Is now a poor time to invest?

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bobbobobbo
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Is now a poor time to invest?

Post by bobbobobbo » Wed Mar 13, 2013 4:52 am

I have my 3 fund portfolio set up. Allocated properly along with 20% bonds.

Given the current high total values in equities, it would only make sense it would drop at some point in the near future? (as most claim) Making it a good time to invest at that point?
I understand one should never attempt to time the market, or use prior history. Yet considering this will be single investment timing, held over a long period of time, perhaps I should wait until a significant downturn?

Some of many, claiming end of the bull..
http://money.cnn.com/2013/01/25/investi ... index.html
http://seekingalpha.com/article/1266721 ... oogle_news

Or should I just invest now and forget about this notion of investing once the market drops?

Investing a large lump sum at the end of a (potential) bull market. What would each of you do?
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bottlecap
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Re: Is now a poor time to invest?

Post by bottlecap » Wed Mar 13, 2013 5:03 am

Welcome to theforum. This is a common question, no matter where the market is. It's as poor a time as any to invest. The problem is you won't know whether those articles are correct until two or three years from now. If they are wrong, you'll be in the same exact dilemna in three years. How about dollar cost averaging?

JT
Last edited by bottlecap on Wed Mar 13, 2013 5:31 am, edited 1 time in total.

bobbobobbo
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Re: Is now a poor time to invest?

Post by bobbobobbo » Wed Mar 13, 2013 5:24 am

First off I apologize, this is a common topic. I searched, but didn't have the right knowledge of key words. DCA was a huge one. I shall leave this thread up anyway.
bottlecap wrote:The problem is you won't know whether those articles are correct until two or three years from now. If they are wrong, you'll be in the same exact dilemna in three years.
That makes a lot of sense. I have no problem tossing everything in and staying rock solid from here on out. Even if it drops, I would have minimal regret. This lump sum is from an inheritance, already riding the waves of the market for many years. I just have the benefit of a brand new cost basis. Hence the "lump sum".
It's just hard when you read almost "facts" that the market is cyclical by nature, and we're nearing the end of the upward trend....
bottlecap wrote:How about dollar cost averaging?
Although it may help me psychologically if the market suddenly tanks, research seems to show a lump sum investment should perform better. Essentially, put the money in at any point, and just stick to the plan.
http://www.bogleheads.org/wiki/Dollar_cost_averaging
It's not so much the benefits psychologically of DCA but rather the relative certainty that the bull will end soon, making lump sum investments that much more risky.
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Re: Is now a poor time to invest?

Post by Call_Me_Op » Wed Mar 13, 2013 5:33 am

If you are concerned about the markets, put half in now and dollar cost average the rest over time. There are then 2 possible outcomes:

1.) Market goes up in the near future, and you pat yourself on the back for having something in there to take advantage of it.

2.) Market goes down in the near future, and you pat yourself on the back for having some "dry powder" to pick-up shares at a reduced price.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Is now a poor time to invest?

Post by Call_Me_Op » Wed Mar 13, 2013 5:35 am

bobbobobbo wrote: Although it may help me psychologically, if the market suddenly tanks, research seems to show a lump sum investment should perform better.
No!!! That's not what research shows. Research shows that at any point in time, the probability is greater that the market will go higher versus lower. But if the market tanks right after you buy, you would have been better-off waiting.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Is now a poor time to invest?

Post by bottlecap » Wed Mar 13, 2013 5:45 am

I only meant to suggest that you aren't the only one conflicted about this. No apology needed.

Lump sum is probably better, on average. But whether it will be better now is anyone's guess. If the market tanks, you will lose more money, if it goes up and never falls you will make more.

I don't quite understand the concern about the adjusted basis. If the money in cash now, the basis doesn't matter anymore. If it's invested, it still has it's basis, whether you sell now or 10 years from now, right?

What is your concern about investing now? Fear of loss or desire for the greatest gain? If you don't fear loss, then lump sum. If you do, DCA. If you want the greatest gain, you will spend a lot of time and effort chasing it, likely to no avail.

Maybe you shouldn't do anything just yet. How recent was this inheritance?

Good luck,

JT

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Re: Is now a poor time to invest?

Post by bobbobobbo » Wed Mar 13, 2013 5:48 am

Call_Me_Op wrote:If you are concerned about the markets, put half in now and dollar cost average the rest over time. There are then 2 possible outcomes:

1.) Market goes up in the near future, and you pat yourself on the back for having something in there to take advantage of it.
2.) Market goes down in the near future, and you pat yourself on the back for having some "dry powder" to pick-up shares at a reduced price.
I may look into something of this nature..
Call_Me_Op wrote:
bobbobobbo wrote: Although it may help me psychologically, if the market suddenly tanks, research seems to show a lump sum investment should perform better.
No!!! That's not what research shows. Research shows that at any point in time, the probability is greater that the market will go higher versus lower. But if the market tanks right after you buy, you would have been better-off waiting.
I believe it was an error on my part from a simple comma. I meant to state "Although it may help me psychologically if the market suddenly tanks, research seems to show a lump sum investment should perform better."
"would have been better off waiting" is out of anyone's control, as no one can predict the future.

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Re: Is now a poor time to invest?

Post by bobbobobbo » Wed Mar 13, 2013 5:59 am

bottlecap wrote:I only meant to suggest that you aren't the only one conflicted about this. No apology needed.
Lump sum is probably better, on average. But whether it will be better now is anyone's guess. If the market tanks, you will lose more money, if it goes up and never falls you will make more.
I don't quite understand the concern about the adjusted basis. If the money in cash now, the basis doesn't matter anymore. If it's invested, it still has it's basis, whether you sell now or 10 years from now, right?
What is your concern about investing now? Fear of loss or desire for the greatest gain? If you don't fear loss, then lump sum. If you do, DCA. If you want the greatest gain, you will spend a lot of time and effort chasing it, likely to no avail.
Maybe you shouldn't do anything just yet. How recent was this inheritance?
No I understand, I was just overwhelmed by the discussions available on this topic, it's a great relief to read through others. Everyone here is so kind.

I've done quite a bit of research before coming upon the 3 fund portfolio. The inheritance is almost a year old now. It has been sitting in a 100% equity portfolio. It will have the same cost basis (from last year) 10 years from now yes, but if I'm fully restructuring a portfolio, it makes sense to do it while the cost basis is low. Too much capital gains all at once I thought is a bad thing to have? Liquidating my portfolio now would create very minimal capital gains, thus can be treated more as a lump sum if anything.
(my only point in bringing that up was that to the psychological effect of it already being "invested" and riding the waves. If it tanks, it would just be me watching what it would have done naturally, untouched from before. I simply have a nice reset button allowing me to liquidate the full amount, and reinvest. A likely one time thing. That or I have something quite off regarding the "hold" aspect of the investing and cost basis/capital gains, etc.)

I do not fear loss if it is out of my control/judgement. Nor do I need to chase greatest gain. I like to do the most sound approach, and stick to it.
My basic concern is that of someone that has a large lump sum to invest at the "end" of a bull market. What you specifically do. You being the individual, wise investors of this board.
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Re: Is now a poor time to invest?

Post by Call_Me_Op » Wed Mar 13, 2013 6:09 am

The point is you have no idea whether this is the end of a bull market or the beginning of one. If you examine the Dow over the past 15 years, it looks more like a secular bear market rather than a bull market. That's why I think half in now and cost-average the rest strikes a good balance. We cannot predict the future of the markets - especially in the short term.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Is now a poor time to invest?

Post by FillorKill » Wed Mar 13, 2013 6:17 am

Call_Me_Op wrote:The point is you have no idea whether this is the end of a bull market or the beginning of one. If you examine the Dow over the past 15 years, it looks more like a secular bear market rather than a bull market. That's why I think half in now and cost-average the rest strikes a good balance. We cannot predict the future of the markets - especially in the short term.
^^^ That's good. The OP needs to keep in mind that you'll find experts to agree with whatever notion you want confirmed. You think equities are wildly overvalued? There's an expert for you. You think massive inflation will decimate bond values? There's an expert for you. You believe stocks are fairly valued and a good long term investment? There's an expert for you. And on and on and on. Confirming your ideas and opinions is easy and satisfying on some level but it isn't usually a good basis for an investment plan. That said education and comfort are important too so taking it slowly is wise. And I'm not an expert. :P

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Re: Is now a poor time to invest?

Post by bobbobobbo » Wed Mar 13, 2013 6:22 am

Call_Me_Op wrote:The point is you have no idea whether this is the end of a bull market or the beginning of one. If you examine the Dow over the past 15 years, it looks more like a secular bear market rather than a bull market. That's why I think half in now and cost-average the rest strikes a good balance. We cannot predict the future of the markets - especially in the short term.
^^^ That's good. The OP needs to keep in mind that you'll find experts to agree with whatever notion you want confirmed. You think equities are wildly overvalued? There's an expert for you. You think massive inflation will decimate bond values? There's an expert for you. You believe stocks are fairly valued and a good long term investment? There's an expert for you. And on and on and on. Confirming your ideas and opinions is easy and satisfying on some level but it isn't usually a good basis for an investment plan. That said education and comfort are important too so taking it slowly is wise. And I'm not an expert. :P

Very true. Good balance sounds great, I'm going to look into 50/50dca. Who knows the future. I definitely want to tune out the noise, and not attempt to time the market. I'm very much for the slow, wise, educated approach. I agree there's an expert for everything. It's just hard with all the statistics showing the end of the bull, and all the index funds I'm purchasing rated at "strong sell". Many here also claim things are peaking, though yup, who really knows.

Opinions also help, would love to hear what others would do with a large lump sum, at this moment in time. Although judging by this forum, time is irrelevant.

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Re: Is now a poor time to invest?

Post by richard » Wed Mar 13, 2013 6:37 am

The market essentially reflects the wisdom of the crowd. If most really thought it will soon drop, then it would be lower today.

No one knows how it will move over the short or long term, although if you don't believe your chosen allocation will do well over the long term, why did you chose it? If you believe your chosen allocation is good, then move to in now. If that's a concern, move in defined stages, as others have suggested.

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Re: Is now a poor time to invest?

Post by nisiprius » Wed Mar 13, 2013 6:45 am

Bobbo, there's no way around the obvious.

1) The stock market is risky.

2) Not only do individual stocks fluctuate, the stock market as a whole fluctuates. A lot. Every stock investment, even "total market" investments or "broadly diversified" stock investments fluctuate. A lot. The cleverest, best diversification practices, or selection theories like "dividend stocks" or "low volatility" stocks might shave just a bit off the volatility, but just a bit... or then again, maybe not.

3) Those fluctuations can last a long time, like one or two decades.

4) If you could be in the market only when it's rising and in cash when it's falling, you would get rich quickly. If you could do this, it would mean that you've eliminated stock market risk--it's risky for everyone else, but not for you. But Bernard Baruch said "Don't try to buy at the bottom and sell at the top. It can't be done except by liars." There are outright market timing by that name (signals and moving averages). There are its more respectable cousins, "tactical asset allocation," and even the "rebalancing bonus." Either they just plain don't work, or at best have a razor-thin long-term statistical "edge" that's so small that people argue forever over whether it's really there.

5) With regard to "stocks for the long run," there are two schools of thought.

Optimists: stocks become less risky over long holding periods, and that you really can sort of count on them if you are willing to stay the course in them for decades. The point here is that if you listen carefully, even the people saying this are talking about very long times. Jeremy Siegel, author of the book Stocks for the Long Run, writes of
... the extraordinary stability of the real return on stocks over all major subperiods:7.0 percent per year from 1802 through 1870, 6.6 percent from 1871 through 1925, and 6.8 percent a year since 1926. [i.e. until 2007]...
The shortest of those subperiods is 55 years..

Pessimists (me): stocks are risky over all periods of time. The "equity risk premium" is a reward for taking risk. If the risk went away just by holding for a long time, it wouldn't be a risk premium, it would be a patience premium. Yes, over an investing lifetime, the chances of getting of a really worthwhile reward are so high that it is a very good risk. But, "risk" means you might take the risk and never actually get the reward.

But even the optimists say you'd better stay the course for decades.

So, what to do? If you can't invest only at "good times," because nobody knows when they are, and you can't make the risk go away...

...obviously...

The only answer is to accept the risk.

You need to make the best assessment you can of the risk of stocks--looking at the data for yourself and using your own definition of "risk," not someone else's. You need to assess your personal risk tolerance. And don't kid yourself about your personal risk tolerance, either. Periods like 2008-2009 happen.

When a friend told J. P. Morgan he was so worried about his stocks that he couldn't sleep at night and asked what to do, Morgan replied, "Sell down to your sleeping point." OK, turn it around, buy up to your sleeping point--and not beyond.

Invest as much in stocks as you can tolerate buying now, knowing that it might indeed be a bad time--or it might be a good time.
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Re: Is now a poor time to invest?

Post by FillorKill » Wed Mar 13, 2013 6:45 am

Opinions also help, would love to hear what others would do with a large lump sum, at this moment in time. Although judging by this forum, time is irrelevant.
I would lump sum. However, like many others here I've seen really nasty equity declines and I know how I react when they arrive. I know that I will stick with the plan. The main reason anyone recommends some version of DCA here is for psychological comfort. When you're new to investing, handling a very large sum of money for the first time, or nervous and not yet fully committed you're in a more likely position to bail on your plan if things head South in a hurry.

If your frame of mind from the onset is that equities are overvalued and headed for a big sell-off then you're probably not the best candidate for lump sum. When I mentioned taking your time and education that may mean that you conclude on your own that you should lump sum based on your research and that is the best solution for you. I was saying "Don't be hasty". If you've decided to DCA, which is perfectly reasonable, then there you are, I'd write a plan with a schedule for the investments to get you to your AA and then follow the plan without regard to what cnn money or seeking alpha might have to say about the state of the market at those times. But that's me. I still say take your time with the decision either way. :beer

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Re: Is now a poor time to invest?

Post by crowd79 » Wed Mar 13, 2013 7:02 am

Never lump sum when the market is at all-time highs. I'm way more confortable DCA'ing at these levels.

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Re: Is now a poor time to invest?

Post by richard » Wed Mar 13, 2013 7:04 am

If you think stocks will go up over time and if you are not able to market time, then lump sum now.

If you don't think stocks will go up over time (or at least that stocks will improve the value of your portfolio), why invest in stocks?

Presumably you can't successfully market time or you wouldn't be looking for advice here.

If most really thought the market will drop at some point in the near future, it would have already dropped.

As others have suggested, moving in defined stages can be easier psychologically. Just make sure you follow the plan, as it's easy to think altering it is a good idea (e.g., the market just went up yesterday, so I'll wait). Discipline is key.

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Re: Is now a poor time to invest?

Post by assumer » Wed Mar 13, 2013 7:07 am

Opinions also help, would love to hear what others would do with a large lump sum, at this moment in time. Although judging by this forum, time is irrelevant.
I would lump sum 2/3, and DCA the remaining 1/3, purely for the psychological benefits of (1) sleeping better at night if you might kick yourself if the market tanks, (2) getting used to having regular deposits into your investment account.

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Re: Is now a poor time to invest?

Post by Call_Me_Op » Wed Mar 13, 2013 7:11 am

crowd79 wrote:Never lump sum when the market is at all-time highs. I'm way more confortable DCA'ing at these levels.
Just remember that this was the case in 1984 - at the start of the greatest stock bull-market in US history.
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Re: Is now a poor time to invest?

Post by Ed 2 » Wed Mar 13, 2013 7:30 am

Call_Me_Op wrote:
crowd79 wrote:Never lump sum when the market is at all-time highs. I'm way more confortable DCA'ing at these levels.
Just remember that this was the case in 1984 - at the start of the greatest stock bull-market in US history.
+1 in addition,keep in mind that stocks in general haven't moved on a higher levels actually since year 2000,that is a long,long period.trillion dollars yet in peoples money market accounts "waiting for the right moment" and so on.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel

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Re: Is now a poor time to invest?

Post by Call_Me_Op » Wed Mar 13, 2013 7:32 am

To add to the above, on an inflation-adjusted basis, the S&P 500 is about 30% below its high.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Is now a poor time to invest?

Post by Ed 2 » Wed Mar 13, 2013 7:38 am

Call_Me_Op wrote:To add to the above, on an inflation-adjusted basis, the S&P 500 is about 30% below its high.
"official" inflation with out food and gas prices and not the real one :happy
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Re: Is now a poor time to invest?

Post by nisiprius » Wed Mar 13, 2013 8:30 am

Ed 2 wrote:
Call_Me_Op wrote:To add to the above, on an inflation-adjusted basis, the S&P 500 is about 30% below its high.
"official" inflation with out food and gas prices and not the real one :happy
:annoyed NO NO NO NO NO. Why DO people keep saying this? It's some kind of urban legend that just keeps getting repeated because it keeps getting repeated. What bothers me is that it literally takes less than ten minutes to go the BLS website and see for yourself that it ain't so. Sometimes I think there is another urban legend that the CPI values are computed in total secrecy and that nothing is ever revealed except the final number... and that the BLS releases that number by burning paper money and emitting green smoke from the BLS's chimney.

"The" CPI, CPI-U, which is the one that is used to index TIPS and I bonds and the one that's always used when "real returns" are stated, includes food and fuel. So does CPI-W, which is what Social Security is indexed to.

Please, Ed, do me a favor. Please please please go to the BLS website, and look for yourself.

CPI Detailed Report, January 2013

Table 1, starting on page 25.

Food accounts for about 15% of the CPI.
Gasoline accounts for about 5% of the CPI.


Breakfast cereal constitutes 0.289% of the CPI. Bananas constitute 0.081% of the CPI.

A special version of the CPI that excludes food and fuel is used by the Fed for planning and policymaking purposes. Excluding food and fuel produces an index with less short-term volatility. Whether this is legit for policy planning I don't know, but this is not the CPI that's used to calculate "real returns" or to adjust benefits.

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Re: Is now a poor time to invest?

Post by KyleAAA » Wed Mar 13, 2013 8:33 am

If the people writing those articles were really THAT good at predicting what the market will do in the future they'd be out sailing on their private yachts rather than writing articles about the stock market.

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Re: Is now a poor time to invest?

Post by tadamsmar » Wed Mar 13, 2013 8:36 am

bobbobobbo wrote: Given the current high total values in equities, it would only make sense it would drop at some point in the near future? (as most claim) Making it a good time to invest at that point?
Not sure what you mean by "as most claim". The current price represents the consensus of investors.

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Re: Is now a poor time to invest?

Post by richard » Wed Mar 13, 2013 8:46 am

nisiprius wrote:A special version of the CPI that excludes food and fuel is used by the Fed for planning and policymaking purposes. Excluding food and fuel produces an index with less short-term volatility. Whether this is legit for policy planning I don't know, but this is not the CPI that's used to calculate "real returns" or to adjust benefits.
Actually, the Fed uses the personal consumption expenditures deflator, a different index, for planning and policy making. http://en.wikipedia.org/wiki/Personal_c ... rice_index

Core CPI (the CPI excluding food and energy) is essentially a smoothed CPI, Over time, the two are virtually identical. Consider the billion prices project, which shows the same results as the CPI.

I share your frustration on the subject, although it is not entirely surprising. You might want to look at a recent survey asking people if the deficit is increasing or decreasing, if you really want to get depressed. A whopping 6% got it right. Even without considering that it's a subject which often dominates the headlines, it's amazing how misinformed people are.

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Re: Is now a poor time to invest?

Post by SP-diceman » Wed Mar 13, 2013 8:50 am

How many more years of employment do you have?

There’s a big difference if you’re 30 and have decades to invest,
vs.
you’re retired and all your savings are on the line.




Thanks
SP-diceman

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Re: Is now a poor time to invest?

Post by Carpe » Wed Mar 13, 2013 8:56 am

bobbobobbo wrote:I have my 3 fund portfolio set up. Allocated properly along with 20% bonds.

Given the current high total values in equities, it would only make sense it would drop at some point in the near future? (as most claim) Making it a good time to invest at that point?
I understand one should never attempt to time the market, or use prior history. Yet considering this will be single investment timing, held over a long period of time, perhaps I should wait until a significant downturn?

Some of many, claiming end of the bull..
http://money.cnn.com/2013/01/25/investi ... index.html
http://seekingalpha.com/article/1266721 ... oogle_news

Or should I just invest now and forget about this notion of investing once the market drops?

Investing a large lump sum at the end of a (potential) bull market. What would each of you do?
My impression is that you may be looking at the issue from a "stock-centric" point of view and, as a consequence, your asset allocation may be off.

Ultimately, is there a risk bias in your asset allocation which is causing your doubt. i.e. more "speculative" than "preservationist". Perhaps your circumstances have changed, which would also be grounds for reviewing your asset allocation.

Having an asset allocation that you are comfortable with is absolutely critical to maintaining your perspective during the downs and ups of the stock market, and financial storms in particular.
Carpe: pick, pluck, pluck off, gather

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Re: Is now a poor time to invest?

Post by grayfox » Wed Mar 13, 2013 11:22 am

bobbobobbo wrote:I have my 3 fund portfolio set up. Allocated properly along with 20% bonds.

Given the current high total values in equities, it would only make sense it would drop at some point in the near future? (as most claim) Making it a good time to invest at that point?
I understand one should never attempt to time the market, or use prior history. Yet considering this will be single investment timing, held over a long period of time, perhaps I should wait until a significant downturn?

Some of many, claiming end of the bull..
http://money.cnn.com/2013/01/25/investi ... index.html
http://seekingalpha.com/article/1266721 ... oogle_news

Or should I just invest now and forget about this notion of investing once the market drops?

Investing a large lump sum at the end of a (potential) bull market. What would each of you do?
Most people saving for retirement have new savings to invest every year. Or maybe every pay period which could be twice a month. But for simplicity, let's say you invest once a year on December 31st. Let's say that you started investing in 1999 to fund a 40-year retirement starting on 1/1/2040. Your savings is $10,000 each year and you decided on 80/20 stocks and bonds.

On 12/31/1999 earnings yield on S&P 500 E10/P was 2.26% and 10-YR Treasury was 6.28%. Expected stock return was poor, but interest rates were high and expected bond returns were good. 80/20 portfolio expected real return, i.e. after inflation, maybe 2.5%

12/31/2002 S&P 500 E10/P was 4.33% and 10-Year was 4.03%. 80/20 portfolio maybe 3.8% real
12/31/2007 S&P 500 E10/P was 3.85% and 10-Year was 4.10%. 80/20 portfolio maybe 3.4% real
12/31/2008 S&P 500 E10/P was 6.51% and 10-Year was 2.42%. 80/20 portfolio maybe 5.2% real
12/31/2012 S&P 500 E10/P was 4.69% and 10-Year was 1.72%. 80/20 portfolio maybe 3.6% real
03/13/2013 S&P 500 E10/P is 4.28% and 10-YR is 2.04%. 80/20 portfolio maybe 3.3% real

Historically, it's a poor time to invest in 80/20. Not as bad as 1999. But before 1995, 80/20 had 4% or 5% expected real return. 1980s, 6% or 7% and higher. 1982 was probably 10-12%. :moneybag

I think the historical average is about 6% real expected return for 80/20. So we are at 1/2 the historical average. :x

(BTW over 40 years, at 3% $10,000 grows to $32,620
at 6% it grows to $102,857)

Expected returns have been low since about 1995. Almost for 20 years. There was a brief period in 2008/2009 when you could get 5-6%. The window was only a few months from 10/2009 to 7/2009. This is a low-return era.

Unfortunately, we have to play the cards we are dealt.

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Re: Is now a poor time to invest?

Post by bobbobobbo » Wed Mar 13, 2013 1:41 pm

I appreciate all the detailed responses! Instead of quoting everyone, I'll give a little further about myself.

I am 25 years old, planning to invest the sum for 30+ years. I feel my 80/20 allocation is perfect (if anything I'd reduce bonds), I will not change from it anytime soon and continue to re-allocate properly. I do not need a psychological benefit, I will set and forget, I'm comfortable whatever the market does, I just need the "that was the most educated thing to do". The extra noise of others means nothing to me. I'm more stating seeing as equities are at an all time high, how would you guys go about inputting money into investing for the (technical) first time right now. Just gathering personal opinions of those with more wisdom than me.

As I sit right now, I have 75% of my equity portion invested. In 5 months or so I shall look to invest the rest.

I really appreciate all the helpful words, and shall definitely keep reading if the thread continues.

Twins Fan
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Re: Is now a poor time to invest?

Post by Twins Fan » Wed Mar 13, 2013 1:55 pm

Sounds like "lump sum" it all in there then. With a 30+ year timeling, no need for psych. "feel better", not worried about what the market does, and set and forget, I'd say no time like the present. Unless you think equities will be lower 30 years from now... but, then why would you invest in them? :happy

Is there a dip or correction come up sometime? Probably, maybe, who knows... Does anyone know when that will be, if it happens? Nope... I'd say for your circumstances, OP, now is not a poor time to invest.

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Toons
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Re: Is now a poor time to invest?

Post by Toons » Wed Mar 13, 2013 2:08 pm

bobbobobbo wrote:I have my 3 fund portfolio set up. Allocated properly along with 20% bonds.

Given the current high total values in equities, it would only make sense it would drop at some point in the near future? (as most claim) Making it a good time to invest at that point?
I understand one should never attempt to time the market, or use prior history. Yet considering this will be single investment timing, held over a long period of time, perhaps I should wait until a significant downturn?

Some of many, claiming end of the bull..
http://money.cnn.com/2013/01/25/investi ... index.html
http://seekingalpha.com/article/1266721 ... oogle_news

Or should I just invest now and forget about this notion of investing once the market drops?

Investing a large lump sum at the end of a (potential) bull market. What would each of you do?

Was March 2009 a poor time to invest? Dow 6600 :shock:
If you are investing for decades ,invest today,don't put it off,it is just one less day your money is compounding for you
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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InvestorNewb
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Re: Is now a poor time to invest?

Post by InvestorNewb » Wed Mar 13, 2013 2:11 pm

My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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bottlecap
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Re: Is now a poor time to invest?

Post by bottlecap » Wed Mar 13, 2013 2:55 pm

I understand your thoughts about the capital gains, although if the rate you paid were to remain the same, it doesn't really matter whether you take the gains now, next week or 10 years from now.

A year out from the inheritance is not too soon to make a decision. You don't seem to be doing anything rash.

I'm a little confused as to how much of this is in equities now from the various posts, but if 75% to 100% is already in equities - you're already in the market. You might as well go to your desired asset allocation and forget about it. If it were inherited as cash, the advice would still probably be the same, but psychologically, in that case it might be easier to DCA some or all of it in.

The only other thing I can say is that there is no "right" answer to this question except in hindsight. It sure seems like the market could turn around after a run up, but I don't think anyone can say that it is more likely to rise than fall or vice versa. It is ultimately probably a good sign that people are still bearish. You should be even more scared to invest when everyone thinks stocks are a sure thing...

Good luck,

JT

dbr
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Re: Is now a poor time to invest?

Post by dbr » Wed Mar 13, 2013 3:07 pm

I have altered the quote below to fit the calendar:

"March: This is one of the particularly dangerous months to invest in stocks. Other dangerous months are July, January, September, April, November, May, October, June, December, August and February."
- Mark Twain

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bottomfisher
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Re: Is now a poor time to invest?

Post by bottomfisher » Wed Mar 13, 2013 3:16 pm

InvestorNewb:
If I can do it, you can do it.

viewtopic.php?f=1&t=109785&p=1619679#p1619679
Everyone's proud of you

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BrandonBogle
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Re: Is now a poor time to invest?

Post by BrandonBogle » Wed Mar 13, 2013 3:26 pm

Personally, I would lump sum, but wait until April. The Vanguard funds are about to distribute dividends. I wouldn't want "buy" the dividend. That said, TSM is mostly qualified, so that isn't too bad. The unqualified dividends of TISM and TBM would be of concern though.

If the lump sum is in a tax-advantaged account, then the above is mute and I'd lump sump now and not time the market.

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Re: Is now a poor time to invest?

Post by magician » Wed Mar 13, 2013 4:13 pm

About the only thing worse than investing now is not investing now.
Simplify the complicated side; don't complify the simplicated side.

ricb
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Re: Is now a poor time to invest?

Post by ricb » Wed Mar 13, 2013 4:28 pm

As a recent retiree, I have more fear of initial losses than perhaps those younger and still in their cumulative phase.

I am also in the position of needing to decide among Lump Sum Investing (LSI) or Dollar Cost Averaging (DCA) or Value Cost Averaging (VCA).

If perhaps LSI is preferable for greater long-term gains, then perhaps DCA or VCA is preferable for lesser initial losses?

I'm thinking VCA instead of DCA and do it over 5 years or maybe even 10 years.

umfundi
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Re: Is now a poor time to invest?

Post by umfundi » Wed Mar 13, 2013 4:43 pm

ricb wrote:As a recent retiree, I have more fear of initial losses than perhaps those younger and still in their cumulative phase.

I am also in the position of needing to decide among Lump Sum Investing (LSI) or Dollar Cost Averaging (DCA) or Value Cost Averaging (VCA).

If perhaps LSI is preferable for greater long-term gains, then perhaps DCA or VCA is preferable for lesser initial losses?

I'm thinking VCA instead of DCA and do it over 5 years or maybe even 10 years.
OK. Let me try to frame this.

You are going to invest in equities because:
a. You believe they have positive expected future returns.
b. You believe they will have negative future returns.

If b., do nothing. Wait until you believe a.
(If b., should you not sell all your current equity investments?)

You are going to invest:
a. By putting it all in as a lump sum investment (LSI).
b. By dollar-cost averaging (DCA) over the next year.

If you LSI you will get market returns going forward.
If you DCA you will get roughly half the market return over the next year, compared to LSI.
(And, neglecting the real cost of cash under the mattress. While you DCA, where is the money that is waiting to be invested?)

Class dismissed.

Keith
Déjà Vu is not a prediction

ricb
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Re: Is now a poor time to invest?

Post by ricb » Wed Mar 13, 2013 6:24 pm

umfundi wrote:
ricb wrote:As a recent retiree, I have more fear of initial losses than perhaps those younger and still in their cumulative phase.

I am also in the position of needing to decide among Lump Sum Investing (LSI) or Dollar Cost Averaging (DCA) or Value Cost Averaging (VCA).

If perhaps LSI is preferable for greater long-term gains, then perhaps DCA or VCA is preferable for lesser initial losses?

I'm thinking VCA instead of DCA and do it over 5 years or maybe even 10 years.
OK. Let me try to frame this.

You are going to invest in equities because:
a. You believe they have positive expected future returns.
b. You believe they will have negative future returns.

If b., do nothing. Wait until you believe a.
(If b., should you not sell all your current equity investments?)

You are going to invest:
a. By putting it all in as a lump sum investment (LSI).
b. By dollar-cost averaging (DCA) over the next year.

If you LSI you will get market returns going forward.
If you DCA you will get roughly half the market return over the next year, compared to LSI.
(And, neglecting the real cost of cash under the mattress. While you DCA, where is the money that is waiting to be invested?)

Class dismissed.

Keith
Keith,

You (and I) are assuming long-term gains - I am addressing short-term net losses. What's worse for a new retiree: a large loss at the early part of retirement or to lose less?

The answer is obvious, hence my premise:

"If perhaps LSI is preferable for greater long-term gains, then perhaps DCA or VCA is preferable for lesser initial losses?"

So, is it true that DCA (or VCA) would produce less initial losses than LSI? If so, then why not use VCA and over a longer than one-year period (e.g. 5-10 years)?

I am looking at previous market declines to see if my premise holds water but it's kind of like data mining to prove one's point - that's the reason I'm proposing a longer 5-10 year period to smooth out the results and using VCA instead of DCA. Edleson's "Value Averaging" doesn't address recent retiree's legitimate concerns about initial losses.

Class just starting.

ricb

umfundi
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Re: Is now a poor time to invest?

Post by umfundi » Wed Mar 13, 2013 6:48 pm

ricb wrote:Keith,

You (and I) are assuming long-term gains - I am addressing short-term net losses. What's worse for a new retiree: a large loss at the early part of retirement or to lose less?

The answer is obvious, hence my premise:

"If perhaps LSI is preferable for greater long-term gains, then perhaps DCA or VCA is preferable for lesser initial losses?"

So, is it true that DCA (or VCA) would produce less initial losses than LSI? If so, then why not use VCA and over a longer than one-year period (e.g. 5-10 years)?

I am looking at previous market declines to see if my premise holds water but it's kind of like data mining to prove one's point - that's the reason I'm proposing a longer 5-10 year period to smooth out the results and using VCA instead of DCA. Edleson's "Value Averaging" doesn't address recent retiree's legitimate concerns about initial losses.

Class just starting.

ricb
ricb,

That's a totally different question. The usual debate over DCA is, how do I avoid regret over a short term loss?

Your question now seems to be more, how do I protect my retirement against near-term market fluctuations? A good concern, because if you have losses early in retirement and make withdrawals, you could deep-six your plan.

My plan is here:

http://www.bogleheads.org/forum/viewtop ... 1&t=112609

Put six years in cash or near-cash. Invest the rest in a reasonable stock/bond portfolio. If stocks take a dive, what do you care? You have six years to wait it out.

There are other threads that led up to my decision, and I also have a PowerPoint presentation that I gave to the local Bogleheads chapter. PM me if you want a copy.

Keith
Déjà Vu is not a prediction

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nedsaid
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Re: Is now a poor time to invest?

Post by nedsaid » Wed Mar 13, 2013 8:41 pm

Here is a hint that will save you a lot of needless worry. It is always a poor time to invest. It is always a poor time to invest either because things look expensive or the news is really bad. Don't over analyze to the point of never investing.
A fool and his money are good for business.

dbr
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Re: Is now a poor time to invest?

Post by dbr » Wed Mar 13, 2013 8:48 pm

nedsaid wrote:Here is a hint that will save you a lot of needless worry. It is always a poor time to invest. It is always a poor time to invest either because things look expensive or the news is really bad. Don't over analyze to the point of never investing.
Indeed, as pointed out by Mr. Twain.

ricb
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Re: Is now a poor time to invest?

Post by ricb » Wed Mar 13, 2013 8:50 pm

umfundi wrote:
ricb wrote:Keith,

You (and I) are assuming long-term gains - I am addressing short-term net losses. What's worse for a new retiree: a large loss at the early part of retirement or to lose less?

The answer is obvious, hence my premise:

"If perhaps LSI is preferable for greater long-term gains, then perhaps DCA or VCA is preferable for lesser initial losses?"

So, is it true that DCA (or VCA) would produce less initial losses than LSI? If so, then why not use VCA and over a longer than one-year period (e.g. 5-10 years)?

I am looking at previous market declines to see if my premise holds water but it's kind of like data mining to prove one's point - that's the reason I'm proposing a longer 5-10 year period to smooth out the results and using VCA instead of DCA. Edleson's "Value Averaging" doesn't address recent retiree's legitimate concerns about initial losses.

Class just starting.

ricb
ricb,

That's a totally different question. The usual debate over DCA is, how do I avoid regret over a short term loss?

Your question now seems to be more, how do I protect my retirement against near-term market fluctuations? A good concern, because if you have losses early in retirement and make withdrawals, you could deep-six your plan.

My plan is here:

http://www.bogleheads.org/forum/viewtop ... 1&t=112609

Put six years in cash or near-cash. Invest the rest in a reasonable stock/bond portfolio. If stocks take a dive, what do you care? You have six years to wait it out.

There are other threads that led up to my decision, and I also have a PowerPoint presentation that I gave to the local Bogleheads chapter. PM me if you want a copy.

Keith
Keith,

The question boils down to which loses less if stocks take a dive early in retirement:

1. Six years in cash/near cash and LSI the rest in a reasonable stock/bond portfolio
or
2. VCA all within 5-10 years in a reasonable stock/bond portfolio

To take the least amount of risk the retiree needs to take, what about a combination of both #1 and #2:

Six years in cash/near cash and VCA the rest within 5-10 years in a reasonable stock/bond portfolio.

ricb

Scooter57
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Re: Is now a poor time to invest?

Post by Scooter57 » Wed Mar 13, 2013 9:27 pm

Value average with a relatively long schedule, but if the market takes a significant dive, go for a more aggressive value path.

And only invest an amount in stocks that if it were to drop 50% would not ruin your life.

Aggressive investors will tell you that you are missing out, but when things do drop dramatically, without warning, as they will, you will be glad you were cautious.

The more I read about the big banks and the hedge fund billionaires 'too big too jail' and bailed out with our money, the less enthusiastic I am about putting my money into the rigged casino that is Wall Street.

umfundi
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Re: Is now a poor time to invest?

Post by umfundi » Wed Mar 13, 2013 9:38 pm

ricb wrote: Keith,

The question boils down to which loses less if stocks take a dive early in retirement:

1. Six years in cash/near cash and LSI the rest in a reasonable stock/bond portfolio
or
2. VCA all within 5-10 years in a reasonable stock/bond portfolio

To take the least amount of risk the retiree needs to take, what about a combination of both #1 and #2:

Six years in cash/near cash and VCA the rest within 5-10 years in a reasonable stock/bond portfolio.

ricb
ricb,

I don't know. My plan, which boils down to 80% in a 60/40 investment in LifeStrategy Medium plus 10% in short bonds plus 10% in not so short bonds is clear.

Your plan, VCA in 5-10 years, depends on future events.

As I think I said, if you think the market will go down, do not invest. If you think it will go up, but average your investment over time, you will decrease your return.

I think it is silly to put 6 years in cash and then lose sleep over tomorrow's value of your portfolio that you only need to access 7 years hence.

Keith
Déjà Vu is not a prediction

ricb
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Re: Is now a poor time to invest?

Post by ricb » Wed Mar 13, 2013 10:23 pm

umfundi wrote:
ricb wrote: Keith,

The question boils down to which loses less if stocks take a dive early in retirement:

1. Six years in cash/near cash and LSI the rest in a reasonable stock/bond portfolio
or
2. VCA all within 5-10 years in a reasonable stock/bond portfolio

To take the least amount of risk the retiree needs to take, what about a combination of both #1 and #2:

Six years in cash/near cash and VCA the rest within 5-10 years in a reasonable stock/bond portfolio.

ricb
ricb,

I don't know. My plan, which boils down to 80% in a 60/40 investment in LifeStrategy Medium plus 10% in short bonds plus 10% in not so short bonds is clear.

Your plan, VCA in 5-10 years, depends on future events.

As I think I said, if you think the market will go down, do not invest. If you think it will go up, but average your investment over time, you will decrease your return.

I think it is silly to put 6 years in cash and then lose sleep over tomorrow's value of your portfolio that you only need to access 7 years hence.

Keith
Keith,

If I knew where the market is going ... but I don't, so we play the game. I think our "disagreement" is really about utilizing DCA/VCA vs LSI. My take is to be even more cautious early in retirement, hence VCA instead of LSI for potentially less gains than more losses.

ricb

umfundi
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Re: Is now a poor time to invest?

Post by umfundi » Wed Mar 13, 2013 10:47 pm

ricb wrote: Keith,

If I knew where the market is going ... but I don't, so we play the game. I think our "disagreement" is really about utilizing DCA/VCA vs LSI. My take is to be even more cautious early in retirement, hence VCA instead of LSI for potentially less gains than more losses.

ricb
ricb,

I absolutely disagree!

1. Where are your cash needs for the next 3 years going to come from?
2. Where are your cash needs for years 4-6 going to come from?

Dribbling in your investments for the long term is not your most pressing issue! Certainly not your biggest fear.

Keith
Déjà Vu is not a prediction

ricb
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Re: Is now a poor time to invest?

Post by ricb » Wed Mar 13, 2013 11:27 pm

Scooter57 wrote:Value average with a relatively long schedule, but if the market takes a significant dive, go for a more aggressive value path.

And only invest an amount in stocks that if it were to drop 50% would not ruin your life.

Aggressive investors will tell you that you are missing out, but when things do drop dramatically, without warning, as they will, you will be glad you were cautious.

The more I read about the big banks and the hedge fund billionaires 'too big too jail' and bailed out with our money, the less enthusiastic I am about putting my money into the rigged casino that is Wall Street.
Scooter57,

Thank you and I agree with you completely on each of your points except the last one. Your last point reflects my gut feeling for a while of being in the wrong game and resenting it but not specifically for your reasons - just having to deal with the historical market risk makes me question why that is so necessary for one's retirement needs and wants.

ricb

ricb
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Re: Is now a poor time to invest?

Post by ricb » Wed Mar 13, 2013 11:37 pm

umfundi wrote:
ricb wrote: Keith,

If I knew where the market is going ... but I don't, so we play the game. I think our "disagreement" is really about utilizing DCA/VCA vs LSI. My take is to be even more cautious early in retirement, hence VCA instead of LSI for potentially less gains than more losses.

ricb
ricb,

I absolutely disagree!

1. Where are your cash needs for the next 3 years going to come from?
2. Where are your cash needs for years 4-6 going to come from?

Dribbling in your investments for the long term is not your most pressing issue! Certainly not your biggest fear.

Keith
Keith,

Remember that I agreed with you to segregate six years of cash? I only differed with you to use VCA instead of LSI for investing the rest in a reasonable stock/bond portfolio.

ricb

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