Allocating funds over time

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sloberg
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Allocating funds over time

Post by sloberg »

I have about $250K I am allocating to Vanguard index ETFs based mainly on the recommended ETFs from the "Gone Fishin" book. I am afraid that the market is beginning to tank so I am only allocating a couple of thousand dollars on the days in which the market is down. I am also putting more money towards the ETFs that have lost the most that day, which has been the small caps lately (VB and VXF). So far I've invested about $20K over the past couple of weeks. Does this sound like a sound strategy or does anyone have any other ideas? I'm just afraid of putting $200K in the Market right now and it drops 20%. Appreciate any ideas you have.
dbr
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Re: Allocating funds over time

Post by dbr »

You are supposed to have settled on an asset allocation that you can live with no matter what the market does. If you are afraid of market ups and downs, then your asset allocation is too risky. If you want to enter risky investments over time, that is your choice, but you should not feel a need to do that if the asset allocation in the end is comfortable.

It is not generally advised that people try to guess what the market is going to do and time their investments.
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Re: Allocating funds over time

Post by pkcrafter »

sloberg wrote: Fri Dec 03, 2021 10:16 pm
Welcome, sloberg. There are two issues here--

1) Following the "Gone Fishing" portfolio
2) Micromanaging on a daily basis.

Neither is a good, long-term investing strategy.



I have about $250K I am allocating to Vanguard index ETFs based mainly on the recommended ETFs from the "Gone Fishin" book. I am afraid that the market is beginning to tank so I am only allocating a couple of thousand dollars on the days in which the market is down. I am also putting more money towards the ETFs that have lost the most that day, which has been the small caps lately (VB and VXF). So far I've invested about $20K over the past couple of weeks. Does this sound like a sound strategy or does anyone have any other ideas? I'm just afraid of putting $200K in the Market right now and it drops 20%. Appreciate any ideas you have.
Decide on an allocation you can stay with in good times and bad times. The market is always going to move up and down on a daily/weekly basis, and you can't base buying/selling on these small movements. BUY/RIDE.

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.
delamer
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Re: Allocating funds over time

Post by delamer »

Investing in stocks is a long-term proposition. They are volatile, and short-term fluctuations are to be expected. You shouldn’t be making investment decisions based on short-term market conditions.

Is this money that you are saving for retirement? If so, how old are you and what other retirement investments do you hold?
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Taylor Larimore
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Re: Allocating funds over time

Post by Taylor Larimore »

sloberg wrote: Fri Dec 03, 2021 10:16 pm I have about $250K I am allocating to Vanguard index ETFs based mainly on the recommended ETFs from the "Gone Fishin" book. I am afraid that the market is beginning to tank so I am only allocating a couple of thousand dollars on the days in which the market is down. I am also putting more money towards the ETFs that have lost the most that day, which has been the small caps lately (VB and VXF). So far I've invested about $20K over the past couple of weeks. Does this sound like a sound strategy or does anyone have any other ideas? I'm just afraid of putting $200K in the Market right now and it drops 20%. Appreciate any ideas you have.
sloberg:

Welcome to the Bogleheads Forum!

Paul Caster (above) has given you an excellent reply.

You are market-timing which is nearly always a losing investment strategy:
Market Timing

Take a look at the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor
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"Simplicity is the master key to financial success." -- Jack Bogle
Marseille07
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Re: Allocating funds over time

Post by Marseille07 »

Yes, it is a sound strategy. You do want to define your asset allocation, but it is perfectly fine to take some time to get there if you feel more comfortable that way.

I'd be very careful listening to those who say that if you can't lump sum into your AA, the AA is too aggressive for you. While it might be true in some cases, it's an unknown and they are in no position to stake this claim on you.
Last edited by Marseille07 on Sat Dec 04, 2021 1:21 pm, edited 1 time in total.
Jeepergeo
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Re: Allocating funds over time

Post by Jeepergeo »

You are basically timing the market. When you figure out how to do it successfully quarter after quarter, year after year, and decade after decade, you will want to write the book of all books for the active traders to read.

Until then, read the links shared by Taylor ^^^.

My approach has been to adopt the Three Fund mentality, only I go with with four index funds, US Stocks, US Bonds, International Stocks, and International Bonds. My international holdings are 15-20% to reflect my confidence in the US markets and my hopes for the international markets. 62 years old, 60/40.
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Re: Allocating funds over time

Post by JayDee37 »

It sounds as if perhaps you have recently come in to a windfall and are therefore looking into investing for the first time. If so, congrats on your good fortune! :moneybag

I was in a similar situation several years ago, and felt pretty overwhelmed and uncertain about how to enter the market without a lot of knowledge or experience. The Bogleheads forum and wiki has been a fantastic resource. I would suggest you take some time to read the wiki about starting out investing. https://www.bogleheads.org/wiki/Getting_started

This might provide some additional viewpoints on how to construct an asset allocation that you feel comfortable with over the long term.

Although the data suggest that "lump sum" investing (i.e. putting all the money available into the market at once) beats the "bit by bit" strategy that you are using about two-thirds of the time, it sure feels risky to a new investor with a bunch of capital available for the first (and perhaps only) time in their life! I ended up sitting on the sidelines for awhile (too long in retrospect) as I did my research on asset allocations, brokerages, funds, etc. In the end I split the difference by using about two-thirds of the available windfall to invest in a lump sum, and holding back that last third to put in over time. I definitely lost out on some returns that way, but that is what make me feel safe at the time. Now that I have a lot more experience with the daily/weekly/quarterly ups and downs of the market, I feel much more comfortable just dumping everything I can into my asset allocation and letting things ride.

Good luck!
Tell me, what is it you plan to do with your one wild and precious life? | ~Mary Oliver
Topic Author
sloberg
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Re: Allocating funds over time

Post by sloberg »

This is all great information. Do most of you invest in Mutual Funds or ETFs? I currently have about 10 Vanguard ETFs and 1 Fidelity Mutual Fund that tracks the S&P 500. I like ETFs because I can better track the price, especially at the end of the day when I'm usually buying. It sounds like many of you just have the 3 or 4 funds that are referenced on this site.
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arcticpineapplecorp.
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Re: Allocating funds over time

Post by arcticpineapplecorp. »

Marseille07 wrote: Sat Dec 04, 2021 12:48 pm Yes, it is a sound strategy. You do want to define your asset allocation, but it is perfectly fine to take some time to get there if you feel more comfortable that way.

I'd be very careful listening to those who say that if you can't lump sum into your AA, the AA is too aggressive for you. While it might be true in some cases, it's an unknown and they are in no position to stake this claim on you.
one does not get "more comfortable" with one's AA over time. The amount of risk is always the same if the AA stays the same. Sure one can get more comfortable with risk I suppose, but how does that work exactly? If s/he's afraid of investing $200k today, but losing 20% of that, s/he's afraid of losing $40k, right?

Well just because s/he doesn't lump sum $200k today, but instead gets the $200k launched over the next three years, what if 4 years from now the market falls 20%??? Doesn't s/he lose $40k 4 years from now rather than now? It's the same amount of money lost whether s/he loses it now or 4 years from now. Has his/her ability or willingness to lose $40k changed between now and 4 years from now?? If so, how?

So if s/he's afraid of losing $40k of this $200k, s/he'll probably always be afraid of losing $40k.

The answer then is to design his/her portfolio in a way that s/he will only lose $40k OR LESS.

The OP should determine how much s/he's willing to lose and choose an AA that keeps the maximum pain point at that amount or less. And s/he shouldn't be concerned with a 20% loss. S/He should be concerned with a 50% loss, which while it may not happen very frequently, can happen at any time. To prepare for a 20% loss, but then experiencing a 50% loss is setting yourself up for failure rather than success. What would have happened if s/he prepared his portfolio for a 20% loss, but then last year the market fell 32%?? Wouldn't that have set him/her up for failure?

So use this chart which shows how different AAs performed during the Great Recession in which stocks most recently lost 50% and these are the drawdowns you might expect (for various AAs) if that happens again:

Image

you can also use this as a guide when choosing AAs:
https://investor.vanguard.com/investing ... allocation

you choose the AA based on need, ability and willingness. S/He may not have the willingness to lose 20%, but s/he might not have a need for an aggressive portfolio or the ability either. OP, please read more:

https://www.cbsnews.com/news/asset-allo ... -you-take/

https://www.cbsnews.com/news/asset-allo ... tolerance/

https://www.cbsnews.com/news/asset-allo ... -you-need/

https://www.cbsnews.com/news/asset-allo ... ing-goals/

Finally, not to belabor the point, but the OP should always be prepared for a 14% drop on average every year because that's what has happened in the market over the past 41 years:

Image

So it's not "I'm afraid the market's going to fall 20%". It's, "I'm prepared for the 14% on average intrayear decline of the market"
Last edited by arcticpineapplecorp. on Mon Dec 06, 2021 6:53 pm, edited 1 time in total.
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bertilak
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Re: Allocating funds over time

Post by bertilak »

arcticpineapplecorp. wrote: Sat Dec 04, 2021 7:49 pm So if s/he's afraid of losing $40k of this $200k, s/he'll probably always be afraid of losing $40k.
More to the point: If he is afraid to lose $40K tomorrow but NOT afraid to lose 40K a year from now, he needs to explain to himself why.
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sloberg
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Re: Allocating funds over time

Post by sloberg »

I think I'm more being cautious, than too afraid to being down in my account. I have already invested $50K of the $250K and invest an extra $10K every month. Trust me, I'm already down quite a bit in my Govt's Thrift Savings Plan account where I have a lot more than $250K invested. I'm 55 and am becoming a little more cautious now. My question was more about when to allocate my additional funds. I'm putting those dollars into the funds that are down the most on the day. I also have a rule that when/if that "loser" fund is down over $500, I stop putting my investments into that fund until it starts going back up. That way I restrain myself from putting too much money into a "laggard." I have anywhere from 10-15 Index funds which may be too many, especially for those who follow the 3-fund method.
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Re: Allocating funds over time

Post by Beensabu »

sloberg wrote: Sun Dec 05, 2021 12:25 pm My question was more about when to allocate my additional funds. I'm putting those dollars into the funds that are down the most on the day. I also have a rule that when/if that "loser" fund is down over $500, I stop putting my investments into that fund until it starts going back up. That way I restrain myself from putting too much money into a "laggard."
You're buying whatever has the biggest dip on down days, but if it dips too much, you stop buying it?

Even with 10-15 funds to buy, you're going to run out of options eventually following that rule.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Re: Allocating funds over time

Post by JayDee37 »

arcticpineapplecorp. wrote: Sat Dec 04, 2021 7:49 pm One does not get "more comfortable" with one's AA over time. The amount of risk is always the same if the AA stays the same. Sure one can get more comfortable with risk I suppose, but how does that work exactly?
I disagree with the notion that one's comfort-level with AA/risk cannot change over time. Especially for newbie investors, more time and experience can lead to more understanding of and comfort with how things tend to work. This can be due to different processes. For example:

1. As investors get more experience with how they react to volatility, how quickly it is possible to recover from even a substantial drop (e.g. March 2020), and begin to get a sense of the longer term "magic of compounding," it becomes easier to shrug off the down days, months, and even years. One starts to understand the (likely) "temporariness" of the drop, rather than focus on its depth. Very early on in my investing journey, I had a month where my investments were down $10k. This is small potatoes to most Bogleheads, but it was more than 10% of my portfolio, and more than my gross monthly income. It did not feel good. But I was able to grit my teeth and wait it out, and within a couple more months the portfolio had recouped those losses and added some gains. That felt better. After several of these experiences, I learned that these small corrections are nothing to be concerned about. I became more comfortable with the actual experience of volatility.

2. As your portfolio grows, even a large drawdown leaves you with a bigger number of dollars in the account. For some people, having a certain number of dollars left after a drawdown makes them feel more comfortable, regardless of the percent loss. This is not necessarily rational, but it exists. If the "floor amount" I need to not freak out about my investments is $100K, I can lose 50% of a $200K portfolio. I can lose 75% of a $400k portfolio. But a loss of 5% of a $100K portfolio will trigger a lot of anxiety. RE: the example above--now my portfolio is large enough that I have days (rather than months) where the value drops by more than $10K. But the overall size of my portfolio is such that these days barely register. We usually talk about being prepared for/comfortable with a 50% drop regardless of portfolio size, but as portfolio size increases one's need to take risk decreases and ability to take risk increases, because the total dollar amount is what matters when it comes to budgeting. Decreased need and increased ability to take risk may very well lead to changes in one's willingness/comfort-level with risk (hence with various AAs).
Tell me, what is it you plan to do with your one wild and precious life? | ~Mary Oliver
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Re: Allocating funds over time

Post by Marseille07 »

sloberg wrote: Sun Dec 05, 2021 12:25 pm I think I'm more being cautious, than too afraid to being down in my account. I have already invested $50K of the $250K and invest an extra $10K every month. Trust me, I'm already down quite a bit in my Govt's Thrift Savings Plan account where I have a lot more than $250K invested. I'm 55 and am becoming a little more cautious now. My question was more about when to allocate my additional funds. I'm putting those dollars into the funds that are down the most on the day. I also have a rule that when/if that "loser" fund is down over $500, I stop putting my investments into that fund until it starts going back up. That way I restrain myself from putting too much money into a "laggard." I have anywhere from 10-15 Index funds which may be too many, especially for those who follow the 3-fund method.
Whatever works for you to get your money invested, that's what's important.

Try to define your asset allocation and figure out how to get there within 12 months at most.
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Re: Allocating funds over time

Post by Triple digit golfer »

I think this is simply a case of "I am afraid for any money I invest to decrease in value."

You have to set your expectations differently. Stocks can and absolutely will go down in value. As a stock investor, you have to accept this.

I don't think being 50/50 and having only half of your $250k going down 50% is going to feel much better. It's still a $63k decline.

Accept that with a large equity portfolio comes large declines in value. If you can't do that, you shouldn't own any stock funds.
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Re: Allocating funds over time

Post by delamer »

sloberg wrote: Sun Dec 05, 2021 12:25 pm I think I'm more being cautious, than too afraid to being down in my account. I have already invested $50K of the $250K and invest an extra $10K every month. Trust me, I'm already down quite a bit in my Govt's Thrift Savings Plan account where I have a lot more than $250K invested. I'm 55 and am becoming a little more cautious now. My question was more about when to allocate my additional funds. I'm putting those dollars into the funds that are down the most on the day. I also have a rule that when/if that "loser" fund is down over $500, I stop putting my investments into that fund until it starts going back up. That way I restrain myself from putting too much money into a "laggard." I have anywhere from 10-15 Index funds which may be too many, especially for those who follow the 3-fund method.
If the $250K is money for retirement, then it’s important that you develop an overall asset allocation for your retirement funds. Then distribute your assets across those accounts to meet that allocation. Generally, you want to hold as much as possible of your equities in your taxable account for tax efficiency reasons.

And you need to stop trying to time the market. Not buying until a fund starts to go back up is a good way to reduce your overall long-term returns.

Figure out a rebalancing scheme (like twice a year or only if your allocation to a component is off by 5+ percentage points) and follow it.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Allocating funds over time

Post by tibbitts »

sloberg wrote: Sun Dec 05, 2021 12:25 pm I think I'm more being cautious, than too afraid to being down in my account. I have already invested $50K of the $250K and invest an extra $10K every month. Trust me, I'm already down quite a bit in my Govt's Thrift Savings Plan account where I have a lot more than $250K invested. I'm 55 and am becoming a little more cautious now. My question was more about when to allocate my additional funds. I'm putting those dollars into the funds that are down the most on the day. I also have a rule that when/if that "loser" fund is down over $500, I stop putting my investments into that fund until it starts going back up. That way I restrain myself from putting too much money into a "laggard." I have anywhere from 10-15 Index funds which may be too many, especially for those who follow the 3-fund method.
Well, you can do that and I don't think it will help or hurt much, but... what if a fund X goes down 5% more than any of your other funds one day, you buy it, then then next day fund X goes up by 2% when all the other funds go down by 2%? Isn't fund X a better buy for that day than the others, even though it's up by two percent on the day, since it's still down over two days relative to the others?
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arcticpineapplecorp.
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Re: Allocating funds over time

Post by arcticpineapplecorp. »

JayDee37 wrote: Sun Dec 05, 2021 1:33 pm
arcticpineapplecorp. wrote: Sat Dec 04, 2021 7:49 pm One does not get "more comfortable" with one's AA over time. The amount of risk is always the same if the AA stays the same. Sure one can get more comfortable with risk I suppose, but how does that work exactly?
I disagree with the notion that one's comfort-level with AA/risk cannot change over time. Especially for newbie investors, more time and experience can lead to more understanding of and comfort with how things tend to work. This can be due to different processes. For example:

1. As investors get more experience with how they react to volatility, how quickly it is possible to recover from even a substantial drop (e.g. March 2020), and begin to get a sense of the longer term "magic of compounding," it becomes easier to shrug off the down days, months, and even years. One starts to understand the (likely) "temporariness" of the drop, rather than focus on its depth. Very early on in my investing journey, I had a month where my investments were down $10k. This is small potatoes to most Bogleheads, but it was more than 10% of my portfolio, and more than my gross monthly income. It did not feel good. But I was able to grit my teeth and wait it out, and within a couple more months the portfolio had recouped those losses and added some gains. That felt better. After several of these experiences, I learned that these small corrections are nothing to be concerned about. I became more comfortable with the actual experience of volatility.

2. As your portfolio grows, even a large drawdown leaves you with a bigger number of dollars in the account. For some people, having a certain number of dollars left after a drawdown makes them feel more comfortable, regardless of the percent loss. This is not necessarily rational, but it exists. If the "floor amount" I need to not freak out about my investments is $100K, I can lose 50% of a $200K portfolio. I can lose 75% of a $400k portfolio. But a loss of 5% of a $100K portfolio will trigger a lot of anxiety. RE: the example above--now my portfolio is large enough that I have days (rather than months) where the value drops by more than $10K. But the overall size of my portfolio is such that these days barely register. We usually talk about being prepared for/comfortable with a 50% drop regardless of portfolio size, but as portfolio size increases one's need to take risk decreases and ability to take risk increases, because the total dollar amount is what matters when it comes to budgeting. Decreased need and increased ability to take risk may very well lead to changes in one's willingness/comfort-level with risk (hence with various AAs).
there is truth in what you write and i wrote that it's possible for it to occur, but i don't think people in general learn these lessons that you (and I) have learned, because most people panic and sell and then never see their portfolio recover. They do get back in the market, after it's recovered or everyone seems to be making money easily. Then they panic again when the next drop comes. Or they think the market drop is coming and get out of the market, even though the market may just as likely keep going out and they miss out on making money. That's what I've generally seen in my observations of people over the years.

After 2008 there was some consternation over target date retirement funds and whether they were too risky or people understood the risk. The TD funds are usually 50% at the target date, that means "at retirement" generally. When the market fell 50% a fund that has 50% in equity would lose 20%-25%. Losing a quarter of your retirement savings the year you retire seems a hard pill to swallow. Congress even had an inquiry in 2009 into TD funds as a result of angry constituents:
https://www.sec.gov/spotlight/targetdat ... 061809.pdf

as a result there were portfolios developed (I think Rick Ferri developed one using an airplane metaphor, being an ex-air force pilot I believe) in which the glidepath didn't start at 90% stocks like they do now, but started conservatively to give the newbie experience with smaller losses (not just because of the size of the portfolio) and then gradually increased risk taking in one's 40s, then started glidinng down again as you approached the "landing" that is retirement. Here it is: Flight Path Approach to Age Based Allocation:
viewtopic.php?t=104934

The OP was very concerned about a 20% decline. That to me says 20% of his money. Not a stock market decline of 20%. So he should set his AA so that a loss is less than 20%.

DCAing is not necessary to do if he designs his portfolio to withstand <-20%.

If his amount of tolerable risk increases overtime, he can change his AA.

DCAing doesn't change any of this.

It only delays the returns you could have gotten on your chosen AA. That's the point here.
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Re: Allocating funds over time

Post by Beensabu »

arcticpineapplecorp. wrote: Sun Dec 05, 2021 2:26 pm The OP was very concerned about a 20% decline. That to me says 20% of his money. Not a stock market decline of 20%. So he should set his AA so that a loss is less than 20%.
+1

Which means a much more conservative AA than 70/30 (which is what "Goin' Fishing" is). But a more aggressive AA than sitting on $230k in cash. Probably. No clue what overall portfolio is in dollar amounts or if the $250k is it.

Asset Allocation: https://www.bogleheads.org/wiki/Categor ... allocation

Portfolio Risk Management: https://www.bogleheads.org/wiki/Categor ... management
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sloberg
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Re: Allocating funds over time

Post by sloberg »

I think the key for me is the get most, if not all the money invested, then worry about how to reallocate it. I can put about $10K into my funds every month due to the excess money I bring in. The biggest thing is not to sell. I learned a big lesson this summer. I bought about $20K of VTI at about $225 and put a stop loss on it at $218. Well, it hit my stop loss than it went back up to around $240, although it's down a little bit now. I had to start rebuying shares at around $230, cost me thousands of dollars and will never make that mistake again with selling of my shares. I'm learning a lot on this site, thanks for everyone's input.
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Re: Allocating funds over time

Post by Marseille07 »

sloberg wrote: Sun Dec 05, 2021 4:07 pm I think the key for me is the get most, if not all the money invested, then worry about how to reallocate it. I can put about $10K into my funds every month due to the excess money I bring in. The biggest thing is not to sell. I learned a big lesson this summer. I bought about $20K of VTI at about $225 and put a stop loss on it at $218. Well, it hit my stop loss than it went back up to around $240, although it's down a little bit now. I had to start rebuying shares at around $230, cost me thousands of dollars and will never make that mistake again with selling of my shares. I'm learning a lot on this site, thanks for everyone's input.
Your money is already allocated in the form of cash in your fixed income allocation. The questions are what your destination AA is and how quickly to get there.
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arcticpineapplecorp.
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Re: Allocating funds over time

Post by arcticpineapplecorp. »

sloberg wrote: Sun Dec 05, 2021 4:07 pm I think the key for me is the get most, if not all the money invested, then worry about how to reallocate it. I can put about $10K into my funds every month due to the excess money I bring in.
these two statments seem at odds.

1. your OP said you have $250k to invest.
2. but now you say "get most, if not all the money invested"
3. and then you say "I can put $10k into my funds every month"

so are you going to lump sum or DCA?

also, you don't want to invest and then worry about how to allocate it.

You determine how you want the money to be allocated and then invest it that way.
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Beensabu
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Re: Allocating funds over time

Post by Beensabu »

sloberg wrote: Sun Dec 05, 2021 4:07 pm I think the key for me is the get most, if not all the money invested, then worry about how to reallocate it. I can put about $10K into my funds every month due to the excess money I bring in. The biggest thing is not to sell. I learned a big lesson this summer. I bought about $20K of VTI at about $225 and put a stop loss on it at $218. Well, it hit my stop loss than it went back up to around $240, although it's down a little bit now. I had to start rebuying shares at around $230, cost me thousands of dollars and will never make that mistake again with selling of my shares. I'm learning a lot on this site, thanks for everyone's input.
Okay. Let's back up. This issue is not how to allocate your funds over time.

The issue is your risk tolerance.

You bought at $225 and put in a stop loss at $218. This means you were only willing to tolerate a 3% or so loss in that investment. That's extremely risk averse.

I don't know why you decided the "Gone Fishin'" portfolio was the one for you, but most of the individual components of that portfolio (other than short-term bonds and TIPS) are extremely volatile, which means the NAV goes up and down a lot. A lot. A lot more than 3%. Most of the time. That's what they do. Maybe you weren't prepared for that, and now you are? But maybe you still aren't.

Honestly, something like Vanguard LifeStrategy Income Fund (VASIX) with a 20/80 AA might be better for you to start off with, in order to get fully invested. Even over the course of this year, with the Spring bond debacle, it's still returned more than cash. Baby steps. Get it all in first, at whatever risk you can handle without feeling the need to "do something". Up it from there later, if that becomes something you can handle later on.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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sloberg
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Re: Allocating funds over time

Post by sloberg »

I've been spending a couple of hours this afternoon reading various posts and I'm coming to the conclusion that I really need only two funds, VTI and BND. It sounds like the International fund, VXUS really doesn't add much and may bring down your rate of return over time. Does that sound like a sound strategy, or am I missing something by leaving out VXUS. I also took the Vanguard test and it said I should be either 80/20 or 70/30 stocks to bonds. It sounds about right as I really don't need the additional money to retire on but that I just have to get over the hurdle of being risk adverse. Maybe if I keep reading these posts I will get there.
dbr
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Re: Allocating funds over time

Post by dbr »

sloberg wrote: Sun Dec 05, 2021 5:13 pm I've been spending a couple of hours this afternoon reading various posts and I'm coming to the conclusion that I really need only two funds, VTI and BND. It sounds like the International fund, VXUS really doesn't add much and may bring down your rate of return over time. Does that sound like a sound strategy, or am I missing something by leaving out VXUS. I also took the Vanguard test and it said I should be either 80/20 or 70/30 stocks to bonds. It sounds about right as I really don't need the additional money to retire on but that I just have to get over the hurdle of being risk adverse. Maybe if I keep reading these posts I will get there.
It is far, far more important to settle on a stock/bond allocation and keep it than to worry about the amount of stocks in an international stock fund. I personally think that some degree of diversification into VXUS is a good idea, but if you don't do it, I doubt that will be a fatal mistake. Investing at too much or too little risk across stocks and bonds does make a difference. Note that an adjustment of 10% in that is not large. What is large is the difference between 0/100, 25/75, 50/50, 75/25 and 100/0.
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Re: Allocating funds over time

Post by pkcrafter »

Slogberg wrote:
I think the key for me is the get most, if not all the money invested, then worry about how to reallocate it.

No, this isn't correct. No. 1: You need a plan that covers asset allocation and the amount of risk you can handle. Don't "get invested" and then figure out your plan.

I also took the Vanguard test and it said I should be either 80/20 or 70/30 stocks to bonds.
From what you have posted, this sounds too aggressive. Is 80/20 your current asset allocation?
I have about $250K I am allocating to Vanguard index ETFs based mainly on the recommended ETFs from the "Gone Fishin" book.

Forget the Gone Fishing portfolio and use Taylor's 3 fund portfolio. If you don't like international, then use a two fund portfolio.
But first, you need to decide on an asset allocation you can stay with. 70-80% stocks is too aggressive.

You might also consider a stock/bond single fund or a lifestrategy or target date fund, but the LS and TR fund hold international.

How much do you have saved/invested now? The "safe" withdrawal rate in retirement is 4%, can you manage that?


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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arcticpineapplecorp.
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Re: Allocating funds over time

Post by arcticpineapplecorp. »

sloberg wrote: Sun Dec 05, 2021 5:13 pm It sounds about right as I really don't need the additional money to retire on but that I just have to get over the hurdle of being risk adverse.
if you don't need the money to retire on, why do you want to take risk that you don't need to take??

if you don't have the willingness to take the risk, why are you taking risk you aren't willing to take?

did you read up on the need, ability and willingness to take risk:

https://www.cbsnews.com/news/asset-allo ... -you-take/

https://www.cbsnews.com/news/asset-allo ... tolerance/

https://www.cbsnews.com/news/asset-allo ... -you-need/

https://www.cbsnews.com/news/asset-allo ... ing-goals/

there's nothing that says you have to "get over the hurdle of being risk averse". (not adverse).

risk aversion is pretty common. in fact being averse to risk has helped us survive as a species for a while now.

it's not sensible to take risk if you don't have the NEED. Read this from Larry Swedroe:
During my visit, I met with a 71-year old couple with financial assets of $3 million. Three years earlier their portfolio was worth $13 million.

The only way they could have experienced that kind of loss was if they had held a portfolio that was almost all equities and heavily concentrated in U.S. large-cap growth stocks, especially technology stocks. They confirmed this. They told me they had been working with a financial advisor during this period -- demonstrating that while good advice doesn't have to be expensive, bad advice almost always costs you dearly.

I asked the couple if, instead of their portfolio falling almost 80 percent, doubling it to $26 million would have led to any meaningful change in the quality of their lives? Their response was a definitive no. I told them the experience of watching $13 million shrink to $3 million must have been very painful, and they probably had spent many sleepless nights. They agreed.

I then asked why they had taken the risks they did, knowing the potential benefit was not going to change their lives very much but a negative outcome like the one they experienced would be so painful. The wife turned to the husband and punched him, exclaiming, "I told you so!"

source: https://www.cbsnews.com/news/asset-allo ... -you-need/
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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sloberg
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Re: Allocating funds over time

Post by sloberg »

Being a retired military Officer, no mortgage and no debt, I basically have enough to retire on already. I plan to work my Civil Service job another 3 years and then will have another retirement as well. Besides my TSP, which has been mostly invested in the C plan (S&P index) I have another $250K to play around with, in which I put an additional $10K into monthly with my surplus income. My TSP was about 100% invested in the C fund but I dialed it back to around 50% with the drop in the market these last couple of weeks. From what I am reading, I should just do something like put 40% in the C fund, 20% in the S fund (small caps), 20% in the I fund (international) and 20% in bonds. Then leave it alone and let it do it's thing. With my surplus money, put 60% in VTI, 20% in VXUS (international) and 20% in bonds BND. Gone Fishin and others mention these other Bond accounts like Tip so I may look into that. My biggest problem has been looking over my investments daily and overtrading or overreacting to the Market. The sooner I can let that go and take more of a long term approach, the better. I just haven't had to worry about losing $10K a day in the past since my income has increased a lot since I retired from the Navy. I guess that's a good problem to have, I suppose.
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Re: Allocating funds over time

Post by sloberg »

So I decided to allocate my funds with 50% in VTI, 10% in VT, 10% in VXUS and 30% in LTPZ vice BND. Does anyone have any comments or advice to provide on this A/A, especially in adding VT to the allocation and substituting LTPZ for BND. Thanks for everyone's insight!
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Re: Allocating funds over time

Post by JayDee37 »

VTI is total US stock market. VXUS is total international stock market. VT is total world stock market (a combo of VTI and VXUS at market cap weight). So you are duplicating somewhat across those three funds. You really only need one (VT if you want all-world equities at their market cap) or two (VTI +VXUS if you want to overweight either US or ex-US). You don't need all three.

It looks as if you would like to allocate a little bit to international, but not at the full market cap, so you can probably just stick with VTI and VXUS at whatever ratio suits you.

I have no comment on the bond portion since I don't really understand bonds. But I'm sure others will be weigh in!
Tell me, what is it you plan to do with your one wild and precious life? | ~Mary Oliver
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sloberg
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Re: Allocating funds over time

Post by sloberg »

Thanks, I just made that changed, dropped VT and put the difference in VXUS. Now the allocation would be 50% VTI, 20% VXUS and 30% LTPZ.
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Re: Allocating funds over time

Post by Marseille07 »

Why LTPZ? Seems like it's quite volatile, max drawdown hitting 20%. It's high risk high return due to longer duration.

If that's what you want it's fine, but be sure you are aware of volatility.
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retiredjg
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Re: Allocating funds over time

Post by retiredjg »

sloberg wrote: Fri Dec 03, 2021 10:16 pm I have about $250K I am allocating to Vanguard index ETFs based mainly on the recommended ETFs from the "Gone Fishin" book. I am afraid that the market is beginning to tank so I am only allocating a couple of thousand dollars on the days in which the market is down. I am also putting more money towards the ETFs that have lost the most that day, which has been the small caps lately (VB and VXF). So far I've invested about $20K over the past couple of weeks. Does this sound like a sound strategy or does anyone have any other ideas? I'm just afraid of putting $200K in the Market right now and it drops 20%. Appreciate any ideas you have.
You are not going to get many useful replies here for several reasons.

1. I'd have to guess that few people know what the Gone Fishing book recommends.

2. What you invest in next depends on a lot of things which are not mentioned. See the "Asking Portfolio Questions" link at the bottom of this message. Of large importance are your other accounts - such as the large TSP account you mentioned later.

My input: Investing $10k a month is well....not a good way to get $250k into the market. If you are comfortable with your chosen asset allocation, you should be able to get $250k into the market in something between 10 minutes and 6 months at the most. It does not seem that you have an overall portfolio plan or you would not have trouble investing this windfall.

If your 10 ETFs are all in this windfall, that is likely to be in a taxable account. 10 funds is a lot of funds for a taxable account. You may be doing yourself a disservice.

How can we help you make a plan?
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Re: Allocating funds over time

Post by pkcrafter »

sloberg wrote: Sun Dec 05, 2021 8:37 pm
Sloberg,
Being a retired military Officer, no mortgage and no debt, I basically have enough to retire on already.

OK, then you can probably get by with a 40/60 asset allocation.

I plan to work my Civil Service job another 3 years and then will have another retirement as well. Besides my TSP, which has been mostly invested in the C plan (S&P index) I have another $250K to play around with, in which I put an additional $10K into monthly with my surplus income.

You are making this much too complicated--you have one retirement portfolio. If you have 250k in additional assets, do not "play around" with it--it is part of total investable assets, so invest it according to your target asset allocation. That AA seems to be something you have not settled on.

My TSP was about 100% invested in the C fund but I dialed it back to around 50% with the drop in the market these last couple of weeks.

A serious mistake that is related to taking too much risk!--and not understanding fundamentals of sound investing.

From what I am reading, I should just do something like put 40% in the C fund, 20% in the S fund (small caps), 20% in the I fund (international) and 20% in bonds. Then leave it alone and let it do it's thing. With my surplus money, put 60% in VTI, 20% in VXUS (international) and 20% in bonds BND. Gone Fishin and others mention these other Bond accounts like Tip so I may look into that.

There is no surplus money. Again, this is part of your total net worth. I would not recommend the S fund or I fund. Keep it simple with total stock market (you said you didn't want international) and total bond at maybe 40-50% stock and stop messing with it. If you want some international, then use a target date fund or lifestrategy fund plus a balanced fund to get to the stock/bond allocation you desire.

https://investor.vanguard.com/mutual-funds/balanced.

Note, if you need to use a taxable account, consider Vanguard's tax-managed balanced fund, then adjust total allocation in a tax-deferred account. Using these types of funds will keep you hands-off. :happy

My biggest problem has been looking over my investments daily and overtrading or overreacting to the Market.

Yes!

The sooner I can let that go and take more of a long term approach, the better.

Yes!

I just haven't had to worry about losing $10K a day in the past since my income has increased a lot since I retired from the Navy. I guess that's a good problem to have, I suppose.

Asset fluctuation is normal, and you don't lose it unless you sell low.


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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sloberg
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Re: Allocating funds over time

Post by sloberg »

Paul:

I see what you are saying about the volatility of LTPZ, yikes, probably should just stick with BND and call it a day. Earlier I meant that I would put in an additional $10K a month once my entire initial amount of $250K is in the market. As of today I have put about $62K out of the $250K into the accounts, about $40K of that today, so I am getting there. I think I can live with a 70/30 split in assets.
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retiredjg
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Re: Allocating funds over time

Post by retiredjg »

You probably do not want to hold taxable bonds such as Total Bond Market in a taxable account unless you are in a very low tax bracket.
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sloberg
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Re: Allocating funds over time

Post by sloberg »

Definitely, I have them in my Roth IRA account.
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retiredjg
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Re: Allocating funds over time

Post by retiredjg »

sloberg wrote: Mon Dec 06, 2021 5:05 pm Definitely, I have them in my Roth IRA account.
Like I said earlier, you need to make an overall plan....a plan so that all your accounts are working together, not separately.

My input would be that the F and G funds are probably where your bonds need to be, not taxable or Roth IRA.
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