Author Topic: Timing the market (windfall + election, oh my)  (Read 1689 times)

Off the Wheel

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Timing the market (windfall + election, oh my)
« on: November 01, 2020, 01:58:43 PM »
So, I know it's time in market vs timing the market, but we'd all agree things are a little bit uncertain at the moment, no?

Long story short, I recently sold an investment property and have about $80K to reinvest into tax sheltered accounts. I'm going more heavily into bonds (about 30%) because we might need the money in a year to buy another property, but the remainder was going to be split across my CA/US/Intl index funds.

Do I buy tomorrow, or do I wait until Wednesday!?

(Recognizing it's impossible to predict the future, what would you do?)

Arbitrage

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Re: Timing the market (windfall + election, oh my)
« Reply #1 on: November 01, 2020, 02:01:55 PM »
Things are always uncertain.  I'd buy tomorrow according to the asset allocation defined in my IPS, and be happy that I missed out on last week's drop.

Retire-Canada

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Re: Timing the market (windfall + election, oh my)
« Reply #2 on: November 01, 2020, 02:06:24 PM »
Things are always uncertain.  I'd buy tomorrow according to the asset allocation defined in my IPS, and be happy that I missed out on last week's drop.

I would do the same. Invest it and stop thinking about it.

Off the Wheel

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Re: Timing the market (windfall + election, oh my)
« Reply #3 on: November 01, 2020, 02:08:40 PM »
Thank you both for the validation. That was my gut but then the underlying sense of foreboding and dread got to me.

cool7hand

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Re: Timing the market (windfall + election, oh my)
« Reply #4 on: November 01, 2020, 02:38:32 PM »
Once upon a time, I saw some research about how much money you would lose if you missed just a handful of the best days in any given year. One might think that the same could be said of the worst days, but we all also know that the market has more good days than bad. These two facts added up to an imperative that you get your money in asap so that you don't miss opportunities.

ChpBstrd

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Re: Timing the market (windfall + election, oh my)
« Reply #5 on: November 01, 2020, 08:03:00 PM »
If you "might need the money in a year" then it doesn't belong in the stock market. Stocks are for long-term investing. In a year, you'd catch random noise.

vand

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Re: Timing the market (windfall + election, oh my)
« Reply #6 on: November 02, 2020, 02:38:53 AM »
This isn't really a market timing question, it's an AA question.  The standard answer to this question should always be: determine your comfortable asset allocation FIRST, and THEN whack all your money in.

That, imo, is the correct way to marry "time in the market" with "timing the market".

Certainly, 100% stocks is probably the wrong AA if you "might" need the money in a year, but that doesn't preclude you from "investing" it as opposed to having it sit all in cash. It doesn't and shouldn't be that black & white. A 20/80 or 40/60 stock/bond allocation or - my personal perferred standard answer, the Permanent Portfolio allocation (25/25/25/25) - can still be considered if that suits your risk tolerance.

Retire-Canada

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Re: Timing the market (windfall + election, oh my)
« Reply #7 on: November 02, 2020, 05:40:30 AM »
I'm going more heavily into bonds (about 30%) because we might need the money in a year to buy another property, but the remainder was going to be split across my CA/US/Intl index funds.

I read the bolded text in the OP as the 30% was the money the OP might want to use for a RE purchase in a year and the remaining 70% was not needed and therefore to be invested in equities. The OP will have to clarify.
« Last Edit: November 02, 2020, 08:01:18 AM by Retire-Canada »

Hawaiian

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Re: Timing the market (windfall + election, oh my)
« Reply #8 on: November 02, 2020, 07:48:01 AM »
So, I know it's time in market vs timing the market, but we'd all agree things are a little bit uncertain at the moment, no?

Long story short, I recently sold an investment property and have about $80K to reinvest into tax sheltered accounts. I'm going more heavily into bonds (about 30%) because we might need the money in a year to buy another property, but the remainder was going to be split across my CA/US/Intl index funds.

Do I buy tomorrow, or do I wait until Wednesday!?

(Recognizing it's impossible to predict the future, what would you do?)

Great question, this should have been a post on MMM (or maybe I missed it). I'm in a similar situation with cash to invest and I share your feeling of uncertainty in the markets. With parts of the market artificially propped up by stimulus funds and the possibility of corporate tax rates going back up AND either party's stance on mask wearing (etc .)...yikes! Brain overload.

John Galt incarnate!

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Re: Timing the market (windfall + election, oh my)
« Reply #9 on: November 02, 2020, 07:55:34 AM »
Once upon a time, I saw some research about how much money you would lose if you missed just a handful of the best days in any given year. One might think that the same could be said of the worst days, but we all also know that the market has more good days than bad. These two facts added up to an imperative that you get your money in asap so that you don't miss opportunities.

 Since ~1930  the total return of the S&P 500   is ~14,962%.

An investor's  total return would be an unimaginably paltry ~91% if they were not invested in  the S&P 500 on its  10 best days in each  decade  since ~1930.

John Galt incarnate!

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Re: Timing the market (windfall + election, oh my)
« Reply #10 on: November 02, 2020, 08:53:03 AM »
So, I know it's time in market vs timing the market, but we'd all agree things are a little bit uncertain at the moment, no?

Long story short, I recently sold an investment property and have about $80K to reinvest into tax sheltered accounts. I'm going more heavily into bonds (about 30%) because we might need the money in a year to buy another property, but the remainder was going to be split across my CA/US/Intl index funds.

Do I buy tomorrow, or do I wait until Wednesday!?

(Recognizing it's impossible to predict the future, what would you do?)

My habit is to buy stocks monthly  at the end of the month.

 If before  the end of the month there's a sell-off I'll take advantage of it and buy stocks then.

If I have extra money I always invest it as soon as I receive it.

A range of uncertainty is ever inseparable from stock markets: On November 4th, or a few days later when there appears to be a reliable tally that indicates the winner, stock markets may surge or plunge but no one can reliably predict only a surge or or only a plunge or the magnitude of either.

Here are some post-Election Day possibilities that can affect stock-market performance:

If Biden wins:

1. There may be a quicker injection of stimulus which is likely to spur the stock market.

2. Investors may fear a change in tax policy and sell their stocks



If Trump wins:

1. Tax cuts/deregulation  remain in place which is positive for stocks

2. Does his combative trade policy portend more tariffs not conducive to economic growth? If this perception obtains there might be a bit of a sell-off.

OP, if  the  "remainder...to be split across [your] CA/US/Intl index funds" is for the long term, I wouldn't worry about stock-market ups and downs immediately following Election Day.



« Last Edit: November 02, 2020, 09:24:32 AM by John Galt incarnate! »

coffeestache

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Re: Timing the market (windfall + election, oh my)
« Reply #11 on: November 02, 2020, 09:00:36 AM »
Long story short, I recently sold an investment property and have about $80K to reinvest into tax sheltered accounts. I'm going more heavily into bonds (about 30%) because we might need the money in a year to buy another property, but the remainder was going to be split across my CA/US/Intl index funds.

How do you put $80k into tax sheltered accounts and have it available to use in a year?

waltworks

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Re: Timing the market (windfall + election, oh my)
« Reply #12 on: November 02, 2020, 08:52:29 PM »
Once upon a time, I saw some research about how much money you would lose if you missed just a handful of the best days in any given year. One might think that the same could be said of the worst days, but we all also know that the market has more good days than bad. These two facts added up to an imperative that you get your money in asap so that you don't miss opportunities.

 Since ~1930  the total return of the S&P 500   is ~14,962%.

An investor's  total return would be an unimaginably paltry ~91% if they were not invested in  the S&P 500 on its  10 best days in each  decade  since ~1930.

You know, I've read this in a variety of places and it doesn't make sense to me. Wouldn't just earning dividends over that time period get you more than that return? You could get zilch in capital gains the whole time and even at 2%, dividends would give you a ~580% return over 90 years.

Note that I'm not disagreeing with the larger point here. Being in the market is the way to make money.

-W

blurkraken22

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Re: Timing the market (windfall + election, oh my)
« Reply #13 on: November 03, 2020, 01:36:31 AM »
I'm going to be the odd one out here.

When I get a large injection of cash that requires investing, I usually plan to dollar-cost-average it in over a set period of time, like 3 to 12 months and calculate a boost in my regular monthly investment amount across that time frame.

I wish I had some good logical reasoning behind this policy. Also, I'm not instantly convinced by the 10 best days argument. Anyone have high quality references for that? I should probably learn more about the danger of missing the frothy days.

If we grossly oversimplify and think of the stock market as a line with a positive slope, then it always makes the most sense to invest the entire amount the moment you get your hands on it...

wenchsenior

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Re: Timing the market (windfall + election, oh my)
« Reply #14 on: November 03, 2020, 07:58:45 AM »
Things are always uncertain.  I'd buy tomorrow according to the asset allocation defined in my IPS, and be happy that I missed out on last week's drop.

I would do the same. Invest it and stop thinking about it.

Agree. (Although if you really do need it in a year, I'm not sure a taxable investment account is the best thing to do with it).
« Last Edit: November 03, 2020, 08:00:26 AM by wenchsenior »

moof

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Re: Timing the market (windfall + election, oh my)
« Reply #15 on: November 03, 2020, 08:20:15 AM »
Once you have a sizable stash the idea of timing new investments or dollar cost averaging just becomes silly.  If that $80k is a large chunk of your net worth I can sympathize with your hand wringing.  Fast forward a decade or so and you’ll be unable to discern which contributions were lucky enough to be well timed, and which were not.  Will mis-timing this one admittedly large contribution by a few percent (i.e. a “huge” stock market move) be a big deal to you in the long run?  Chronically sitting on the sidelines will more likely be bad than chronically missing the optimum buying opportunities by just investing early and often.