How do you avoid bad market timing for lump sum investments?

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Earl Lemongrab
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Re: How do you avoid bad market timing for lump sum investments?

Post by Earl Lemongrab » Tue Oct 03, 2017 6:36 pm

hoops777 wrote:
Tue Oct 03, 2017 5:48 pm
My last response is to the end of your last response.
Naturally, I was referring to investing.
This week's fortune cookie: "The stock market may be your ticket to success." I sure hope so!

hoops777
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Re: How do you avoid bad market timing for lump sum investments?

Post by hoops777 » Tue Oct 03, 2017 7:25 pm

Do I have to tell a man with a lemon avatar that I was joking?
Happy investing and I do admire your unwavering commitment to your belief :beer
K.I.S.S........so easy to say so difficult to do.

mojorisin
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Re: How do you avoid bad market timing for lump sum investments?

Post by mojorisin » Tue Oct 03, 2017 10:13 pm

I didnt read the entire thread. So posting my thoughts at the end.

Remember you need to build a balanced asset allocation.
Your asset allocation should have correlation of assets.
If the assets are doing different things, go ahead and lump sum invest. Or in a couple of chunks.
When the market moves, stay disciplined to your investment plan. Rebalance.

This plan works well with a long term view.

For example - if you invest 50 stocks / 50 bonds. The idea is if one is going up, the other is going down. Rebalance to 50/50. When one goes up, the other goes down. Rebalance to 50/50. Rinse. Repeat.

Collect interest in dividends and bond payments while holding and collecting gains. Trying to time the market you will lose out.

dbr
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Re: How do you avoid bad market timing for lump sum investments?

Post by dbr » Wed Oct 04, 2017 12:03 pm

tibbe wrote:
Sat Apr 23, 2016 10:09 am
Lets say I decided to start investing and would like to move into index funds with a lump of cash. I'm not trying to beat the market, but I would like to get the long term market returns.

It seems to me that if I do just a single large purchase, at an unlucky moment, I could end up doing worse than the market. Perhaps we can see this as being "poorly diversified in the time dimension". Is there a strategy for avoiding this "worse than average" outcome (i.e. is there a way to reduce this variance)? I'm guessing the answer could be "spread out your purchases over time", but over how long a time horizon? In addition, if I spread out my purchases for a really long time horizon, say ten years, I'm missing out on a bunch of compound interest.

Just to be clear, this is not a problem if you start from very little cash and save and invest some sum every month. However, this seems to be a problem if you've been saving but not investing for a long time.
The answer to this question is that there is no strategy for avoiding the timing of a downturn other than to not invest at all. There is no such thing as time diversification except in the sense that the longer you avoid taking risk the less risk you take :idea: (and the more return you forego on average).

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whodidntante
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Re: How do you avoid bad market timing for lump sum investments?

Post by whodidntante » Wed Oct 04, 2017 12:06 pm

You could buy a put option at a strike price 5% below today's price, or whatever your pain point is.

goblue100
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Re: How do you avoid bad market timing for lump sum investments?

Post by goblue100 » Wed Oct 04, 2017 12:48 pm

hoops777 wrote:
Tue Oct 03, 2017 7:25 pm
Do I have to tell a man with a lemon avatar that I was joking?
Happy investing and I do admire your unwavering commitment to your belief :beer
I dug up a post I posted in another thread back in June. I linked a bunch of threads since 2012 where people are concerned about investing at an all time high. Do you think they would have been better off lump summing, or waiting for the crash?

2014
https://bogleheads.org/forum/viewtopic.php?f=1&t=140783
What are Bogleheads doing with the market at an all time high?
Continuing to invest?
Taking money off the table and counting your blessings?
Not taking any action at all and just sitting tight?
A wise friend once said:
"Gambling is when you stand to loose more than you have to gain
Risk is when you have more to gain than you have to loose"

Are Bogleheads gambling or risk taking?
2013
https://bogleheads.org/forum/viewtopic.php?t=126699
"I just rolled over $360 K of my business Solo (K) to a SEP IRA and right now it is just sitting in my portfolio in a money market waiting for me to Self-Direct it to the funds I want. I am going to use the 60/40 portfolio but very hesitant to invest it right now since the DOW is at an all time high. Shouldn't I wait till it goes down a bit before I invest 60% of my retirement into stocks. I feel that investing it now when stock are crushing it will surely set me up for a big loss in the near future. I don't want to let it sit here very long. I know I need to get it back into the market (it has been uninvested now for 1 month). Am I looking at this correctly? Any advice on what some of you all would do in this situation would be very appreciated. Thank you."

2012
https://bogleheads.org/forum/viewtopic.php?t=100393
"So, the cash would mostly be flowing from money market -> international and emerging market funds.
Should I just load it all in now and not worry about timing? Monthly installments? Wait for the market to dip? I'm having a hard time deciding to "buy high" according to metrics, but also don't want my money sitting doing nothing."
Some people are immune to good advice. - Saul Goodman

hoops777
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Re: How do you avoid bad market timing for lump sum investments?

Post by hoops777 » Wed Oct 04, 2017 5:26 pm

goblue100 wrote:
Wed Oct 04, 2017 12:48 pm
hoops777 wrote:
Tue Oct 03, 2017 7:25 pm
Do I have to tell a man with a lemon avatar that I was joking?
Happy investing and I do admire your unwavering commitment to your belief :beer
I dug up a post I posted in another thread back in June. I linked a bunch of threads since 2012 where people are concerned about investing at an all time high. Do you think they would have been better off lump summing, or waiting for the crash?

2014
https://bogleheads.org/forum/viewtopic.php?f=1&t=140783
What are Bogleheads doing with the market at an all time high?
Continuing to invest?
Taking money off the table and counting your blessings?
Not taking any action at all and just sitting tight?
A wise friend once said:
"Gambling is when you stand to loose more than you have to gain
Risk is when you have more to gain than you have to loose"

Are Bogleheads gambling or risk taking?
2013
https://bogleheads.org/forum/viewtopic.php?t=126699
"I just rolled over $360 K of my business Solo (K) to a SEP IRA and right now it is just sitting in my portfolio in a money market waiting for me to Self-Direct it to the funds I want. I am going to use the 60/40 portfolio but very hesitant to invest it right now since the DOW is at an all time high. Shouldn't I wait till it goes down a bit before I invest 60% of my retirement into stocks. I feel that investing it now when stock are crushing it will surely set me up for a big loss in the near future. I don't want to let it sit here very long. I know I need to get it back into the market (it has been uninvested now for 1 month). Am I looking at this correctly? Any advice on what some of you all would do in this situation would be very appreciated. Thank you."

2012
https://bogleheads.org/forum/viewtopic.php?t=100393
"So, the cash would mostly be flowing from money market -> international and emerging market funds.
Should I just load it all in now and not worry about timing? Monthly installments? Wait for the market to dip? I'm having a hard time deciding to "buy high" according to metrics, but also don't want my money sitting doing nothing."
Very true but this is 2017 and the thread was mostly about dca not waiting for a crash.
K.I.S.S........so easy to say so difficult to do.

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triceratop
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Re: How do you avoid bad market timing for lump sum investments?

Post by triceratop » Wed Oct 04, 2017 5:42 pm

hoops777 wrote:
Wed Oct 04, 2017 5:26 pm
goblue100 wrote:
Wed Oct 04, 2017 12:48 pm
hoops777 wrote:
Tue Oct 03, 2017 7:25 pm
Do I have to tell a man with a lemon avatar that I was joking?
Happy investing and I do admire your unwavering commitment to your belief :beer
I dug up a post I posted in another thread back in June. I linked a bunch of threads since 2012 where people are concerned about investing at an all time high. Do you think they would have been better off lump summing, or waiting for the crash?

2014
https://bogleheads.org/forum/viewtopic.php?f=1&t=140783
What are Bogleheads doing with the market at an all time high?
Continuing to invest?
Taking money off the table and counting your blessings?
Not taking any action at all and just sitting tight?
A wise friend once said:
"Gambling is when you stand to loose more than you have to gain
Risk is when you have more to gain than you have to loose"

Are Bogleheads gambling or risk taking?
2013
https://bogleheads.org/forum/viewtopic.php?t=126699
"I just rolled over $360 K of my business Solo (K) to a SEP IRA and right now it is just sitting in my portfolio in a money market waiting for me to Self-Direct it to the funds I want. I am going to use the 60/40 portfolio but very hesitant to invest it right now since the DOW is at an all time high. Shouldn't I wait till it goes down a bit before I invest 60% of my retirement into stocks. I feel that investing it now when stock are crushing it will surely set me up for a big loss in the near future. I don't want to let it sit here very long. I know I need to get it back into the market (it has been uninvested now for 1 month). Am I looking at this correctly? Any advice on what some of you all would do in this situation would be very appreciated. Thank you."

2012
https://bogleheads.org/forum/viewtopic.php?t=100393
"So, the cash would mostly be flowing from money market -> international and emerging market funds.
Should I just load it all in now and not worry about timing? Monthly installments? Wait for the market to dip? I'm having a hard time deciding to "buy high" according to metrics, but also don't want my money sitting doing nothing."
Very true but this is 2017 and the thread was mostly about dca not waiting for a crash.
This comment would work well on the 2014 thread.

Earl Lemongrab's comments about buying your portfolio every day are quite wise and entirely correct. Anyone disagreeing with them should think more and reevaluate why they disagree with such a clear truth.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

tesuzuki2002
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Re: How do you avoid bad market timing for lump sum investments?

Post by tesuzuki2002 » Wed Oct 04, 2017 5:45 pm

just start scaling in and make changes based on your AA if the market takes big changes.

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Rob54keep
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Re: How do you avoid bad market timing for lump sum investments?

Post by Rob54keep » Wed Oct 04, 2017 6:11 pm

Every time I have tried to DCA back into the market with a lump sum amount of money, it's never worked in my favor. I would have been better served by just doing a lump sum at one time per my objectives.

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Earl Lemongrab
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Re: How do you avoid bad market timing for lump sum investments?

Post by Earl Lemongrab » Wed Oct 04, 2017 6:26 pm

triceratop wrote:
Wed Oct 04, 2017 5:42 pm
Earl Lemongrab's comments about buying your portfolio every day are quite wise and entirely correct.
While I have expressed the sentiment previously, the exact words were someone else's up-thread.
This week's fortune cookie: "The stock market may be your ticket to success." I sure hope so!

hoops777
Posts: 1820
Joined: Sun Apr 10, 2011 12:23 pm

Re: How do you avoid bad market timing for lump sum investments?

Post by hoops777 » Wed Oct 04, 2017 9:42 pm

triceratop wrote:
Wed Oct 04, 2017 5:42 pm
hoops777 wrote:
Wed Oct 04, 2017 5:26 pm
goblue100 wrote:
Wed Oct 04, 2017 12:48 pm
hoops777 wrote:
Tue Oct 03, 2017 7:25 pm
Do I have to tell a man with a lemon avatar that I was joking?
Happy investing and I do admire your unwavering commitment to your belief :beer
I dug up a post I posted in another thread back in June. I linked a bunch of threads since 2012 where people are concerned about investing at an all time high. Do you think they would have been better off lump summing, or waiting for the crash?

2014
https://bogleheads.org/forum/viewtopic.php?f=1&t=140783
What are Bogleheads doing with the market at an all time high?
Continuing to invest?
Taking money off the table and counting your blessings?
Not taking any action at all and just sitting tight?
A wise friend once said:
"Gambling is when you stand to loose more than you have to gain
Risk is when you have more to gain than you have to loose"

Are Bogleheads gambling or risk taking?
2013
https://bogleheads.org/forum/viewtopic.php?t=126699
"I just rolled over $360 K of my business Solo (K) to a SEP IRA and right now it is just sitting in my portfolio in a money market waiting for me to Self-Direct it to the funds I want. I am going to use the 60/40 portfolio but very hesitant to invest it right now since the DOW is at an all time high. Shouldn't I wait till it goes down a bit before I invest 60% of my retirement into stocks. I feel that investing it now when stock are crushing it will surely set me up for a big loss in the near future. I don't want to let it sit here very long. I know I need to get it back into the market (it has been uninvested now for 1 month). Am I looking at this correctly? Any advice on what some of you all would do in this situation would be very appreciated. Thank you."

2012
https://bogleheads.org/forum/viewtopic.php?t=100393
"So, the cash would mostly be flowing from money market -> international and emerging market funds.
Should I just load it all in now and not worry about timing? Monthly installments? Wait for the market to dip? I'm having a hard time deciding to "buy high" according to metrics, but also don't want my money sitting doing nothing."
Very true but this is 2017 and the thread was mostly about dca not waiting for a crash.
This comment would work well on the 2014 thread.

Earl Lemongrab's comments about buying your portfolio every day are quite wise and entirely correct. Anyone disagreeing with them should think more and reevaluate why they disagree with such a clear truth.
All I can say is that I disagree.I already bought my portfolio and now I will decide when and if I buy more.I am choosing not to sell which is not buying.I own and drive a car everyday.It changes in value frequently so am I buying my car everyday?How about my house?Thats gone up 10 pct the last year.Am I buying that everyday?
My portfolio produces dividends and interest.I take those.I do not buy them.
K.I.S.S........so easy to say so difficult to do.

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triceratop
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Re: How do you avoid bad market timing for lump sum investments?

Post by triceratop » Wed Oct 04, 2017 11:00 pm

All I can say is that I disagree.I already bought my portfolio and now I will decide when and if I buy more.I am choosing not to sell which is not buying.I own and drive a car everyday.It changes in value frequently so am I buying my car everyday?How about my house?Thats gone up 10 pct the last year.Am I buying that everyday?
My portfolio produces dividends and interest.I take those.I do not buy them.
Selling your car and house is not the same as mutual funds in an IRA or 401k. They are illiquid and often have high transaction costs. There are also possible tax consequences to selling. They are also required for living your life on a day-to-day basis and are not pure investments. Completely different from a tax-advantaged account which you can exchange between cash and stocks on a day-to-day with zero transaction costs.

Whether you agree or not, the facts remain the same: you buy your portfolio every day. That's a beautiful thing about facts.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

hoops777
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Re: How do you avoid bad market timing for lump sum investments?

Post by hoops777 » Thu Oct 05, 2017 9:45 am

triceratop wrote:
Wed Oct 04, 2017 11:00 pm
All I can say is that I disagree.I already bought my portfolio and now I will decide when and if I buy more.I am choosing not to sell which is not buying.I own and drive a car everyday.It changes in value frequently so am I buying my car everyday?How about my house?Thats gone up 10 pct the last year.Am I buying that everyday?
My portfolio produces dividends and interest.I take those.I do not buy them.
Selling your car and house is not the same as mutual funds in an IRA or 401k. They are illiquid and often have high transaction costs. There are also possible tax consequences to selling. They are also required for living your life on a day-to-day basis and are not pure investments. Completely different from a tax-advantaged account which you can exchange between cash and stocks on a day-to-day with zero transaction costs.

Whether you agree or not, the facts remain the same: you buy your portfolio every day. That's a beautiful thing about facts.
Can you please look at the definition of buying because I believe you are not using the word correctly.Your fact is an opinion.
If I play blackjack and buy $100 worth of chips,the money is liquid when I cash them in.In an hours time that amount may change to 140 or down to 50.I did not buy anymore chips.So am I buying my chips the entire time I play blackjack?
So you CAN change between stocks and cash in a tax advantaged account.If you leave your portfolio alone you are not buying anything.If you choose to make a transaction you are buying something the day you do it.You do not buy your portfolio everyday.It sounds nice but is not factual.Sorry.
K.I.S.S........so easy to say so difficult to do.

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triceratop
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Re: How do you avoid bad market timing for lump sum investments?

Post by triceratop » Thu Oct 05, 2017 10:22 am

hoops777 wrote:
Thu Oct 05, 2017 9:45 am
triceratop wrote:
Wed Oct 04, 2017 11:00 pm
All I can say is that I disagree.I already bought my portfolio and now I will decide when and if I buy more.I am choosing not to sell which is not buying.I own and drive a car everyday.It changes in value frequently so am I buying my car everyday?How about my house?Thats gone up 10 pct the last year.Am I buying that everyday?
My portfolio produces dividends and interest.I take those.I do not buy them.
Selling your car and house is not the same as mutual funds in an IRA or 401k. They are illiquid and often have high transaction costs. There are also possible tax consequences to selling. They are also required for living your life on a day-to-day basis and are not pure investments. Completely different from a tax-advantaged account which you can exchange between cash and stocks on a day-to-day with zero transaction costs.

Whether you agree or not, the facts remain the same: you buy your portfolio every day. That's a beautiful thing about facts.
Can you please look at the definition of buying because I believe you are not using the word correctly.Your fact is an opinion.
If I play blackjack and buy $100 worth of chips,the money is liquid when I cash them in.In an hours time that amount may change to 140 or down to 50.I did not buy anymore chips.So am I buying my chips the entire time I play blackjack?
So you CAN change between stocks and cash in a tax advantaged account.If you leave your portfolio alone you are not buying anything.If you choose to make a transaction you are buying something the day you do it.You do not buy your portfolio everyday.It sounds nice but is not factual.Sorry.
(you don't really think I don't know the definition of "buying", do you? That was probably just a snide way to dismiss my point, right?)

You are buying your chips between hands, yes. (ignoring the possible expected benefits of inter-hand play like card counting) That's a great example, thank you, because it demonstrates the immediate liquidity of your position with a frequency higher than the per-day pricing of mutual funds.
So you CAN change between stocks and cash in a tax advantaged account.If you leave your portfolio alone you are not buying anything.
This is almost a trolley problem, but functionally, choosing not to go to cash is the same as selling and buying every day. The expected effect of inaction (holding) is the same as buying the same securities with cash. You buy your portfolio every day.

"Your fact is an opinion."

haha :)
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

hoops777
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Re: How do you avoid bad market timing for lump sum investments?

Post by hoops777 » Thu Oct 05, 2017 10:37 am

Definition of buying...obtain in exchange for payment.What payment is being exchanged?
You are holding your portfolio and choosing not to sell.You are not buying anything unless you buy new shares.I guess all those bogleheads who think they are passive investors would be shocked to know that they are buying everyday.
K.I.S.S........so easy to say so difficult to do.

dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: How do you avoid bad market timing for lump sum investments?

Post by dbr » Thu Oct 05, 2017 10:41 am

hoops777 wrote:
Thu Oct 05, 2017 10:37 am
Definition of buying...obtain in exchange for payment.What payment is being exchanged?
You are holding your portfolio and choosing not to sell.You are not buying anything unless you buy new shares.I guess all those bogleheads who think they are passive investors would be shocked to know that they are buying everyday.
It's a metaphor for the idea that in effect holding is deciding everyday to be in that investment rather than out. It is certainly not literally buying but intended to make a point.

hoops777
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Joined: Sun Apr 10, 2011 12:23 pm

Re: How do you avoid bad market timing for lump sum investments?

Post by hoops777 » Thu Oct 05, 2017 12:06 pm

dbr wrote:
Thu Oct 05, 2017 10:41 am
hoops777 wrote:
Thu Oct 05, 2017 10:37 am
Definition of buying...obtain in exchange for payment.What payment is being exchanged?
You are holding your portfolio and choosing not to sell.You are not buying anything unless you buy new shares.I guess all those bogleheads who think they are passive investors would be shocked to know that they are buying everyday.
It's a metaphor for the idea that in effect holding is deciding everyday to be in that investment rather than out. It is certainly not literally buying but intended to make a point.
I understand that and that was my point,but I did not see anything being said that implied it was was simply a metaphor.The language suggested otherwise which is why I was a bit annoyed.
K.I.S.S........so easy to say so difficult to do.

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