Right time to start new Investment

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CheeseWiz
Posts: 1
Joined: Wed May 15, 2019 5:37 pm

Right time to start new Investment

Post by CheeseWiz » Wed May 15, 2019 7:21 pm

Hello,

I am a new investor and was ready to start a "lazy portfolio". I was planning on this consisting of the VTSAX, VTIAX, and VBTLX funds. However, given the recent market dip on Monday and talk about possible upcoming bear market, would it be wise to wait to start investing? Or possibly invest a certain percentage and hold some in cash? for instance, I have $60,000 available to invest. should I only start with a certain amount of this?

I should also mention I am 29 years old.

Thanks

mhalley
Posts: 7692
Joined: Tue Nov 20, 2007 6:02 am

Re: Right time to start new Investment

Post by mhalley » Wed May 15, 2019 7:39 pm

Over the long term, investing a lump sum results in superior performance 60some % of the time.
See what happened to bob who only invested at market peaks.
https://awealthofcommonsense.com/2014/0 ... ket-timer/
Read about dca here
https://www.bogleheads.org/wiki/Dollar_cost_averaging

megabad
Posts: 2524
Joined: Fri Jun 01, 2018 4:00 pm

Re: Right time to start new Investment

Post by megabad » Thu May 16, 2019 1:58 pm

CheeseWiz wrote:
Wed May 15, 2019 7:21 pm
Hello,

I am a new investor and was ready to start a "lazy portfolio". I was planning on this consisting of the VTSAX, VTIAX, and VBTLX funds. However, given the recent market dip on Monday and talk about possible upcoming bear market, would it be wise to wait to start investing? Or possibly invest a certain percentage and hold some in cash? for instance, I have $60,000 available to invest. should I only start with a certain amount of this?

I should also mention I am 29 years old.

Thanks
Personally, I would dump it all in my desired allocation lump sum today. As mhalley indicated DCA would probably statiscally reduce your likely return. Plus you have plenty of time to turn around any short term market volatility.

carmonkie
Posts: 154
Joined: Fri Jun 29, 2018 4:31 pm

Re: Right time to start new Investment

Post by carmonkie » Thu May 16, 2019 3:14 pm

I think another issue with DCA is that it leads to market timing. In you case since you are buying, you were probably hoping for the market to keep going down after Monday that way you can buy more shares right?. The market has almost recovered Monday losses over the past 3 days and now you are kicking yourself for not buying when the market dipped.

It is time in the market not timing the market what matters.

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ruralavalon
Posts: 16746
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Right time to start new Investment

Post by ruralavalon » Thu May 16, 2019 4:16 pm

Welcome to the forum :) .

CheeseWiz wrote:
Wed May 15, 2019 7:21 pm
Hello,

I am a new investor and was ready to start a "lazy portfolio". I was planning on this consisting of the VTSAX, VTIAX, and VBTLX funds. However, given the recent market dip on Monday and talk about possible upcoming bear market, would it be wise to wait to start investing? Or possibly invest a certain percentage and hold some in cash? for instance, I have $60,000 available to invest. should I only start with a certain amount of this?

I should also mention I am 29 years old.

Thanks
Lump sum or in stages? There is much discussion here about the two approaches. I am in the invest it "all at once" camp. When investing a large chunk of new money, "all at once" works out better about 2/3 of the time. Please see the Vanguard paper, "Dollar-cost averaging just means taking risk later".

Wiki article, "Dollar-cost averaging". “Lump sum investing will always carries a higher expected return, because it immediately moves your funds from asset classes with lower expected returns to ones with higher expected returns. Note that higher expected returns do not guarantee that your actual returns will be higher. According to an investopedia article, studies indicate that lump sum investing has produced higher returns 66% of the time”.

Holding on to cash while you wait for a better time to invest is likely to give you a negative real return net of inflation and taxes. I think it is better to invest in something with the prospect of a positive real return. Market timing (waiting for a good time to buy) is a fool's errand. No one can successfully do that consistently. If you wait for a good day to buy you will never know if the next day, or the next week, or the next month, or the next year might be an even better time to buy.

It was always my policy to invest whenever I had extra money available to invest.

Here is another interesting article to read -- "What if you only invested at market peaks?"

The compromise solution is to invest part in a lump sum now, and the rest in stages. For example invest 50% in a lump sum now, and invest the other 50% in stages (like an additional 10% on a predetermined date each month for the next 5 months). Don't needlessly agonize over when the best time may be to invest.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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