Re: Lots of cash .. Scared to put it to work now

Post by remomnyc » Thu Mar 07, 2019 8:36 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:31 am
Probably would need duration no longer than one year for that allocation , just in case... where could I squeeze the most out of ? Thx
Recommendation remains CDs or Treasuries for short-term cash needs.

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Thu Mar 07, 2019 8:37 am

remomnyc wrote:
Thu Mar 07, 2019 8:36 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:31 am
Probably would need duration no longer than one year for that allocation , just in case... where could I squeeze the most out of ? Thx
Recommendation remains CDs or Treasuries for short-term cash needs.
Thx

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gmaynardkrebs
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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Thu Mar 07, 2019 8:38 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:30 am
gmaynardkrebs wrote:
Thu Mar 07, 2019 8:15 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement.
You might have mentioned that little fact in your first post. There are now 4 pages of posts from people who were trying to help you based on an entirely different premise.
Things change. My sister is asking me to invest in some property with her.
Sounds like an excellent idea to me.

remomnyc
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Re: Lots of cash .. Scared to put it to work now

Post by remomnyc » Thu Mar 07, 2019 8:48 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:30 am
Things change. My sister is asking me to invest in some property with her. Btw nobody is telling you that you must reply to this post .
Think long and hard before you invest in property with anyone to whom you're not married...

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corn18
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Re: Lots of cash .. Scared to put it to work now

Post by corn18 » Thu Mar 07, 2019 8:53 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:31 am
remomnyc wrote:
Thu Mar 07, 2019 8:11 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
Understandable. I’m not worried about my ability to follow through and stay the course once the decision is made by early next week... I have after all managed to spend a good part of the last 6 years living in China- go try that. What keeps my mind in overdrive is my AA given the 10 year bull run. And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement. Again , vanguard is pushing me to 80/20 which I could do w the retirement piece however I’m not comfortable with the entire amount at those levels. Where is the error in my thinking and what would you advise ? Thx
If there is a portion that you need short term, I would segregate that portion in CDs or Treasuries, and then apply your desired asset allocation to the remaining money. If your situation changes 2-3 years from now, you can take those CDs/Treasuries and invest them into your desired asset allocation.
Probably would need duration no longer than one year for that allocation , just in case... where could I squeeze the most out of ? Thx
Vanguard Prime MM (VMMXX @ 2.46%)
Don't do something, just stand there!

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gmaynardkrebs
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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Thu Mar 07, 2019 8:54 am

remomnyc wrote:
Thu Mar 07, 2019 8:48 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:30 am
Things change. My sister is asking me to invest in some property with her. Btw nobody is telling you that you must reply to this post .
Think long and hard before your invest in property with anyone to whom you're not married...
I must respectfully disagree. I know several people who have made a lot of money investing in some property with their sisters or brothers.

TN_Boy
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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Thu Mar 07, 2019 9:05 am

Geoffrey9 wrote:
Thu Mar 07, 2019 8:30 am
gmaynardkrebs wrote:
Thu Mar 07, 2019 8:15 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:04 am
And also the fact that I may need half of those assets in the next 2-3 years while the rest will be earmarked for retirement.
You might have mentioned that little fact in your first post. There are now 4 pages of posts from people who were trying to help you based on an entirely different premise.
Things change. My sister is asking me to invest in some property with her. Btw nobody is telling you that you must reply to this post .
Yeah, but that does change the answer. If you may need 1/2 the assets in the next 2 - 3 years, that money should be in something like a mm fund, CDs, shorter term treasuries, etc.

And the rest, I'd say go 50-50 stocks/high quality bonds. If you are truly setting aside 50% of the money, I'd immediately put the rest into your target AA for longer term money; I see no point in DCAing that money in. A 3 fund portfolio per your original post would be fine for the retirement funds.

If you go 50-50 for the retirement funds, and (for example) 6 month CDs for the other 1/2 of the money, most of your assets are not exposed to the stock market. Then, if the property deal doesn't happen, you can feed that money into the retirement AA, changing it then if you feel market conditions warrant a change.

(For what it is worth, I'd suggest to the OP and other posters that if you want advice on the property deal, and you might not :happy that you open a new thread, to avoid confusing this thread).

The money is all taxable I gather?, so you'd want to pay attention to the tax ramifications of your bond choices.

50-50 is conservative, but that is not a sin. It is easy to increase the stock market percentage later (it tends to be harder to go the other direction in a taxable account since you might have to sell appreciated securities to rebalance, lacking large inflows of new money). We have no details, and I'm not asking for any, but 500k in a non-diversified property deal is potentially pretty risky, so I'd think about that when considering the AA for my retirement account.

TN_Boy
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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Thu Mar 07, 2019 9:09 am

pascalwager wrote:
Thu Mar 07, 2019 3:52 am
TN_Boy wrote:
Wed Mar 06, 2019 1:47 pm
pascalwager wrote:
Wed Mar 06, 2019 8:55 am
TN_Boy wrote:
Tue Mar 05, 2019 11:17 pm
pascalwager wrote:
Sun Mar 03, 2019 9:43 pm
I was 100% cash from 1981 to 1995. The return over inflation was 3.08% for that overall period. Then, in 1995, I lump-summed $400k into an 85/15 portfolio.

stuff deleted ...
I have to ask ... you stayed 100% cash during most of the biggest bull market in US history? Wasn't that ... really painful?
No pain. I knew nothing about investing then. The stock market was only on the very fringes of my consciousness. To me, the cash (T-Bills) was simply a solid way of saving. Finally, in 1995, another E.E. at work, who happened to be a CFP, learned what I was doing, set up a meeting with me and proposed an investment plan using stock funds and short-term bond funds. He became my sub-advisor and my portfolio was comprised of DFA funds managed by an investment company. Otherwise, I might have kept stashing T-Bills forever. I guess, after the computer became commonplace, I would have been exposed to investment marketing information and would have finally ventured into using higher-risk assets. I guess, but who knows.

I just now ran some curves using PV for that 15-year period and yes, the stock market really did take off. But, in those days, most stock funds were high-fee, active type, and I probably wouldn't have been investing very efficiently anyway. And the DIY investing books hadn't been written yet so there's just no way I would have had the nerve to jump into the stock market without some assistance.

Anyway, $2.5 million later, the end results were probably adequate.
Oh sure, a lot of us have learned a lot about investing over the years. I pointed this out mostly as an example of the potential damage from not being in the market, though I don't think today's market is going to make us happy like the 1981 and later years did.

I'm sure you find the results adequate now, but obviously, depending on how much you started with in the early 80s, you've have a good deal more now had you owned a decent slug of equities back then -- even high fee active funds worked in the 80s and 90s, the market was so hot.
TN,

I thought I made it clear. I was an IGNORAMUS between 1981 and 1995. I should have been investing, but I was only saving. My results were adequate, but could have been much better. I agree with you 100%. I'm an object lesson about uninformed money management and my heirs will pay the price.
Sorry, I was misreading your comments. My main point was that being out of the market doesn't mean you can't make money, but the opportunity costs can be very high.

You also make a very good point -- it's so easy to find good advice on investing now (bad advice too, I realize, but REALLY EASY to find good clear advice). It was NOT that easy in the 80s. I had money in stock and bond funds back then in my 401k, but a messy blend of overlapping, higher cost (albeit not terrible) funds. I didn't know any better, though I had a basic understanding that stocks were generally better in the long run.

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Thu Mar 07, 2019 10:08 am

remomnyc wrote:
Thu Mar 07, 2019 8:48 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:30 am
Things change. My sister is asking me to invest in some property with her. Btw nobody is telling you that you must reply to this post .
Think long and hard before you invest in property with anyone to whom you're not married...
I’m more than comfortable with this. I ll be contributing the larger piece and putting it in my name.. sharing any appreciation and rental with her. For the remaing half of the assets I believe 50/50 is a bit too conservative however.

TN_Boy
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Re: Lots of cash .. Scared to put it to work now

Post by TN_Boy » Thu Mar 07, 2019 10:54 am

Geoffrey9 wrote:
Thu Mar 07, 2019 10:08 am
remomnyc wrote:
Thu Mar 07, 2019 8:48 am
Geoffrey9 wrote:
Thu Mar 07, 2019 8:30 am
Things change. My sister is asking me to invest in some property with her. Btw nobody is telling you that you must reply to this post .
Think long and hard before you invest in property with anyone to whom you're not married...
I’m more than comfortable with this. I ll be contributing the larger piece and putting it in my name.. sharing any appreciation and rental with her. For the remaing half of the assets I believe 50/50 is a bit too conservative however.
Okay. You didn't like 80/20 either.

60/40? 70/30? I'd say pick one and go. Flip a coin if necessary (not kidding).

There is not a right answer, unless one knows exactly what the markets will do in the future and of course we do not. Nor will waiting until next week, or next month or whatever provide more clarity.

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Re: Lots of cash .. Scared to put it to work now

Post by Shallowpockets » Thu Mar 07, 2019 11:36 am

This thread goes on and on. At every turn OP finds a reason to contest. Now maybe real estate investing with relative. Really doesn't know what or when to do anything with the money.
Realize that not making a choice is still a choice.
The market it down today about 1% on thhe S and P. Start the DCA today. Small portion to get used to it. Crazy to wait for a big drop.
Real estate investing, in single property, with a relative, is not usually advised as a postive thing on this forum.

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gmaynardkrebs
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Re: Lots of cash .. Scared to put it to work now

Post by gmaynardkrebs » Thu Mar 07, 2019 11:55 am

Shallowpockets wrote:
Thu Mar 07, 2019 11:36 am
This thread goes on and on. At every turn OP finds a reason to contest. Now maybe real estate investing with relative. Really doesn't know what or when to do anything with the money.
Realize that not making a choice is still a choice.
The market it down today about 1% on thhe S and P. Start the DCA today. Small portion to get used to it. Crazy to wait for a big drop.
Real estate investing, in single property, with a relative, is not usually advised as a postive thing on this forum.
True, but apparently he/she lived in China for a while. Perhaps he/she would have an edge investing there with his/her sister. Along the lines of Peter Lynch, "invest in what you know." He/she does seem rather overwhelmed by the choices facing him/her.

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Geoffrey9
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Re: Lots of cash .. Scared to put it to work now

Post by Geoffrey9 » Thu Mar 07, 2019 11:58 am

Shallowpockets wrote:
Thu Mar 07, 2019 11:36 am
This thread goes on and on. At every turn OP finds a reason to contest. Now maybe real estate investing with relative. Really doesn't know what or when to do anything with the money.
Realize that not making a choice is still a choice.
The market it down today about 1% on thhe S and P. Start the DCA today. Small portion to get used to it. Crazy to wait for a big drop.
Real estate investing, in single property, with a relative, is not usually advised as a postive thing on this forum.
And yet here you are.. I think I’ll wait a little longer...

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