Cash basically sitting uninvested. What to do?

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curiosity123
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Cash basically sitting uninvested. What to do?

Post by curiosity123 » Wed Oct 16, 2019 9:59 am

Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.

I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.

What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.

muffins14
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Re: Cash basically sitting uninvested. What to do?

Post by muffins14 » Wed Oct 16, 2019 10:05 am

If you read the many other posts on the same question, what do you feel are the pros and cons of;

1) investing according to your asset allocation immediately (not necessarily 100% SPY)
2) #1 again, but changing your asset allocation to be 5% more conservative, because your post indicates your current AA is uncomfortable for you
3) 50% lump sum, DCA the rest over 6 months

(Edit to add #3 for completeness)
Last edited by muffins14 on Wed Oct 16, 2019 10:14 am, edited 1 time in total.

RadAudit
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Re: Cash basically sitting uninvested. What to do?

Post by RadAudit » Wed Oct 16, 2019 10:08 am

curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?
Short answer. To avoid the higher probability of heartburn, do the first. To make the most money, do the second.

Long answer. Write an IPS (Investor's Policy Statement [sp?]) and figure out what you want to do with your money in order to meet your goals and do that.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Tamarind
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Re: Cash basically sitting uninvested. What to do?

Post by Tamarind » Wed Oct 16, 2019 10:08 am

Muffins had good suggestions, above, especially finding an asset allocation that you could move all your investments to that would make you feel safe now.

If it helps you to DCA, you certainly can, but make sure you:
1) Set your DCA schedule in advance and stick to it.
2) Know that your performance will probably be worse DCAing than investing it all right now.

KingRiggs
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Location: Indiana

Re: Cash basically sitting uninvested. What to do?

Post by KingRiggs » Wed Oct 16, 2019 10:10 am

A Haiku:

"I know it's market timing
But maybe I'm smart enough?
I hold cash, waiting..."
Advice = noun | Advise = verb | | Roth, not ROTH

student
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Re: Cash basically sitting uninvested. What to do?

Post by student » Wed Oct 16, 2019 10:13 am

I would also dollar average in to the market and I would do it over 12 months. This is purely for psychological reasons. (Research shows that lump sum usually perform better.)

hap_ca
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Re: Cash basically sitting uninvested. What to do?

Post by hap_ca » Wed Oct 16, 2019 12:51 pm

KingRiggs wrote:
Wed Oct 16, 2019 10:10 am
A Haiku:

"I know it's market timing
But maybe I'm smart enough?
I hold cash, waiting..."
Haikus are 5/7/5 :happy

KingRiggs
Posts: 324
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Location: Indiana

Re: Cash basically sitting uninvested. What to do?

Post by KingRiggs » Wed Oct 16, 2019 12:54 pm

hap_ca wrote:
Wed Oct 16, 2019 12:51 pm
KingRiggs wrote:
Wed Oct 16, 2019 10:10 am
A Haiku:

"I know it's market timing
But maybe I'm smart enough?
I hold cash, waiting..."
Haikus are 5/7/5 :happy
Dang...I was counting sylables and everything...

How about:

Market timing, yes.
But maybe I'm smart enough?
I hold cash, waiting...
Advice = noun | Advise = verb | | Roth, not ROTH

Keenobserver
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Re: Cash basically sitting uninvested. What to do?

Post by Keenobserver » Wed Oct 16, 2019 1:02 pm

curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.

I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.

What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.
Im in same exact boat.. sitting on significant cash for 3 years..afraid ..indecisive...same thoughts..missed the gains and now dont want to go in with recession looming... sucks everytime I look at the gains I could have made..still afraid to go in due to a correction looming... mutual fund i was supposed to goninto is up 17% last 3 years ans 22% YTD..oh the gains that could have been.. sigh

boogiehead
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Re: Cash basically sitting uninvested. What to do?

Post by boogiehead » Wed Oct 16, 2019 1:12 pm

Keenobserver wrote:
Wed Oct 16, 2019 1:02 pm
curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.

I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.

What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.
Im in same exact boat.. sitting on significant cash for 3 years..afraid ..indecisive...same thoughts..missed the gains and now dont want to go in with recession looming... sucks everytime I look at the gains I could have made..still afraid to go in due to a correction looming... mutual fund i was supposed to goninto is up 17% last 3 years ans 22% YTD..oh the gains that could have been.. sigh
Don't be so hard on yourself... I'm assuming you wouldn't have sold it for the gains at the perfect time anyways so what you are describing is just unrealized gains paper gains.... woulda, coulda, shoulda.... To me what's the most important part is not making rash decision and losing a big chunk of your principal that you accumulated.

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goodenyou
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Re: Cash basically sitting uninvested. What to do?

Post by goodenyou » Wed Oct 16, 2019 1:23 pm

The answer is that there is a lot of missing information. What your portfolio value is, how close you are to your number and retirement age will influence recommendations on your cash. Any given scenario will yield a different answer. The truism is that market timing doesn't work the vast majority of time. Your fear should be heightened or tempered by the time frame of when you plan to put the money to use. There is ample opportunity and failure left in the market.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

ivk5
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Re: Cash basically sitting uninvested. What to do?

Post by ivk5 » Wed Oct 16, 2019 1:45 pm

Summary of these type of posts:

I stayed in cash because I felt it was a bad time to invest.

I was wrong. Missed a lot of gains. Bummer. Guess I shouldn’t have been trying to outsmart the market.

What do I do now? This time I just KNOW it’s a bad time to invest.

...

dbr
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Re: Cash basically sitting uninvested. What to do?

Post by dbr » Wed Oct 16, 2019 1:48 pm

I am convinced these dilemmas originate in not having a clear idea how much risk you want to take and what asset allocation suits that decision. Once those things are clear no one should hesitate to invest at the chosen asset allocation without delay. Without clarity about these things you can't invest in any reasonable way.

PS I also suspect questions about timing also arise in unresolved conflicts about risk and how much should be taken.

magicrat
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Re: Cash basically sitting uninvested. What to do?

Post by magicrat » Wed Oct 16, 2019 2:01 pm

If you invested 2 years ago it would have been at or near market highs as well, with just as many people screaming about downturns and recessions. Make a plan that makes sense for you and implement it.

DonIce
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Re: Cash basically sitting uninvested. What to do?

Post by DonIce » Wed Oct 16, 2019 2:05 pm

Even if a bear market hits, most likely it will recover after several years. People who invested in 2007 before the crash were doing great a couple years later, as long as they didn't sell out at the bottom. People who invested in 1999 took longer to recover (i.e. "the lost decade"), but they are still doing great now. This thread about the "worst market timer" might be informative:

viewtopic.php?t=166730

While of course it would be nice to invest in the S&P500 when its at 2000 rather than 3000, the danger of remaining paralyzed on the sidelines while it keeps going up to 4000, 5000, 6000, etc is greater than the danger of it dropping after you buy before eventually continuing to grow. This is all only true provided your time horizon is long enough, and provided you don't have reason to believe that capitalism and innovation are about to come to a permanent end.

DoctorWu
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Re: Cash basically sitting uninvested. What to do?

Post by DoctorWu » Wed Oct 16, 2019 2:12 pm

To alleviate these types of situations I've set aside enough to live on for one full year, in a one time special offer 14 month CD at a local credit union paying 2.7%. And all the rest of our funds, including about $52k a year which we add in, get fully invested each month on a 60/40% stock/bond mix (whether my SEP, our ROTHs or non-IRA investments). We are both 58 and in somewhat precarious work situations which could come to an end at almost any time, or continue well into our mid 60s. (The additional return of 70/30 vs 60/40 didn't seem big enough to reach for with a potential correction seemingly due. So not market timing, but market planning the way I see it.)

bck63
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Re: Cash basically sitting uninvested. What to do?

Post by bck63 » Wed Oct 16, 2019 2:15 pm

This helped me in 2017 when I had a moderate inheritance and was afraid to invest it and posted a similar post as yours: I decided to search Bogleheads for past similar posts. I found them going all the way back to about 2010 as I recall.

Here's one from 2014:

viewtopic.php?t=140093

And another from 2013:

viewtopic.php?t=126699

I decided to go all in, at an asset allocation I am comfortable with, and I'm glad I did. Try doing the search. I hope this helps.

As Jack Bogle said, nobody knows nuthin'.

GaryA505
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Re: Cash basically sitting uninvested. What to do?

Post by GaryA505 » Wed Oct 16, 2019 2:19 pm

I just love all these people saying to invest it all immediately. Of course that's the advice they give for OTHER PEOPLE'S ASSETS and not their own. I wonder how many of these people would actually do that themselves.

I'm in a similar situation with some of my assets. I'm going to DCA it in to get to my chosen AA.
Of course, some will say research shows ... blah, blah, blah, ... whatever. :sharebeer

bck63
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Re: Cash basically sitting uninvested. What to do?

Post by bck63 » Wed Oct 16, 2019 2:21 pm

GaryA505 wrote:
Wed Oct 16, 2019 2:19 pm
I just love all these people saying to invest it all immediately. Of course that's the advice they give for OTHER PEOPLE'S ASSETS and not their own. I wonder how many of these people would actually do that themselves.

I'm in a similar situation with some of my assets. I'm going to DCA it in to get to my chosen AA.
Of course, some will say research shows ... blah, blah, blah, ... whatever. :sharebeer
See my post, directly above.

dbr
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Re: Cash basically sitting uninvested. What to do?

Post by dbr » Wed Oct 16, 2019 2:22 pm

GaryA505 wrote:
Wed Oct 16, 2019 2:19 pm
I just love all these people saying to invest it all immediately. Of course that's the advice they give for OTHER PEOPLE'S ASSETS and not their own. I wonder how many of these people would actually do that themselves.

I'm in a similar situation with some of my assets. I'm going to DCA it in to get to my chosen AA.
Of course, some will say research shows ... blah, blah, blah, ... whatever. :sharebeer
That isn't the message. The message is figure out your asset allocation, which is how much to put in risky investments and how much to put in low risk investments and then proceed. Keeping money in cash IS an investment in a low risk asset.

If you are asking, I have followed my own advice on many occasions.

Keenobserver
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Re: Cash basically sitting uninvested. What to do?

Post by Keenobserver » Wed Oct 16, 2019 2:30 pm

Great links. We that all being said. Is not true that there is correction on the horizon?

HomeStretch
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Re: Cash basically sitting uninvested. What to do?

Post by HomeStretch » Wed Oct 16, 2019 2:31 pm

How/when to invest your cash stash is a personal decision. You will find opinions on either side of the debate about whether it’s better to lump sum or dollar cost average (DCA). I am a proponent of lump sum investing. To address a point raised by a prior poster, I don’t just give the suggestion to lump sum to others; I follow this advice in my own investing.

Here’s a Vanguard paper on lump sum vs DCA that (paraphrasing a bit) concludes it’s prudent under certain assumptions to lump sum to gain access to markets as soon as possible, but acknowledges that for the investor concerned with managing risk and minimizing regret, DCA may be of use:
https://personal.vanguard.com/pdf/s315.pdf

Here’s a Kitces article that (paraphrasing a bit) says DCA (as compared to lump sum) may help manage risks but on average just reduces returns:
https://www.kitces.com/blog/dollar-cost ... s-returns/

HomeStretch
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Re: Cash basically sitting uninvested. What to do?

Post by HomeStretch » Wed Oct 16, 2019 2:34 pm

GaryA505 wrote:
Wed Oct 16, 2019 2:19 pm
I just love all these people saying to invest it all immediately. Of course that's the advice they give for OTHER PEOPLE'S ASSETS and not their own. I wonder how many of these people would actually do that themselves.
I do.

bck63
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Re: Cash basically sitting uninvested. What to do?

Post by bck63 » Wed Oct 16, 2019 2:34 pm

Keenobserver wrote:
Wed Oct 16, 2019 2:30 pm
Great links. We that all being said. Is not true that there is correction on the horizon?
There's always a correction on the horizon. :happy

“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves."
-- Peter Lynch

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goodenyou
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Re: Cash basically sitting uninvested. What to do?

Post by goodenyou » Wed Oct 16, 2019 2:36 pm

bck63 wrote:
Wed Oct 16, 2019 2:34 pm
Keenobserver wrote:
Wed Oct 16, 2019 2:30 pm
Great links. We that all being said. Is not true that there is correction on the horizon?
There's always a correction on the horizon. :happy

“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves."
-- Peter Lynch
Just like rain. And, hence, my signature line.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

Northern Flicker
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Re: Cash basically sitting uninvested. What to do?

Post by Northern Flicker » Wed Oct 16, 2019 2:36 pm

Historically, while there are no guarantees, the US market has always recovered from a bear market. On the other hand, if you miss a rally, you may never see the valuation at the start of a rally again. This asymmetry favors staying invested.

That said, you should not take more risk than you can take comfortably and need to take. The best advice you will receive is to have an asset allocation that is consistent with your risk tolerance and investment horizon, and stick to it.
Last edited by Northern Flicker on Wed Oct 16, 2019 3:00 pm, edited 1 time in total.
Index fund investor since 1987.

DonIce
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Re: Cash basically sitting uninvested. What to do?

Post by DonIce » Wed Oct 16, 2019 2:45 pm

Keenobserver wrote:
Wed Oct 16, 2019 2:30 pm
Great links. We that all being said. Is not true that there is correction on the horizon?
How far away is the horizon? A month? A year? 3 years? No one knows. There is no actionable information based on the vague sense of there being a correction at some point in the future.

bck63
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Re: Cash basically sitting uninvested. What to do?

Post by bck63 » Wed Oct 16, 2019 2:55 pm

Can't resist. One more "afraid to invest"-type post, from 2016:

viewtopic.php?t=197468

wolf359
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Re: Cash basically sitting uninvested. What to do?

Post by wolf359 » Wed Oct 16, 2019 2:59 pm

The problem is that you're paralyzed because this feels like a big chunk of money, and you don't want to lose it. So let's reframe it a little bit.

Is this your entire investment portfolio? It's likely not. You probably have retirement accounts and other holdings.

Is your emergency fund fully funded? Take off what you need to get it fully funded.

Of the remainder, add it into your overall asset allocation. The amount held in cash is simply considered an ultra short term bond fund.

What does your investor's policy statement say about your asset allocation? Do you need to rebalance your portfolio if your cash was part of fixed income?

Don't think of the money as separate from your portfolio. It is part of your overall portfolio, but is currently allocated to cash.

SuperGrafx
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Re: Cash basically sitting uninvested. What to do?

Post by SuperGrafx » Wed Oct 16, 2019 2:59 pm

GaryA505 wrote:
Wed Oct 16, 2019 2:19 pm
I just love all these people saying to invest it all immediately. Of course that's the advice they give for OTHER PEOPLE'S ASSETS and not their own. I wonder how many of these people would actually do that themselves.

I'm in a similar situation with some of my assets. I'm going to DCA it in to get to my chosen AA.
Of course, some will say research shows ... blah, blah, blah, ... whatever. :sharebeer
+1
Same goes for the lunatics who claim they never hold any cash.

Those are the ones panicking and selling in a downturn. Yep!

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Tamarind
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Re: Cash basically sitting uninvested. What to do?

Post by Tamarind » Wed Oct 16, 2019 3:03 pm

ivk5 wrote:
Wed Oct 16, 2019 1:45 pm
Summary of these type of posts:

I stayed in cash because I felt it was a bad time to invest.

I was wrong. Missed a lot of gains. Bummer. Guess I shouldn’t have been trying to outsmart the market.

What do I do now? This time I just KNOW it’s a bad time to invest.

...
+1

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goodenyou
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Re: Cash basically sitting uninvested. What to do?

Post by goodenyou » Wed Oct 16, 2019 3:19 pm

"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

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unclescrooge
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Re: Cash basically sitting uninvested. What to do?

Post by unclescrooge » Wed Oct 16, 2019 3:38 pm

KingRiggs wrote:
Wed Oct 16, 2019 10:10 am
A Haiku:

"I know it's market timing
But maybe I'm smart enough?
I hold cash, waiting..."
:sharebeer

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Meg77
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Re: Cash basically sitting uninvested. What to do?

Post by Meg77 » Wed Oct 16, 2019 3:59 pm

Keenobserver wrote:
Wed Oct 16, 2019 1:02 pm
curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.

I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.

What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.
Im in same exact boat.. sitting on significant cash for 3 years..afraid ..indecisive...same thoughts..missed the gains and now dont want to go in with recession looming... sucks everytime I look at the gains I could have made..still afraid to go in due to a correction looming... mutual fund i was supposed to goninto is up 17% last 3 years ans 22% YTD..oh the gains that could have been.. sigh
There is nothing indicating that a correction is looming.
The economy does not equal the stock market. (In other words, stock markets often correct when there isn't a recession and frequently rise during recessionary periods)
When market corrections do occur, they have always bounced back and often do so very quickly.


By way of a recent example, there was a correction - a stock market decline of 20%+ - last year (2018) in Q4. Apparently, neither of you seized the moment and invested at that time. So what makes you think you'll do so next time there is a correction? Of course the market has already come back and then some since that time.

Personally, I get the hesitation. Not trying to give you a hard time, just telling you the stuff I tell myself. I had a few windfalls this year starting in January - a family gift and some RE syndication sales and a couple of bonuses - that put our cash holdings close to 20% of my portfolio. I hemmed and hawed and waited and invested a couple of chunks when the market dropped 5% on down days. But the thing is, the cash pile just grew as our monthly savings added up too. Then a tax refund. Sure I *might* buy an investment property, or upgrade the house, or time the market just right and wait for a correction, or pay off my (very cheap) mortgage(s). But I wasn't, and I knew enough to know this could drag on for years.

Finally, a few months ago, set up automatics investments from cash to total stock mkt and total intl market to the tune of $25K per month. I'm adding $10K - $13K a month to the cash on average if the income keeps up, and at this rate my cash will be whittled back down to fully funded EF levels in about 15 months (unless income spikes or more windfalls occur - or we go on a spending spree or have an emergency). I know lump sum investing is typically better, but I'm a scardy cat. I know the mutual funds cost slightly more than the ETFs, but you can't auto invest into ETFs and I don't want to have to mull over this decision every month and second guess my plan. If there's a big correction, I will change course and invest more that month. Yes, I'll market time. But otherwise, a year from now, I'll be glad I don't have to think about what to do and whether to invest and where.

By the way, when in doubt, just use your cash pile to pay off your mortgage if you haven't already and it's accessible. No point hoarding cash at 1.7% or whatever when your mortgage is doubtless around 3% at best. Then you can DCA into the market with the freed up monthly mortgage payment funds.
"An investment in knowledge pays the best interest." - Benjamin Franklin

SovereignInvestor
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Re: Cash basically sitting uninvested. What to do?

Post by SovereignInvestor » Wed Oct 16, 2019 5:25 pm

What recession? Leading economic indicators just made new all time highs. There's never been a post 1960 recession without them dropping for many months before recession. They just busted to new high for July and the fed has been cutting since then.

Consumer debt service ratio is lowest in over 35 years.

Housing starts just hit new cycle high.

The Google searches for recession have been highest in last few months than any time ever. When everyone thinks something it's priced into the market...


What bubble?

The S&P is at 16.5 x forward EPS. The 10Y is 1.7% the SPX earnings yield is 6% or about 4.3 pts above 10Y bonds.

A bubble was year 2000 when the S&a forward Earnings yield was 4.0% area and 10Y bonds were yielding around 6.0% for a minus 2% stock risk premium.

Now it's plus 4.3. Not even close.

IMO slowly average in. Pick a time frame...say 2 years and do 1/24th per month.

Or even do it daily since many brokers have commission free trades now. Good luck

alex123711
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Re: Cash basically sitting uninvested. What to do?

Post by alex123711 » Wed Oct 16, 2019 5:42 pm

student wrote:
Wed Oct 16, 2019 10:13 am
I would also dollar average in to the market and I would do it over 12 months. This is purely for psychological reasons. (Research shows that lump sum usually perform better.)
But the times that it doesn't perform better are when there has been a bull market and or high valuations, like now.

smectym
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Re: Cash basically sitting uninvested. What to do?

Post by smectym » Wed Oct 16, 2019 5:47 pm

Keenobserver wrote:
Wed Oct 16, 2019 1:02 pm
curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.

I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.

What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.
Im in same exact boat.. sitting on significant cash for 3 years..afraid ..indecisive...same thoughts..missed the gains and now dont want to go in with recession looming... sucks everytime I look at the gains I could have made..still afraid to go in due to a correction looming... mutual fund i was supposed to goninto is up 17% last 3 years ans 22% YTD..oh the gains that could have been.. sigh
A common problem, it happens to a lot of investors. Remember that your "indecisiveness" does come from a good place, a commendable caution. Capital preservation isn't a bad thing. Don't ponder past decisions that you can't go back and fix. But yeah, if the money is ultimately earmarked for investment, then you need to invest it. Many on this board argue that statistically speaking, investing lump sum is more likely to deliver superior returns that dollar cost averaging. I have no reason to disagree. However, for investors who nevertheless are reluctant to go "all in," dollar cost averaging (as some above suggest), or investing only 1/2 or 1/4 of the earmarked assets, gets the ball rolling. It's better than nothing. Then take it from there.

almostretired1965
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Re: Cash basically sitting uninvested. What to do?

Post by almostretired1965 » Wed Oct 16, 2019 6:25 pm

I think there are a couple of different ways to look at this. One is the fact that the dividend yield is actually 20 basis points higher than the yield on 10 year Treasuries at the moment. So if you can hold out and not sell at the bottom when and if we have a big correction, the odds that you will be better off investing in equities (in the medium/long term), and the cash yield will actually be higher (at least for now) if you need to live on the cash flow.

Personally I would just go all in, but if that is too much for you, dollar cost averaging over some number of months (say 6 to 24) is surely better than nothing if the alternative is that you continue to sit on your hands ....... Or just pick a conservative balanced fund like Wellesley and do that first.

Dave55
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Re: Cash basically sitting uninvested. What to do?

Post by Dave55 » Wed Oct 16, 2019 7:03 pm

curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.

I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.

What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.
What is this money for? Will you be using any of it in the next 10 years? How close are you to retirement?

Dave

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Re: Cash basically sitting uninvested. What to do?

Post by pkcrafter » Wed Oct 16, 2019 10:22 pm


curiosity, welcome to investing and the forum. I'll respond to your question, but as a new member, you might post information according to this suggested format:

viewtopic.php?f=1&t=6212

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.
Trying to avoid a market drop? No matter what you do or how you do it, there will be a point where you finally get in. At that point you will be exposed to the same risk you are now trying to avoid. The market will take hard falls during your investing time, and there is just no way you will be able to miss most of them, and if you do get out every time you feel nervous, your long term portfolio value will be very poor.
I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.
Do you mean SPY is the only investment you would hold? Of course that isn't a proper portfolio, especially for an investor who does not have the risk taking gene. There are several studies on this, and here is just one you give you some background. Just be aware that those with a risk-taking gene may suggest 100% equity, but that is totally wrong for an investor who does not posses that gene.

https://patch.com/california/paloalto/a ... -investing
What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?
The first thing to do is come up with an asset allocation (% stocks, % bonds/cash) that you are comfortable with. Then either DCA (dollar cost average) in, or go all in. Remember, if you DCA, when completed you will be in "full bore." Don't make "full bore" riskier than you can hold in good times and bad times. Constantly worrying and changing AA is the worst thing you can do.

Paul




[/quote]
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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goodenyou
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Re: Cash basically sitting uninvested. What to do?

Post by goodenyou » Wed Oct 16, 2019 10:59 pm

One thing I have learned about investing is that when you think you are avoiding being the greater fool, you end up being the greater fool. If it goes up, it’s too high, if it goes down, it’s going lower. Not criticizing. Just saying, I understand.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

bayview
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Re: Cash basically sitting uninvested. What to do?

Post by bayview » Wed Nov 20, 2019 10:21 pm

Just put it all - yes, all at once; bite the bullet and get it over with - into a cheap (low-fee) income fund from VG. It has very low exposure to stocks. You should at least beat inflation, which cash generally doesn’t. It’s a blended fund, so you can’t freak out about which segment is up and which is down.

Maybe you’ll become more comfortable and gradually broaden out a bit. Maybe you’ll find that an income fund is as much as you can stand, and you’ll stick with that, and that’s perfectly fine.

Don’t deceive yourself that by not investing, you’re being safe. You’re not, because unless you’re in something other than cash, you are most likely losing money ever day and every year to inflation. It’s just hard to input that into your records to show how the real value (inflation-adjusted) is dropping each year.

https://investor.vanguard.com/mutual-fu ... file/VASIX
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

dh
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Re: Cash basically sitting uninvested. What to do?

Post by dh » Wed Nov 20, 2019 10:29 pm

You have received so many terrific replies already. I only want to add one thing - you will find many who are in their comfort zone (also referred to as their sleep quotient). Individuals have a fixed income percentage (cash and bond) that "fit" them. You had the most powerful statement; I believe your own words are the answer to your basic question. I am quoting it below. Best wishes to you. This isn't as big of a struggle as you might believe.
curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years.

Carter3
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Re: Cash basically sitting uninvested. What to do?

Post by Carter3 » Thu Nov 21, 2019 12:19 am

hap_ca wrote:
Wed Oct 16, 2019 12:51 pm
KingRiggs wrote:
Wed Oct 16, 2019 10:10 am
A Haiku:

"I know it's market timing
But maybe I'm smart enough?
I hold cash, waiting..."
Haikus are 5/7/5 :happy
That's exactly what I was thinking, like what's going on here

Carter3
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Re: Cash basically sitting uninvested. What to do?

Post by Carter3 » Thu Nov 21, 2019 12:21 am

KingRiggs wrote:
Wed Oct 16, 2019 12:54 pm
hap_ca wrote:
Wed Oct 16, 2019 12:51 pm
KingRiggs wrote:
Wed Oct 16, 2019 10:10 am
A Haiku:

"I know it's market timing
But maybe I'm smart enough?
I hold cash, waiting..."
Haikus are 5/7/5 :happy
Dang...I was counting sylables and everything...

How about:

Market timing, yes.
But maybe I'm smart enough?
I hold cash, waiting...
That'll do it

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LilyFleur
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Re: Cash basically sitting uninvested. What to do?

Post by LilyFleur » Thu Nov 21, 2019 12:47 am

I don't think I would want to invest less than $50,000 at a time. The idea of all those different tax lots from DCA makes my head spin.

Independent George
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Re: Cash basically sitting uninvested. What to do?

Post by Independent George » Thu Nov 21, 2019 12:52 am

I know that historically, lump sums beat DCA roughly 2/3 of the time, but it can be quite hard to risk all of your hard-earned savings at once. At the same time, though, you've already missed out on a lot of gains because of that. It's not the mathematically correct answer, but I think a good answer is to put it 50/50 stocks/bonds in a lump sum, and then gradually change your AA (maybe 2% per month) until you hit a point where you feel comfortable.

I'd also ask how much you add to your savings every month, versus how much is currently sitting in cash. If, for example, you have 50k saved and are adding 1k per month, you are adding enough that it doesn't matter if there's a 20% drop this year, because you will have added 24% by the end of the year; I would just lump sum that amount regardless. If, however, you had a recent windfall and are sitting on $500k to invest, but only save an additional $250 per month, the prospect of suddenly losing decades of savings in an instant is terrifying. In that case, some form of DCA makes a lot of sense to me.

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ruralavalon
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Re: Cash basically sitting uninvested. What to do?

Post by ruralavalon » Thu Nov 21, 2019 12:22 pm

Welcome to the forum :) .

curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
Hi All -

So I have a significant chunk of cash sitting relatively idle right now (its in an online savings account earning 1.7%). I know I should invest it but basically have been sitting idle with it for, I'm embarrassed to say, about 2 years. I basically missed the current boom with it, but I'm skitish to just throw it into the market now because I think the market is over bought and a recession is on the horizon. I feel like I'd be buying the high and just would take a hit without the gain once a bear market hits.
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 reasonable 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.

Please read this: "What if you only invested at market peaks?"

curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
I logically understand that you can't time the market, but I feel like going full bore buying SPY for instance at this point would be setting myself up for a loss.
So don't go "full bore" with SPDR® S&P 500 ETF Trust (SPY), don't invest 100% in stocks. SPY by itself would not be good in my opinion. Couple that with a diversified, low expense bond fund such as iShares Core US Aggregate Bond ETF (AGG). A bond allocation is expected to reduce risk. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation"; and
3) Morningstar (8/10/2019), "The Best Diversifiers for Your Equity Portfolio".


curiosity123 wrote:
Wed Oct 16, 2019 9:59 am
What would you all do in this scenario? Should I start investing it slowly and hope I can dollar cost average over a period of time? Or should I go full bore and throw it all right in?

Appreciate any thoughts.
It was always my policy to invest whenever I had money available to invest.

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 [sic] 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”.

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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