Author Topic: Looking to make a 2016 IRA contribution...should I wait it out a bit?  (Read 1249 times)

TedW

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Ok, ok, I know.  No one can time the market, I'm just feeling a little timid about funding my 2016 SEP IRA right now.   Wondering if I should wait a few days or weeks to see if this very high market will have any sort of correction in the short term.  My plan was contributing 10k (which is a lot for me) to FSTVX, Fidelity's version of Vanguard's VTSAX.  I know most of you prefer Vanguard, but I like the handholding I get from Fidelity.
 
With the market at such a high, I may consider adding a total bond fund as well or just using the 4 in 1 fund, with the intention of getting back to the total stock market fund once (if) market levels off.  I'm pretty new to this and so happy to have found the MMM community.  I am grateful for any input.  Thanks!
« Last Edit: February 22, 2017, 01:15:49 PM by TedW »

MrGville

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Re: Looking to contribute to my 2016 SEP IRA...should I wait it out a bit?
« Reply #1 on: February 22, 2017, 01:18:49 PM »
I would go ahead and contribute the money...especially since you will likely not be touching these funds for a long time (potentially decades, but I don't know how old you are).  People have been worried about the high level of the market for a while now, but the S&P 500 has increased ~4.2% over the last 30 days.  Anyone holding onto their money back on January 23rd missed out on 4.2% gains (Assuming they would have bought an S&P index).

nereo

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Re: Looking to make a 2016 IRA contribution...should I wait it out a bit?
« Reply #2 on: February 22, 2017, 01:22:14 PM »
yup - that's market timing.  Even more to the point, you only have ~8 weeks, so the window is pretty narrow to count on any particular metric to push prices up or down significantly.

Regarding what you should invest IN - follow your IPS.  If you don't have an IPS, make one, then follow it.  Right now you are chasing bonds because 'the stock market [is] at such a high" - no, no, no!

TedW

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Re: Looking to make a 2016 IRA contribution...should I wait it out a bit?
« Reply #3 on: February 22, 2017, 01:39:27 PM »
Yup...trying to time the market and chasing bonds out of fear.  Thanks for the reminder and the push I needed to go forward with my plan. 

Next newbie question...IPS, investment policy statement?...would appreciate some tips/clarification.  If you mean my allocation...I'm about 80/20 now and would be fine going to 85-90% stock index funds.  I'm 47 now and hoping to let this grow for the next 20 years.

terran

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Re: Looking to make a 2016 IRA contribution...should I wait it out a bit?
« Reply #4 on: February 22, 2017, 01:43:33 PM »
Next newbie question...IPS, investment policy statement?...would appreciate some tips/clarification.  If you mean my allocation...I'm about 80/20 now and would be fine going to 85-90% stock index funds.  I'm 47 now and hoping to let this grow for the next 20 years.

Can't say I've gone to the trouble myself, but this is what it is: https://www.bogleheads.org/wiki/Investment_policy_statement

nereo

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Re: Looking to make a 2016 IRA contribution...should I wait it out a bit?
« Reply #5 on: February 22, 2017, 01:48:01 PM »
Yup...trying to time the market and chasing bonds out of fear.  Thanks for the reminder and the push I needed to go forward with my plan. 

Next newbie question...IPS, investment policy statement?...would appreciate some tips/clarification.  If you mean my allocation...I'm about 80/20 now and would be fine going to 85-90% stock index funds.  I'm 47 now and hoping to let this grow for the next 20 years.
Yes, IPS = Investor Policy Statement. Your asset allocation (AA - what percentage of your portfolio is in stocks, bonds, REITs, Cash, Beanie Babies, etc) is one key part of your IPS, but not the only part. A good IPS should list the order in which you make investments (e.g. 401(k) to company match first, then HSA, then IRA, then taxable accounts...) as well as what your AA should be.  It should consider your short-term and long term goals ("I'm saving for a downpayment on a house) as well as your risk tolerance. It should mention how often you re-balance (for me: once/year in January).

That said, a good IPS can still be very simple and can fit onto an index card. Having an IPS prevents people from doing stupid things with their money, like market timing, or chasing the latest 'hot' sector.

TedW

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Re: Looking to make a 2016 IRA contribution...should I wait it out a bit?
« Reply #6 on: February 22, 2017, 01:49:24 PM »
Ahhh....got it!  Smart advice.  Thank you all!
So grateful to have found this community.

I'll be putting my IPS together...now.  Thanks!