Author Topic: Help me...I'm mostly in cash...  (Read 6882 times)

tyleriam

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Help me...I'm mostly in cash...
« on: January 14, 2015, 04:06:48 PM »
So over the past year I have moved my Roth IRA and opened a 529 directly with Vanguard.  Right now those funds are all in cash.  I plan to put it all in index stuff like VTSMX and it's all ready to go but...I can't help but to think right now it the US stock market is at all time highs so I have this inkling to wait for the next recession and buy then.  Is this stupid?  When it comes to regular reinvestment type stuff I just set it and forget it but for placing lump sums I feel like if I buy now I am knowingly buying at the tippy top.

Secondly, I have two 401k's (wife and mine) that I cannot move, they have to stay where they are at.  We used our companies fund advisers when we set these things up and they put us in almost all heavily managed mutual funds and as I am comparing them to stuff like VTSMX they are DRASTICALLY under performing the market every one of them.  To top it off they all have fees averaging in the 1.5% range +/-.  So I am kicking myself for taking the advice of the financial advisers and want to get out of these expensive, poorly performing mutual funds several of which are at or close to their all time highs right now so I figure...good time to sell them.  I have stopped future investments in these funds and put them into the ONLY index option available (BSPAX) 100% going forward but when it comes to the crappy mutual funds I have I am struggling to sell them and buy the index fund for the same reasons as I mentioned above...fear of buying at the tip top of the market.

Any guidance would be appreciated.

Thank you

iamlindoro

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Re: Help me...I'm mostly in cash...
« Reply #1 on: January 14, 2015, 04:13:45 PM »
With no offense intended to you, this same question comes up about twice a week here.  Expect the following:

* Someone tells you to dollar cost average in.

* Someone explains that dollar cost averaging a lump sum is generally shown to be worse than simply getting the entire amount in immediately.

* Those two fight.

Just get it out of cash.  Start now.  Do something.  DO IT.

But I'd invest the lump sum.  Yesterday.

mumbojumbo

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Re: Help me...I'm mostly in cash...
« Reply #2 on: January 14, 2015, 04:17:54 PM »
"The best time to invest in stocks was long ago. The second best time is today."

http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/


MDM

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Re: Help me...I'm mostly in cash...
« Reply #3 on: January 14, 2015, 04:20:25 PM »
Well, you know it won't be the very top because essentially all the indexes have retreated from their all time highs.  Congratulate yourself on having waited a few weeks and take the plunge.  No way to know if things will then drop more - or rebound and never look back.

tyleriam

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Re: Help me...I'm mostly in cash...
« Reply #4 on: January 14, 2015, 04:53:20 PM »
Thank you for the fast replies.

Mumbojumbo - thank you for reposting that post, I read it when it first came out and didn't realize/remember it applied so directly to my situation today.

What about all the bad mutual funds I am in?  Just sell them all and buy all BSPAX (Blackrock S&P Index Fund w/ .48% expense ratio)?  I would have to do that with my whole 401k as that is the only index fund offered, literally everything else is highly managed/high fee stuff.

My wife has some Vanguard index options in hers.
« Last Edit: January 14, 2015, 04:59:38 PM by tyleriam »

trailrated

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Re: Help me...I'm mostly in cash...
« Reply #5 on: January 14, 2015, 05:03:45 PM »
If you post your 401k options along with the ER's of the funds we could help you out. Best of luck!

RapmasterD

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Help me...I'm mostly in cash...
« Reply #6 on: January 14, 2015, 08:36:15 PM »
And you are how old? 28? 82? Something in between? The closer you are to 28, the closer you should be to all at once investing.

FYI - That Black Rock fund is expensive. Buy the Vanguard S&P 500 ETF, assuming your 401K has a self directed brokerage option, which many do. Otherwise...yes, the Black Rock.
« Last Edit: January 14, 2015, 08:39:46 PM by RapmasterD »

tyleriam

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Re: Help me...I'm mostly in cash...
« Reply #7 on: January 15, 2015, 06:59:31 AM »
I am about to be 34.

I am looking at a sheet of my 401k fund options and it is dismal.  I have searched and read about all of them and they are all managed funds.

I am scrolling through, here are the only ones with fees under 1%, everything else is between 1-3% fees.  The only index fund is BSPAX.

Blackfock Multi-Asses Income Inst/Conservative Allocation (BIICX) .74% fee
Blackrock S&P 500 Stock A/Large Blend (BSPAX) .37%
Franklin Income R/ Conservative Allocation (FISRX) .97%
Ivy Asset Strategy A/World Allocation (WASAX) .96%
MFS Mass Investors Trust R2/Large Growtn (MIRTX) .98%

tyleriam

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Re: Help me...I'm mostly in cash...
« Reply #8 on: January 15, 2015, 07:04:44 AM »
Here are the five funds I am in because of the advice of our fund adviser guy.  I have it set to buy all Blackrock S&P going forward.

http://www.bloomberg.com/quote/MGBRX:US
http://www.bloomberg.com/quote/MRLOX:US
http://www.bloomberg.com/quote/SGENX:US
http://www.bloomberg.com/quote/WASAX:US
http://www.bloomberg.com/quote/BIICX:US

DrF

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Re: Help me...I'm mostly in cash...
« Reply #9 on: January 15, 2015, 07:31:48 AM »
pro tip, only contribute in your 401k to get the match in the s&p fund.

Use your wife's 401k to park anything above and beyond the match. You're married, it's all the same pot.

NWOutlier

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Re: Help me...I'm mostly in cash...
« Reply #10 on: January 15, 2015, 08:36:25 AM »
yes, even if every purchase you made over your lifetime was at all time highs, you had the worst luck in the world .... check this out.  don't delay, time in the market is more valuable than attempting to avoid a short term correction of 10-20%...  buy NOW, keep buying... consistently and relentlessly.


http://awealthofcommonsense.com/worlds-worst-market-timer/

"To recap, Bob was a terrible market timer with his only stock market purchases being made at the market peaks just before extreme losses."

"Even though he only bought at the very top of the market, Bob still ended up a millionaire with $1.1 million."

Scandium

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Re: Help me...I'm mostly in cash...
« Reply #11 on: January 15, 2015, 09:32:34 AM »
pro tip, only contribute in your 401k to get the match in the s&p fund.

Use your wife's 401k to park anything above and beyond the match. You're married, it's all the same pot.
What? No nono. This is not true. Max out ($18,000) for both of you. The ER of the s&p fund is not that bad, the tax savings more than make up for it

DrF

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Re: Help me...I'm mostly in cash...
« Reply #12 on: January 15, 2015, 09:52:16 AM »
pro tip, only contribute in your 401k to get the match in the s&p fund.

Use your wife's 401k to park anything above and beyond the match. You're married, it's all the same pot.
What? No nono. This is not true. Max out ($18,000) for both of you. The ER of the s&p fund is not that bad, the tax savings more than make up for it

I should have said "first". Yes, if you have the ability max out both.

tyleriam

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Re: Help me...I'm mostly in cash...
« Reply #13 on: January 15, 2015, 09:59:52 AM »
I gotcha.  I don't have the ability to max out either right now but I will soon.  My wife is not working currently but her old company lets her leave hers where it is.  When she starts working again I plan to roll it into her new/active one.

Mine I am contributing enough to get the full match.

Scandium

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Re: Help me...I'm mostly in cash...
« Reply #14 on: January 15, 2015, 11:00:15 AM »
pro tip, only contribute in your 401k to get the match in the s&p fund.

Use your wife's 401k to park anything above and beyond the match. You're married, it's all the same pot.
What? No nono. This is not true. Max out ($18,000) for both of you. The ER of the s&p fund is not that bad, the tax savings more than make up for it

I should have said "first". Yes, if you have the ability max out both.

Oh, you mean same pot to draw from in retirement? Yes that is true. Unless you need to factor in the stability of your marriage I guess..  Fill up wife's (or husband's) 401k only; then get divorced. Ouch.

RapmasterD

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Re: Help me...I'm mostly in cash...
« Reply #15 on: January 15, 2015, 11:10:45 AM »
Is there  a self-directed brokerage option in either your wife's or your 401K plans? That could be a way to circumvent your still relatively expensive Black Rock S&P 500 fund option.

Different story: my wife's company recently changed 401K providers and some of their house funds have such ridiculously low expenses that I'm moving stuff around a bit to take advantage of it. This is largely because like a BONEHEAD I've had my BND holding sitting in a regular account for the past few years, and as a result I've been cutting Obama unnecessarily larger checks as a result. I had no clue that BND spits out INTEREST, which is taxed at one's highest marginal tax rate.

So now I can keep my non-qualified bond ETF/fund dividends in a retirement account and at the same time purchase a fund with even lower expenses than BND, which is almost unimaginable. I know this is way off topic, but the lesson is that there are inevitably always ways to keep on optimizing.

Good luck. Even with Black Rock, you're going to be on a better track.

Kaspian

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Re: Help me...I'm mostly in cash...
« Reply #16 on: January 15, 2015, 12:09:30 PM »
I plan to put it all in index stuff like VTSMX and it's all ready to go but...I can't help but to think right now it the US stock market is at all time highs so I have this inkling to wait for the next recession and buy then. 

Check your emotion at the door.  You don't "feel" or "instinct" or "inkle" or "predict" or do anything emotional at all with investments.  You can't possible know.  It's numbers, math and that's all.  The market shows every day that exactly half of peoples' gut feelings are wrong.  Every sell is somebody else's buy.  So, forget all that nonsense.

Here's another way to think about what you have sitting in cash.  If it was all sitting in investments instead would you pull it out today?  If the answer is "no", you're not thinking clearly because keeping it in cash or pulling it out of investments is the same question.  $1 = $1.

tyleriam

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Re: Help me...I'm mostly in cash...
« Reply #17 on: January 15, 2015, 12:30:23 PM »
Ok so I agree, I need to invest the cash immediately.

What about the 401k funds that are in the high fee managed fund crap?  Should I just sell it all and buy Blackrock S&P?

Cromacster

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Re: Help me...I'm mostly in cash...
« Reply #18 on: January 15, 2015, 12:52:08 PM »
My wife is not working currently but her old company lets her leave hers where it is.  When she starts working again I plan to roll it into her new/active one.

Now, you can choose what is right for you.  Personally, I would roll it over to a vanguard IRA.  That way you have more control over where it's invested etc.  Sure it somewhat simplifies things if they are all together, but you run the risk of your wife's new employer having shitty funds as well.

What about the 401k funds that are in the high fee managed fund crap?  Should I just sell it all and buy Blackrock S&P?

Short answer, yes.
« Last Edit: January 15, 2015, 12:56:22 PM by Cromacster »

Kaspian

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Re: Help me...I'm mostly in cash...
« Reply #19 on: January 15, 2015, 01:38:51 PM »
What about the 401k funds that are in the high fee managed fund crap?  Should I just sell it all and buy Blackrock S&P?

I'd say definitely, but don't let that paralyze any other action.  I use index funds and the couch potato method.  It took me almost 3 years to get all my crazy accounts and investments aligned properly.  I hate to fill in paperwork for each, get the accounts changed, wait for CoDs (GICs in Canada) to mature, etc.  ...But while all that lengthy annoyance was going on, any new cash added was only going only to the index funds.

DrF

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Re: Help me...I'm mostly in cash...
« Reply #20 on: January 15, 2015, 01:44:16 PM »
pro tip, only contribute in your 401k to get the match in the s&p fund.

Use your wife's 401k to park anything above and beyond the match. You're married, it's all the same pot.
What? No nono. This is not true. Max out ($18,000) for both of you. The ER of the s&p fund is not that bad, the tax savings more than make up for it

I should have said "first". Yes, if you have the ability max out both.

Oh, you mean same pot to draw from in retirement? Yes that is true. Unless you need to factor in the stability of your marriage I guess..  Fill up wife's (or husband's) 401k only; then get divorced. Ouch.

Retirement assets generally get split, regardless of who's accounts they are in.