Author Topic: Bad Time to Enter Large Position into Market? (Read 3280 times)

Hoosier Daddy · « **on:** April 11, 2021, 05:05:51 PM »

Currently, 50% of my net worth is uninvested. Given current valuations, would it be unwise to put 50% of net worth in the market all at once? Or should I dollar cost average, and if so, over what time horizon?

On one hand, I see my little green employees slacking off. On the other hand, if half my little green buddies disappeared the day after putting them to work, I would miss them very much!

AlanStache · « **Reply #1 on:** April 11, 2021, 05:34:18 PM »

If this is a large percent of what you could save and invest over the next year then yeah you have an internet strangers permission to dollar cost average into the market over the next 6-12months, I might not but I can see how someone might want to spread it out. If it is about what you would be investing in total this year then I would just drop it in and be done with it. This is based on you setting up a time table and actually investing when you said you would.

Feb/March 2020 I sold a condo and put all the proceeds at one time into the market, went basically down for a few more months but it came back strong.

Personally I would likely drop it all in Monday at 930am, but I have also developed the stomach for that, ymmv.

RWD · « **Reply #2 on:** April 11, 2021, 05:54:05 PM »

maizefolk · « **Reply #3 on:** April 11, 2021, 06:35:38 PM »

I'll second AlanStache's random internet stranger's permission to DCA in this case.

On average, you will end up with somewhat less money by dollar cost averaging instead of investing all of the money when the market opens tomorrow. But your worst case scenario is less bad if you DCA. The trade off between reduced average outcome but improved worst case outcome in analogous to buying insurance. Makes sense in some cases. Makes less sense in others.

But if it's 50% of your net worth and DCA gets you investing it in the market, even over 6-12 months, I can understand making the tradeoff.

reeshau · « **Reply #4 on:** April 11, 2021, 08:13:32 PM »

Quote from: maizefolk on April 11, 2021, 06:35:38 PM

But if it's 50% of your net worth and DCA gets you investing it in the market, even over 6-12 months, I can understand making the tradeoff.

+1
OP, you are asking the question,so you are uncertain what to do. The answer is to get that invested as fast as you can stand. 6 to 12 month's opportunity lost is a lot less than however long your 50% has been on the sidelines up until now.

As for the question of too high now: what is your investing time horizon? Not your FIRE date, or even traditional retirement date; It's your lifespan. By the end of your life, the market will surely be higher, or we will have bigger problems to worry about than optimizing returns. Get invested now. Keep saving and living today, too. Let the little green employees get to work. They aren't slacking off; their boss is holding them back.

Good luck!

We be free if we try · « **Reply #5 on:** April 11, 2021, 10:32:57 PM »

I’d only add that if you’re just about to retire (in the next year or two or three), having some money on the sidelines makes sense, given SORR. I have half my money sitting on the sidelines, because I just retired, and if the market tanks tomorrow I’ll sleep better. But I do intend to invest a slightly higher percentage each year (and will buy to rebalance if we get a big drop). I might top out at about 65% in the market, 5-10 years from now, unless my assets grow (or spending diminishes) to where risking more feels more comfortable, and it becomes about funding the grandkids education, etc.

ChpBstrd · « **Reply #6 on:** April 12, 2021, 08:30:04 AM »

Quote from: Hoosier Daddy on April 11, 2021, 05:05:51 PM

Given current valuations...

Which valuation metrics are you looking at? Any metric which includes 2020 is going to factor in a massive drop in revenue/earnings due to the worst pandemic since 1918. This includes PE ratios, P/S, CAPE, and most other fundamentals. Unless we are predicting in another pandemic, an asteroid strike, nuclear war, etc. we can expect a better 2021.

Today's trailing-twelve-months PE ratio for the S&P 500 is about 47, which seems insane. The S&P 500's forward PE ratio, based on expert estimates of the next 12 months, is 23.5 which is not at all insane.

https://www.wsj.com/market-data/stocks/peyields

I spent 2009 and 2010 under-invested because the backward-looking metrics looked so bad at the time. Plus the financial media was nonstop during that era about how overpriced stocks were - and they've been nonstop ever since. Do not repeat my mistake. During and after a recession, you have to look forward and do not underestimate how quickly index earnings tend to grow, especially after a recession.

cool7hand · « **Reply #7 on:** April 12, 2021, 08:52:04 AM »

+1 on invest all now in an allocation that fits your situation and goals

JLee · « **Reply #8 on:** April 12, 2021, 01:18:59 PM »

If you had 100% of your money in the market right now, would you withdraw 50% of it to DCA it over 6-12 months?

Dibbels81 · « **Reply #9 on:** April 12, 2021, 01:24:40 PM »

I had a big chunk of change following a home sale in 2018, about 100k. The market was at an all time high then, too. I bit the bullet and dropped it all in VTI. It did drop to 87k later that year, but now is worth 154k. It's nerve wracking to dump such a large sum in at once, but take a look at a stock market return chart that dates back 50 years to reinforce which direction it's going to trend in the long run.

dandarc · « **Reply #10 on:** April 12, 2021, 01:44:25 PM »

The OP reads a lot like someone who needs to read the stock series.

https://jlcollinsnh.com/stock-series/

Wolfpack Mustachian · « **Reply #11 on:** April 12, 2021, 07:15:02 PM »

Quote from: RWD on April 11, 2021, 05:54:05 PM

Pick an asset allocation that lets you sleep at night. Rebalance to it immediately. Stop worrying.

1/2013 [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013 [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013 [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014 [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014 [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014 [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014 [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015 [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015 [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015 [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016 [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017 [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017 [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017 [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017 [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018 [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018 [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018 [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018 [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018 [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019 [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019 [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019 [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019 [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/

Just want to give you props for always taking the time to post this.

RWD · « **Reply #12 on:** April 12, 2021, 08:01:10 PM »

Quote from: Wolfpack Mustachian on April 12, 2021, 07:15:02 PM

Quote from: RWD on April 11, 2021, 05:54:05 PM
Pick an asset allocation that lets you sleep at night. Rebalance to it immediately. Stop worrying.

<SP500 vs posts>

Just want to give you props for always taking the time to post this.

Thanks, no problem. The beginning of the time period here coincides pretty well with when I was most worried about the stock market myself. Mid-2012 was when we first had enough assets to seriously consider investing and I was pretty convinced that the stock market was due for another crash/correction. I had been contributing a token amount to my 401k to get the match but otherwise avoided the stock market. But then I read the MMM blog in 2014 and gained at least a little understanding of how stocks work. Every subsequent year I have maxed my 401k and been invested almost entirely in index funds. I am so glad I didn't keep waiting for the perfect opportunity to invest that would never come.

I'm sure that a big crash will come along eventually (ignoring the smaller ones we already had in 2015/2016, 2018, 2020) and I am not worried about it because 1) I am reasonably diversified, 2) the run-up preceding it will be a cushion to absorb some of the crash, and 3) my investing timeline is long enough that it will just be noise in the end.

Wolfpack Mustachian · « **Reply #13 on:** April 12, 2021, 08:21:07 PM »

Quote from: RWD on April 12, 2021, 08:01:10 PM

Quote from: Wolfpack Mustachian on April 12, 2021, 07:15:02 PM
Quote from: RWD on April 11, 2021, 05:54:05 PM
Pick an asset allocation that lets you sleep at night. Rebalance to it immediately. Stop worrying.

<SP500 vs posts>

Just want to give you props for always taking the time to post this.

Thanks, no problem. The beginning of the time period here coincides pretty well with when I was most worried about the stock market myself. Mid-2012 was when we first had enough assets to seriously consider investing and I was pretty convinced that the stock market was due for another crash/correction. I had been contributing a token amount to my 401k to get the match but otherwise avoided the stock market. But then I read the MMM blog in 2014 and gained at least a little understanding of how stocks work. Every subsequent year I have maxed my 401k and been invested almost entirely in index funds. I am so glad I didn't keep waiting for the perfect opportunity to invest that would never come.

I'm sure that a big crash will come along eventually (ignoring the smaller ones we already had in 2015/2016, 2018, 2020) and I am not worried about it because 1) I am reasonably diversified, 2) the run-up preceding it will be a cushion to absorb some of the crash, and 3) my investing timeline is long enough that it will just be noise in the end.

Good points. Out of curiosity, by diversifying, do you mean stocks vs. bonds, US vs. international, real estate vs. equities, etc.? Just curious in general if you don't mind sharing.

vand · « **Reply #14 on:** April 13, 2021, 04:14:27 AM »

1. It's probably a bad time to throw money into the market...
2. ... but you should do it anyway

These two concepts are not mutually exclusive

RWD · « **Reply #15 on:** April 13, 2021, 06:31:31 AM »

Quote from: Wolfpack Mustachian on April 12, 2021, 08:21:07 PM

Quote from: RWD on April 12, 2021, 08:01:10 PM
Quote from: Wolfpack Mustachian on April 12, 2021, 07:15:02 PM
Quote from: RWD on April 11, 2021, 05:54:05 PM
Pick an asset allocation that lets you sleep at night. Rebalance to it immediately. Stop worrying.

<SP500 vs posts>

Just want to give you props for always taking the time to post this.

Thanks, no problem. The beginning of the time period here coincides pretty well with when I was most worried about the stock market myself. Mid-2012 was when we first had enough assets to seriously consider investing and I was pretty convinced that the stock market was due for another crash/correction. I had been contributing a token amount to my 401k to get the match but otherwise avoided the stock market. But then I read the MMM blog in 2014 and gained at least a little understanding of how stocks work. Every subsequent year I have maxed my 401k and been invested almost entirely in index funds. I am so glad I didn't keep waiting for the perfect opportunity to invest that would never come.

I'm sure that a big crash will come along eventually (ignoring the smaller ones we already had in 2015/2016, 2018, 2020) and I am not worried about it because 1) I am reasonably diversified, 2) the run-up preceding it will be a cushion to absorb some of the crash, and 3) my investing timeline is long enough that it will just be noise in the end.

Good points. Out of curiosity, by diversifying, do you mean stocks vs. bonds, US vs. international, real estate vs. equities, etc.? Just curious in general if you don't mind sharing.

Yes, essentially all of the above. Our asset allocation is currently roughly 50/30/5/15 (US/Intl/REIT/Bonds). Plus maybe a year and change worth of expenses in cash and precious metals combined.

yachi · « **Reply #16 on:** April 13, 2021, 09:23:21 AM »

Quote from: Hoosier Daddy on April 11, 2021, 05:05:51 PM

Currently, 50% of my net worth is uninvested. Given current valuations, would it be unwise to put 50% of net worth in the market all at once? Or should I dollar cost average, and if so, over what time horizon?

On one hand, I see my little green employees slacking off. On the other hand, if half my little green buddies disappeared the day after putting them to work, I would miss them very much!

Why do you currently have 50% of your net worth uninvested?
1. I recently sold a house, prize horse, kidney. --> I'd be likely to recommend you invest it sooner rather than later.
2. I panic-sold half of my stock last March, and now I'm excited because the market is moving up. --> dollar cost average into the market over the next 5 years, also read up on Bob, the world's worst investment timer: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ and build up your investment stomach.

FLBiker · « **Reply #17 on:** April 13, 2021, 11:48:26 AM »

Agree with the advice here.

We sold our house last July, and I couldn't bring myself to dump the extra 60 grand in all at once, so I did $10K per month for 6 months. Definitely would have been better to just dump it all in. :)

We just got another lump sum of ~$30K. I'm just going to dump it in. Full disclosure, $60K is not 50% of our net worth (more like 5%), but the principle is the same.

vand · « **Reply #18 on:** April 13, 2021, 12:46:11 PM »

Quote from: yachi on April 13, 2021, 09:23:21 AM

Quote from: Hoosier Daddy on April 11, 2021, 05:05:51 PM
Currently, 50% of my net worth is uninvested. Given current valuations, would it be unwise to put 50% of net worth in the market all at once? Or should I dollar cost average, and if so, over what time horizon?

On one hand, I see my little green employees slacking off. On the other hand, if half my little green buddies disappeared the day after putting them to work, I would miss them very much!

Why do you currently have 50% of your net worth uninvested?
1. I recently sold a house, prize horse, kidney. --> I'd be likely to recommend you invest it sooner rather than later.
2. I panic-sold half of my stock last March, and now I'm excited because the market is moving up. --> dollar cost average into the market over the next 5 years, also read up on Bob, the world's worst investment timer: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ and build up your investment stomach.

Or better, decide on a suitable asset allocation that you can sleep well on, THEN dump all your money in.

People always ask if they should lump sum a life changing amount into the market or cost average it in, but a better question is to ask what portfolio mix would you be happy to dump a any amount into?

If you have a problem putting $1m cash into your portfolio then you have an asset allocation problem, not a timing problem.

Wolfpack Mustachian · « **Reply #19 on:** April 13, 2021, 06:40:33 PM »

Quote from: RWD on April 13, 2021, 06:31:31 AM

Quote from: Wolfpack Mustachian on April 12, 2021, 08:21:07 PM
Quote from: RWD on April 12, 2021, 08:01:10 PM
Quote from: Wolfpack Mustachian on April 12, 2021, 07:15:02 PM
Quote from: RWD on April 11, 2021, 05:54:05 PM
Pick an asset allocation that lets you sleep at night. Rebalance to it immediately. Stop worrying.

<SP500 vs posts>

Just want to give you props for always taking the time to post this.

Thanks, no problem. The beginning of the time period here coincides pretty well with when I was most worried about the stock market myself. Mid-2012 was when we first had enough assets to seriously consider investing and I was pretty convinced that the stock market was due for another crash/correction. I had been contributing a token amount to my 401k to get the match but otherwise avoided the stock market. But then I read the MMM blog in 2014 and gained at least a little understanding of how stocks work. Every subsequent year I have maxed my 401k and been invested almost entirely in index funds. I am so glad I didn't keep waiting for the perfect opportunity to invest that would never come.

I'm sure that a big crash will come along eventually (ignoring the smaller ones we already had in 2015/2016, 2018, 2020) and I am not worried about it because 1) I am reasonably diversified, 2) the run-up preceding it will be a cushion to absorb some of the crash, and 3) my investing timeline is long enough that it will just be noise in the end.

Good points. Out of curiosity, by diversifying, do you mean stocks vs. bonds, US vs. international, real estate vs. equities, etc.? Just curious in general if you don't mind sharing.

Yes, essentially all of the above. Our asset allocation is currently roughly 50/30/5/15 (US/Intl/REIT/Bonds). Plus maybe a year and change worth of expenses in cash and precious metals combined.

Thanks for sharing!

Must_ache · « **Reply #20 on:** April 13, 2021, 07:05:51 PM »

If you're that concerned about the market (and it's not an unreasonable concern) maybe you should go heavy on bonds for awhile and settle with a low return. But it's sounds like you (and many others) invoke "DCA" in lieu of having an actual investment strategy.

PDXTabs · « **Reply #21 on:** April 13, 2021, 08:43:17 PM »

Quote from: maizefolk on April 11, 2021, 06:35:38 PM

I'll second AlanStache's random internet stranger's permission to DCA in this case.

I'll third this, just from an emotional/psychological perspective. Mathematically, you should dump it all in now. But if I had that sort of windfall at earlier points in my life I would have DCAed it in just to sleep at night. Nowadays I think that I would have the stomach to just dump it in. So I guess that I'm saying to DCA it in on the shortest timeline that you can live with.

ChpBstrd · « **Reply #22 on:** April 13, 2021, 08:49:12 PM »

Here's a middle road. Sell put options with the cash as collateral.

You get a few thousand dollars in instant cash upfront that's yours to keep no matter what.

If the market goes down, you will be assigned shares, but your cost basis will be lower than if you had bought today. So that's a good thing. If the market goes up, you can repeat the process next month, and earn a few thousand more dollars. That's an even better thing. This process could potentially continue for several months until the stock market drops and you finally buy shares.

I would just dump it in, but if this put-selling strategy gets you over the hump and eventually invested, that's better than sitting in cash for years. You are essentially fighting the fed by holding cash.

Dancin'Dog · « **Reply #23 on:** April 14, 2021, 09:35:00 AM »

According to the CNN Fear & Greed Index meter, the market is "Neutral".

https://money.cnn.com/data/fear-and-greed/

vand · « **Reply #24 on:** April 14, 2021, 11:27:36 AM »

Quote from: GreenEggs on April 14, 2021, 09:35:00 AM

According to the CNN Fear & Greed Index meter, the market is "Neutral".

https://money.cnn.com/data/fear-and-greed/

OTOH AAII's sentiment indicator is at a 3yr high:
https://www.aaii.com/sentimentsurvey

as with any indicators, take them with a pinch of salt and look at a range of them

PJC74 · « **Reply #25 on:** April 14, 2021, 03:41:18 PM »

The math has said LSI>DCA

maizefolk · « **Reply #26 on:** April 14, 2021, 03:49:04 PM »

Quote from: PJC74 on April 14, 2021, 03:41:18 PM

The math has said LSI>DCA

Stop with this. Seriously. There are things which are answerable by math and things which are not and it is harmful to confound the two.

The math says the average outcome from LSI is better than DCA, while the worst case outcomes are better for DCA than LSI. These are both answerable with math.

Whether people care more about maximizing their average outcome or minimizing their worst case outcome? This is not answerable with math (and will vary from person to person based on their individual circumstances).

chevy1956 · « **Reply #27 on:** April 15, 2021, 01:05:15 AM »

Quote from: RWD on April 11, 2021, 05:54:05 PM

Pick an asset allocation that lets you sleep at night. Rebalance to it immediately. Stop worrying.

Yep. This idea that you aren't invested is inaccurate thinking anyway. It you are not invested it just means you are investing in cash and maybe hoping you can time the market.

The professionals (i.e. this should be all of us) invest all their assets according to their pre-determined asset allocation/plan.

Personally I'm about 15% Bonds and Cash and the rest stocks, I have some specific company shares which are due to working at the company. Everything else is in index funds. Low cost index funds + your asset allocation = don't really even think about it.

I'm also retired and my drawdown plan is similar to McClungs with the end goal being at some point I should be 100% stocks.

News:

Author Topic: Bad Time to Enter Large Position into Market? (Read 3280 times)