Author Topic: Broke the Fear of Overvalued Markets, Opened a Taxable Account  (Read 2183 times)

RePatriot

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Wife and I have been back and forth on this a while.  We have an oversized cash stash at this point.  Not including or 6 month emergency fund, we still had about 47k sitting in savings between the two of us.  The reasons we were holding this much cash:

-Fear.  We worked really hard to save this money and the thought of a downturn scared us both.  We are deep into a bull market and the thought of dumping in this pile of cash only to watch it tank 40%+ is nightmarish.  The temptation to try and time the market is a strong one.

-Long term expenses.  I'm going to grad school next year, and we both want to be home owners in the next 5 years.

-Confusion.  I was (and still am) woefully ignorant on the ins and outs of taxable investing.

Here is what broke the fear and allowed us to dump 15k into the market:

-We are staying EXTREMELY conservative.  We are keeping a 33.1k cash buffer outside of our emergency fund to front load all of our tax deferred space next year.

-Faith in future earnings.  We both have a lot of self doubt about our income long term, but we've started to come around to the fact that we are good with our money and don't need a hoard of cash on hand to survive and thrive.

-Kissing the money goodbye.  Now that it is invested, I have no fear about pulling the money out.  We are both absolutely in it for the long haul.  It may seem stupid to some of the more experienced minds, as the risk of sitting on too much cash has been well discussed, but prior to putting the money in, my wife and I were both afraid of risking that hard earned stash.  Now that it is in the market, I'm not even watching it outside of our once monthly net worth calculation.

The plan is to keep the cash buffer in place to frontload next year, and to invest anything above and beyond that amount into the taxable account for the year.  But it is a huge win for us to stop hoarding cash and put that money to work!

Carrie

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #1 on: May 01, 2018, 06:30:39 AM »
Good for you! I need to do the same, but have been holding back thinking we needed to do some home maintenance. But we probably don't need nearly the cash we've saved up.

Penn42

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #2 on: May 01, 2018, 06:21:54 PM »
I'm kind of at this point too.  Got all my ducks in a row and am on track to max out all of my tax advantaged options this year.  I've still got more coming in than I need though.  It's not much more, but I've got raises coming and I know that I will need to open a taxable account to get that money pumping into the market.  Why does it feel so different if it's taxable?

RePatriot

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #3 on: May 02, 2018, 05:40:56 AM »
I'm kind of at this point too.  Got all my ducks in a row and am on track to max out all of my tax advantaged options this year.  I've still got more coming in than I need though.  It's not much more, but I've got raises coming and I know that I will need to open a taxable account to get that money pumping into the market.  Why does it feel so different if it's taxable?

One of the big things for me is that there is so much less discussion of taxable account investing in the FIRE space.  Most articles discuss maxing tax advantaged space, and then say "put the remainder in a taxable brokerage."  If its not on your radar, it seems bigger and scarier.

Good for you! I need to do the same, but have been holding back thinking we needed to do some home maintenance. But we probably don't need nearly the cash we've saved up.

We had our reasons for stacking this much cash.  I think they were mostly excuses to mask the fear I had.  Now that I've pushed through the "maybe we need it" feeling and opened the account, I realized that we don't need that much cash on hand.  It is really nice to have a spot to put excess cash that I feel good about.

marty998

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #4 on: May 02, 2018, 06:09:25 AM »
Wife and I have been back and forth on this a while.  We have an oversized cash stash at this point.  Not including or 6 month emergency fund, we still had about 47k sitting in savings between the two of us.  The reasons we were holding this much cash:

-Fear.  We worked really hard to save this money and the thought of a downturn scared us both.  We are deep into a bull market and the thought of dumping in this pile of cash only to watch it tank 40%+ is nightmarish.  The temptation to try and time the market is a strong one.

-Long term expenses.  I'm going to grad school next year, and we both want to be home owners in the next 5 years.

-Confusion.  I was (and still am) woefully ignorant on the ins and outs of taxable investing.

Here is what broke the fear and allowed us to dump 15k into the market:

-We are staying EXTREMELY conservative.  We are keeping a 33.1k cash buffer outside of our emergency fund to front load all of our tax deferred space next year.

-Faith in future earnings.  We both have a lot of self doubt about our income long term, but we've started to come around to the fact that we are good with our money and don't need a hoard of cash on hand to survive and thrive.

-Kissing the money goodbye.  Now that it is invested, I have no fear about pulling the money out.  We are both absolutely in it for the long haul.  It may seem stupid to some of the more experienced minds, as the risk of sitting on too much cash has been well discussed, but prior to putting the money in, my wife and I were both afraid of risking that hard earned stash.  Now that it is in the market, I'm not even watching it outside of our once monthly net worth calculation.

The plan is to keep the cash buffer in place to frontload next year, and to invest anything above and beyond that amount into the taxable account for the year.  But it is a huge win for us to stop hoarding cash and put that money to work!

You are going to look back and laugh one day when you have $470k invested in the markets, and are entirely comfortable with seeing it bounce around by $10,000 a day.

Arbitrage

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #5 on: May 08, 2018, 11:14:40 AM »
I can empathize, though my lack of a taxable investment account wasn't due to any particular market fears; rather, it was due to wanting to avoid the additional complexity if possible.  When I embraced the desire to FIRE, and stopped mentally separating my 'non-retirement' and 'retirement' assets, it became clear that I needed to throw a bunch of money into taxable equity investments.

Make sure you take advantage of tax-loss harvesting.  I know that it might seem counterintuitive to want to sell when you've lost money, but that's the way the tax code works.  If you don't know how to do it, ask some questions.

tryingtosave

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #6 on: May 18, 2018, 02:04:56 PM »
I am sort of in the same boat too. I keep 1 year of emergency fund, maxed out 401k, cant do Roth IRA. Don't want to deal with the work to do backdoor IRA. But I still have way too much in savings account. I opened a taxable account last year but because of the fear of the market crashing and losing 50%. I have been putting in 1k per month to spread it out. I am also holding out on buying an investment property in fear of housing price will crash soon. I feel like there is so much to worry about when investing.

avedaprincess

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #7 on: June 10, 2018, 07:27:52 AM »
if you don't mind my asking, where did you open the taxable account? I created a Betterment account (after reading one of MMM posts) but I haven't funded it yet. Should I do Betterment or MMM's Vanguard suggestion? I'm still looking around on the Betterment account to make sure I understand how to use it. I am not very tech savvy and need things to be very simple....

RePatriot

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #8 on: June 10, 2018, 04:23:55 PM »
if you don't mind my asking, where did you open the taxable account? I created a Betterment account (after reading one of MMM posts) but I haven't funded it yet. Should I do Betterment or MMM's Vanguard suggestion? I'm still looking around on the Betterment account to make sure I understand how to use it. I am not very tech savvy and need things to be very simple....

I went with Vanguard.  After exhaustive research, careful contemplation, and countless monte carlo simulations, I decided to keep my IRA's and taxable investments all in one spot to make things easy on myself.

Silverado

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #9 on: June 10, 2018, 04:31:56 PM »
if you don't mind my asking, where did you open the taxable account? I created a Betterment account (after reading one of MMM posts) but I haven't funded it yet. Should I do Betterment or MMM's Vanguard suggestion? I'm still looking around on the Betterment account to make sure I understand how to use it. I am not very tech savvy and need things to be very simple....

Simple? Just do Vanguard and be done with it. Total Stock, dump all you can into it.

avedaprincess

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Re: Broke the Fear of Overvalued Markets, Opened a Taxable Account
« Reply #10 on: June 10, 2018, 08:47:59 PM »
@Silverado and @RePatriot...Thank you! Looking into Vanguard next week then!