Cash to investments

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Topic Author
Santhony511
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Joined: Tue Jun 11, 2019 4:06 am

Cash to investments

Post by Santhony511 » Tue Jun 11, 2019 4:38 am

I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?

mortfree
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Re: Cash to investments

Post by mortfree » Tue Jun 11, 2019 5:09 am

Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
How much cash?

Did you have the cash in December 2018- If so why didn’t you invest then?

livesoft
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Re: Cash to investments

Post by livesoft » Tue Jun 11, 2019 5:42 am

Here is a behavioral trick that you can do:

Say you have $100,000 cash to invest, but already have $500,000 invested. Sell the $500,000 of funds you have. You will be so bothered by selling that you will want to buy it all back. So now buy back $600,000 because it's only a little more than the $500,000 you just sold. Bingo! You now have all your cash invested!
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Jack FFR1846
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Re: Cash to investments

Post by Jack FFR1846 » Tue Jun 11, 2019 6:25 am

So if the market never drops below where it is now, are you flexible enough to kick yourself hard in the butt?
Bogle: Smart Beta is stupid

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jabberwockOG
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Re: Cash to investments

Post by jabberwockOG » Tue Jun 11, 2019 7:12 am

Equity markets cycle up and down every week based on real events/news/noise, but price/returns long term trend has been up over time. If you have long term investment goals than at what level you invest today does not make that much difference in the long run.

If you have short term goals the equity market is likely not the right place for your money.

If it makes you feel better pick a few down market days and get slices of your long term goal money into the market over a few months time .

asif408
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Re: Cash to investments

Post by asif408 » Tue Jun 11, 2019 8:22 am

Great news, OP! There has already been a correction in stocks that began last year, and we are still in it for foreign developed and emerging markets: http://quotes.morningstar.com/chart/etf ... 2%3A955%7D.

FWIW, we also had a correction in US stocks, but now we're out of it. So you missed the boat on the US correction.

miamivice
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Re: Cash to investments

Post by miamivice » Tue Jun 11, 2019 8:24 am

Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
When I have had large sums to invest, I have spread the investments over a 12 or 24 month period. I figured that way I would catch some of the ups and some of the downs of the market, and would get stocks/funds for a good price.

Topic Author
Santhony511
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Re: Cash to investments

Post by Santhony511 » Tue Jun 11, 2019 9:01 am

Thank you

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Toons
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Re: Cash to investments

Post by Toons » Tue Jun 11, 2019 9:08 am

Now
Time
Not Timing







:moneybag
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

bck63
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Re: Cash to investments

Post by bck63 » Wed Jun 12, 2019 4:35 am

livesoft wrote:
Tue Jun 11, 2019 5:42 am
Here is a behavioral trick that you can do:

Say you have $100,000 cash to invest, but already have $500,000 invested. Sell the $500,000 of funds you have. You will be so bothered by selling that you will want to buy it all back. So now buy back $600,000 because it's only a little more than the $500,000 you just sold. Bingo! You now have all your cash invested!
Mental accounting!! (Right out of a book I’m reading on behavioral economics). 8-)

Call_Me_Op
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Re: Cash to investments

Post by Call_Me_Op » Wed Jun 12, 2019 5:39 am

Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
Common sense says no such thing. You are contemplating market timing, nothing less.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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ruralavalon
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Re: Cash to investments

Post by ruralavalon » Wed Jun 12, 2019 7:38 am

Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
How much cash?

Is it a large amount compared to what is already invested?

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”.

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

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 even 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.

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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DragonJoey3
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Re: Cash to investments

Post by DragonJoey3 » Wed Jun 12, 2019 7:59 am

If you had that money invested now would you sell it to cash because "The market is overvalued"? If not then invest it now. You are making the decision to "sell to cash" every day you decide not to buy.

MotoTrojan
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Re: Cash to investments

Post by MotoTrojan » Wed Jun 12, 2019 8:11 am

miamivice wrote:
Tue Jun 11, 2019 8:24 am
Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
When I have had large sums to invest, I have spread the investments over a 12 or 24 month period. I figured that way I would catch some of the ups and some of the downs of the market, and would get stocks/funds for a good price.
Do you have large sums in a tax-advantaged account already? Why don't you move that to cash and re-invest it over 12-24 months? These are logically (but not emotionally) equivalent actions.

miamivice
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Re: Cash to investments

Post by miamivice » Wed Jun 12, 2019 10:47 am

MotoTrojan wrote:
Wed Jun 12, 2019 8:11 am
miamivice wrote:
Tue Jun 11, 2019 8:24 am
Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
When I have had large sums to invest, I have spread the investments over a 12 or 24 month period. I figured that way I would catch some of the ups and some of the downs of the market, and would get stocks/funds for a good price.
Do you have large sums in a tax-advantaged account already? Why don't you move that to cash and re-invest it over 12-24 months? These are logically (but not emotionally) equivalent actions.
I was about 26 years old at the time and didn't have a lot of experience under my belt about investing. I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.

I wasn't market timing though. I took the amount that I had to invest - about $200,000, and decided to invest over a 24 month time frame. I setup automatic investments on Vanguard in the amount of $4,000 every two weeks and invested until the money ran out.

It is true I would have done better in retrospect by investing all $200,000 from day 1. I didn't do poorly with my strategy though.

MotoTrojan
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Re: Cash to investments

Post by MotoTrojan » Wed Jun 12, 2019 11:47 am

miamivice wrote:
Wed Jun 12, 2019 10:47 am
MotoTrojan wrote:
Wed Jun 12, 2019 8:11 am
miamivice wrote:
Tue Jun 11, 2019 8:24 am
Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
When I have had large sums to invest, I have spread the investments over a 12 or 24 month period. I figured that way I would catch some of the ups and some of the downs of the market, and would get stocks/funds for a good price.
Do you have large sums in a tax-advantaged account already? Why don't you move that to cash and re-invest it over 12-24 months? These are logically (but not emotionally) equivalent actions.
I was about 26 years old at the time and didn't have a lot of experience under my belt about investing. I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.

I wasn't market timing though. I took the amount that I had to invest - about $200,000, and decided to invest over a 24 month time frame. I setup automatic investments on Vanguard in the amount of $4,000 every two weeks and invested until the money ran out.

It is true I would have done better in retrospect by investing all $200,000 from day 1. I didn't do poorly with my strategy though.
While I have nothing against those that use these strategies, you were absolutely market timing so don't fool yourself. Just because you only made one decision and automated the investment, doesn't mean you didn't time the market.

My final point about whether you would do this with your 401k and/or IRA stands. Why haven't you moved it to cash and started an automatic redeploy right now since we are near an all-time high?

As long as people are honest about doing this for emotional reasons I can agree, but I do like to point out the logical disconnect.

Tamalak
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Re: Cash to investments

Post by Tamalak » Wed Jun 12, 2019 1:54 pm

MotoTrojan wrote:
Wed Jun 12, 2019 11:47 am
miamivice wrote:
Wed Jun 12, 2019 10:47 am
MotoTrojan wrote:
Wed Jun 12, 2019 8:11 am
miamivice wrote:
Tue Jun 11, 2019 8:24 am
Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
When I have had large sums to invest, I have spread the investments over a 12 or 24 month period. I figured that way I would catch some of the ups and some of the downs of the market, and would get stocks/funds for a good price.
Do you have large sums in a tax-advantaged account already? Why don't you move that to cash and re-invest it over 12-24 months? These are logically (but not emotionally) equivalent actions.
I was about 26 years old at the time and didn't have a lot of experience under my belt about investing. I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.

I wasn't market timing though. I took the amount that I had to invest - about $200,000, and decided to invest over a 24 month time frame. I setup automatic investments on Vanguard in the amount of $4,000 every two weeks and invested until the money ran out.

It is true I would have done better in retrospect by investing all $200,000 from day 1. I didn't do poorly with my strategy though.
While I have nothing against those that use these strategies, you were absolutely market timing so don't fool yourself. Just because you only made one decision and automated the investment, doesn't mean you didn't time the market.

My final point about whether you would do this with your 401k and/or IRA stands. Why haven't you moved it to cash and started an automatic redeploy right now since we are near an all-time high?

As long as people are honest about doing this for emotional reasons I can agree, but I do like to point out the logical disconnect.
It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.

MotoTrojan
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Re: Cash to investments

Post by MotoTrojan » Wed Jun 12, 2019 2:01 pm

Tamalak wrote:
Wed Jun 12, 2019 1:54 pm


It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.
Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.
I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.

miamivice
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Re: Cash to investments

Post by miamivice » Wed Jun 12, 2019 2:32 pm

MotoTrojan wrote:
Wed Jun 12, 2019 2:01 pm
Tamalak wrote:
Wed Jun 12, 2019 1:54 pm


It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.
Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.
I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.
You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.

MotoTrojan
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Re: Cash to investments

Post by MotoTrojan » Wed Jun 12, 2019 5:01 pm

miamivice wrote:
Wed Jun 12, 2019 2:32 pm
MotoTrojan wrote:
Wed Jun 12, 2019 2:01 pm
Tamalak wrote:
Wed Jun 12, 2019 1:54 pm


It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.
Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.
I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.
You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.
Let’s agree to disagree. Time in the market, not timing the market.

reginekierkegaard
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Joined: Tue Oct 02, 2018 2:56 pm

Re: Cash to investments

Post by reginekierkegaard » Wed Jun 12, 2019 5:19 pm

Santhony511 wrote:
Tue Jun 11, 2019 4:38 am
I am sitting on some cash in a taxable account. Invest it now or wait me til market corrects ? I know timing is discouraged here but common sense says market is overvalued. Goal is 60% stock. Any thoughts?
Time the market, Don't time the market.

Technically, you can do both and I am doing exactly that.
I have a 'core portfolio' where I would invest a set amount of cash each year. (For this, I expect to get an average market return, Beta)
I also have a much smaller 'satellite portfolio' where I put extra money in when the prices drop to certain level. I may hold on to it for dividend or sell it when the market reaches new high to produce 'alpha'.
On top of this, I have cash, at my disposal as 'dry power'.
If the market drop 40-50%, I will switch from strategic to tactical asset allocation mode. I would systemically sell my bonds and increase my allocation in stock in my 'Core portfolio'.

“Be fearful when others are greedy. Be greedy when others are fearful.”

To be honest with you, even with this approach, I can't guarantee I would not had been better off, if I was to invest everything at once but there is a psychological element in this. People feel helpless when market drop, doing something i.e. rebalancing, switching to tactical asset allocation mode would help you 'stay the course'. Simply because, you are doing something and there is something you can do.
Some dry powder and a satellite portfolio make you felt like you have an insurance policy against sudden market drop. Psychologically, it makes you more at ease in putting money into the market in your Core portfolio.

miamivice
Posts: 1721
Joined: Tue Jun 11, 2013 11:46 am

Re: Cash to investments

Post by miamivice » Wed Jun 12, 2019 6:10 pm

MotoTrojan wrote:
Wed Jun 12, 2019 5:01 pm
miamivice wrote:
Wed Jun 12, 2019 2:32 pm
MotoTrojan wrote:
Wed Jun 12, 2019 2:01 pm
Tamalak wrote:
Wed Jun 12, 2019 1:54 pm


It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.
Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.
I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.
You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.
Let’s agree to disagree. Time in the market, not timing the market.
No, you are wrong. Investing $100,000 by splitting it into 48 equal investments over a 2 year period is not market timing. If you call that market timing, you are defining market timing differently than me.

miamivice
Posts: 1721
Joined: Tue Jun 11, 2013 11:46 am

Re: Cash to investments

Post by miamivice » Wed Jun 12, 2019 6:11 pm

reginekierkegaard wrote:
Wed Jun 12, 2019 5:19 pm
If the market drop 40-50%, I will switch from strategic to tactical asset allocation mode. I would systemically sell my bonds and increase my allocation in stock in my 'Core portfolio'.
This is market timing.

reginekierkegaard
Posts: 10
Joined: Tue Oct 02, 2018 2:56 pm

Re: Cash to investments

Post by reginekierkegaard » Wed Jun 12, 2019 7:03 pm

miamivice wrote:
Wed Jun 12, 2019 6:11 pm
reginekierkegaard wrote:
Wed Jun 12, 2019 5:19 pm
If the market drop 40-50%, I will switch from strategic to tactical asset allocation mode. I would systemically sell my bonds and increase my allocation in stock in my 'Core portfolio'.
This is market timing.
True. If the market drop 40-50%, all my core and satellite portfolio would be based on a market timing approach.
If the market had not dropped 40-50%, my Core portfolio would not try to time the market while the satellite portfolio would continue to do so.

MotoTrojan
Posts: 4528
Joined: Wed Feb 01, 2017 8:39 pm

Re: Cash to investments

Post by MotoTrojan » Wed Jun 12, 2019 7:19 pm

miamivice wrote:
Wed Jun 12, 2019 6:10 pm
MotoTrojan wrote:
Wed Jun 12, 2019 5:01 pm
miamivice wrote:
Wed Jun 12, 2019 2:32 pm
MotoTrojan wrote:
Wed Jun 12, 2019 2:01 pm
Tamalak wrote:
Wed Jun 12, 2019 1:54 pm


It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.
Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.
I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.
You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.
Let’s agree to disagree. Time in the market, not timing the market.
No, you are wrong. Investing $100,000 by splitting it into 48 equal investments over a 2 year period is not market timing. If you call that market timing, you are defining market timing differently than me.
So why not divest your 401k and reinvest it over 2 years? It’s an emotional crutch. Clearly timing.

miamivice
Posts: 1721
Joined: Tue Jun 11, 2013 11:46 am

Re: Cash to investments

Post by miamivice » Wed Jun 12, 2019 9:44 pm

MotoTrojan wrote:
Wed Jun 12, 2019 7:19 pm
miamivice wrote:
Wed Jun 12, 2019 6:10 pm
MotoTrojan wrote:
Wed Jun 12, 2019 5:01 pm
miamivice wrote:
Wed Jun 12, 2019 2:32 pm
MotoTrojan wrote:
Wed Jun 12, 2019 2:01 pm


Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.

You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.
Let’s agree to disagree. Time in the market, not timing the market.
No, you are wrong. Investing $100,000 by splitting it into 48 equal investments over a 2 year period is not market timing. If you call that market timing, you are defining market timing differently than me.
So why not divest your 401k and reinvest it over 2 years? It’s an emotional crutch. Clearly timing.
The 100k or 200k that I invested 10 years ago I had acquired from proceeds from selling a house as well as savings for a down payment for a new home. While looking for a house, I didn't know whether I was going to need 100k or 300k or somewhere in between for a down payment. I ended up buying at the lower end of the down payment, and once I closed on the house, I decided to invest the money in the stock market and chose dollar cost averaging as a safer method of investing the money in instead of all at once. So, my decision to invest was not based on thinking it was a good time to invest in the market but rather because I no longer needed the money for a down payment for a house.

It is not advisable to hold down payment for a home in the stock market because down payments for homes are usually short time periods, so I elected to hold it in a cash position. After buying a home, my horizon increased greatly so the stock market now made sense.

I don't liquidate my stocks and dollar cost average back into the market because I have no reason to liquidate, and I don't think that liquidating and reinvesting in a dollar cost averaging sense would be profitable.

I am not saying that dollar cost averaging was the best strategy for me to choose, but I am saying that my decision to invest was not market timing because no investment decision was based on my perception of the valuation of the stock market. It was based on the availability of cash and a desire to invest in a safer manner than all in at once.

MotoTrojan
Posts: 4528
Joined: Wed Feb 01, 2017 8:39 pm

Re: Cash to investments

Post by MotoTrojan » Wed Jun 12, 2019 10:02 pm

miamivice wrote:
Wed Jun 12, 2019 9:44 pm
MotoTrojan wrote:
Wed Jun 12, 2019 7:19 pm
miamivice wrote:
Wed Jun 12, 2019 6:10 pm
MotoTrojan wrote:
Wed Jun 12, 2019 5:01 pm
miamivice wrote:
Wed Jun 12, 2019 2:32 pm


You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.
Let’s agree to disagree. Time in the market, not timing the market.
No, you are wrong. Investing $100,000 by splitting it into 48 equal investments over a 2 year period is not market timing. If you call that market timing, you are defining market timing differently than me.
So why not divest your 401k and reinvest it over 2 years? It’s an emotional crutch. Clearly timing.
The 100k or 200k that I invested 10 years ago I had acquired from proceeds from selling a house as well as savings for a down payment for a new home. While looking for a house, I didn't know whether I was going to need 100k or 300k or somewhere in between for a down payment. I ended up buying at the lower end of the down payment, and once I closed on the house, I decided to invest the money in the stock market and chose dollar cost averaging as a safer method of investing the money in instead of all at once. So, my decision to invest was not based on thinking it was a good time to invest in the market but rather because I no longer needed the money for a down payment for a house.

It is not advisable to hold down payment for a home in the stock market because down payments for homes are usually short time periods, so I elected to hold it in a cash position. After buying a home, my horizon increased greatly so the stock market now made sense.

I don't liquidate my stocks and dollar cost average back into the market because I have no reason to liquidate, and I don't think that liquidating and reinvesting in a dollar cost averaging sense would be profitable.

I am not saying that dollar cost averaging was the best strategy for me to choose, but I am saying that my decision to invest was not market timing because no investment decision was based on my perception of the valuation of the stock market. It was based on the availability of cash and a desire to invest in a safer manner than all in at once.
You are not following logic but that’s okay, to each their own. I wouldn’t call it safer either.

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ruralavalon
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Re: Cash to investments

Post by ruralavalon » Thu Jun 13, 2019 1:55 pm

miamivice wrote:
Wed Jun 12, 2019 2:32 pm
MotoTrojan wrote:
Wed Jun 12, 2019 2:01 pm
Tamalak wrote:
Wed Jun 12, 2019 1:54 pm


It's not market timing. Market timing is any strategy that factors in the state of the market (e.g. down recently, up recently. So 'waiting for a dip' is market timing). Dollar cost averaging is not a strategy I favor (I think it's irrational for reasons you've explained) but neither is it market timing and it's not gonna ruin you.
Dollar cost averaging is a phrase used to describe the way most of us invest as we get income to do it (bi-weekly paychecks). Dollar cost averaging once you have a lump-sum is 100% market timing, frankly there is no argument, especially when there is mention of the current state of the market as a reason for doing so.
I didn't have large sums in the stock market and didn't want to buy high and then have the market tank for 5-7 years.
You are incorrect that dollar cost averaging by investing a fixed dollar amount over a number of periods is market timing. It is not.

Market timing is holding cash and and making conscientous decisions to invest during times that a person feels that a stock market is low and selling when they think the stock market is high. Typically, this is buying right after a big drop and then selling after a good run. What I did absolutely was not that.

Regardless, I wrote what I did with a large sum of cash not because necessarily it was the best path for me, but it is what I did. I thought that my response would help the OP.
The confusion is at least in part because the term "dollar cost averaging" (DCA) is used to describe two different procedures used in two different circumstances.

1) You invest a fixed dollar amount out of your income every pay period. I believe that this is the original meaning of the term "dollar cost averaging". This is not market timing.

2) You have a relatively large lump sum of cash (for example from a bonus, inheritance or asset sale), don't want to invest it all at once because because of some economic issue (for example the market is high and about to fall, the yield curve is funny, there will be a tariff war) and decide instead to invest in stages like a certain % of the lump sum or specific dollar amount every month for x months.

In my opinion # 2 is a type of market timing (even though not the same as buying on the dips, or waiting for a market bottom), because it is basing a "when to invest" decision on some actual or perceived economic indicator or market condition.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

miamivice
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Re: Cash to investments

Post by miamivice » Thu Jun 13, 2019 2:07 pm

ruralavalon wrote:
Thu Jun 13, 2019 1:55 pm
The confusion is at least in part because the term "dollar cost averaging" (DCA) is used to describe two different procedures used in two different circumstances.

1) You invest a fixed dollar amount out of your income every pay period. I believe that this is the original meaning of the term "dollar cost averaging". This is not market timing.

2) You have a relatively large lump sum of cash (for example from a bonus, inheritance or asset sale), don't want to invest it all at once because because of some economic issue (for example the market is high and about to fall, the yield curve is funny, there will be a tariff war) and decide instead to invest in stages like a certain % of the lump sum or specific dollar amount every month for x months.

In my opinion # 2 is a type of market timing (even though not the same as buying on the dips, or waiting for a market bottom), because it is basing a "when to invest" decision on some actual or perceived economic indicator or market condition.
Thanks for your longer, detailed explanation.

I agree that if one is stockpiling cash waiting for the "right time to invest" and then pulls the trigger but does so over a 24 month period is market timing.

In my case, I made the decision to invest not because I thought it was a good/bad time to invest, but rather had made the decision to not use the money to buy a house. Once I knew the money wasn't going to buy a house, I needed to invest it someplace else. The fact that I did so by spreading the investments out over a 24 month period wasn't market timing. I didn't have a prediction as to whether it was a good time or bad time to invest, or a prediction if the market was going up or down.

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Santhony511
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Re: Cash to investments

Post by Santhony511 » Fri Jun 14, 2019 10:31 am

Thank you for responding.

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Santhony511
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Re: Cash to investments

Post by Santhony511 » Fri Jun 14, 2019 10:32 am

Thank you for your response. This is helpful.

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Santhony511
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Re: Cash to investments

Post by Santhony511 » Sun Jun 16, 2019 2:39 pm


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