Immature Investor and Lessons Learned

[marcus_silvus]

I just wanted to share my recent experience with lump sum investing and the coronavirus. Late last year I sold all of my shares of a high expense ratio Franklin Templeton mutual fund with the plan of putting it in VTSAX. At that time, VTSAX was trading at about $77/share. All of the research I did told me to do a lump-sum investment and definitely DO NOT TRY TO TIME THE MARKET. Did I do this?

Nope.

I was holding it waiting for a correction to happen and then jump in when the market took a dip. So I waited through December and into January and as you all know, the market kept a climbing. Corona was starting to take more of a hold globally so I thought a dip would be coming soon but as you know, it kept a climbing. So come February 14th, I decided that the time was now and I need to just toss the money in, stop stressing, and stay the course.

As you all know, the following week saw a stable market and then Monday and Tuesday happened. I am currently experiencing a huge sense of regret for A) not doing the lump-sum investment back in Nov '19 and B) since I didn't commit to A, not waiting a bit longer to see the outcome of corona.

Based off of what the market has done in the past, I am certain that I will come out ahead in the long run and everything will be fine but again, I keep thinking about my mistakes.

What I learned:
1) Don't try to time the market (duh)
2) Invest your money when you have it
3) The psychology of investing is strong, even when you are cognizant that your thoughts are irrational

This post is mainly therapy for myself to get this garbage out of my head

[magicrat]

Consider it tuition paid for a valuable education.

[mhalley]

They often say that one of the worst things that can happen to a novice investor is they market time, buy a stock, etc and they get it right. Getting it wrong often sears the lesson into your brain so that going forward you are more likely to stay the course. So congratulations on learning your lesson!

[lgs88]

Marcus,

Take heart! At least you learned the right lesson.

A significant lump sum -- big chunk of my net worth -- became available for me to invest early last week. In accordance with my IPS, I invested it immediately. I believe it was Nietzsche who said that "one is punished most for one's virtues."

lgs88

[Puretaxableindexer]

Don't worry about it, It's done and you will get your eventual return back soon enough. You will still be ahead of the majority of the population who doesn't invest.

[pasadena]

That is a lesson best learned at the start of your investing journey. It's arguably more valuable than the money you didn't make (you didn't actually lose anything) and will pay off in the future.

[abuss368]

Whether you know it or not, you will be a much better investor going forward.

[abuss368]

Please read the Two Fund Portfolio post: viewtopic.php?f=10&t=188176

[marcus_silvus]

Thanks everyone for the kind words and advice!

[tennisplyr]

Fret not, there are 2 guarantees: 1) the market will go up and 2) the market will go down.

[cashboy]

thanks for sharing.

best of luck going forward!

[Fallible]

...
Based off of what the market has done in the past, I am certain that I will come out ahead in the long run and everything will be fine but again, I keep thinking about my mistakes.

What I learned:
1) Don't try to time the market (duh)
2) Invest your money when you have it
3) The psychology of investing is strong, even when you are cognizant that your thoughts are irrational

This post is mainly therapy for myself to get this garbage out of my head.

We've all made investing mistakes and probably most, like me, remember them. But if we have learned the right lessons, remembering isn't all that bad and we can move on. You've learned the right lessons.

[Ornery Old Guy]

I was sure Obama was going to screw up the market. I had a big lump sum and waited and waited. Well I didn't wait, but I slowly DCA'd, waiting to invest the big lump when the market crashed. It wasn't a major blunder, but I would have been richer if I just put it in. I feel your pain!

[Cubicle]

I've paid this "ticket" several times, but kept staying in the fast lane & getting pulled over. Meanwhile everyone in the slow lane arrived, parked, & are sitting down for pizza.

Now I'm very comfy in the slow lane. And can afford unlimited pizza. Do not beat yourself up over this. But if you do it again...

[watchnerd]

3) The psychology of investing is strong, even when you are cognizant that your thoughts are irrational

This is one of the main reasons I automate practically all of our investment decisions.

Even if I'm aware that I'm not an entirely rational being, that doesn't prevent all sorts of cognitive biases creeping in.

Once everything is on auto pilot, my own psychological foibles are mostly eliminated.

[Eagle33]

Don't be like Bob in this story.
https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Learn from your mistake the first time.

A speculator tries to buy low and sell high. He focuses on the market noise and his account balance.
A Boglehead investor focuses is on his portfolio AA and ignores the noise. Buy, Hold, and Rebalance your way to your financial goals.

[stocknoob4111]

I lumpsummed a massive sum (multiple six figures) into the market in Jan 2018. In Feb 2018 the market promptly crashed!!
Losing tens of thousands of dollars right off the bat stung... but i've come out quite alright since then with 2019's stellar performance. Long term the difference in timing probably will not matter all that much and there are more gains in the years ahead.

[Gemini1962]

The worst thing you can do now is to sell and make those losses permanent. As long as you don't need the money in the short time just forget about it and it will recover - if it doesn't then we're all doomed and it won't matter anyway.

[FatRat]

I don’t guess it has to be market timing really. Did something similar - I did research on lump vs dollar cost averaging (which is my tendancy) for a chunk of cash that I wanted to invest. I went against my inclinations and “manned” up. Win some you lose some I suppose. The real real losers are my kids as this probably just means less for them because I didn’t dollar cost average the money over a few months. I think I’ll stick with lump sum if I ever get another chunk- it will have to be the correct decision next time.

[Stinky]

Thanks everyone for the kind words and advice!

Thank you for sharing your story.

Congratulations to you for recognizing your mistakes, and for pledging to learn from them.

As others have said, don’t sweat this one too much. Every investor was “immature” at one time, and everyone has made mistakes. It sounds like you’re early in your investing career, and the $$$ involved in this incident will seem smaller and smaller as your investments grow.

Keep coming to this Board to read and learn. There’s just so much good information presented here.

[RootSki]

Good thread OP. These down swings are never easy to hold, but make buying kinda fun for me.

[marcus_silvus]

Thanks guys. I still find myself going back to two weeks ago and obsessively thinking, "if only I did this..." and "if only I did that..." ad nauseam.

The only thing that terminates the loop and allows me to feel better is hopping on the forum and reading the calming words of experienced investors saying they've had similar experiences. I'm 20-ish years away from retirement and am riding this out for the long haul

I think @magicrat put it beautifully with this:

Consider it tuition paid for a valuable education.

[Thesaints]

2) Invest your money when you have it

Coronavirus can always strike the day after a lump sum investment. For the immature and for the mature investor as well.
Cost averaging into a position always allows to avoid the worst possible outcome.

[tesuzuki2002]

As you all know, the following week saw a stable market and then Monday and Tuesday happened. I am currently experiencing a huge sense of regret for A) not doing the lump-sum investment back in Nov '19 and B) since I didn't commit to A, not waiting a bit longer to see the outcome of corona.

Based off of what the market has done in the past, I am certain that I will come out ahead in the long run and everything will be fine but again, I keep thinking about my mistakes.

On the bonus side now... the markets are priced at around September '19 levels... so keep buying on that discount... I was still investing some... but I was holding some in cash over that last several months... that cash has been converted to shares at this point...

[sharukh]

It didn’t matters what I have or lost in brokerage account.
A low balance in checking account kept me awake for many days.

Kept balancing the credit card bills, rent with any incoming money to ensure there was enough to meet the needs in cash was always on mind.

[MotoTrojan]

Consider it tuition paid for a valuable education.

+1. If you’d waited and timed it perfectly, I’d wager you would end up losing more over your life with your newfound ability to time the market with ease.

Invest as much as you can, as soon as you can. Makes life easy.

[Independent George]

The funny thing is, you could also take the lesson that you should DCA a large amount instead of lump sum. In your situation, yes, the least painful thing to do would have been buy as soon as the money cleared - but when someone receives an unexpected windfall, I still think the best course of action is to DCA into their equity allocation over the course of at least a year. It's not optimal statistically, but from a behavioral standpoint, I think it's the best way to manage their investment.

[clown]

To OP - I'm going to advocate an idea the many find naieve. But I think it is true.

If you owned 100 shares of XYZ before the fall and you did nothing, you still own 100 shares today. You have not lost money unless you sold. The market will pay you less on one gien day than another, but that is immaterial unless you s ell. The American economy always recovers. Any other approach, in my mind, is woulda-coulda-shoulda. The reality is: what happened happened, it is what it is, and you will be fine in the long run. Good education early on.

[Broken Man 1999]

This has been attributed to Dandy Don Meredith, not original, 'net says it is a portion of an old nursery rhyme, but Meredith made popular:

"If ifs and buts were candy and nuts, we'd all have a merry Christmas!"

But, the fact remains life will always be filled with "ifs" and "buts."

Few, if any, of us get through life without making a couple of substantial blunders. You get up, dust yourself off, and move on, hopefully a little wiser.

Broken Man 1999