Author Topic: Help!  (Read 1953 times)

LTDL

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Help!
« on: January 05, 2017, 09:53:42 AM »
Hi Folks~

Need your thoughts, as we are new to investing.

Currently, we have about $500k cash that we would like to invest. The question is where to invest and when.

The hubs and I are divided on strategy.

My strategy: Place the whole darn thing into the Vanguard Total Stock Market Index Fund. New to investing, I feel like this is a good place to start. My only hesitation is when? I don't want to place the bulk of our monies into the market, only to see a big crash in the next few months. We plan on dipping into these monies (4%) within the next three years, as part of a soft retirement.

Hubs strategy: Hubs has been watching individual stocks, has picked (3), and would like to split the investment $100k to individual stock and $400K into the VTSMIF. He feels like timing is good for the individual stocks, and is also unsure about the timing of the VTSMIF.

So, what would you do? Where to start?!?!



terran

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Re: Help!
« Reply #1 on: January 05, 2017, 10:19:56 AM »
Start here for how to invest: http://jlcollinsnh.com/stock-series/. The short version: do it your way, not your husband's, but maybe Jim can help you convince your husband.

As far as when to invest, on average lump sum investing (do it now) beats dollar cost averaging (do it over time), but DCA can help with your loss aversion and is certainly better than not investing at all. Here's a good read on the topic: https://personal.vanguard.com/pdf/ISGDCA.pdf

catccc

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Re: Help!
« Reply #2 on: January 05, 2017, 10:30:37 AM »
Another vote to read the stock series and index.

Lentils4Lunch

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Re: Help!
« Reply #3 on: January 05, 2017, 11:20:22 AM »
Quote
As far as when to invest, on average lump sum investing (do it now) beats dollar cost averaging (do it over time), but DCA can help with your loss aversion and is certainly better than not investing at all. Here's a good read on the topic: https://personal.vanguard.com/pdf/ISGDCA.pdf

Thank you for that link!

Also, how did you get $500K? Just curious...

LTDL

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Re: Help!
« Reply #4 on: January 05, 2017, 12:16:08 PM »
Thank you for the responses!

As to how we reached the $500k...We own a small, but profitable roofing company. After our salaries, we have be able to to take about $500K in distributions.

We are planning to sell the business in the next couple of years, if anyone is interested. :-)

stockjohn

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Re: Help!
« Reply #5 on: January 05, 2017, 01:39:52 PM »
Nice work building the business. Very impressive.

If you weren't going to touch it for at least 15 years I would say to dump it all into Vanguard total stock market. Given that you will start drawing down the money in three years, however, and given that the stock market is presently at historic highs, I would take a more  cautious and more diversified  approach. 

First I would divide the money into at least three buckets: Bucket 1 (money you will be drawing down within 3 to 7 years), Bucket 2 (money you may access 7 to 15 years out), and Bucket 3 (money you won't need to touch for at least 15 years). How much goes in each bucket depends on your other savings and your expected income in your semi-retirement. For Bucket 1 I would put at least 40% in lower risk bond funds, TIPS (Treasury Inflation Protected Securities) and Real Estate Investment Trusts , and 60% in the Vanguard total stock fund. If you don't have significant savings elsewhere and you're serious about   scaling back in three years I would also consider  putting some portion of Bucket 1 in a high yield savings account like FNBO. Bucket 2 could be 90% stock and 10% bonds, with TIPS,  and Bucket 3 could be all VTI possibly with an extra weighting to emerging markets.

I am sure some here would say that with a 4% withdrawal rate there's no need for the bucketed approach. For me, buckets reduce stress in the event of a market downturn. If two years down the road the market has dropped 20%, Bucket 1 will still be closer to even and you won't feel like you're locking in losses when you start to withdraw.

For the specific allocations go and play around with FutureAdvisor.com. You can enter the amount  of money, the planned withdrawal date and they'll automatically recommend an investment allocation and identify the cheapest and most tax efficient funds.