Convince me not to try to time the market

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roadnottaken
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Convince me not to try to time the market

Post by roadnottaken » Thu Jun 06, 2019 11:08 am

I'm fortunate to have a substantial lump-sum (~$300k) to invest at the moment which will roughly double my current retirement savings. I'm 38 so I've got some time, but work in a volatile industry and would feel good if I didn't *have* to work beyond ~55-60. Generally I agree with the Bogleheads philosophy and am tentatively planning to set-up a 3-fund portfolio with a ~70/30 stock/bond split. However, I'm hearing lots of warnings that the market is due for a major correction soon. Posts like this one make me uneasy about dropping major cash into the market at this particular moment. I know it's unwise to try to time the market, but should I consider dollar cost averaging or keeping some cash for a few years to see what happens? Or - since I'm investing for the long-term (~20 years) should I just bite the bullet, buy the funds, and try to ignore the market? I know you shouldn't pull-out of the market when it corrects, but it still feels kind-of dumb to jump in at the top...

I think I know the right answer, just looking for some reassurance...

Thanks

azanon
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Re: Convince me not to try to time the market

Post by azanon » Thu Jun 06, 2019 11:15 am

What stock/bond ratio were you previously using for the initial 300K? The reason I ask is because if you had something along the lines of a 70/30 for years already, then it's not like you're just starting to invest now.

As far as stock valuations go, GLOBAL valuations are not terribly high - last I looked it was about CAPE of 20, which is on the higher end of still median. So if you did a 2 fund instead of a 3 fund (just buy VT - Vanguard total world stock), then I don't see the problem. And with VT, you can just know you'll never have home country bias ever again.

Vanguard had a very recent article/paper on recommendations based on research on US vs. International weights (feb 19' i believe). Conclusion was 40-50% foreign. VT's right in the middle.

Nowizard
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Re: Convince me not to try to time the market

Post by Nowizard » Thu Jun 06, 2019 11:19 am

One issue if invested during a downturn that can benefit long-term investors and mitigate some of the paper losses occurs when others sell during a downturn for whatever reason. Fund companies, in turn, sell stocks to repay the sellers. Those stocks often have gains that are passed on to those continuing to hold those funds. If they reinvest distributions, they are purchasing shares at a decreased cost. It helps to keep in mind that losses are on paper only until you sell. Younger investors may have an experience with a downturn that results in determining their risk tolerance is not as high as they thought, but that is just part of the learning process. Unfortunately, errorless discrimination in complex areas like finance is not possible.

Tim

dru808
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Re: Convince me not to try to time the market

Post by dru808 » Thu Jun 06, 2019 11:22 am

how about dollar cost averaging it? 10k-50k a month.

Rus In Urbe
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Re: Convince me not to try to time the market

Post by Rus In Urbe » Thu Jun 06, 2019 11:24 am

...and there's also a marketwatch.com article today about how the DOW is going to 40,000.
So which are you going to believe?

Truly, there is no one, right answer about what to do.
There is a ton of information on this site, solid data (I expect Taylor Larimore will weigh in soon with all the links!)
Ultimately, after reading all the facts, there is only the choice that you feel comfortable with now.
Yours alone.

Here are three basic possibilities:
A. Put it all in now with your long-term AA. Then Don't Look for about five years.
B. Break it up into segments (say 12) and auto-pilot it into the market (DCA).
C. Tuck it under the mattress until the market bottoms out (let us all know the day you get back in, and how that works out).

You can always play Shoulda-Woulda-Coulda with any decision you make, whether about your finances, or anything else for that matter. I know people who live like that. They are miserable.

My philosophy has always been to do as much research as I can on a decision. Then once I make it, I jump and never look back. Have I made mistakes? Sure! Have I won the game anyway? You bet. Am I happy? Deliriously.

And be happy about the windfall! It will all work out......
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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Re: Convince me not to try to time the market

Post by azanon » Thu Jun 06, 2019 11:27 am

If you're going to do the - don't look for years - approach (which isn't a bad idea at all), then go with a 1-fund instead, aka a balanced fund. 2+ funds require oversight, at least annually.

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packet
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Re: Convince me not to try to time the market

Post by packet » Thu Jun 06, 2019 11:28 am

First round’s on me.

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packet
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Re: Convince me not to try to time the market

Post by packet » Thu Jun 06, 2019 11:31 am

Oh yeah, and...

Welcome to Bogleheads!

:beer Cheers,
packet
First round’s on me.

Rus In Urbe
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Re: Convince me not to try to time the market

Post by Rus In Urbe » Thu Jun 06, 2019 11:35 am

packet » Thu Jun 06, 2019 12:28 pm
Bob, the world’s worst market timer
:beer Cheers,
packet
Oh, Packet, as linked above----yes, I've read this "Bob, the world's worst market timer" and it's a classic, a treasure, a reminder that it's "not market timing, it's time in the market." Thanks for linking to this! Luckily, none of us could possibly be that unlucky!
I'd like to live as a poor man with lots of money. ~Pablo Picasso

bondsr4me
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Re: Convince me not to try to time the market

Post by bondsr4me » Thu Jun 06, 2019 11:42 am

roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
I'm fortunate to have a substantial lump-sum (~$300k) to invest at the moment which will roughly double my current retirement savings. I'm 38 so I've got some time, but work in a volatile industry and would feel good if I didn't *have* to work beyond ~55-60. Generally I agree with the Bogleheads philosophy and am tentatively planning to set-up a 3-fund portfolio with a ~70/30 stock/bond split. However, I'm hearing lots of warnings that the market is due for a major correction soon. Posts like this one make me uneasy about dropping major cash into the market at this particular moment. I know it's unwise to try to time the market, but should I consider dollar cost averaging or keeping some cash for a few years to see what happens? Or - since I'm investing for the long-term (~20 years) should I just bite the bullet, buy the funds, and try to ignore the market? I know you shouldn't pull-out of the market when it corrects, but it still feels kind-of dumb to jump in at the top...

I think I know the right answer, just looking for some reassurance...

Thanks
We've just experienced a pretty sizable drop in the markets and it may (or may not) be over....nobody knows for sure.
This is not a political statement, but if the current administration continues with the tariff nonsense, the markets are not gonna take too kindly to it.
I think one of the major reasons the markets rallied for a few days it's the belief that the FED is gonna lower rates, but again, nobody knows for sure.
You have a long time horizon, so why not invest while the "Stocks on sale" light is flashing.
I would do a mix of 2, maybe 3 ETF's and some individual stocks....that's what I am doing (not that it may be right for you).
Buy while the sale is going on. A previous poster mentioned averaging into the market which can be a good thing...or maybe not a good thing.
I don't like the market timing stuff. It usually ends up "buy high (at emotional high)...sell low (panic emotions)".
Buy good, quality investments and keep them.
I can't help but think of this perfect example of "buy and hold investing"....it's just a great example.
https://www.cnbc.com/2015/02/09/heres-h ... rtune.html
https://www.dailymail.co.uk/news/articl ... tions.html

Good Luck whatever you decide to do.

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roadnottaken
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Re: Convince me not to try to time the market

Post by roadnottaken » Thu Jun 06, 2019 12:23 pm

@packet - thanks, the 'Bob, the world's worst market timer' story was very comforting.

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Re: Convince me not to try to time the market

Post by Fallible » Thu Jun 06, 2019 12:39 pm

roadnottaken wrote:
Thu Jun 06, 2019 11:08 am

Generally I agree with the Bogleheads philosophy and am tentatively planning to set-up a 3-fund portfolio with a ~70/30 stock/bond split. However, I'm hearing lots of warnings that the market is due for a major correction soon. ... I know it's unwise to try to time the market, but should I consider dollar cost averaging or keeping some cash for a few years to see what happens? Or - since I'm investing for the long-term (~20 years) should I just bite the bullet, buy the funds, and try to ignore the market? ...
You do have a good time horizon and it should help you determine how much you can afford to lose in a market downturn before you actually need the money. Mainly because of that time horizon, you could invest (wisely) all of the money at once, or you could invest some or most of it and dollar-cost-average the rest. You can also lower your stock allocation if that would better match your risk tolerance and get you into the market. (DCA, btw, is not market timing.)
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

deltaneutral83
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Re: Convince me not to try to time the market

Post by deltaneutral83 » Thu Jun 06, 2019 12:52 pm

The S&P is down from 1/26/2018. You rarely get 16.5 months where it is not higher (of course this excludes dividends but still...) so not sure the "the market is sooooo high" rhetoric. I would imagine lump summing would beat DCA in this exact situation more than the usual 66% of the time seeing as how we've stagnated the past year and a half. Of course, lump sum over 12-18 months will likely neither hurt nor harm in the long run too much I wouldn't think.

FrankLUSMC
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Re: Convince me not to try to time the market

Post by FrankLUSMC » Thu Jun 06, 2019 4:42 pm

Rus In Urbe wrote:
Thu Jun 06, 2019 11:24 am
...and there's also a marketwatch.com article today about how the DOW is going to 40,000.
I can't wait, if it gets there I will have won the game and will cash out to CDs. :sharebeer

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Re: Convince me not to try to time the market

Post by KyleAAA » Thu Jun 06, 2019 4:45 pm

It is dumb to jump in at the top. The problem is there is no way to determine if we are at the top.

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arcticpineapplecorp.
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Re: Convince me not to try to time the market

Post by arcticpineapplecorp. » Thu Jun 06, 2019 4:52 pm

first read these posts on exactly the same subject:

https://www.google.com/search?ei=3or5XL ... 3Px2FTINUU

then come back and see if you need more convincing.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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dogagility
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Re: Convince me not to try to time the market

Post by dogagility » Thu Jun 06, 2019 4:55 pm

OP,

Convince me that you should time the market...

The market is at an all-time high the majority of the time. The only thing I am pretty confident in about this investing thing is that the equity market has an upward trajectory, especially over your investing horizon (50 years). Don't be afraid and stay the course.

DA
Taking "risk" since 1995.

mmmodem
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Re: Convince me not to try to time the market

Post by mmmodem » Thu Jun 06, 2019 4:55 pm

This thread about Bob, the worst market timer in the world gives me confidence to lump sum. Time in the market is what matters.
viewtopic.php?t=166730

lkar
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Re: Convince me not to try to time the market

Post by lkar » Thu Jun 06, 2019 5:01 pm

You're not going to sell for 17 years at a minimum.

Think about what that means for a second. It's hard to fathom what it means right now, especially if you look at your balances from time to time. But it means that all the ups and downs that this money goes through over the next 17 years really don't make a difference. Your entry point in the next few weeks or months really isn't going to amount to very much one way or the other.

It just doesn't matter until you sell or, at a minimum, until you do a very significant rebalancing to get mostly into non equity or fixed income. And you're a long way away from that.

So, go ahead. Try to time. Or don't. It really doesn't matter. Just do something. Don't get frozen waiting for the perfect moment and then find yourself sitting on cash 5 years from now.

fallingeggs
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Re: Convince me not to try to time the market

Post by fallingeggs » Thu Jun 06, 2019 5:08 pm

roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
Posts like this one make me uneasy about dropping major cash into the market at this particular moment.
You should also realize that market timer, the author of that post, is in a very different position financially then most of us here. He doesn't need the market to move a dime to reach his retirement goal; therefore, he is being very conservative and protecting his nest egg against inflation. This isn't your facts, so don't get lead astray by his actions. Follow the advice "for the rest of us" above.

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Re: Convince me not to try to time the market

Post by mrspock » Thu Jun 06, 2019 5:17 pm

Rus In Urbe wrote:
Thu Jun 06, 2019 11:24 am
...and there's also a marketwatch.com article today about how the DOW is going to 40,000.
So which are you going to believe?
Lord, I hope he’s right! :sharebeer But I do I love this part:
Lamoureux said he had 10% exposure to stocks at the start of the year, but is ready to move that to 50%, and maybe 100% by the third quarter.
So in other words he missed a 20% uptick? Not good enough for him?

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arcticpineapplecorp.
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Re: Convince me not to try to time the market

Post by arcticpineapplecorp. » Thu Jun 06, 2019 6:42 pm

roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
I'm fortunate to have a substantial lump-sum (~$300k) to invest at the moment which will roughly double my current retirement savings. I'm 38 so I've got some time, but work in a volatile industry and would feel good if I didn't *have* to work beyond ~55-60.
So let's say you plan to retire at 55 or 60. What do you need this $300,000 to do for you between now and then?

In other words, you obviously don't have enough to retire now even with the $300,000 so presumably you need more money to be able to retire (whether that's 55-60, before, or after).

So what's the plan exactly? Were you planning on reaching your goal (to retire) without this $300k (by adding new contributions between now and 55-60)? If so, then you don't need to take risk with this money, do you? No, because your goal could be accomplished without it (but requires other savings/investing over time, just as you had planned to do anyway before you got this $300k).

Now if you say, you couldn't have reached your goals with other savings, then I suppose you'd have to deploy some of this money to reach your goals. How much? You've got to determine that. Run the numbers.

So, in other words, it's rarely an everything or nothing type answer required here. But rather, what are your goals and what are the best ways to accomplish them (see, there is rarely "one" way to achieve your goals. You could cut expenses, switch jobs and get more income, etc.).
roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
Generally I agree with the Bogleheads philosophy and am tentatively planning to set-up a 3-fund portfolio with a ~70/30 stock/bond split. However, I'm hearing lots of warnings that the market is due for a major correction soon.
Who is giving these warnings exactly? Do they stand to benefit in some way from making such pronouncements? How specific are these claims? Are they actionable? Will anyone remind them if they got it wrong? Will you? Have you researched what other predictions they made in the past and whether they came true or not? Are they putting their money where their mouths are? If they were, they'd not only be all in cash but would be shorting the stock market, wouldn't they if they were so darned sure the market was going to drop?
roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
I know it's unwise to try to time the market, but should I consider dollar cost averaging or keeping some cash for a few years to see what happens? Or - since I'm investing for the long-term (~20 years) should I just bite the bullet, buy the funds, and try to ignore the market?
You know there's a chance that holding cash will yield worse outcomes than if it was invested. You also know there's a chance your money might yield worse outcomes if invested than in cash. There's no way to know for sure. It doesn't matter in the short term. The long term is all that matters. If you have plenty of time until you need the money, the likely scenario is it will recover and grow between now and when you need it. Has there ever been a 20 year period when stocks didn't recover? No. Even the Great Depression, stocks recovered by 1945 which was 16 years and included two severe recessions back to back. If you don't expect another Great Depression than any decline should recover sooner than 16 years, which means if you've got 20 to go, you should be fine (no guarantees).

More money has been lost in fear of corrections than in the corrections themselves. Swedroe shows you why it's "Better to Face the Correction" : https://www.etf.com/sections/index-inve ... nopaging=1
roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
I know you shouldn't pull-out of the market when it corrects, but it still feels kind-of dumb to jump in at the top...
the top of what? Are you calling a permanent top in which the market will never get back to or climb higher still? Are you saying this is "A" top, or "The" top? Even If you think this is the/a top, you should probably hold on to this post and re-read it 10 years from now. I bet you'll be surprised.
roadnottaken wrote:
Thu Jun 06, 2019 11:08 am
I think I know the right answer, just looking for some reassurance...
Thanks
So what's the right answer?

The market declines on average 14% in any given year (these are intra-year declines). That means half of the time markets drop more than 14% in any given year, and half of the time, less than 14% in any given year. But we also know the market has gone up 2 out of every 3 years (that includes all these intrayear declines). See the chart? In all years (even bad years like 2002, 2003, 2008 the end of year returns were less bad than the intra year declines). Some bad declines (see the chart year 1987) actually recovered from the intra year decline and ended the year in positive territory. 1998 saw an intra year loss of -19% but ended the year UP +27%! Do you see how silly it can be to worry about short term market moves. Last year is a great example. The market had an intra year decline of 20% but it recovered within the 1st quarter of this year and stocks went up like 17% (before the recent decline). Investing is a marathon, not a sprint.

Image

source: https://am.jpmorgan.com/gi/getdoc/1383614189296

Now what do you think?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: Convince me not to try to time the market

Post by delamer » Thu Jun 06, 2019 6:46 pm

If you really believe that this is the top of the market, then you shouldn’t invest in stocks at all.

At age 38 now, there will be a point in your life when you’ll look back at stock prices today and think “wow, things were really cheap in June 2019!”

If you don’t believe that, then don’t put your money in stocks now (or ever).

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Re: Convince me not to try to time the market

Post by whodidntante » Thu Jun 06, 2019 6:49 pm

Well if you should not purchase 300k, I should sell 300k, and I don't recall selling 300k today.

Rus In Urbe
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Re: Convince me not to try to time the market

Post by Rus In Urbe » Thu Jun 06, 2019 9:42 pm


Rus In Urbe wrote:
...and there's also a marketwatch.com article today about how the DOW is going to 40,000.
So which are you going to believe?

mrspock wrote:
Lord, I hope he’s right! :sharebeer But I do I love this part:
Lamoureux said he had 10% exposure to stocks at the start of the year, but is ready to move that to 50%, and maybe 100% by the third quarter.
So in other words he missed a 20% uptick? Not good enough for him?
I know. Hilarious, isn't it?
Really if you read the financial press with just a modicum of skepticism, you realize about 90% of it is bunk.
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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mhadden1
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Re: Convince me not to try to time the market

Post by mhadden1 » Thu Jun 06, 2019 9:47 pm

You just need to follow the advice of Will Rogers regarding market timing, which often gets trotted out on the forum. "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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Re: Convince me not to try to time the market

Post by FOGU » Fri Jun 07, 2019 1:25 pm

arcticpineapplecorp. wrote:
Thu Jun 06, 2019 6:42 pm
The market declines on average 14% in any given year (these are intra-year declines). That means half of the time markets drop more than 14% in any given year, and half of the time, less than 14% in any given year. But we also know the market has gone up 2 out of every 3 years (that includes all these intrayear declines). See the chart? In all years (even bad years like 2002, 2003, 2008 the end of year returns were less bad than the intra year declines). Some bad declines (see the chart year 1987) actually recovered from the intra year decline and ended the year in positive territory.

This is why I am suspicious of the constant refrain that we are on a 10-year bull run. Yes the general trend has been up over that time, but the same is true for all of stock market history. Generally upward trajectory with pullbacks along the way.

During the last 10 years there have been up years ("year" meaning that arbitrary period of time designated as Jan 1 to Dec 31), and down years, and stretches of months in and around and throughout that 10-year period in which stocks have taken a beating.

Last year (2018) the S&P 500 was down 4.38% as of Dec 31. Was 2018 then part of the 10-year bull run? Were all the down years and intra-year declines part of the bull run?

Of course I know a dramatic market decline could hit at any time for reasons that may be imperceptible to me. But this constant chatter about a 10-year bull run, and we're at the top and due for a huge correction any day now just doesn't make much sense to me.
~ Don't just do something. Sit there. ~

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Re: Convince me not to try to time the market

Post by LiveSimple » Fri Jun 07, 2019 4:51 pm

Do whatever you think is appropriate, either you may be lucky and make some $$$ or more lucky to gain a lesson

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