I'm essentially market timing, but can't bring myself to stop.
I'm essentially market timing, but can't bring myself to stop.
Ok, so I have a significant chunk of excess cash left over from our house down-payment fund and some old company stock I've been slowly selling down. Before I say anything else, I will tell you that I'm aware we should sell it down all at once, but it's my wife's old ESPPs from her first company, so she gets to decide what to do. Also the stock has significantly outperformed the market so my wife can look at me and say: "see look at how amazing we did keeping this stuff." In any case we have been selling a significant amount every year. So, we now have a fairly large amount of cash, in excess of our emergency fund needs. I want to put it into the market, but I just can't bring myself to pull the trigger. I'm so convinced there will be a big market drop at some point in the next year that I just can't help but stay frozen. I've invested a few thousand slowly the past couple days (I'll do it by letting my OCD overpower other concerns, and I'll buy shares so that my total number of shares is an even number).
So advice needed: is there a problem holding on to this cash for a big market drop or should I just pull the trigger and invest a ton of it?
So advice needed: is there a problem holding on to this cash for a big market drop or should I just pull the trigger and invest a ton of it?
Re: I'm essentially market timing, but can't bring myself to stop.
So what has your experience been when there is a big market drop? What did you do on December 24, 2018? That will tell you how you react to waiting for a big market drop.
Re: I'm essentially market timing, but can't bring myself to stop.
I tax loss harvested some stock into a total market fund to reach 3k in losses for the year. That’s about it. I know I should have bought more stock at that time.
Re: I'm essentially market timing, but can't bring myself to stop.
If you want to hold it in cash, hold it in cash. History has proven long term market exposure as you know is a key to building wealth. Market timing is not. Can you risk losing 10, 20, or 30%? How will you feel if the markets go up another 15% this year with it in cash?
On a separate note; you haven't given many details. How much is a significant amount, how old are you, how does one have significant money left over from a down payment fund, what other investments do you have, etc.? You have a mortgage with an interest rate yes? Throw some money at the mortgage.
On a separate note; you haven't given many details. How much is a significant amount, how old are you, how does one have significant money left over from a down payment fund, what other investments do you have, etc.? You have a mortgage with an interest rate yes? Throw some money at the mortgage.
Re: I'm essentially market timing, but can't bring myself to stop.
Life intervenes.
Sometimes one needs to give a nod to behavior-driven sub-optimization. We all do it.
In this situation, both you and your wife must believe it is his/her own idea to make a specific investment. If this means DCA, well, so be it. Time in the market, especially for long-term money, is everything.
Sometimes one needs to give a nod to behavior-driven sub-optimization. We all do it.
In this situation, both you and your wife must believe it is his/her own idea to make a specific investment. If this means DCA, well, so be it. Time in the market, especially for long-term money, is everything.
"Plans are useless; planning is indispensable.” (Dwight Eisenhower) |
"Man plans, God laughs" (Yiddish proverb)
Re: I'm essentially market timing, but can't bring myself to stop.
This actual behavior tells me that you actually don't buy when the market has the drop that you were waiting for. You are a terrible market timer. Stop doing that.
And when the market goes up like it has, it becomes time to sell. Now would not be a bad time to sell those ESPP shares.
So buy index fund shares with your cash on Monday and sell more ESPP shares on Monday and buy more index fund shares on Monday with the cash you get from that.
And what do you mean by "ton" anyways? Is it $500,000? A million or more? I'm guessing not since you only TLH'd to get $3K in losses for 2018. What is the current amount of unrealized losses that you have now in your taxable accounts? Why do you still have them? Realize them ALL!
Once again, if you are going to market time, at least do it properly.
Re: I'm essentially market timing, but can't bring myself to stop.
I’m mid 30s, wife is late 30s260chrisb wrote: ↑Sat Feb 23, 2019 8:33 am If you want to hold it in cash, hold it in cash. History has proven long term market exposure as you know is a key to building wealth. Market timing is not. Can you risk losing 10, 20, or 30%? How will you feel if the markets go up another 15% this year with it in cash?
On a separate note; you haven't given many details. How much is a significant amount, how old are you, how does one have significant money left over from a down payment fund, what other investments do you have, etc.? You have a mortgage with an interest rate yes? Throw some money at the mortgage.
Investments: 1 million 80/20 Stocks/bonds
Housing: roughly 750k total value, one rental/ one home, with 440k debt
Cash: 180k
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Re: I'm essentially market timing, but can't bring myself to stop.
How old you are and when you are going to withdraw your money are factors to take into consideration when making this decision. If you have a 20+ year time horizon and are under 40, you should definitely lump sum this cash into the market. If i was making an exhaustive list of investment advice to a 25 year old investor, i would tell them to always lump sum instead of dollar cost averaging any cash that becomes available to them to invest and disregard what any talking heads say about the valuations of the stock market. This advice will prove to be profitable, less headache, and less likely for an investor making an emotional decision the overwhelming majority of the time.
Re: I'm essentially market timing, but can't bring myself to stop.
We have roughly 450k in my wife’s old company stock in the form of espp and rsus. This is in addition to all the other investments I mentioned. My wife won’t let me sell it all because it performed so well. I’ve been selling slowly as she allows.livesoft wrote: ↑Sat Feb 23, 2019 8:40 amThis actual behavior tells me that you actually don't buy when the market has the drop that you were waiting for. You are a terrible market timer. Stop doing that.
And when the market goes up like it has, it becomes time to sell. Now would not be a bad time to sell those ESPP shares.
So buy index fund shares with your cash on Monday and sell more ESPP shares on Monday and buy more index fund shares on Monday with the cash you get from that.
And what do you mean by "ton" anyways? Is it $500,000? A million or more? I'm guessing not since you only TLH'd to get $3K in losses for 2018. What is the current amount of unrealized losses that you have now in your taxable accounts? Why do you still have them? Realize them ALL!
Once again, if you are going to market time, at least do it properly.
Re: I'm essentially market timing, but can't bring myself to stop.
The first step solving the problem is acknowledging there is a problem. Done.cdu7 wrote: ↑Sat Feb 23, 2019 8:20 am Ok, so I have a significant chunk of excess cash left over from our house down-payment fund and some old company stock I've been slowly selling down. Before I say anything else, I will tell you that I'm aware we should sell it down all at once, but it's my wife's old ESPPs from her first company, so she gets to decide what to do. Also the stock has significantly outperformed the market so my wife can look at me and say: "see look at how amazing we did keeping this stuff." In any case we have been selling a significant amount every year. So, we now have a fairly large amount of cash, in excess of our emergency fund needs. I want to put it into the market, but I just can't bring myself to pull the trigger. I'm so convinced there will be a big market drop at some point in the next year that I just can't help but stay frozen. I've invested a few thousand slowly the past couple days (I'll do it by letting my OCD overpower other concerns, and I'll buy shares so that my total number of shares is an even number).
So advice needed: is there a problem holding on to this cash for a big market drop or should I just pull the trigger and invest a ton of it?
The second step is to identify who is the culprit: we are our worst enemies <-- Have you realized this yet?
The third step is to establish control to keep you from harming your portfolio. There are many ways to achieve this. A written investment policy will help. Or a 3-fund portfolio with appropriate AA will help. If you want to get fancy, get a advisor to manage portfolio for you.
Personally, I set certain controls and procedure for myself. I use automatic contributions, setting alerts for TLH / rebalancing / buying low, etc., and using market cap allocation (U.S./international). I find myself not touching or tweaking portfolio for a while now.
There are only a few things I do manually: make more money and convert it to savings, and tax planning.
If you're addicted to market timing, maybe carving out a 10% of portfolio to do it for your pleasure.
Time is the ultimate currency.
Re: I'm essentially market timing, but can't bring myself to stop.
We have a 3 fund already, the issue is in moving money We currently have in the form of cash / company stock into the 3 fund all at once. This company stock literally doubled in value in the past two years, my wife thinks it’s a winner (understandably so) and won’t let me dump it all and definitely not all at once. This was the first company she worked at and it’s money she saved / earned so I can’t force this.
Re: I'm essentially market timing, but can't bring myself to stop.
Buy a car
Pay down debt
Do some home improvements and maintenance.
Otherwise the numbers look like 1.5 million (appx) invested and you are worrying about 180k.
Pay down debt
Do some home improvements and maintenance.
Otherwise the numbers look like 1.5 million (appx) invested and you are worrying about 180k.
Mid-40’s
Re: I'm essentially market timing, but can't bring myself to stop.
I think you are right, I should just pull the trigger on it, I have the gumption to sell these shares, just not to buy into our index funds for some reason.livesoft wrote: ↑Sat Feb 23, 2019 8:40 amThis actual behavior tells me that you actually don't buy when the market has the drop that you were waiting for. You are a terrible market timer. Stop doing that.
And when the market goes up like it has, it becomes time to sell. Now would not be a bad time to sell those ESPP shares.
So buy index fund shares with your cash on Monday and sell more ESPP shares on Monday and buy more index fund shares on Monday with the cash you get from that.
And what do you mean by "ton" anyways? Is it $500,000? A million or more? I'm guessing not since you only TLH'd to get $3K in losses for 2018. What is the current amount of unrealized losses that you have now in your taxable accounts? Why do you still have them? Realize them ALL!
Once again, if you are going to market time, at least do it properly.
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Re: I'm essentially market timing, but can't bring myself to stop.
Correction: You have TWO issues: one is the cash, and the other is the company stock. Your wife's emotions are tied up in the company stock, granted. But why are you not investing the cash? There shouldn't be any emotions involved on that issue.cdu7 wrote: ↑Sat Feb 23, 2019 9:13 am We have a 3 fund already, the issue is in moving money We currently have in the form of cash / company stock into the 3 fund all at once. This company stock literally doubled in value in the past two years, my wife thinks it’s a winner (understandably so) and won’t let me dump it all and definitely not all at once. This was the first company she worked at and it’s money she saved / earned so I can’t force this.
Re: I'm essentially market timing, but can't bring myself to stop.
Because I feel like if a crash happens, I’d be in an amazing position to buy low with our excess cash. I’m fully aware I’m irrational because I don’t know when it will happen and when the bottom will be.UpperNwGuy wrote: ↑Sat Feb 23, 2019 9:22 amCorrection: You have TWO issues: one is the cash, and the other is the company stock. Your wife's emotions are tied up in the company stock, granted. But why are you not investing the cash? There shouldn't be any emotions involved on that issue.cdu7 wrote: ↑Sat Feb 23, 2019 9:13 am We have a 3 fund already, the issue is in moving money We currently have in the form of cash / company stock into the 3 fund all at once. This company stock literally doubled in value in the past two years, my wife thinks it’s a winner (understandably so) and won’t let me dump it all and definitely not all at once. This was the first company she worked at and it’s money she saved / earned so I can’t force this.
Edit: another fear driver perhaps is that when we had kids I changed careers / and my wife took a part time position essentially halving our income. We went from 300k + to 170k. It’s a good income and the quality of life changes are invaluable (spending time with kids), but I feel somehow that how I handle our existing savings is now more important than ever, which is ironically driving me to make worse decisions.
Last edited by cdu7 on Sat Feb 23, 2019 9:31 am, edited 2 times in total.
Re: I'm essentially market timing, but can't bring myself to stop.
If you're afraid to deploy your capitol it probably is a hint that your AA is probably assuming more risk than your risk tolerance. I would first look at your AA, make sure it's correct, and if need be adjust it to a level that you are comfortable come what may. Then once that is set, deploy your capitol. That being said, there's also nothing wrong with having part of your capitol invested in short term treasuries (which is what a money market really is). You may even naturally be at the proper AA for your risk tolerance by counting this as a bond allocation. If as an example pulled out of a hat, you were say 100% stocks before, and this chunk of change were ~20% of your assets, and you're sleeping well with this 20% in short term bonds, maybe 80/20 is where you should be?
If you want to play market timer maybe allow for an AA of 5-10% in cash that is for discretionary trading. That way you can feel free to gamble on part of your money, but not enough to break your long term goals if worse comes to worse. I did this in the past, and I actually did pretty good, the problem though was I realized how the time and hassle involved in beating the market wasn't worth it. In other words, I learned the juice wasn't worth the squeeze.
As far as your ESPP shares, you could always just do a trailing stop to protect your downside if you want to hold on longer. There are also plenty of people on this board that have some individual stock holdings, so you could permanently hold that stock if you want. It's ok to roll the dice on individual stocks, just make sure that you can afford to lose any money that is invested in individual stocks if worse comes to worse.
If you want to play market timer maybe allow for an AA of 5-10% in cash that is for discretionary trading. That way you can feel free to gamble on part of your money, but not enough to break your long term goals if worse comes to worse. I did this in the past, and I actually did pretty good, the problem though was I realized how the time and hassle involved in beating the market wasn't worth it. In other words, I learned the juice wasn't worth the squeeze.
As far as your ESPP shares, you could always just do a trailing stop to protect your downside if you want to hold on longer. There are also plenty of people on this board that have some individual stock holdings, so you could permanently hold that stock if you want. It's ok to roll the dice on individual stocks, just make sure that you can afford to lose any money that is invested in individual stocks if worse comes to worse.
Last edited by pward on Sat Feb 23, 2019 9:46 am, edited 4 times in total.
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Re: I'm essentially market timing, but can't bring myself to stop.
It seems to me that both you and your wife are letting your emotions control your investment decisions. You both may benefit from reading the bogleheads wiki page on the topic of having an investment policy statement.
Re: I'm essentially market timing, but can't bring myself to stop.
"Housing: roughly 750k total value, one rental/ one home, with 440k debt"?
I'm 'Old-School'...and obviously out of touch with the younger generation's way of thinking...but in my simple mind it's a no-brainer...pay down the debt first...then deal with the rest.
I'm 'Old-School'...and obviously out of touch with the younger generation's way of thinking...but in my simple mind it's a no-brainer...pay down the debt first...then deal with the rest.
Independence = Financial assets working for you versus you working for them. |
"Own an Index Fund, Get a Life Outside of Finance, and Relax"...John C. Bogle
Re: I'm essentially market timing, but can't bring myself to stop.
The interest rates are 3.68 and 4.5 30 year fixed. I could pay it off, but feel like they are inflation hedges.billyo44 wrote: ↑Sat Feb 23, 2019 9:32 am "Housing: roughly 750k total value, one rental/ one home, with 440k debt"?
I'm 'Old-School'...and obviously out of touch with the younger generation's way of thinking...but in my simple mind it's a no-brainer...pay down the debt first...then deal with the rest.
Re: I'm essentially market timing, but can't bring myself to stop.
You WERE in an amazing position to buy equities in December. Your behavior in December tells me that you would not buy equities if another drop happened. (I note the following to let you know that it can be done: My records show that between 12/1/2018 and 01/03/2019, I purchased more than $475K of equity funds by rebalancing out of bond funds. I didn't time every purchase perfectly and the early December purchases were in the red for quite a number of weeks, but it didn't matter.)
As for the company stock, can you find an index ETF that did almost as well or tracked the stock? If so, then I would use that to show that there are legitimate reasons to do something with the stock.
As for 'Old-School' debt, I wouldn't worry about mortgage debt. Old school is actually to have mortgages, so I don't know what that comment was about.
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Re: I'm essentially market timing, but can't bring myself to stop.
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Last edited by letsgobobby on Thu Apr 18, 2019 1:15 am, edited 1 time in total.
Re: I'm essentially market timing, but can't bring myself to stop.
I bought in december, as my risk tolerance changed, and i increased equities by 5-10%. Doesnt seem like you are ready for the markets ups and downs. I tend to just judge my own risk tolerance and rebalance accordingly
Re: I'm essentially market timing, but can't bring myself to stop.
I’m very very good at doing nothing, even if markets are in free fall I can just sit and do nothing no problem. My issue is the fear of doing something wrong. So ironically while this is great in terms of keeping me from selling when markets crash, it’s preventing me from investing my cash at the right time. That’s why I love my 401k etc. where it is just automatically buying for me. For everyone saying I need to re-evaluate my risk tolerance, it’s not an issue of me panicking and selling, it’s me being able to push a button in any respect. I hardly ever rebalance for example.letsgobobby wrote: ↑Sat Feb 23, 2019 9:50 amthen you’re no good at this game and should quit. i increased my stock allocation by ten percent between December 19 and December 24. i like the market timing game.
Re: I'm essentially market timing, but can't bring myself to stop.
You are right, so are you saying I should just buy maybe regularly? Like plan on doing 5k a month or something?livesoft wrote: ↑Sat Feb 23, 2019 9:48 amYou WERE in an amazing position to buy equities in December. Your behavior in December tells me that you would not buy equities if another drop happened. (I note the following to let you know that it can be done: My records show that between 12/1/2018 and 01/03/2019, I purchased more than $475K of equity funds by rebalancing out of bond funds. I didn't time every purchase perfectly and the early December purchases were in the red for quite a number of weeks, but it didn't matter.)
As for the company stock, can you find an index ETF that did almost as well or tracked the stock? If so, then I would use that to show that there are legitimate reasons to do something with the stock.
As for 'Old-School' debt, I wouldn't worry about mortgage debt. Old school is actually to have mortgages, so I don't know what that comment was about.
P.S. no index will match the performance of this particular stock over the past few years, it was a significant outperformer. It literally doubled in value. My wife is onboard with selling some, we both realize it isn’t likely to keep rising like it did. She just can’t bring herself to dump it.
Re: I'm essentially market timing, but can't bring myself to stop.
Putting your cash to work over time is a fine plan. I would evaluate how you would feel under both possibilities - that you lump sum it next week and it then drops in value 20% or so for some period of time, or that you average it in over time, but the market continues to rise, causing you to buy at ever higher prices.cdu7 wrote: ↑Sat Feb 23, 2019 10:15 amYou are right, so are you saying I should just buy maybe regularly? Like plan on doing 5k a month or something?livesoft wrote: ↑Sat Feb 23, 2019 9:48 amYou WERE in an amazing position to buy equities in December. Your behavior in December tells me that you would not buy equities if another drop happened. (I note the following to let you know that it can be done: My records show that between 12/1/2018 and 01/03/2019, I purchased more than $475K of equity funds by rebalancing out of bond funds. I didn't time every purchase perfectly and the early December purchases were in the red for quite a number of weeks, but it didn't matter.)
As for the company stock, can you find an index ETF that did almost as well or tracked the stock? If so, then I would use that to show that there are legitimate reasons to do something with the stock.
As for 'Old-School' debt, I wouldn't worry about mortgage debt. Old school is actually to have mortgages, so I don't know what that comment was about.
P.S. no index will match the performance of this particular stock over the past few years, it was a significant outperformer. It literally doubled in value. My wife is onboard with selling some, we both realize it isn’t likely to keep rising like it did. She just can’t bring herself to dump it.
For your wife’s stock, you should discuss the possibilities with her here as well. What is the likelihood that it has room to double again? What is the likelihood it will go to zero? Try to remove emotion from these discussions. Perhaps decide what an acceptable amount to take off the table is, and do that, while maybe also no longer re-investing dividends so that money can go into your other investments, and set a schedule where you will continue to sell a portion of this stock on a regular basis.
Re: I'm essentially market timing, but can't bring myself to stop.
If one is going to DCA, then I always suggest getting it done in 10 months at most: Put in 50% now, then 5% of total additional every month, but if the market drops, put in an additional month early. That way all cash is invested for sure in 10 months or less. Your idea of $5K per month is just too little.cdu7 wrote: ↑Sat Feb 23, 2019 10:15 am You are right, so are you saying I should just buy maybe regularly? Like plan on doing 5k a month or something?
P.S. no index will match the performance of this particular stock over the past few years, it was a significant outperformer. It literally doubled in value. My wife is onboard with selling some, we both realize it isn’t likely to keep rising like it did. She just can’t bring herself to dump it.
As for the company stock, can a case be made for "selling high"? Some index ETFs have almost doubled in the past 5 years, e.g. MTUM. No way to predict the future though.
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Re: I'm essentially market timing, but can't bring myself to stop.
cdu7 wrote: ↑Sat Feb 23, 2019 9:41 amThe interest rates are 3.68 and 4.5 30 year fixed. I could pay it off, but feel like they are inflation hedges.billyo44 wrote: ↑Sat Feb 23, 2019 9:32 am "Housing: roughly 750k total value, one rental/ one home, with 440k debt"?
I'm 'Old-School'...and obviously out of touch with the younger generation's way of thinking...but in my simple mind it's a no-brainer...pay down the debt first...then deal with the rest.
I also am from the era of "getting out of debt if you can" (though when I had mortgages, the rates were higher). I'm not sure what percent of your total debt is at the higher interest rate (4.5%), but personally, I would probably be paying that off.
If you can tax deduct the mortgage interest, in the 22% bracket, paying 4.5% is like paying 3.5%. Are you getting 3.5% on the cash?
One thing, speaking psychologically, that I had underestimated prior to getting out of mortgage debt, was how good the feeling was to have zero debt. Plus, all of a sudden, there was a corresponding jump in monthly cash flow.
The other point I haven't seen mentioned so far is the unrealized long term gain on your wife's company stock.
Just because you're paranoid doesn't mean they're NOT out to get you.
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Re: I'm essentially market timing, but can't bring myself to stop.
Sell rulecdu7 wrote: ↑Sat Feb 23, 2019 8:20 am Ok, so I have a significant chunk of excess cash left over from our house down-payment fund and some old company stock I've been slowly selling down. Before I say anything else, I will tell you that I'm aware we should sell it down all at once, but it's my wife's old ESPPs from her first company, so she gets to decide what to do. Also the stock has significantly outperformed the market so my wife can look at me and say: "see look at how amazing we did keeping this stuff." In any case we have been selling a significant amount every year. So, we now have a fairly large amount of cash, in excess of our emergency fund needs. I want to put it into the market, but I just can't bring myself to pull the trigger. I'm so convinced there will be a big market drop at some point in the next year that I just can't help but stay frozen. I've invested a few thousand slowly the past couple days (I'll do it by letting my OCD overpower other concerns, and I'll buy shares so that my total number of shares is an even number).
So advice needed: is there a problem holding on to this cash for a big market drop or should I just pull the trigger and invest a ton of it?
I have a simple rule sell at "all time high" usually break out point above 20 day moving average line, this is usually as stated by financial news.
Buy Rule
The opposite is true, buy at dips below 200 day moving average, "all time lows".
watch video: https://www.youtube.com/watch?v=ktToRNpKNgI&t=6s
How many times do I check?
I check 11:00AM, 2:30PM, and 3:30PM, I use limit sell orders which controls the sell price in my mind which makes sense to my cost basis.
I find that individual stocks take up enormous amount of time, and the profits distracts me from my day job, and mutual funds Sectors, and Active funds satisfies my gambling instincts.
I own approx 220K VSEQX and 460K of Vanguard PrimeCap, this is approx 60% of my portfolio, but is smart beta in my mind and day to day moves show changes. In Dec 24, 2018 i lost approx 275, but have regained most of it.
Others may disagree with this approach, but it has worked for me several years my portfolio is 1.5 million and like someone else mentioned I agree limit 10% of value of portfolio to aggressive or high risk play in which you are willing to loose the whole thing. If it is in a taxable account you could forward losses for several years until IRS disclaims that option.
If you have a Roth account, it could be your play account or high risk, I agree with others if you have cash to pay off mortgage I agree that would be a priority depending on whether or not you can write of interest deductions moving forward.
Re: I'm essentially market timing, but can't bring myself to stop.
A good move is to sell the company stock and buy a stock index fund immediately. That way you stay invested.
In reading your posts I can't tell if $180K is all of the cash, or only that in excess of emergency fund. Also, is the $450K company stock is part of your 80/20 $1mill or in addition to it. I think it's a good idea to view all your investable assets in total, and make informed decisions based on that. A portfolio of your size, with I presume a fairly large taxable account, doesn't need a segregated emergency fund. If you want to hold cash that's fine, but it's part of your fixed income AA.
I've had a few bad experiences holding company stock so I wouldn't want 45% of my investable assets tied up in that. Many people say no more than 10%, but I could probably live with 25% if I had a compelling reason.
You might consider setting up automatic purchases of mutual funds in your account. Automation works for those of us without good timing or nerves of steel.
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Re: I'm essentially market timing, but can't bring myself to stop.
Few thoughts:cdu7 wrote: ↑Sat Feb 23, 2019 10:04 am I’m very very good at doing nothing, even if markets are in free fall I can just sit and do nothing no problem. My issue is the fear of doing something wrong. So ironically while this is great in terms of keeping me from selling when markets crash, it’s preventing me from investing my cash at the right time. That’s why I love my 401k etc. where it is just automatically buying for me. For everyone saying I need to re-evaluate my risk tolerance, it’s not an issue of me panicking and selling, it’s me being able to push a button in any respect. I hardly ever rebalance for example.
Markets falling are one thing, they have always recovered (except in a couple instances like Germany and Russia in the past).
But individual stocks are different. They can and have and will continue to go to zero. Problem is we don't know when and which ones. So if you have employer stock (the ESOP) that could go to zero. Remember Enron? How would that feel? Would you still "do nothing no problem"? Would that not have been "doing something wrong"?
If I'm reading your earlier posts right, you have $1 million invested total. You also said you have $450k in the ESOP. Is the $450k part of the $1 million invested?
Because if it is, you've got about half your investments tied up in one company (in the ESOP)??? Is that correct? Are you prepared to lose half of your investments? Is your wife? Does she understand the risk she is taking?
The common advice is to not have any more than 5-10% of your money in company stock. Because if the company goes bust (yeah, I know this company will never go bust. If I had a nickel everytime someone said that to me. You realize that at some point people said that same thing about every single company that ever went out of business right?) you will have only lost 5-10% of your money. If you have 45% in one company, that's really risky. Your wife a gambler by chance? Because that's exactly what she's doing rolling the dice.
My mom had 17% of her money in the company she worked for. It was half of her stock investments though. I was able to convince her to more fully diversify. The stock had beaten the market while she held it. I reminded her of her good fortune and mostly luck and had her cash in her chips while she still had them. That was just a couple years ago. Last year she complained about her 401k losing some money (because the market ended down slightly). I showed her how she would have done if she held on to her company stock which did far worse last year than the market as a whole. She really would have been complaining if she had held onto the stock. People just don't realize the risk they're taking as long as the good times keep rolling.
Another common way of thinking about this is:
Ask your wife if she didn't own $450k in the employer stock, would she go out right now and buy $450k in the company stock at the current price?
If the answer is yes, then shouldn't she be backing the truck up and buying as much company stock as she can?
If the answer is no, then why wouldn't she be selling the company stock at the current price?
See how asking that question crystalizes your thinking? If you wouldn't buy it now at the current price, why would you hold on to it? You should sell. If you would buy at the current price, then why isn't she buying more right now at the current price?
One final thought is that she could have possibly taken advantage of NUA if all conditions were met. Read more here: https://www.kitces.com/blog/net-unreali ... sop-plans/
what do you think? What does she?
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Re: I'm essentially market timing, but can't bring myself to stop.
Is this a cry for help? Or are you seeking justification?
US Stocks and Bonds look very overvalued to me at this time, but I've lost money on that bet before. Losing money by not making it is the same as losing it by losing it.
US Stocks and Bonds look very overvalued to me at this time, but I've lost money on that bet before. Losing money by not making it is the same as losing it by losing it.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking
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Re: I'm essentially market timing, but can't bring myself to stop.
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Last edited by letsgobobby on Thu Apr 18, 2019 1:07 am, edited 1 time in total.
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Re: I'm essentially market timing, but can't bring myself to stop.
It doesn't seem so bad. Just be realistic. If you count your cash as part of your bond allocation, you are pretty close to your age in bonds. If you are conservative, that is OK.
And if your are gradually converting the stock to a broad based index fund as fast as your wife allows, that's not so bad.
And if your are gradually converting the stock to a broad based index fund as fast as your wife allows, that's not so bad.
Re: I'm essentially market timing, but can't bring myself to stop.
You need to invest it all right now. That's the best thing to do.
If you can't bring yourself to do that, then just "officially" change your asset allocation to 75/25 or 70/30 because that's what you are.
If you can't bring yourself to do that, then just "officially" change your asset allocation to 75/25 or 70/30 because that's what you are.
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Re: I'm essentially market timing, but can't bring myself to stop.
And you're worried about the total stock market falling a bit! If half of my portfolio was concentrated in a single stock, I couldn't sleep at night due to my gambling with my retirement account.
As another poster mentioned upthread, we are our own worst enemies. Unfortunately, you need to convince someone else that this is gambling. I suspect the only way for her to realize this is to actually lose a large chunk of this money. However, if she is open to taking the time to learn about investing, she would realize the risk she is taking.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
Re: I'm essentially market timing, but can't bring myself to stop.
The company stock is in addition to the portfolio, but it still represents an unhealthily large part of our net worth. I know what needs to be done, I’ll be setting up auto investment buys and continue to sell the company stock as allowed.
Re: I'm essentially market timing, but can't bring myself to stop.
Perhaps you and your wife can read articles and research written for individuals holding a large percentage of their assets in a single stock.
https://blog.alliancebernstein.com/post ... stock-risk
http://www.alliancebernstein.com/Resear ... mma_BB.pdf
https://blog.alliancebernstein.com/post ... stock-risk
http://www.alliancebernstein.com/Resear ... mma_BB.pdf
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Re: I'm essentially market timing, but can't bring myself to stop.
Wait, so you are trying to market AND CPI time? Wowsa.cdu7 wrote: ↑Sat Feb 23, 2019 9:41 amThe interest rates are 3.68 and 4.5 30 year fixed. I could pay it off, but feel like they are inflation hedges.billyo44 wrote: ↑Sat Feb 23, 2019 9:32 am "Housing: roughly 750k total value, one rental/ one home, with 440k debt"?
I'm 'Old-School'...and obviously out of touch with the younger generation's way of thinking...but in my simple mind it's a no-brainer...pay down the debt first...then deal with the rest.
I would get the money invested at maximum, and pay the mortgage down at minimum. Owing debt is NOT an inflation hedge if you are going to sit in cash. Cash is the WORST asset with regards to inflation. Sitting cash on one position while paying debt to a loan servicer so you can hedge inflation is a total and complete lack of logic.
Get the debt paid down as that seems like an easier way to deal with your loss aversion.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Re: I'm essentially market timing, but can't bring myself to stop.
There is plenty of debate on the upsides and downsides of holding a mortgage, there are many reasons why we would prefer holding a mortgage, primarily from the perspective of having flexibility to move etc. In any case it is generally agreed that a mortgage is not bad debt. As to the cash it is if course optimized at 2.6%, which theoretically is meeting inflation. That said I’m fully aware we need to invest it, which is the purpose of the post. I would rather invest it than use it to pay down the mortgage however. Paying off a mortgage is certainly a perfectly acceptable choice for some people, but in our case we aren’t considering it at this time.Olemiss540 wrote: ↑Sun Feb 24, 2019 7:19 amWait, so you are trying to market AND CPI time? Wowsa.cdu7 wrote: ↑Sat Feb 23, 2019 9:41 amThe interest rates are 3.68 and 4.5 30 year fixed. I could pay it off, but feel like they are inflation hedges.billyo44 wrote: ↑Sat Feb 23, 2019 9:32 am "Housing: roughly 750k total value, one rental/ one home, with 440k debt"?
I'm 'Old-School'...and obviously out of touch with the younger generation's way of thinking...but in my simple mind it's a no-brainer...pay down the debt first...then deal with the rest.
I would get the money invested at maximum, and pay the mortgage down at minimum. Owing debt is NOT an inflation hedge if you are going to sit in cash. Cash is the WORST asset with regards to inflation. Sitting cash on one position while paying debt to a loan servicer so you can hedge inflation is a total and complete lack of logic.
Get the debt paid down as that seems like an easier way to deal with your loss aversion.
Re: I'm essentially market timing, but can't bring myself to stop.
I was in the same boat and indeed did TLH in December but didn’t have nerve to buy more stocks using cash in checking/ savings as I feared it will fall further. There are two things that helped me put rest of the cash in market:
- DCA: Automated weekly additions to index
- Balanced: Less tinkering and auto rebalance
- Open a fun money account at Robinhood to tinker
I know I won’t buy more stocks in next dip manually but I know both taxable and 401k balanced funds (signature) will do that automatically keeping my AA.
- DCA: Automated weekly additions to index
- Balanced: Less tinkering and auto rebalance
- Open a fun money account at Robinhood to tinker
I know I won’t buy more stocks in next dip manually but I know both taxable and 401k balanced funds (signature) will do that automatically keeping my AA.
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Re: I'm essentially market timing, but can't bring myself to stop.
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Last edited by letsgobobby on Thu Apr 18, 2019 1:07 am, edited 1 time in total.
Re: I'm essentially market timing, but can't bring myself to stop.
There doesn't seem to be anything wrong with spending the cash on several of the options. Spend some on each mortgage, invest some into your general account per your AA, open a play account in Robinhood, hold some extra cash, spend some on a car or vacation, and set up a schedule to DCA.is there a problem holding on to this cash for a big market drop or should I just pull the trigger and invest a ton of it?
As retire2022 mentioned, set up a few buy rules for the excess cash by picking an amount to invest at various levels of 200 day drops. If the market never drops, you have a bit extra cash that is keeping up with inflation and you can spend that on something nice while all your other accounts go up; not a terrible worst case scenario.
Re: I'm essentially market timing, but can't bring myself to stop.
Fuller update after checking details:
1 million index 3 fund 80/20
450k company stock
180k cash earning roughly 2.6%
315k rental with 105k mortgage at 3.7% (rental getting 2300 a mo with expenses at 1700 a mo, paying off mortgage would reduce monthly expenses by roughly 750)
460k house with 325k mortgage at 4.5%
Different Advice so far:
1. set up auto payment plan for cash
2. Sell as much company stock as possible as fast as possible (there are some tax implications to this due to them being espp / rsus and having a TON of capital gains)
3. Put all cash into market now
4. Put cash into mortgage
Thanks for all the advice so far, it’s just a matter now of getting something done.
1 million index 3 fund 80/20
450k company stock
180k cash earning roughly 2.6%
315k rental with 105k mortgage at 3.7% (rental getting 2300 a mo with expenses at 1700 a mo, paying off mortgage would reduce monthly expenses by roughly 750)
460k house with 325k mortgage at 4.5%
Different Advice so far:
1. set up auto payment plan for cash
2. Sell as much company stock as possible as fast as possible (there are some tax implications to this due to them being espp / rsus and having a TON of capital gains)
3. Put all cash into market now
4. Put cash into mortgage
Thanks for all the advice so far, it’s just a matter now of getting something done.
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Re: I'm essentially market timing, but can't bring myself to stop.
So, you have 800k in the market already and are not worried about that but are worried about the 180k cash going in? Come up with a plan and stick to it. If I were you, I'd DCA it in over a period of time. Somewhere between 6-18 months depending on what makes you feel most comfortable. When you DCA, it is kind of like splitting the difference when you cannot make up your mind. Are you adding to stocks now from your paychecks? I am not sure why the $180k should be treated any different.cdu7 wrote: ↑Sun Feb 24, 2019 9:09 am Fuller update after checking details:
1 million index 3 fund 80/20
450k company stock
180k cash earning roughly 2.6%
315k rental with 105k mortgage at 3.7% (rental getting 2300 a mo with expenses at 1700 a mo, paying off mortgage would reduce monthly expenses by roughly 750)
460k house with 325k mortgage at 4.5%
Different Advice so far:
1. set up auto payment plan for cash
2. Sell as much company stock as possible as fast as possible (there are some tax implications to this due to them being espp / rsus and having a TON of capital gains)
3. Put all cash into market now
4. Put cash into mortgage
Thanks for all the advice so far, it’s just a matter now of getting something done.
Re: I'm essentially market timing, but can't bring myself to stop.
It doesn’t sound to me like you’re a “market timer”. You’re not selling out of your existing 80/20 portfolio to wait for the drop... you’re just having a hard time pulling the trigger to dump everything else in.
You’ve stated your end goal is to get the rest of the cash and old stock positions allocated to your 80/20 portfolio. Best to make a plan that takes emotion out of the equation - how about investing / reallocating $12,500 per week?
1) Transfer it all to vanguard or your brokerage of choice, including the company stock. Put cash in VUSXX or VMMXX
2) Put in your calendar a recurring reminder - every Monday morning, log in and trade $12,500 into your 80/20 portfolio.
* Consider setting an automatic trade in vanguard, but you may want to do it manually to control the allocation to rebalance the portfolio with new funds
3) ignore the market and just do the above until there’s no cash and concentrated stock left
* If there’s a drop, you can put more in if you feel like it, but just stick to plan every Monday and keep the funds going where you know they need to be
You’ve stated your end goal is to get the rest of the cash and old stock positions allocated to your 80/20 portfolio. Best to make a plan that takes emotion out of the equation - how about investing / reallocating $12,500 per week?
1) Transfer it all to vanguard or your brokerage of choice, including the company stock. Put cash in VUSXX or VMMXX
2) Put in your calendar a recurring reminder - every Monday morning, log in and trade $12,500 into your 80/20 portfolio.
* Consider setting an automatic trade in vanguard, but you may want to do it manually to control the allocation to rebalance the portfolio with new funds
3) ignore the market and just do the above until there’s no cash and concentrated stock left
* If there’s a drop, you can put more in if you feel like it, but just stick to plan every Monday and keep the funds going where you know they need to be
Re: I'm essentially market timing, but can't bring myself to stop.
cdu7 wrote: ↑Sun Feb 24, 2019 9:09 am Fuller update after checking details:
1 million index 3 fund 80/20
450k company stock
180k cash earning roughly 2.6%
315k rental with 105k mortgage at 3.7% (rental getting 2300 a mo with expenses at 1700 a mo, paying off mortgage would reduce monthly expenses by roughly 750)
460k house with 325k mortgage at 4.5%
Different Advice so far:
1. set up auto payment plan for cash
2. Sell as much company stock as possible as fast as possible (there are some tax implications to this due to them being espp / rsus and having a TON of capital gains)
3. Put all cash into market now
4. Put cash into mortgage
Thanks for all the advice so far, it’s just a matter now of getting something done.
In general, unless the money is ear-marked for a specific short term purpose, it is better to think about your portfolio as whole.
So, instead of $1M @ 80/20 plus company stock plus $180k cash, what you really have is $1250 in equities and $380k in fixed income, $1630k total.
This is ~77/23 asset allocation. where do you wish to be?
You are definitely concentrated in one stock, so i agree with others that you should do something about that. How quickly is a tough question depending on tax consequences. You will have to weigh the risks of the company stock against the tax hit.
As for the cash, the rate you are getting is not bad, i would think of it as a portion of my fixed income. If the 77/23 is close to what you want anyway, no reason to have to deploy in to equities. If you are holding it in a taxable account, that is not very tax efficient, you could consider buying equities in taxable with that money and selling an equivalent amount of equities in a tax-deferred account and buying CDs, or other fixed income asset to maintain the same asset allocation, or whatever allocation you decide you are comfortable with. That should be the main goal, to choose an allocation you are comfortable with, and move to get that implemented, while reducing/eliminating the heavy concentration in one stock.
Good luck to you.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: I'm essentially market timing, but can't bring myself to stop.
I worked for a very stable company in the utility space. If you manage the company assets, the rates are guaranteed. You can’t lose.....
Having said that, I would never hold that much company stock. Our 401k match was in company stock and I would exchange it immediately. In the past ten years, my company went through two acquisitions. Each time, the company stock plummeted and never recovered.
My three fund portfolio performed much better. I also don’t likely salary and stocks being tied to the same company.
This is just my personal preference, but I think it is perfectly ok to pay down your mortgage if you have concerns or don’t care to commit the money to the market. I slept well at night knowing that my family had shelter and that was our biggest expense. So acquisitions, market crashes, threats of job loss never worried me. I just stayed the course.
Good luck to you.
Having said that, I would never hold that much company stock. Our 401k match was in company stock and I would exchange it immediately. In the past ten years, my company went through two acquisitions. Each time, the company stock plummeted and never recovered.
My three fund portfolio performed much better. I also don’t likely salary and stocks being tied to the same company.
This is just my personal preference, but I think it is perfectly ok to pay down your mortgage if you have concerns or don’t care to commit the money to the market. I slept well at night knowing that my family had shelter and that was our biggest expense. So acquisitions, market crashes, threats of job loss never worried me. I just stayed the course.
Good luck to you.
"I started with nothing and I still have most of it left."
Re: I'm essentially market timing, but can't bring myself to stop.
My wife's 401k match is in company stock, and since 2011 it has done better than the S&P 500 / TSM. But we still limit it in our portfolio and usually sell off some 2-3 times a year. If you are emotionally attached, pick a limit as a reasonable percentage of your portfolio for single-stock risk and don't exceed it. If it outperforms, take those "winnings" off the table. If it underperforms, you've at least significantly limited your exposure.
Re: I'm essentially market timing, but can't bring myself to stop.
Unless I missed it you don't give an international percentage, but if you don't have some reasonable (30%, 40%, 50%...?) overall international percentage (including the remaining company stock) then some mix of international (emerging, etc.) would be the place to add to equities. You may be able to convince yourself to do that based on valuations or some similar metric.
Re: I'm essentially market timing, but can't bring myself to stop.
If you are still worried about dip:
A correction or crash is not a bad thing for long-term investors
Of course, nobody enjoys watching the value of their brokerage account go down. I still look back on 2008 as a particularly traumatic period, and in full honesty, there were times when I considered throwing in the towel when it came to the stock market.
Thankfully, I didn't. I understood one important concept that all long-term investors should know: that corrections and panics are the best opportunities. When Buffett wrote his 2008 letter to shareholders in early 2009, when the market was close to the bottom, he took the opportunity to address the company's declining investment portfolio by saying: "This does not bother Charlie [Munger] and me. Indeed, we enjoy such price declines if we have funds available to increase our positions."
Think of it this way. If you were shopping at your favorite clothing store and everything suddenly became 30% cheaper, would you panic and run to your car? Of course you wouldn't -- you'd probably stock up while the sale was going on. The same logic applies here. From a long-term perspective, a correction or crash is nothing more than a really good sale.
A correction or crash is not a bad thing for long-term investors
Of course, nobody enjoys watching the value of their brokerage account go down. I still look back on 2008 as a particularly traumatic period, and in full honesty, there were times when I considered throwing in the towel when it came to the stock market.
Thankfully, I didn't. I understood one important concept that all long-term investors should know: that corrections and panics are the best opportunities. When Buffett wrote his 2008 letter to shareholders in early 2009, when the market was close to the bottom, he took the opportunity to address the company's declining investment portfolio by saying: "This does not bother Charlie [Munger] and me. Indeed, we enjoy such price declines if we have funds available to increase our positions."
Think of it this way. If you were shopping at your favorite clothing store and everything suddenly became 30% cheaper, would you panic and run to your car? Of course you wouldn't -- you'd probably stock up while the sale was going on. The same logic applies here. From a long-term perspective, a correction or crash is nothing more than a really good sale.
Emergency: FDIC |
Taxable: VTMFX |
Retirement: TR2040