Author Topic: I think I accidentally timed the market -- now what?  (Read 2465 times)

Shelz123

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I think I accidentally timed the market -- now what?
« on: February 05, 2018, 03:16:30 PM »
About 2 weeks ago I cashed out a mutual fund. It was a gift from my dear departed grandfather, and over the course of many years it had matured to a nice, low-five-figure number. But I always hated the high carrying costs, and I wanted to consolidate some of my non-401(k) investments into one place, so I planned to sell the fund, take the cash, and roll it over into my low-cost Vanguard account. 

I sold the shares just before this little market plunge about 10 days ago. In the time it took for the money to clear into my checking account, the DJIA is down 2,200 points, and I'm not sure what to do. I know the Mustachian thing to do is buy investments "on sale." But something is holding me back, and I guess I'm unsure about the best strategy. Is it better to put a big chunk of cash back into the market now, or should I wait? Another idea: should I buy a little extra each week (as I do already, out of my biweekly paycheck), to amortize the gain / loss?

I should add that I have a solid emergency fund already, so the basics are well covered. I want to put this money back to work, but I'm a little gun-shy at present. What's the smartest way to invest a little extra cash right now?

terran

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Re: I think I accidentally timed the market -- now what?
« Reply #1 on: February 05, 2018, 03:22:57 PM »
Sounds like you got lucky. Don't attribute it to skill, buy back in now and take you "winnings."

Historically, 67% of the time lump sum investing beats dollar cost averaging. The primary purpose of DCA is as a psychological trick to prevent loss aversion keeping you from investing at all.

Edit - Source: https://personal.vanguard.com/pdf/ISGDCA.pdf
« Last Edit: February 05, 2018, 03:25:53 PM by terran »

Shelz123

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Re: I think I accidentally timed the market -- now what?
« Reply #2 on: February 05, 2018, 03:31:16 PM »
Oh yes, I totally got lucky -- I can claim no skill here at all with my little windfall! I should clarify: I'm not looking to try and recreate the investment magic I lucked into. If / when I reinvest the money, it will be in my low-cost Vanguard fund. I'm just trying to figure out the best strategy and time to pump this little windfall back into my boring, steady investments.

Very interesting re. the stats about lump sum vs. amortized investing -- thanks!

JLee

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Re: I think I accidentally timed the market -- now what?
« Reply #3 on: February 05, 2018, 03:33:29 PM »
I would just dump it all back in.

DS

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Re: I think I accidentally timed the market -- now what?
« Reply #4 on: February 05, 2018, 03:35:22 PM »
Oh yes, I totally got lucky -- I can claim no skill here at all with my little windfall! I should clarify: I'm not looking to try and recreate the investment magic I lucked into. If / when I reinvest the money, it will be in my low-cost Vanguard fund. I'm just trying to figure out the best strategy and time to pump this little windfall back into my boring, steady investments.

Very interesting re. the stats about lump sum vs. amortized investing -- thanks!

Why treat the windfall differently from your boring, steady investments?

ShoulderThingThatGoesUp

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Re: I think I accidentally timed the market -- now what?
« Reply #5 on: February 05, 2018, 07:12:25 PM »
Yep, put it in at market open tomorrow.

Reynolds531

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Re: I think I accidentally timed the market -- now what?
« Reply #6 on: February 06, 2018, 05:53:19 AM »
Wait, you redeem some mutual fund and the market drops?!

IT'S HIS FAULT!!! You're the straw that broke the camel's back!

boarder42

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Re: I think I accidentally timed the market -- now what?
« Reply #7 on: February 06, 2018, 06:03:18 AM »
dump it into the market - i got lucky when we bought our second house- i wasnt sure if our first house would sell in time so i went ahead and cashed in my taxable accounts in dec. 2015 we closed on both houses in feburary right before this new bull market started and we dumped it back in - sometimes you get lucky with your life events and they line up - dont wait any longer you got a 10% sell off basically thats pretty amazing luck in timing.

Shelz123

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Re: I think I accidentally timed the market -- now what?
« Reply #8 on: February 06, 2018, 09:18:37 AM »
Wait, you redeem some mutual fund and the market drops?!

IT'S HIS FAULT!!! You're the straw that broke the camel's back!

Oof, sorry world!

Sibley

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Re: I think I accidentally timed the market -- now what?
« Reply #9 on: February 06, 2018, 02:50:49 PM »
Yes, reinvest it asap. Then go do some more self education, because it's not hard to realize that you got lucky this time but are having trouble just dumping the money back in the market (at a gain!!!!), then there's something wrong with YOU. Education is the #1 thing to check.

ChpBstrd

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Re: I think I accidentally timed the market -- now what?
« Reply #10 on: February 06, 2018, 08:52:25 PM »
If you waited just one day (Tuesday), you missed out on a 2% rally.

Sometimes we win the lottery with luck and blow the winnings with skill.

nexus

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Re: I think I accidentally timed the market -- now what?
« Reply #11 on: February 07, 2018, 10:27:40 AM »
There's no time like the present. If you don't do it now, what's to say you'll do it next week, next month, next year? The longer you wait, the more negative the impact when you consider compounding.

ChpBstrd

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Re: I think I accidentally timed the market -- now what?
« Reply #12 on: February 07, 2018, 12:34:04 PM »
Actually, here's how to further exploit your position.

Volatility is high, so options prices are high. This means you can buy your stocks by selling a put option and eventually getting assigned at a lower price WHILE pocketing a significant option premium.

VTI is at 138.23 as I write.

Puts at the 138 strike price can be sold for...
1.73 expiring in 9 days (1.5 in time value, or a free 1.1%)
2.87 expiring in 37 days (2.64 in time value, or a free 1.9%)

The main risk compared to just buying VTI is that the market could rally, making the puts you sold worthless and leaving you with only the put premium in hand. But then you just play again the next week/month until you are assigned. Earning a couple percent a month is not bad, and you'll eventually be assigned on a dip

BrickByBrick

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Re: I think I accidentally timed the market -- now what?
« Reply #13 on: February 07, 2018, 01:37:35 PM »
Dump it in ASAP, I've been where you are.  I rolled over a 401k from a previous job and it landed in my new Rollover IRA as all cash.  Instead of immediately investing it all I hesitated...and continued to hesitate...after nearly a year later and missing out on a big rally I finally chastised myself for my lack of disciplined and dumped it all in.

Don't do what I did!  Dump it in now!

BuildingmyFIRE

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Re: I think I accidentally timed the market -- now what?
« Reply #14 on: February 08, 2018, 11:32:50 AM »
Buy a new TV, a new car, and a designer handbag!!

Just kidding!

Actually a great piece of advice I got from an accountant in a situation like yours, is to spike up your 401K contribution now (its the beginning of the year yay!) so that you get the pre-tax benefit of the "re-invested' funds, and then use the cashed out money as short term wage replacement.