Adding in this market

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jaj2276
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Joined: Sat Apr 16, 2011 5:13 pm

Adding in this market

Post by jaj2276 » Tue Feb 28, 2012 9:21 pm

Ok, so I'm somewhat paralyzed by the fear of "buying at the top" so I need some advice. My situation is slightly different than the typical "just got $XXX dollars, should I lump sum or DCA" questions, although maybe after you read it you'll think it's exactly like that.

My current investments total around $715k with retirement accounts making up around $275k. My target AA is Age - 10 in bonds, 10% in gold/silver, 5% cash, and the rest in equities (with a 66/33 split between domestic/international).

I have $75k in a taxable account to invest (the amounts in this paragraph are all part of the above totals). After TLH'ing at the end of last year, I wanted to wait the 2-month lockout period so I could buy back into Total Stock and Total Intl Stock with this amount (I created my AA last year and was attempting to DCA this amount over a few months). I'm also in the process of moving over a $110k Roth that has been sitting in cash since mid-January. It's been in cash since then because it was invested in ETFs at another brokerage and due to circumstances beyond my control needed to be liquidated before being moved into a Mutual Fund-only account at Vanguard. Unfortunately the process has taken much, much longer than I had anticipated.

So at this point, I have $75k that I can invest immediately (the two-month lock-out period for the desired funds ended yesterday). In about two weeks, I'll hope to have the $110k in the Roth to invest. Obviously I'm not at my AA with so much cash (I'm currently at Age - 10 in bonds, 9% gold/silver, 34% cash, and the rest in equities). I wouldn't be so "worried" about lump sum investing if there hadn't been such a large move in the market over the past month in a half.

Should I forget about what the market has done?
Should I wait for really bad days to move in (knowing that there might be more to follow)?
Should I be more aggressive with the $75k in taxable since I can at least TLH those amounts if I am in fact buying at the top?

livesoft
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Re: Adding in this market

Post by livesoft » Tue Feb 28, 2012 9:24 pm

You should not have waited for 2 months. You have missed 10%+ upward moves in equities. Do you realize that??

One should not wait for RBDs to invest. On an RBD, I think one should rebalance and/or exchange from bonds to equities.

Did you see that in 2009, small-caps were up 47% in 5 weeks? I think the market moves in fits and starts, so you cannot time the market. Hold your nose and invest. You will lose money, but so what? You will make it back eventually.
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Majormajor78
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Re: Adding in this market

Post by Majormajor78 » Tue Feb 28, 2012 10:28 pm

jaj2276 wrote: Ok, so I'm somewhat paralyzed by the fear of "buying at the top" so I need some advice. My situation is slightly different than the typical "just got $XXX dollars, should I lump sum or DCA" questions, although maybe after you read it you'll think it's exactly like that.
Yes, it's exactly like that. :wink: Lots of arguments either way but no way to know which decision is the best. Statistically I believe it's better to invest right away. I vaguely remember reading that on any given day, the market is higher 1 year later 2/3rds of the time. Or dollar cost average if that remaining 1/3rd scares you. There really is no meaningful advice I or anyone else can give you other than to tell you the risks and take the plung at your comfort level.

As livesoft pointed out, you should not have been uninvested, even with that ridiculous lockout period Vanguard imposes on people. If you TLH total market, stick it in a close enough proxy like a S&P 500 fund. TLH total international? Buy a combination of Vanguard Developed Markets Index Fund Admiral (VDMAX)
and Vanguard Emerging Markets Select Stock Fund (VMMSX) to approximate total international.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."

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MortgageOnBlack
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Re: Adding in this market

Post by MortgageOnBlack » Tue Feb 28, 2012 10:40 pm

I feel your pain, but I must say not at your level due to the cash difference :lol: but I believe I do to scale . I have 10k that I've been waiting to drop into my Roth shortly (5k for 2011-april 17th deadline, and 5k for 2012). I know I'm 100% going to drop it in my ROTH's because I refuse to lose that opportunity, but it's driving me crazy when I actually should (I'm guilty of market timing :oops: ). Someone made the analogy of dipping your toes in the pool gradually vs jumping in and that pretty much sums me up. It would be nice to drop all 10k in right now and forget about it but I have the same fears as you. I feel more comfortable DCAing it throughout this year because of this. I'm more weary because this is my starting cash for retirement investing.

livesoft
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Re: Adding in this market

Post by livesoft » Tue Feb 28, 2012 11:00 pm

Many years ago I read that for the stock market to go higher, it will have to spend some time at near-term highs, intermediate-term highs, and all-time highs. That is, there is no way getting around investing at highs. Just do it. It is best to have a contract (i.e. plan) before you get in such a situation that forces you to do what needs to be done. If that is forced DCA, then so be it. If that is a temporary change in asset allocation, then so be it. If that is an RBD, then so be it.

So write something down that you can at least use the next time. :)
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White Coat Investor
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Re: Adding in this market

Post by White Coat Investor » Tue Feb 28, 2012 11:12 pm

It probably is about to crash. I put in the year's backdoor Roth IRA contributions today. Used tax refund money.
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icedtea
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Re: Adding in this market

Post by icedtea » Tue Feb 28, 2012 11:22 pm

I can speak from similar experience. I have had a lot of cash on the sidelines for a long time, but now I have a plan, thanks largely to members of this forum. I'm investing a portion of my cash in the short term and DCAing the rest throughout the year. I've already invested 25k in the last two weeks. I would do something similar if you have the jitters. Get some of the money in the market now, so you don't feel bad if it keeps rising. And DCA some, so you don't feel bad if the market drops.

The S&P may end the year at 1600, or it may end at 1100. We really have no idea, and I'm sure you're well aware of that. I'm reminding myself that I have plenty of time on my side. I'm 30. If your time horizon is any bit like mine, investing now or when the S&P is at 1100 or 1500 won't really mean all that much.

Good luck!

-Iced Tea

madbrain
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Re: Adding in this market

Post by madbrain » Tue Feb 28, 2012 11:30 pm

I took out $330k out of the market due to a 401k rollover on jan 18. My rollover should finally be completed and the funds reinvested on thursday or friday, finally. 50% is going into VIIIX, ie. US total stock market. I believe the market will crash next monday.

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tuckeverlasting
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Re: Adding in this market

Post by tuckeverlasting » Tue Feb 28, 2012 11:53 pm

icedtea wrote:I can speak from similar experience. I have had a lot of cash on the sidelines for a long time, but now I have a plan, thanks largely to members of this forum.-Iced Tea
I am in the exact same position. After months of learning, planning, agonizing and finally, asking questions here, I am on the verge of executing my plan and investing my cash...only to find we are at a market high (or not...?). Glad to know I'm not the only one struggling with this issue. I am older than some posters like Iced Tea so may be in a little different situation.
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jaj2276
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Re: Adding in this market

Post by jaj2276 » Wed Feb 29, 2012 6:12 am

Of course I should have been invested for this market move, but that's the reason for this post! When I TLH'd, I took those loss-harvested funds and purchased similar funds so I've participated in the market with those funds. The TLH event only caused me trouble with new money, not the TLH'd money (I hope that's clear).

The amounts that haven't participated in the market move is the cash I was still DCA'ing (but "paused" due to me not being able to DCA into the exact funds I wanted for two months) and the cash I have due to an account transfer (which isn't TLH money and was supposed to be reinvested in early February).

I'm glad (well not really because it's a terrible feeling) that there are many others in my situation (i.e. cash to invest) who are going to invest and then expect the market to collapse soon thereafter. I actually don't have much worry about the $75k in the taxable account because I can TLH if the market does in fact move down. The Roth IRA on the other hand is a bit more worrisome since I can't do anything with its paper losses.

quiet_morning
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Joined: Tue Jun 21, 2011 5:36 am

Re: Adding in this market

Post by quiet_morning » Wed Feb 29, 2012 7:01 am

Well,though you say it's not a lump sum v. DCA situation, it sounds similar. Also, it's a market timing question.

I suffer from the same fears and am trying to get a 7-figure sum into my AA after sale of a company. Here's how I [try with moderate success to] sleep at night.
  • http://www.cbsnews.com/8301-505123_162- ... r-results/
  • http://www.rickferri.com/blog/investmen ... -lump-sum/
  • Nobody has a clue what the market will do; anybody who says they do is selling you something or blowing off steam because they're scared/fantasizing about their own portfolio.
  • Say you have 100k to invest on a 20 yr time horizon. Now imagine a magic genie says A) you can keep that cash right now or B) I can go back in time and invest the same amount (real terms, inflation reduced) in the market exactly 20 yrs ago today in the AA you specify. Which would you choose? I'd always choose B, despite having no clue what the market was like 20 yrs ago today.
Good luck.

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