Author Topic: Buy stocks while market is high?  (Read 2084 times)

cabeasle

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Buy stocks while market is high?
« on: January 18, 2013, 05:22:31 AM »
Last year I went with the dollar-cost-average theory and just put a chunk of my savings into stocks/bonds each month.   But then, I decided to look in to different investments, so I began to hold on to my capital near the end of the last year and the beginning of 2013. 

Now, my Vanguard accounts seem to be doing quite well, and I am hesitant to invest a large chunk of cash into stocks while my account is on the rise... seems counter-intuitive to buy high.

Vanguard has a chart that graphs out the performance of my interest gains/losses.  Currently, this is in an up-spike.  Is it a bad idea to wait to invest for several months until I see that spike start to reverse?  Or should I just throw the money in now anyways since I plan to be holding on to the investments for 10+ years?

Just curious on your thoughts :)  Jump in now, or wait for cheaper waters?

NumberCruncher

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Re: Buy stocks while market is high?
« Reply #1 on: January 18, 2013, 07:03:10 AM »
This is trying to time the market, which doesn't sound like what you want to do if you're going by the dollar-cost-average theory. I'd probably just set up an automatic transfer each month to get your mind off it.

James

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Re: Buy stocks while market is high?
« Reply #2 on: January 18, 2013, 07:13:15 AM »
I'm in a similar bind, I'm looking to move more of my savings from bonds to stocks.  Right now I have about 22% bonds, I'd like to get that down closer to 10%.  I'm not sure if I should wait for a possible dip from the build up to the debt ceiling and move it all in once chunk, or just start moving $10,000 a month until I get where I want to be.  My gut tells me the second option is best, but my greed wants to be really smart and make the big jump while the market is down.  My head says just move the damn money and be done with it, so I might do that on Monday.
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rjack

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Re: Buy stocks while market is high?
« Reply #3 on: January 18, 2013, 07:29:37 AM »

fiveoh

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Re: Buy stocks while market is high?
« Reply #4 on: January 18, 2013, 08:38:43 AM »
Overall market is high... some individual stocks that are fair priced or cheap.... oh wait nevermind...

:)

Honest Abe

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Re: Buy stocks while market is high?
« Reply #5 on: January 18, 2013, 08:48:33 AM »
I would be damned if there wasn't a downward move in February while the boys in DC play chicken with the debt ceiling.

Another Reader

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Re: Buy stocks while market is high?
« Reply #6 on: January 18, 2013, 09:18:31 AM »
I sold a bunch of bond funds and am sitting on a lot of cash.  I'm waiting for a pullback before I put that cash to work.  I'm spending time right now researching, so I have a shopping list when the sale starts.

James

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Re: Buy stocks while market is high?
« Reply #7 on: January 18, 2013, 09:20:54 AM »
I sold a bunch of bond funds and am sitting on a lot of cash.  I'm waiting for a pullback before I put that cash to work.  I'm spending time right now researching, so I have a shopping list when the sale starts.


That's not a bad idea, getting out of bonds is my first goal so I could make the move right now.  Entering the market could be done in chunks as I go along, timing it over the next few months as I feel good about entering the market.
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Another Reader

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Re: Buy stocks while market is high?
« Reply #8 on: January 18, 2013, 10:07:50 AM »
I have been getting out of bonds for the last couple of weeks.  I finally decided to get out when someone suggested I consider emerging market bond funds for better yield.  Looking at the charts, the growth and the yield looked great.  Then I looked at what these folks actually own in their funds.  Somehow, I don't feel good about funneling money to Vladimir Putin to buy a country dascha or Hugo Chavez for his latest cancer surgery.  Buyers of this paper forget how debts in places like Moscow and Caracas can easily get erased if it becomes inconvenient to pay them back.  My favorite was DLENX.  Here's the fund objective, as shown on the Schwab website.  The bolding is mine.

The investment seeks high total return from current income and capital appreciation. The fund intends to invest at least 80% of its net assets (plus the amount of borrowings for investment purposes) in fixed income instruments. It may invest, without limitation, in fixed income instruments of any credit quality. The fund may invest up to 20% of its net assets in defaulted corporate securities. The portfolio manager intends to seek to construct an investment portfolio with a weighted average effective duration of no less than two years and no more than eight years. The fund is non-diversified.

Folks, when you have to stretch this far for yield, something is very wrong.  On top of that, it's becoming increasingly clear that the Fed cannot buy enough debt to keep interest rates down forever.  We are already seeing mortgage rates start to rise, and borrowing is becoming more difficult for everyone.  The bank purse strings are tightening, quite possibly in anticipation of higher rates going forward.  Finally, here and at other financial websites and forums, the undercurrent of unease is getting stronger.  Once savvy individual investors pull out, the crowds will follow.

I still have inflation protected securities and a little in high quality short and medium term bonds.  The rest of what used to be in bonds is in cash, waiting for the right opportunity.  I have my finger on the trigger to dispose of the remaining bonds if conditions worsen.  And if I'm wrong, I can always buy them back.

If you own bond funds and you don't know what is in those funds, now would be a good time to look at that.  A lot of fund managers have been juicing their yields with preferreds and derivatives.  What you think you own and what you actually own may be two different things.  Do your homework now, so you can make good decisions as conditions change.

Mr Mark

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Re: Buy stocks while market is high?
« Reply #9 on: January 18, 2013, 12:06:56 PM »
Whenever people start talking about the market being 'over valued', I start to anticipate a rally...

If you have regular savings, I think dca is simple and effective.

For lump sums, a dva approach over a short period of say 3 months broken into 5 pieces is what I'd do. This is similar to using a rolling mean approach, buying more when below say 2 month average. If the market drops 2%, accelerate a buy and visaversa.

As for bond market timers, be careful. If fed rates were to drop to 'Japanese' levels, bonds could almost double, and solid corporate bonds maybe even triple. So although it looks like rates are bottoming out, there may still be room to go. If there is some massive stock correction, those bonds will also rise as the market falls.

Most people hold way too much cash, IMHO.
Mr. Mark

Another Reader

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Re: Buy stocks while market is high?
« Reply #10 on: January 18, 2013, 12:20:34 PM »
The US turning into Japan is the risk, I agree.  I don't see the signs of that at this point.  Do you? 

When I have to buy junk to make any money in bonds when there are a lot of high grade companies paying solid equity dividends out there, I have to pause.  I think your DVA approach makes a lot of sense in buying into equities, and it's similar to what I intend to do. 

If our economy fizzles, then you could see both stocks and bonds drop.  Higher risk in both asset classes, and lower earnings for stocks.  That's when it makes sense to hold cash.

AlexK

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Re: Buy stocks while market is high?
« Reply #11 on: January 18, 2013, 04:57:32 PM »
In October 2010 I had some money to invest but the market seemed over-valued so I decided to wait for a dip. Well I waited and waited and by July 2011 the market had gone up 20%. So I gave up waiting, put it into stocks and then the market dropped 15% over the next 2 months. The moral of the story is it's hard to know what is going  to happen over the short term, even if it looks easy in hindsight.