Paralysis

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
MishkaWorries
Posts: 7
Joined: Wed Aug 14, 2019 4:39 pm

Paralysis

Post by MishkaWorries » Wed Aug 14, 2019 5:20 pm

Questions for all the financial gurus here. Where to start. I'm a very cautious investor in the market. I haven't had much luck with it in the past. In 1999 I pulled my money out to buy a house. Very good decision even though I missed a year of more growth before the crash. 2008 I didn't see anything coming and I saw my portfolio lose 40% of my savings. I lost faith and pulled my money in 2010 after recoupment. Obviously I'm not a good market timer.

Since then I've been investing in vacation rentals. Some did amazing (Prague), some have been stagnant (Albania) and some are cash cows (Paris). Unfortunately we had to sell Paris because change in laws. We decided to cash out. Now we have $250,000 USD sitting in a bank. That is our only savings. I need to get the decision right because this is our retirement savings.

I know research says to lump sum the investment. But I don't think this market in this business cycle is"average."

We talk to a tax guy next week. We hope we can get this money in a solo 401k.

My fear is investing the money and watch it drop 40%. Maybe better to wait two or three months and see where the market is?

My wife does not believe in the markets and barely believes in banks. She wants the money in CDs and treasuries.

I think we need more aggressive allocation. I see retirement in three phases*.

First phase is 62-67 or 70 years old. I have pension from work and I'll work some part-time gig type job. Our house is paid off ($250,000) Our monthly expenses (including travel to Europe 2-3 per year) is $2,500-$3,000 per month. My pension will be $1500 per month. Risk is losing health and not able to work.

Second phase will be 67 or 70 to my death. Pension and two SS will be $5,000 per month.

Third phase my wife only has my SS $2,300.

I am 56 and wife 52. I work and bring home $2,000-2,500 above expenses so I can save more.

I'm very conservative investor. We have Wellesley at Vanguard VWINX in an old IRA. I really like that find. It just goes with no drama. We had 10,000 HSA bank account and I moved to Fidelity and bought JABAX Balanced Fund. Of course now that has lost money and I worry.

I told we should do 60 stock and 40 bond AA. But I worry. What if stocks crash.

Do you think we can just save the money or do we have to risk it in the market. Can we get away with 70 bonds and 30 stock? But bond prices scare me too. They are so high. But Europe is negative interest and I'm sure we will follow eventually. So maybe bonds have more gain potential. Aaarrrggh.

I'm rambling sorry. Any assurance would be welcomed.

*If you want to make God laugh, tell him your plans.

mhalley
Posts: 7288
Joined: Tue Nov 20, 2007 6:02 am

Re: Paralysis

Post by mhalley » Wed Aug 14, 2019 6:07 pm

On average, lump sum is better. Most would recommend that. But for someone that is very risk averse, has no current stock positions, doing so puts you at risk of selling at a loss. I think DCA over the course of a year into a 60/40 or 50/50 portfolio would be reasonable for you.
What you want to do is create an Investor Policy Statement that you then follow.

https://www.bogleheads.org/wiki/Investm ... _statement
As to investing at highs, take a look at Bob.
https://awealthofcommonsense.com/2014/0 ... ket-timer/

User avatar
Watty
Posts: 16902
Joined: Wed Oct 10, 2007 3:55 pm

Re: Paralysis

Post by Watty » Wed Aug 14, 2019 6:16 pm

I don't have a clue what will happen with stocks and bond so I won't try to predict that. One thing to watch out for thought is that if you put a lot of money into cash like investments then that is a big bet against inflation and diversification might be a better strategy.

How much are your two remaining rental properties worth? do you have mortgages? and how much rental income can you expect from those?

It was not clear but it did not look like you had included any rental income in your retirement income projections.

Topic Author
MishkaWorries
Posts: 7
Joined: Wed Aug 14, 2019 4:39 pm

Re: Paralysis

Post by MishkaWorries » Wed Aug 14, 2019 7:13 pm

Thank you mhalley for the suggestion to do an investment strategy. I'll make one and sit down with my wife. Maybe we can agree on a plan and just not look for a year. That would be ideal. I need to be like Bob from your link. Thank you for that.

I know it must be strange to be so risk adverse but my wife lived through the collapse of the Soviet Union and I worked there through the 1990s. It was awful. So many lives disrupted and some destroyed.

Watty, we sold all our rentals. We did keep one in Albania that family uses. It's a beautiful condo with a view of the sun setting in the sea. If Albania builds the southern international airport the condo should be a great investment.

So no more rental income. That money is the bulk of our retirement fund. I'll be able to save another 100,000 to 150,000 before I retire. Hence the stress.

Thank you all. I feel better already.

Grt2bOutdoors
Posts: 20989
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Paralysis

Post by Grt2bOutdoors » Wed Aug 14, 2019 9:08 pm

MishkaWorries wrote:
Wed Aug 14, 2019 5:20 pm
Questions for all the financial gurus here. Where to start. I'm a very cautious investor in the market. I haven't had much luck with it in the past. In 1999 I pulled my money out to buy a house. Very good decision even though I missed a year of more growth before the crash. 2008 I didn't see anything coming and I saw my portfolio lose 40% of my savings. I lost faith and pulled my money in 2010 after recoupment. Obviously I'm not a good market timer.

I need to get the decision right because this is our retirement savings.

I know research says to lump sum the investment. But I don't think this market in this business cycle is"average."

We talk to a tax guy next week. We hope we can get this money in a solo 401k.

My fear is investing the money and watch it drop 40%. Maybe better to wait two or three months and see where the market is?
If you do not have the willingness to invest in the stock market, then don't. Never mind about what research says. Research doesn't know you and your wife can't sleep at night because you are worried.
My wife does not believe in the markets and barely believes in banks. She wants the money in CDs and treasuries.
CD's pay more than treasuries, CD's are insured by FDIC and CD's are issued by banks. The banking industry in the US is substantially more robust in terms of capital and management practices than it was ten years ago.
I think we need more aggressive allocation. I see retirement in three phases*.

First phase is 62-67 or 70 years old. I have pension from work and I'll work some part-time gig type job. Our house is paid off ($250,000) Our monthly expenses (including travel to Europe 2-3 per year) is $2,500-$3,000 per month. My pension will be $1500 per month. Risk is losing health and not able to work.

Second phase will be 67 or 70 to my death. Pension and two SS will be $5,000 per month.

Third phase my wife only has my SS $2,300.

I am 56 and wife 52. I work and bring home $2,000-2,500 above expenses so I can save more.
If you just saved that $2K per month, you would have at the worst $4K per month available in the worse scenario. If you saved the $2K per month, that coupled with pension and social security would give you $5.7K per month. The only risk is the rate of interest could be less than inflation.
I'm very conservative investor. We have Wellesley at Vanguard VWINX in an old IRA. I really like that find. It just goes with no drama. We had 10,000 HSA bank account and I moved to Fidelity and bought JABAX Balanced Fund. Of course now that has lost money and I worry.

I told we should do 60 stock and 40 bond AA. But I worry. What if stocks crash.
Who told you to invest at 60/40? If stock prices goes down by 50%, your $10,000 becomes $7,000 and a few dollars more as money flows into bonds.

Do you think we can just save the money or do we have to risk it in the market. Can we get away with 70 bonds and 30 stock? But bond prices scare me too. They are so high. But Europe is negative interest and I'm sure we will follow eventually. So maybe bonds have more gain potential. Aaarrrggh.
Why do bond prices scare you? A bond is a contractual agreement to pay back principal and interest if held to maturity. It's not a stock which is a lottery ticket, based on the hope the company is profitable.
I'm rambling sorry. Any assurance would be welcomed.

*If you want to make God laugh, tell him your plans.
Try this tool for an idea about what your asset allocation could be: https://personal.vanguard.com/us/FundsInvQuestionnaire
Then take a look at the best/worse returns for a variety of different portfolio allocations: https://personal.vanguard.com/us/insigh ... llocations
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
MishkaWorries
Posts: 7
Joined: Wed Aug 14, 2019 4:39 pm

Re: Paralysis

Post by MishkaWorries » Wed Aug 14, 2019 9:48 pm

Thanks grt2boutdoors for your detailed answer. It is much appreciated. I just need to relax and create an investment plan my wife and I can agree to.

As to bond prices maybe I don't understand but we have bond funds not actual bonds. Those fund prices seem really high. Everything seems bubbly.

We talked and I think we are going to ease into the market. We just need to let time work for us and not obsess over the daily ups and downs.

Start to contribute our extra monthly money into 457 plan every paycheck. That money can just grow out of sight in a time target fund. I'll ignore the HSA too.

Our cash we'll CBA. I'm just not comfortable dumping the whole lot in the market right now. If there is a correction of 15-20% I'll feel more comfortable and lump sum then.

On the front page of Vanguard it's says someone my age should have an AA of 65% stock. I think we'll start with an AA of about 60 bond and 40 stock and up it as time passes.

I know that is frowned on and considered market timing but a few dollars missed out is not too much for a little piece of mind.

User avatar
abuss368
Posts: 14555
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Paralysis

Post by abuss368 » Wed Aug 14, 2019 9:50 pm

You have no control over the markets. Buy one or a few low cost and diversified total market index funds and stay the course. You can focus on keeping costs low and your asset allocation.

The rest is noise.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!"

protagonist
Posts: 5860
Joined: Sun Dec 26, 2010 12:47 pm

Re: Paralysis

Post by protagonist » Wed Aug 14, 2019 10:32 pm

MishkaWorries wrote:
Wed Aug 14, 2019 5:20 pm


*If you want to make God laugh, tell him your plans.
I like that.

"God is a comedian playing to an audience that is too afraid to laugh". That one is usually attributed to Voltaire, though its real author is HL Mencken. That said, knowing Voltaire, I imagine he would have wished he said it.

Lafder
Posts: 3971
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Paralysis

Post by Lafder » Thu Aug 15, 2019 7:54 am

A solo401k requires self employment income.

If you have self employment income and meet other requirements for a solo401k (self and spouse as only employees) you can put away up to 62,000$/year, but there is also a percentage of income limit.

Consider listing all of your holdings in this format for a more detailed discussion and suggestions.

viewtopic.php?f=1&t=6212

I just saw an ad in my local paper for a CD at 2.5% interest. It sounds like you and your wife are conservative investors and could panic and sell low if you buy stocks. Do not buy mutual funds if you are likely to panic and sell low. CDs are not bad and are one of the only ways to guarantee no loss of principle. But the compromise is lower rates of return than often seen with the "market" over time.

lafder

User avatar
Mullins
Posts: 50
Joined: Wed May 08, 2019 4:38 pm

Re: Paralysis

Post by Mullins » Thu Aug 15, 2019 8:25 am

MishkaWorries wrote:
Wed Aug 14, 2019 5:20 pm
We have Wellesley at Vanguard VWINX in an old IRA. I really like that find. It just goes with no drama...

...Can we get away with 70 bonds and 30 stock?
Just a reminder you've already experienced a 30/70 allocation because Wellesley is one-third stocks, two-thirds bonds (with a focus on higher quarterly income distribution).

retiredjg
Posts: 37221
Joined: Thu Jan 10, 2008 12:56 pm

Re: Paralysis

Post by retiredjg » Thu Aug 15, 2019 8:43 am

MishkaWorries wrote:
Wed Aug 14, 2019 5:20 pm
I'm very conservative investor. We have Wellesley at Vanguard VWINX in an old IRA. I really like that find. It just goes with no drama. We had 10,000 HSA bank account and I moved to Fidelity and bought JABAX Balanced Fund. Of course now that has lost money and I worry.
Listen to your own wisdom. Your own words tell you exactly where you need to be...at about 33% to 40% stocks. No more. Since your wife would prefer not to be invested in stocks at all, you should probably be at nothing more than 30% stocks in your entire portfolio.

That may be more than she wants, but a portfolio with 25% to 30% stocks is actually less risky and more productive than a portfolio with all CDs, cash, and bonds. Maybe that will make her more comfortable.

You only wish you want to be invested at 60% stocks. Your post tells us a completely different story. Do not go against your nature or you will likely be miserable and could make big mistakes that you cannot afford.

3-20Characters
Posts: 577
Joined: Tue Jun 19, 2018 2:20 pm

Re: Paralysis

Post by 3-20Characters » Thu Aug 15, 2019 8:58 am

Leave it all in CDs/cash for now. Even though your wife does not believe in banks, I assume she is somewhat OK with them if she accepts CDs? As for treasuries, does she understand that the safest guarantee we have is from the US government? Nothing is 100% though.

Now send your wife here and let her ask questions and see how she feels about 30% stock, etc. I don’t think you can make a plan when she’s just playing adversary to every reasonable solution. Ask her to offer her solution. Does she suggest to store it under a mattress? Does she understand risk vs. volatility (as in markets go up and down but inflation or the house burning up erodes or wipes out value)?

I’m not being snide or condescending but she has to come with some reasonable counter suggestions after she’s thought about it more and you can discuss and agree. Maybe the answer will be more real estate. Good luck.

rich126
Posts: 565
Joined: Thu Mar 01, 2018 4:56 pm

Re: Paralysis

Post by rich126 » Thu Aug 15, 2019 10:29 am

There isn't anything wrong with Wellesley if that makes you more comfortable with investing. In taxable accounts it isn't ideal.

Maybe you could invest with Wellesley, then some long term bonds and some total stock market fund. Just do it in a way that you are comfortable with.

I'm not a BH investor (disclaimer). Due to what I believe (interest rates and inflation are going to stay low for a while) I have moved away from a stock and cash portfolio to stocks, long term bonds, gold (not really something I do very often) and Wellesley, Wellington and Moderate growth fund (I had some money moved into Vanguard to diversify from totally being at TD Ameritrade).

With the more diversified investments I looked at my TD Ameritrade account last night and while the market dropped 3% (hardly a crash despite the news) mine dropped just over 1%.

Back to Wellesley with its low percentage of stocks, the largest drawdown on the fund was around 18% (if memory is correct). I think that is more acceptable to many people than 30-50% especially if they are getting close to retirement (as I am).

At this time cash, cds and Wellesley is hardly a terrible thing. Despite me moving money around (not all that often) I would never go 100% in or out of the market. There are things you know will happen but usually you don't know when. For example most of those internet stocks back in 1999 had to crash but they lasted a bit longer than I expected. Or in that movie (The Big Short?) where the guys were shorting stuff like crazy, ultimately they were correct but they were running out of money while the it almost lasted longer than they had time.

delamer
Posts: 8482
Joined: Tue Feb 08, 2011 6:13 pm

Re: Paralysis

Post by delamer » Thu Aug 15, 2019 2:00 pm

So you have multiple international rental properties, a paid-off home in the US, and $250,000 in cash?

So very large exposure to real estate.

That seems inconsistent with a fear of a diversified stock portfolio.

Does your wife understand the risk of having such a heavy weight in real estate?

Topic Author
MishkaWorries
Posts: 7
Joined: Wed Aug 14, 2019 4:39 pm

Re: Paralysis

Post by MishkaWorries » Thu Aug 15, 2019 8:08 pm

So much good advice and effort on everybody's part. All of you are really amazing.

This blog post had been very therapeutic.

It is strange. We can pay cash for a property in a foreign country where we have no friends or family members. That does not bother us. Dumping our life savings in the US markets scare us to death. I've been burned before (hence the Bogle method from here on out) and my wife lived through an economic collapse. I think we just need to get a comfort level with the market. I had my wife read mhalley's great article of Bob the world's worse market timer article. Every scared novice investor should read it.

I like the idea of starting off in a compromise AA of 70 bonds and 30 stock. Give that a year and see if our confidence is up and increase our risk if we want.

Northern Flicker
Posts: 4415
Joined: Fri Apr 10, 2015 12:29 am

Re: Paralysis

Post by Northern Flicker » Fri Aug 16, 2019 3:08 am

Choosing an asset allocation you can stick with and staying the course is the most important thing.

protagonist
Posts: 5860
Joined: Sun Dec 26, 2010 12:47 pm

Re: Paralysis

Post by protagonist » Fri Aug 16, 2019 8:23 am

MishkaWorries wrote:
Thu Aug 15, 2019 8:08 pm
I think we just need to get a comfort level with the market. I had my wife read mhalley's great article of Bob the world's worse market timer article. Every scared novice investor should read it.
I would go a step further and say we all need to get a comfort level with uncertainty, because the markets, like essentially everything else that is part of life (job security, marriages, health, etc) is uncertain. It's called "the future".

If you can accept that, you are much better prepared to enjoy the ride. To quote the Incredible String Band paraphrasing Shakespeare, "All the world is but a play. Be thou the joyful player."

Every scared investor should read "The Book of Predictions", published , I believe, in 1980, which is a collection of predictions about just about everything by the "experts" of the day. At the very least it's great for a laugh, and it may change your life regarding how much faith you put in expert predictions. A used hardcover copy is currently available at Amazon for $1.99, and it may be the best two bucks you ever spent- certainly, IMHO, more valuable than any finance literature (with the possible exception of the Bogleheads Wiki).https://www.amazon.com/gp/offer-listing ... d&qid=&sr= . Combine that with this article from the New Yorker: https://www.newyorker.com/magazine/2005 ... -an-expert . And if you want to delve further, learn about chaos and complexity theory. This is the best primer I have found: http://globalintelhub.com/wp-content/up ... 10/cce.pdf

Post Reply