Author Topic: Advice Needed (Read 2007 times)

YoungAndNotFree · « **on:** October 20, 2019, 08:39:17 AM »

Hello everyone!
As adviced in a case study I published.
I sold my boat.

13k paid in high interest debt.
I have 13k left for investing.

Not sure if buying it all of VTI, just because of the market timing.
I know we are not suppose to try to time it. But feels odd not to consider this all time high.

Any thoughts please?

terran · « **Reply #1 on:** October 20, 2019, 08:49:05 AM »

Immediate investment beats temporarily holding cash (otherwise known as dollar cost averaging) 67% of the time: https://personal.vanguard.com/pdf/ISGDCA.pdf

Most of the time the market is at an all time high, and even if you only invested at the worst possible times, you'd still do alright: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

RWD · « **Reply #2 on:** October 20, 2019, 09:03:05 AM »

Quote from: YoungAndNotFree on October 20, 2019, 08:39:17 AM

But feels odd not to consider this all time high.

js82 · « **Reply #3 on:** October 20, 2019, 11:05:31 AM »

Quote from: RWD on October 20, 2019, 09:03:05 AM

Quote from: YoungAndNotFree on October 20, 2019, 08:39:17 AM
But feels odd not to consider this all time high.

I was starting to think we were going to get through October without this assertion. Is it at an all time high? I haven't been looking at the stock market this month due to a personal challenge, but I'll make an exception for updating my list. Uhhhh, we're definitely not at the all-time high (which was 3025.86 on July 26). Stock market needs to go up another 1.33% for that. And even then that would only be a 5.3% increase over January 2018.

Going to emphasize the bold part and expand a little more. If you look at the major domestic indices:

S&P: Only up slightly since January 2018, nearly flat since August 2018
DJIA: Essentially flat since January 2018
NASDAQ: Flat since August 2018

Relatively speaking, stocks are probably "cheaper" now than they were 14-21 months ago when considering metrics such as P/E ratios, cash returned to shareholders(dividend payout on VTI), and the fact that stock prices were flat while the domestic economy grew during that time period. That's not to say that stocks are currently "cheap" by historical standards, but it's not like the alternative options are particularly cheap either.

That's not to say that a recession/market downturn won't happen - it's just that, statistically speaking, letting your money sit(high probability of incremental losses over time) will probably hurt you more than investing it right now(smaller probability of larger loss).

Still, investing success can be as much a behavioral game as a mathematical one. If one is anxious about risk, getting into the market gradually is still better than not getting in at all.

Buffaloski Boris · « **Reply #4 on:** October 20, 2019, 12:56:55 PM »

There’s always one in the crowd, and I guess that falls to me. I am not a fan of the US based large cap indexes and view them as a mediocre investment at this time. Why:

1. Generally speaking the US stock market is expensive in both historic terms and global terms. You can check out comparable PE and CAPE ratios for US and other countries on the Star Capital website. If you’re a buy and hold investor what you’re usually trying to do is buy low and sell high. When valuations overall are high, it doesn’t seem to me that there’s much opportunity for making money on the market as a whole.

2. US Large cap stocks relative to small and medium caps have not done as well over long time periods. Although for the last 5 years they seem to have done better than small or medium caps. I expect that to change back to the historical norm. I could be wrong.

3. The large cap indexes are mostly cap weighted. Or said another way, when you buy the popular large cap indexes, most of your money is going to the largest stocks by market capitalization. If you buy a top 500 index, you’ll find that about half of what you’re actually getting is the top 50 stocks, so maybe it should be better thought of as a top 50 index with an insignificant allocation to 450 other stocks. That holds true with many of the so-called all market indexes as well. That sort of index is fine if you like the 50 or 100 largest stocks. I’m not a fan. There are equal weight Index funds out there and if I do start looking at US large cap indexes again, I suppose I’ll look into those.

Longer term, Charles Schwab just announced this week that they’re going to allow customers to buy hold and sell fractional shares . With that you’ll be able to craft your own “index” should you so choose.

vand · « **Reply #5 on:** October 20, 2019, 01:44:04 PM »

This is asked a lot, and.... it's the wrong question.

A better question is "What should my asset allocation be?"

Once you have that sussed then you should be happy to whack additional lump sums into your portfolio in accordance to your AA.

TomTX · « **Reply #6 on:** October 20, 2019, 01:49:05 PM »

Lots of good answers here.

Frankly, with $13k - it's hardly worth putting in major effort for the "ideal" allocation. Invest. Broad-based, low cost indexing. Long time horizon? Stocks. Develop an IPS and stick to it. Don't try to time the market. The vast majority of people fail at it, and fail hard. Keep investing and ignore the volatility.

Personally, I recently added international (after thinking about it literally for years, finally amended my IPS), so my allocation is:

50% ESGV
50% VSGX

But by far the most important things are (again)

1) Invest.
2) Make it a broad based, low cost stock index.
3) DON'T TRY TO TIME THE MARKET.

vand · « **Reply #7 on:** October 23, 2019, 04:46:30 AM »

Quote from: vand on October 20, 2019, 01:44:04 PM

This is asked a lot, and.... it's the wrong question.

A better question is "What should my asset allocation be?"

Once you have that sussed then you should be happy to whack additional lump sums into your portfolio in accordance to your AA.

Nick Magiulli writes a great finance blog.. here is a recent post of analysis of lump summing with different defensive portfolio mixes vs DCAing into an aggressive portfolio:

https://ofdollarsanddata.com/the-cost-of-waiting/

Conclusion: if you are worried about lumping it all into stocks, then dial down to a more conservative portfolio and lump it in there instead.

The data shows that lumping even into very conservative portfolio usually beats DCAing into a TSM portfolio over 24 months.. so much so that even lumping into a 100% bond portfolio you would be no worse of at least half the time.

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Author Topic: Advice Needed (Read 2007 times)

YoungAndNotFree

Advice Needed

terran

Re: Advice Needed

RWD

Re: Advice Needed

js82

Re: Advice Needed

Buffaloski Boris

Re: Advice Needed

vand

Re: Advice Needed

TomTX

Re: Advice Needed

vand

Re: Advice Needed