Invest cash in conservative manner until next recession

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Rosencrantz1
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Joined: Tue Sep 10, 2019 12:28 pm

Re: Invest cash in conservative manner until next recession

Post by Rosencrantz1 » Sun Dec 01, 2019 2:55 pm

retired@50 wrote:
Fri Nov 29, 2019 2:13 pm
ebeb wrote:
Fri Nov 29, 2019 12:19 pm
invest in something like Vanguard500index fund at a good buying price.
This reminds me of a line Richard Dreyfus used in the movie "Tin Men". It was about aluminum siding salesmen in the 1950s who were very image conscious, so they all drove Cadillac automobiles.

Dreyfus is at the car dealer, and asks how much the car is... then the dealer says "What do you want to pay for the car?".

Dreyfus says "A dollar and a half"

Figuring out a good price for the Vanguard 500 Index could be equally challenging... Somewhere between a dollar and a half, and it's current market price... Best of luck to you...
Great movie and I remember that scene well. Back on topic... IF it were me, I'd probably stick with a 50:50 equity/bond mix (as some others have already mentioned). And, I'd probably go all at once on the bond allocation and I'd DCA the equity portion (although, I've read that, statistically, one is better off going in all at once on equity). I'm in a similar boat - I have several large CDs maturing in the near future and I need to allocate the proceeds soon. Defining your Asset Allocation is, in my view, critically important (especially when allocating a large cash infusion all at once).

I don't know that there's any better way to hold insured cash than what you're already doing. I keep getting notices that the rate is now sub 2%... it's atrocious and regularly makes me rethink my cash holdings.

VaR
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Re: Invest cash in conservative manner until next recession

Post by VaR » Sun Dec 01, 2019 6:24 pm

ebeb wrote:
Sat Nov 30, 2019 3:11 pm
VaR wrote:
Sat Nov 30, 2019 2:58 pm
OP, what is your target asset allocation (notwithstanding any of your market-timing concerns)?
Unfortunately, I dont think I have a properly defined target AA, however I would like to be eventually mostly in US equities like S&P500 in the long term.
I think your desire to be "mostly in U.S. equities" is is opposition to the risk tolerance / risk aversion evidenced by your having most/all of your money sitting on the sidelines and wanting to wait until the market goes down before getting in. The latter is more indicative of someone whose risk tolerance only allows for something like a 50% equity allocation.

Besides your $1 million lump sum, what additional annual investments do you plan on making over the next 30-40 years? That's an additional element that informs your ability to bear losses.

OP, have you read the "Managing a Windfall" article from the wiki?
https://www.bogleheads.org/wiki/Managing_a_windfall

Prescriptively, I'd issue a preliminary recommendation of dollar-cost-averaging into a 50/50 allocation over the next 6 - 18 months.

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dogagility
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Re: Invest cash in conservative manner until next recession

Post by dogagility » Sun Dec 01, 2019 8:13 pm

ebeb wrote:
Sun Dec 01, 2019 10:39 am
After reading lot of the advice I am tending towards moving more of the cash first into some bond index like BND initially and as opportunities present try to rebalance towards S&P500 over a longer period. The overhanging cloud of the longest period since 1929 between recessions does cause some worry to move directly into equities all at once. It will be interesting to come back and review this thread after 5 years and see which way things went and the investment outcome. :confused
If your intent is to invest for the long term with the highest probability of maximizing your investment return within your risk tolerance, then market timing is a poor choice.

If you come back in five years after using this approach and have achieved a higher return than without market timing, this will not indicate a sound tactic... just luck of the draw.

As you can see, I don't think this is a prudent decision. Instead, you might consider reexamining your asset allocation and invest fully at that asset allocation as soon as possible. Then, stay the course. :beer
Taking "risk" since 1995.

Explorer
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Re: Invest cash in conservative manner until next recession

Post by Explorer » Sun Dec 01, 2019 9:22 pm

krb wrote:
Sun Dec 01, 2019 2:24 pm
Equities and imaginary or paper gains and losses until you sell and a larger amount at the end, or bonds and much less volatility but a much smaller amount at the end. Depends on time in the market and risk tolerance.
I continue to question the above assertion..regardless of how much time one wants to stay invested. We are in a mature business cycle of the economy and thus odds of an economic slowdown are higher than further rapid expansion of the economy. Caution is appropriate. How soon people forget how bad 2001 and 2008 stock meltdowns were...

anoop
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Re: Invest cash in conservative manner until next recession

Post by anoop » Mon Dec 02, 2019 12:28 am

Explorer wrote:
Sun Dec 01, 2019 9:22 pm
krb wrote:
Sun Dec 01, 2019 2:24 pm
Equities and imaginary or paper gains and losses until you sell and a larger amount at the end, or bonds and much less volatility but a much smaller amount at the end. Depends on time in the market and risk tolerance.
I continue to question the above assertion..regardless of how much time one wants to stay invested. We are in a mature business cycle of the economy and thus odds of an economic slowdown are higher than further rapid expansion of the economy. Caution is appropriate. How soon people forget how bad 2001 and 2008 stock meltdowns were...
How can you be sure? We might be on the way to Dow 100,000. Trade deal with China, further tightening of the job market, farming situation improving, infrastructure spending, millenials buying houses and having kids, ...
https://www.calculatedriskblog.com/2019 ... began.html
https://www.calculatedriskblog.com/2013 ... right.html

There was rampant speculation going on back in 2001, 2008. That is missing this time around. The fact that WeWork IPO got pulled means it's not all irrational exuberance.

(For the record, I am close to 100% money market and treasuries. I have been proven wrong since 2008, and I think I can certainly continue to be proven wrong in my investment choices for longer than I live.)

Money Market
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Re: Invest cash in conservative manner until next recession

Post by Money Market » Mon Dec 02, 2019 7:41 am

Why didn't you invest your cash when the US stock market dropped 20% from September 2018 - December 24th 2018? It's now up 36% from that low point.

Mister A
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Re: Invest cash in conservative manner until next recession

Post by Mister A » Mon Dec 02, 2019 9:22 am

$1,000,000 is 100 equal payments of $10,000. At 2%, it's also yielding $20,000 a year.

Why not just start Dollar Cost Averaging in at $10,000/month today until your hoped-for recession occurs? The realistic worst-case is that you'll face a temporary setback and will recover the earlier investments in a year or two after the dip.

krb
Posts: 182
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Re: Invest cash in conservative manner until next recession

Post by krb » Mon Dec 02, 2019 5:31 pm

anoop wrote:
Mon Dec 02, 2019 12:28 am
Explorer wrote:
Sun Dec 01, 2019 9:22 pm
krb wrote:
Sun Dec 01, 2019 2:24 pm
Equities and imaginary or paper gains and losses until you sell and a larger amount at the end, or bonds and much less volatility but a much smaller amount at the end. Depends on time in the market and risk tolerance.
I continue to question the above assertion..regardless of how much time one wants to stay invested. We are in a mature business cycle of the economy and thus odds of an economic slowdown are higher than further rapid expansion of the economy. Caution is appropriate. How soon people forget how bad 2001 and 2008 stock meltdowns were...
How can you be sure? We might be on the way to Dow 100,000. Trade deal with China, further tightening of the job market, farming situation improving, infrastructure spending, millenials buying houses and having kids, ...
https://www.calculatedriskblog.com/2019 ... began.html
https://www.calculatedriskblog.com/2013 ... right.html

There was rampant speculation going on back in 2001, 2008. That is missing this time around. The fact that WeWork IPO got pulled means it's not all irrational exuberance.

(For the record, I am close to 100% money market and treasuries. I have been proven wrong since 2008, and I think I can certainly continue to be proven wrong in my investment choices for longer than I live.)
If you're 30, being close to 100% money market and treasuries is foolish. If you're 65, it might not be unwise... Depends of course on when you need the money!

anoop
Posts: 1051
Joined: Tue Mar 04, 2014 1:33 am

Re: Invest cash in conservative manner until next recession

Post by anoop » Mon Dec 02, 2019 5:35 pm

krb wrote:
Mon Dec 02, 2019 5:31 pm
anoop wrote:
Mon Dec 02, 2019 12:28 am
Explorer wrote:
Sun Dec 01, 2019 9:22 pm
krb wrote:
Sun Dec 01, 2019 2:24 pm
Equities and imaginary or paper gains and losses until you sell and a larger amount at the end, or bonds and much less volatility but a much smaller amount at the end. Depends on time in the market and risk tolerance.
I continue to question the above assertion..regardless of how much time one wants to stay invested. We are in a mature business cycle of the economy and thus odds of an economic slowdown are higher than further rapid expansion of the economy. Caution is appropriate. How soon people forget how bad 2001 and 2008 stock meltdowns were...
How can you be sure? We might be on the way to Dow 100,000. Trade deal with China, further tightening of the job market, farming situation improving, infrastructure spending, millenials buying houses and having kids, ...
https://www.calculatedriskblog.com/2019 ... began.html
https://www.calculatedriskblog.com/2013 ... right.html

There was rampant speculation going on back in 2001, 2008. That is missing this time around. The fact that WeWork IPO got pulled means it's not all irrational exuberance.

(For the record, I am close to 100% money market and treasuries. I have been proven wrong since 2008, and I think I can certainly continue to be proven wrong in my investment choices for longer than I live.)
If you're 30, being close to 100% money market and treasuries is foolish. If you're 65, it might not be unwise... Depends of course on when you need the money!
I'm 49 but with some health issues that make long term planning almost impossible, dare I say optimistic.

Godot
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Re: Invest cash in conservative manner until next recession

Post by Godot » Mon Dec 02, 2019 5:41 pm

Wiggums wrote:
Fri Nov 29, 2019 12:48 pm
Not a good idea.

Even if a recession comes, it will be after the market has run up 30-40 percent. It would be better to invest to you asset allocation.
You say this with as much confidence as the OP says there will be a recession. What makes you think we will get a "run up" of 30-40 percent?
Estragon: I can't go on like this. | Vladimir: That's what you think. | ― Samuel Beckett, Waiting for Godot

krb
Posts: 182
Joined: Tue Nov 19, 2019 1:30 pm

Re: Invest cash in conservative manner until next recession

Post by krb » Mon Dec 02, 2019 6:33 pm

Explorer wrote:
Sun Dec 01, 2019 9:22 pm
krb wrote:
Sun Dec 01, 2019 2:24 pm
Equities and imaginary or paper gains and losses until you sell and a larger amount at the end, or bonds and much less volatility but a much smaller amount at the end. Depends on time in the market and risk tolerance.
I continue to question the above assertion..regardless of how much time one wants to stay invested. We are in a mature business cycle of the economy and thus odds of an economic slowdown are higher than further rapid expansion of the economy. Caution is appropriate. How soon people forget how bad 2001 and 2008 stock meltdowns were...
Sounds suspiciously like market timing! I am nearly 100% certain we will have a crash in the future between tomorrow and 100 years from now. I am nearly 100% certain we will recover from that crash, at least one day after but certainly before 100 years after. Since I don't know the exact dates and my confidence intervals are broad, and since there has never been a 20 year period in the history of the market that ended down, and since there have been very, very few 15 year periods that have been down, I think the best choice is to be in 100% equities for money that you don't need for at least 15 and preferably 20 years from now.

So far, historically, equities outperform bonds over long and medium periods of time.

So far, historically, inflation eats away at spending power. So if your dollar is not growing, it is weakening. So you need to be in a vehicle to allow for growth. Historically stocks outperform bonds. Money in bonds to my mind should be expected to outpace inflation but not necessarily by a lot. Money in stocks should be expected to outpace inflation - over long periods of time - the most. So to my mind bonds is where you would put money you need for <10 years from now (safer but lower return) and equities for >15y from now. Spending power of cash is eroding constantly so you wouldn't want a lot of cash except for emergency funds and for what you would use in the immediate future (maybe <5y?).

I certainly don't know anything. I would be concerned if I were too conservatively invested that inflation would eat away my spending power and concerned if I were too aggressively invested that I might lose it all. I think intellectually the above makes sense from a historical perspective. We could all ignore history of course, but I think the best decisions are made by taking history into consideration.

A scalded cat is afraid of cold water. I totally get why a lot of people might hesitate to get back into the market after a big crash. And it's rational if you're older and have less time to make up for a crash. It's irrational if you're younger and not planning on using that money for > 20y.

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Wiggums
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Re: Invest cash in conservative manner until next recession

Post by Wiggums » Mon Dec 02, 2019 6:36 pm

lakpr wrote:
Fri Nov 29, 2019 2:40 pm
ebeb wrote:
Fri Nov 29, 2019 12:19 pm
Hello Experts,

Assuming I have about $1mil sitting in cash in savings accounts giving 2.00% apy, I would like to wait until the next recession (hard to say when but will happen :o ) to invest in something like Vanguard500index fund at a good buying price. In the meantime what may be a way I can get a little better return (more than 2%)without getting hit by a sudden stock crash while preserving the principal. I think even AAA bonds are not safe in recessions as in 2008. Yes I am quite low risk at present. Thanks for any suggestions! :confused
Reminds me of the famous quote from Peter Lynch (ex-manager of Fidelity's Magellan fund): "There is more money lost on the side lines waiting for stock market crash, than actually lost in the market crashes themselves" ....

I would put it all in at 50:50 which is quite conservative. Whichever way the market turns, you will always be half-right!!
I love it.

krb
Posts: 182
Joined: Tue Nov 19, 2019 1:30 pm

Re: Invest cash in conservative manner until next recession

Post by krb » Mon Dec 02, 2019 6:36 pm

anoop wrote:
Mon Dec 02, 2019 5:35 pm
krb wrote:
Mon Dec 02, 2019 5:31 pm
anoop wrote:
Mon Dec 02, 2019 12:28 am
Explorer wrote:
Sun Dec 01, 2019 9:22 pm
krb wrote:
Sun Dec 01, 2019 2:24 pm
Equities and imaginary or paper gains and losses until you sell and a larger amount at the end, or bonds and much less volatility but a much smaller amount at the end. Depends on time in the market and risk tolerance.
I continue to question the above assertion..regardless of how much time one wants to stay invested. We are in a mature business cycle of the economy and thus odds of an economic slowdown are higher than further rapid expansion of the economy. Caution is appropriate. How soon people forget how bad 2001 and 2008 stock meltdowns were...
How can you be sure? We might be on the way to Dow 100,000. Trade deal with China, further tightening of the job market, farming situation improving, infrastructure spending, millenials buying houses and having kids, ...
https://www.calculatedriskblog.com/2019 ... began.html
https://www.calculatedriskblog.com/2013 ... right.html

There was rampant speculation going on back in 2001, 2008. That is missing this time around. The fact that WeWork IPO got pulled means it's not all irrational exuberance.

(For the record, I am close to 100% money market and treasuries. I have been proven wrong since 2008, and I think I can certainly continue to be proven wrong in my investment choices for longer than I live.)
If you're 30, being close to 100% money market and treasuries is foolish. If you're 65, it might not be unwise... Depends of course on when you need the money!
I'm 49 but with some health issues that make long term planning almost impossible, dare I say optimistic.
Oh for EVERYTHING I wrote, I think it's true in general but not appropriate in particular situations. If you are saving up for a house, you probably want more access to more funds reliably (meaning not equities). If you have health problems, you may have more concern about accessing funds now than accessing them 20 years from now. The principles I wrote are I think sound. I don't know anything about the stock market. I only know like three or four things. But those three or four things are I think pretty fundamental and lead to logical decisions as to where to deploy assets. I definitely screwed up lots of times and lost a lot of money but that's been pretty much always when I knew better than the market and put assets in places opposing those principles.

krb
Posts: 182
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Re: Invest cash in conservative manner until next recession

Post by krb » Mon Dec 02, 2019 6:37 pm

Godot wrote:
Mon Dec 02, 2019 5:41 pm
Wiggums wrote:
Fri Nov 29, 2019 12:48 pm
Not a good idea.

Even if a recession comes, it will be after the market has run up 30-40 percent. It would be better to invest to you asset allocation.
You say this with as much confidence as the OP says there will be a recession. What makes you think we will get a "run up" of 30-40 percent?
Isn't it up around that much this year? After the last drop Dec 2018?

lakpr
Posts: 3064
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Re: Invest cash in conservative manner until next recession

Post by lakpr » Mon Dec 02, 2019 7:02 pm

Wiggums wrote:
Mon Dec 02, 2019 6:36 pm
lakpr wrote:
Fri Nov 29, 2019 2:40 pm
Reminds me of the famous quote from Peter Lynch (ex-manager of Fidelity's Magellan fund): "There is more money lost on the side lines waiting for stock market crash, than actually lost in the market crashes themselves" ....

I would put it all in at 50:50 which is quite conservative. Whichever way the market turns, you will always be half-right!!
I love it.
Wiggums,

Located the precise quote from Peter Lynch, with the help of my trusty friend Google:

https://awealthofcommonsense.com/2014/0 ... et-losses/
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

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Wiggums
Posts: 1922
Joined: Thu Jan 31, 2019 8:02 am

Re: Invest cash in conservative manner until next recession

Post by Wiggums » Mon Dec 02, 2019 7:04 pm

lakpr wrote:
Mon Dec 02, 2019 7:02 pm
Wiggums wrote:
Mon Dec 02, 2019 6:36 pm
lakpr wrote:
Fri Nov 29, 2019 2:40 pm
Reminds me of the famous quote from Peter Lynch (ex-manager of Fidelity's Magellan fund): "There is more money lost on the side lines waiting for stock market crash, than actually lost in the market crashes themselves" ....

I would put it all in at 50:50 which is quite conservative. Whichever way the market turns, you will always be half-right!!
I love it.
Wiggums,

Located the precise quote from Peter Lynch, with the help of my trusty friend Google:

https://awealthofcommonsense.com/2014/0 ... et-losses/
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch
Thank you for the link. I have not seen that before.

smectym
Posts: 615
Joined: Thu May 26, 2011 5:07 pm

Re: Invest cash in conservative manner until next recession

Post by smectym » Tue Dec 03, 2019 12:03 am

Dontridetheindexdown wrote:
Fri Nov 29, 2019 1:37 pm
We use Vanguard Treasury Money Market VUSXX.

VUSXX returns about 10% more than savings accounts.

Also, VUSXX dividends are not subject to state income tax, so it returns an additional 5.75% for us.

It is not FDIC insured, so there are no account limits to consider.

I believe U.S. Treasuries are the safest available place for cash.
Agree with the VUSXX reco for cash—but also agree with those who have advised OP that sitting in cash while waiting for the ideal entry point is a fool’s errand. OP, suggest you either (A) select a conservative balanced fund tthat resonates with your risk profile and invest now, or (B) dollar-cost-average into the market at whatever pace you’re comfortable. Some hybrid of (A) and (B) may also merit consideration.

WhiteMaxima
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Joined: Thu May 19, 2016 5:04 pm

Re: Invest cash in conservative manner until next recession

Post by WhiteMaxima » Tue Dec 03, 2019 4:48 pm

ebeb wrote:
Fri Nov 29, 2019 12:19 pm
Hello Experts,

Assuming I have about $1mil sitting in cash in savings accounts giving 2.00% apy, I would like to wait until the next recession (hard to say when but will happen :o ) to invest in something like Vanguard500index fund at a good buying price. In the meantime what may be a way I can get a little better return (more than 2%)without getting hit by a sudden stock crash while preserving the principal. I think even AAA bonds are not safe in recessions as in 2008. Yes I am quite low risk at present. Thanks for any suggestions! :confused
Where can can you get 2% APY in savings? If so, I would pull out all my equity into it?

Topic Author
ebeb
Posts: 18
Joined: Sat Dec 23, 2017 2:18 pm

Re: Invest cash in conservative manner until next recession

Post by ebeb » Tue Dec 03, 2019 5:51 pm

WhiteMaxima wrote:
Tue Dec 03, 2019 4:48 pm
Where can can you get 2% APY in savings? If so, I would pull out all my equity into it?
https://www.bankrate.com/banking/savings/rates/ lists about 5 banks that have 2% apy currently. You need to click on All Products and then click APY to sort by highest APY. But perhaps I may also go for VUSXX as it is giving similar returns https://investor.vanguard.com/mutual-fu ... ance/vusxx . Of course rates can change anytime.

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