Author Topic: Am i crazy to dump half my current liquid into VTSAX?  (Read 1594 times)

zoochadookdook

  • Pencil Stache
  • ****
  • Posts: 562
  • Age: 28
Am i crazy to dump half my current liquid into VTSAX?
« on: March 11, 2020, 01:41:53 PM »
Hi,

I just sold my house and hold about 160k in my HYSA.
27/single.
Other assets:
4000 HSA
32K Roth ira (need to throw another 5k in there to max this year)
Haven't used my employers 401k yet this year but will start next month (fund 12k this year)

No debt.

My out of pocket expenses going forward (between buying/renting right now, this is for both) are around 2000. That's 2000 take home or so total.

I'm considering keeping 20k in the HYSA (emergency/bill paying fund-each check goes here)
60k as a possibly house deposit (assuming buying up to 240k leaves me at 180 mortgage).....I'm new to the city and am between renting and waiting or buying sooner with the low rates/market/intenet to keep long term as a rental. A bigger kitchen/no neighbors and such vs apt would be nice as well.
As for the other 80-toss it pure stocks and let it ride?

Im not trying to find the bottom; it just seems like i'm losing to inflation having everything at 1.7% in the HYSA and keeping it in VTI/VTSAX when I don't need it for anything direct right now doesn't seem to have many negatives.

Any advice?

bwall

  • Pencil Stache
  • ****
  • Posts: 815
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #1 on: March 11, 2020, 01:52:06 PM »
We're on the cusp of a bear market. I suspect that the market will go lower still. So there is no need to make any quick decisions.

Here are your best options:

1) put all the money towards a house- by putting the money to work now, you're paying less in interest later. FIRE awaits. Lots of opinions on this and it's been chewed over before on other threads. But, keep in mind, we're on the edge of a bear market.

2) Put the money in VTSAX. Forget about the money and go about your life. Put as much into VTSAX as possible. FIRE awaits.

Either way, FIRE awaits if you save and invest enough but it's important to sleep well at night along the way.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2051
  • Religion isn't the opiate, politics is.
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #2 on: March 11, 2020, 02:02:31 PM »
If it were me, Iíd be patient and be taking a look at markets outside the US. VIX is in the 50s. The market is dropping. Whatís the rush?

DadJokes

  • Handlebar Stache
  • *****
  • Posts: 1641
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #3 on: March 11, 2020, 02:13:38 PM »
If that $80k were $50k in a month, would you be freaking out?

Investors are behaving irrationally at the moment, and we're seeing huge swings daily it seems. So I would probably DCA the money over a couple months.

zoochadookdook

  • Pencil Stache
  • ****
  • Posts: 562
  • Age: 28
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #4 on: March 11, 2020, 02:52:23 PM »
The irrational side of me says I have money sitting around losing to inflation. I should be vesting that money in some other diversification (market or tangible house). It also says look at houses now, don't settle for a little hole in the wall when I value things like not having a neighbor on every side/a garage/etc etc).

The rational side says rent now, look at houses slowly for a few months and hold or spread entry to VTI/VTSAX over the next 6 months to mitigate risk.

Battle of emotions vs strict numbers. Normally I'm pretty good about this sort of thing but I think I was spoiled in my previous housing choice.

Fru-Gal

  • Bristles
  • ***
  • Posts: 267
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #5 on: March 11, 2020, 02:53:36 PM »
I'd put it in the market.

terran

  • Magnum Stache
  • ******
  • Posts: 2994
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #6 on: March 11, 2020, 03:24:21 PM »
If you currently had $80k invested would you sell it to hold cash? If not then you should invest $80k cash that you're currently holding. They are the same decision.

zoochadookdook

  • Pencil Stache
  • ****
  • Posts: 562
  • Age: 28
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #7 on: March 11, 2020, 03:53:41 PM »
If you currently had $80k invested would you sell it to hold cash? If not then you should invest $80k cash that you're currently holding. They are the same decision.

Interesting perspective. If I had vested 50k and it was 80k I'd consider selling it and holding cash. then again i'd probably let it ride. Haven't looked at it that way

SubL stache

  • 5 O'Clock Shadow
  • *
  • Posts: 74
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #8 on: March 11, 2020, 08:41:14 PM »
Iím putting 167k into a house at the end of the month.  But thatís because Iím married and my wife wants a house...

If I was single/in your position I couldnít pass up this buying opportunity.  I would probably DCA the 80k in VTSAX over the next 2-4 months.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2938
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #9 on: March 11, 2020, 08:43:33 PM »
So you have $60k to put in a savings account, and then $136k of which only $36k is invested.  So your investment portfolio is 73% cash, which historically is a bad idea.

In the past 4 weeks, the U.S. stock market has a total return of -19%, but for the past 12 months it's just -1.7%.  The way I view this, if you buy now, you're beating 12 months worth of investing by everyone else in the market.  Your price would be better than anyone else buying in the past 12 months.

I'm more pessimistic than the market, and actually lowered my equity percentage to market time.  My allocation is 64% stocks, while your allocation is 27% stocks.  Your portfolio represents an extreme view of the market dropping significantly... the question is, when?

I wouldn't recommend timing 73% of your portfolio by holding cash.  Can you at least invest $30k now, at prices better than anyone else had in the past 12 months?

zoochadookdook

  • Pencil Stache
  • ****
  • Posts: 562
  • Age: 28
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #10 on: March 12, 2020, 09:26:21 AM »
Iím putting 167k into a house at the end of the month.  But thatís because Iím married and my wife wants a house...

If I was single/in your position I couldnít pass up this buying opportunity.  I would probably DCA the 80k in VTSAX over the next 2-4 months.

Why not make a lesser down payment (i'm assuming) and take advantage of locking in the low apr/investing the difference? Mathwise you get a discount and in theory should return over 3% (or whatever a 30 year is right now)?

zoochadookdook

  • Pencil Stache
  • ****
  • Posts: 562
  • Age: 28
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #11 on: March 12, 2020, 09:30:33 AM »
So you have $60k to put in a savings account, and then $136k of which only $36k is invested.  So your investment portfolio is 73% cash, which historically is a bad idea.

In the past 4 weeks, the U.S. stock market has a total return of -19%, but for the past 12 months it's just -1.7%.  The way I view this, if you buy now, you're beating 12 months worth of investing by everyone else in the market.  Your price would be better than anyone else buying in the past 12 months.

I'm more pessimistic than the market, and actually lowered my equity percentage to market time.  My allocation is 64% stocks, while your allocation is 27% stocks.  Your portfolio represents an extreme view of the market dropping significantly... the question is, when?

I wouldn't recommend timing 73% of your portfolio by holding cash.  Can you at least invest $30k now, at prices better than anyone else had in the past 12 months?

Yes it's cash- I just sold my house and net was around 85k after all the fees and such. I've never really been in this position so I hadn't moved it to anything.

I was thinking of DCA averaging the next 3 weeks/months or so. I guess worse case scenario It's still a discounted rate from a year ago.

My current conundrum is how to split VTI/VTSAX and VTIAX/VXUS. Thinking a 75/25 or 80/20 split.

FINate

  • Handlebar Stache
  • *****
  • Posts: 1799
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #12 on: March 12, 2020, 09:59:42 AM »
First things first: Don't invest anything in equities that you don't plan on leaving put for at least 10 years. The next couple of months will by a tiny blip 10 years down the road. If you're looking to time the market and/or get some quick short term gains...well...good luck with that, don't risk anything you can't afford to lose.

That said, the next 1-2 months will be a rollercoaster. By all accounts of how things evolved elsewhere, the US is currently in the quiet before the storm. The US healthcare system is about to get absolutely slammed. More and more movement of people and goods will come to a standstill in 2-4 week waves as this thing progresses across the country.  At least, this is the pattern we've seen elsewhere. People will die, entire industries will get decimated, but by summer it will have passed and we will be in recovery mode.

Are stocks a good buy right now? Well, they're certainly a better buy than a month ago. This is one of those rare buying opportunities that everyone talks about in hindsight but few actually pull the trigger on, because it's hard to take the plunge when everyone around you is panicking and everything is incredibly volatile.

To me this has similarities to circa 2011 when I was encouraging certain family members to purchase one of the many homes selling at deep discounts, but they wouldn't do it because "it's too risky" which then later quickly became "housing is too expensive" as things bounced back.

If I were in your situation I would wait about 2 weeks until we are deep in the throes of the pandemic. I would then invest with confidence for the long term. If you just can't bring yourself to invest all at once, then dollar cost average your lump sum over 1-2 months. Either way, you don't want to be holding lots of cash in this environment. The Fed will further drive down interest rates (we may even see negative rates) and will inject a shit-ton of liquidity into the system.
« Last Edit: March 12, 2020, 10:28:15 AM by FINate »

zoochadookdook

  • Pencil Stache
  • ****
  • Posts: 562
  • Age: 28
Re: Am i crazy to dump half my current liquid into VTSAX?
« Reply #13 on: March 16, 2020, 08:39:28 AM »
First things first: Don't invest anything in equities that you don't plan on leaving put for at least 10 years. The next couple of months will by a tiny blip 10 years down the road. If you're looking to time the market and/or get some quick short term gains...well...good luck with that, don't risk anything you can't afford to lose.

That said, the next 1-2 months will be a rollercoaster. By all accounts of how things evolved elsewhere, the US is currently in the quiet before the storm. The US healthcare system is about to get absolutely slammed. More and more movement of people and goods will come to a standstill in 2-4 week waves as this thing progresses across the country.  At least, this is the pattern we've seen elsewhere. People will die, entire industries will get decimated, but by summer it will have passed and we will be in recovery mode.

Are stocks a good buy right now? Well, they're certainly a better buy than a month ago. This is one of those rare buying opportunities that everyone talks about in hindsight but few actually pull the trigger on, because it's hard to take the plunge when everyone around you is panicking and everything is incredibly volatile.

To me this has similarities to circa 2011 when I was encouraging certain family members to purchase one of the many homes selling at deep discounts, but they wouldn't do it because "it's too risky" which then later quickly became "housing is too expensive" as things bounced back.

If I were in your situation I would wait about 2 weeks until we are deep in the throes of the pandemic. I would then invest with confidence for the long term. If you just can't bring yourself to invest all at once, then dollar cost average your lump sum over 1-2 months. Either way, you don't want to be holding lots of cash in this environment. The Fed will further drive down interest rates (we may even see negative rates) and will inject a shit-ton of liquidity into the system.

Yeah i'm not big on holding cash.

I think I may enter today. Wheter or not i'll split it into 4 20k chunks or 8 10k is kind of in the air but I'll try to DAC a bit. Looking at 60/40 splits US/international total. Between mutual funds and ETF's right now- there doesn't seem to be that much of a difference though