Author Topic: The Great Marital Dispute - Who is "right" about how to invest?!  (Read 3418 times)

Flyingstache

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General Info - Wife & I are both 30yr old with 2 little ones (3 & 1yr) living in central OH. Both teach & coach in the local school system. I worked in business for 5yrs before changing to education, wife is in year 9 of teaching.

Financial Info - (numbers rounded for ease)
- Salaries of $74k & $63k for upcoming school year
- No debt other than mortgage
- Typical monthly expenses of about $3,500
- House was purchased in Feb. of 2018 for $167,500
- Refinanced in March of 2020 to 15yr @  2.75%
- Balance is about $96k
- Payment each month is about $1,100 including insurance/taxes
- Total money between banking & investing - $262k
- Checking - $2,100
- HSA - $7,000
- Savings - $61,500
- Roth IRA (mine) - $39,100
- Roth IRA (wifes) - $13,200
- Traditional IRA - $49,500
- VTSAX - $87,200 (have $350 going in weekly)
- Don’t have 529s set up for the kids (have thought about it) & are working with the school district to provide 403b options (only options available currently have super high fees)

Other things to consider -
1) We hope to have more children in the future. Obviously this will increase childcare costs & all the other wonderful expenses that come with kids!
2) We likely will move within the next 2-5yrs. We will stay within the area but hope to find more space. When we purchased the home we viewed it as a nice 5yr starter home.
3) Another big expense coming up is buying a new (not literally new - just new for us) vehicle. The car I am driving is perfect for driving from home & to work but it likely won’t be serviceable after another year or so.
4) We are strongly looking into real estate investing & having a few rentals to diversify our holdings & hopefully increase our timeline for FIRE.

Big Question - My wife feels like we are putting too much money into VTSAX each week ($350 automatically going in each week) & not getting much “bang for our buck” with how high the market has been. She thinks we should have less going in now & save up the rest. The thought process is when the market crashes, we can then use that saved money to buy up more shares at a lower cost. I have always thought it was best to just put money in whenever possible & not worry about trying to time the market. So...who is “right”?!?! Should we keep plugging along & then use extra money to load up when the market does go down or would it make more sense for us to reduce our weekly investment & save the money for other things or for when the market crashes?

**full disclosure - my wife & I get along great & this marital “dispute” is all in good fun! She is awesome & regardless of the general verdict of this forum, she will remind me often that she IS always "right"!!!**

Thanks so much for your time & any insights! Have a great day!

v8rx7guy

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #1 on: August 08, 2021, 03:08:52 PM »
Statistically, you are correct.  Realistically, there will be a correction making your wife believe she was correct.  Anecdotally, wife is always right ;).

maizefolk

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #2 on: August 08, 2021, 03:41:03 PM »
v8rx7guy cuts to the heart of the matter. But even so, the argument I've found most compelling when I've personally dealt with the temptation to cut back on investing at high valuations is to try to answer these questions:

1) How much would the market have to go down before it would feel like a good value?
2) Would I feel comfortable putting a big chunk of money into a stock market that was dropping day after day?
3) How much would the market have to come back up after dropping before I was convinced it had stopped dropping?

After going through those questions, I always arrive at the conclusion that either I'm going to feel nervous investing because the market has been going up a lot or feeling nervous investing because the market has been dropping. So I might as well feel nervous in the way that statistically is likely to pay off over the long run (consistent investing instead of trying to time the market). Your mileage make vary.

Radagast

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #3 on: August 08, 2021, 03:53:48 PM »
It doesn't solve the emotional aspect, but you can diversify into international stocks and US small cap value stocks, which are not nearly as high as anything with US Large Growth company exposure. I always recommend diversification.

Also, I should point out that you haven't saved nearly enough to be preparing for a crash IMO. A crash right now would be great for you, but preparing for a crash by saving cash is likely to end up bad for you.

Freedomin5

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #4 on: August 08, 2021, 04:24:52 PM »
Statistically you’re right. Realistically, there may be a market correction that makes you want to wait longer because “it’s going to go down further” and you’ll likely end up missing the correction because it’s going to come back up before you put anything in. My DH is in your wife’s camp about waiting for a drop, and that’s what happened in March 2020. He was convinced COVID would trigger a recession, like what all the talking heads were saying. He was wrong. I’ve been reading MMM since 2014, and they’ve been talking about a correction for at least that’s long (“a correction is coming; we just don’t know when”). Guess what? It hasn’t come yet. Even with a 30% correction, I still come out ahead compared to if I didn’t invest and just held onto cash. So I’m going to keep putting money in according to the schedule set out by my IPS.

BicycleB

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #5 on: August 08, 2021, 04:24:53 PM »
^Bingo! You should hope for a long lasting crash, because you have large flows to invest from your employment.

That said, if you truly intend to focus on real estate, and your purchase timeline is less than say 2 years, the case to preserve RE purchase cash in less volatile form (not stocks) becomes much stronger. Personal decision though. Basically your high savings rate makes you safe no matter which choice you make.

As in any good marriage, harmony and communication are important. Much easier with your high savings rate, congrats. Curious what you decide.

trollwithamustache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #6 on: August 08, 2021, 04:50:05 PM »
So your wife in on board with saving and FIRE? and she wants to back down the savings that goes into VTSAX and more into cash?  I'd go along with it, since it sounds like you are getting 95% of what you want financially.


Plus, there is a lot of hate on this board about cash being inefficient, but cash is ready, spendable, problem solving cash. When/if you need it, cash is king. If you don't, its easy to Monday morning quarterback your poor allocation.

Edubb20

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #7 on: August 08, 2021, 04:58:29 PM »
You have 60k+ in savings.  I wouldn't' be keen on holding onto more cash. Also,  there really haven't been better "bang for your buck" periods in VTSAX than right now (not to say that isn't subject to change here shortly... or whenever). You could shift a small amount of your contributions into international markets(VTIAX) if you think U.S. market are going to cool off. Not sure what kind of non-U.S. exposure you are comfortable with.

You say you both teach, do you have 457(b) plans?  If you do, and they have a good selection of funds, dump money into those if you can.


Malcat

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #8 on: August 08, 2021, 05:52:55 PM »
You are right, time in the market matters more than timing the market.

If you were talking about a half million dollar lump sum, even I would struggle with faith and have a hard time dumping it in, but in the long run $1400/mo even over a year or two won't make much of a difference in the long term, it just feels that way at the beginning.

What *can* really fuck your finances though is getting sucked into market timing and starting to believe that it works.

reeshau

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #9 on: August 09, 2021, 07:09:10 AM »
You are right, of course.  Has your conversation included outside sources, like The Simple Path to Wealth?

The problem with timing is that you have to be right twice in a row: when you buy, and when you sell.  There are people who get it right once.  They are sometimes profiled in business news sources.  But you don't hear about them at the next turn, because they missed that one.  Anyone who was right twice in a row, with full conviction, would be a billionaire.  But because those decisions are also partially made emotionally, there is not conviction, but hedging and doubt, so the moves are only half-moves anyway.  All that hedging waters down any impact, and the result is routine underperformance.

I like the saying @Malcat used: the other saying is that stocks climb a wall of worry.  It is that worry that gives the market some level of discipline.  It is the times when everyone believes the market will go straight up that are most worrisome.  But you have to act in opposition to your emotions to realize that.

If you had to, you could take Warren Buffett's approach and propose a bet.  Set up two new accounts, and put your new investments equally into both.  In yours, keep to your strategy and invest in VTSAX on each deposit.  Let her take the other one, and time to her heart's content.  Whoever has more in 5 years wins.  Or, first to $10k wins.  You will take a small hit in your overall stache trajectory, but deeply learning this investing lesson early on will be valuable.

getmoneyeatpizza

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #10 on: August 09, 2021, 07:19:27 AM »
I just ran across an article (posted on an old MMM thread I think) in 2018 saying a major correction is coming and the market will only return 4% in the future. VTI is up 60% since 2018. What if you had had cash then instead of in the market?

I have cash I wanna dump in the market and have the same cold feet as you but I'm still going to do it.

SwordGuy

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #11 on: August 09, 2021, 07:46:27 AM »
I thought stocks were way too high back in Nov of 2012 when I found MMM.   

$100 invested in 2012 and with all dividends re-invested would be worth $347.96 today.

https://www.officialdata.org/us/stocks/s-p-500/2012

Obviously, I was wrong.   

Malcat

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #12 on: August 09, 2021, 08:04:56 AM »
I thought stocks were way too high back in Nov of 2012 when I found MMM.   

$100 invested in 2012 and with all dividends re-invested would be worth $347.96 today.

https://www.officialdata.org/us/stocks/s-p-500/2012

Obviously, I was wrong.

See, the issue here is that she might be right, but it doesn't matter.

Even if she is right, what does that mean for long term planning? What happens when she feels like SwordGuy above and "feels" like she's right again a decade too early?

The worst thing that can happen to a potential market timer is to get it right the first time. That's where the biggest danger lies.

What's worse, is that if she gets it right this time, the gains will be pathetic and irrelevant in the long term. Like really, how much of an impact would $1400/mo at this point actually have at the end of the day??

But down the line? When the sums are bigger? That's where her believing she can market time could cause huge impacts.
« Last Edit: August 09, 2021, 08:07:08 AM by Malcat »

talltexan

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #13 on: August 09, 2021, 08:20:49 AM »
There are good answers here already--including the one pointing out that your $VTSAX stake should be viewed alongside the various cash instruments--but I notice that you have an HSA.

Access to the HSA--and investing within it--can be a powerful vehicle for your long-term planning. Do not lose the opportunity to manage that.

And within it, you can use an allocation like "The Larry" which will have cash for the immediate health care expenses--you can show your wife this to answer her market timing concerns--but a high-juice small cap value produce that will help you for the long-run. Win/win

For what it's worth, my wife's risk tolerance is higher than mine, and--for the last five years--she never misses an opportunity to remind me.

mckaylabaloney

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #14 on: August 09, 2021, 08:23:17 AM »
I just ran across an article (posted on an old MMM thread I think) in 2018 saying a major correction is coming and the market will only return 4% in the future. VTI is up 60% since 2018. What if you had had cash then instead of in the market?

I have cash I wanna dump in the market and have the same cold feet as you but I'm still going to do it.

There's someone on these forums who, when this topic comes up, often comes in with a loooooong list of threads saying "but isn't the market too high right now?" going back for years. I can't for the life of me remember who it is, but hopefully they'll see this.

ETA: found them. https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/msg2823626/#msg2823626
« Last Edit: August 09, 2021, 08:35:46 AM by mckaylabaloney »

dougules

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #15 on: August 09, 2021, 10:10:32 AM »
It might be good to go back to the basics.  The mutual funds represent ownership in businesses.  Those businesses are earning money every day that you're missing out on as a potential shareholder.  Even more, the majority of those earnings are being reinvested by those companies to improve their profitability, and you're missing out on that growth.  If you buy later, you will have to pay for shares of companies that are bigger, more efficient, or more technologically advanced than they are today. 

There's someone on these forums who, when this topic comes up, often comes in with a loooooong list of threads saying "but isn't the market too high right now?" going back for years. I can't for the life of me remember who it is, but hopefully they'll see this.

ETA: found them. https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/msg2823626/#msg2823626

This thread would probably reasonably fit on @RWD 's list of market timing threads. 

RWD

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #16 on: August 10, 2021, 07:31:47 AM »
Statistically, you are correct.  Realistically, there will be a correction making your wife believe she was correct.  Anecdotally, wife is always right ;).
The thread could have ended right here, the perfect answer.


This thread would probably reasonably fit on @RWD 's list of market timing threads. 
Yes yes, I have a reputation to uphold. =)

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Tyler

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #17 on: August 11, 2021, 09:15:20 AM »
Big Question - My wife feels like we are putting too much money into VTSAX each week ($350 automatically going in each week) & not getting much “bang for our buck” with how high the market has been. She thinks we should have less going in now & save up the rest. The thought process is when the market crashes, we can then use that saved money to buy up more shares at a lower cost. I have always thought it was best to just put money in whenever possible & not worry about trying to time the market. So...who is “right”?!?!

IMHO, you're both wrong. ;)

The obvious middle ground is to select an asset allocation that reduces investing risk on autopilot and rebalances when situations change without any need for market timing. There are plenty of excellent options that don't require 100% VTSAX to generate solid returns or heavy amounts of uninvested cash to avoid collapse. In fact, a good couples exercise might be to study different portfolio ideas and talk about which approach best meets your individual and mutual needs.

Psychstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #18 on: August 11, 2021, 09:20:52 AM »
I thought stocks were way too high back in Nov of 2012 when I found MMM.   

$100 invested in 2012 and with all dividends re-invested would be worth $347.96 today.

https://www.officialdata.org/us/stocks/s-p-500/2012

Obviously, I was wrong.

See, the issue here is that she might be right, but it doesn't matter.

Even if she is right, what does that mean for long term planning? What happens when she feels like SwordGuy above and "feels" like she's right again a decade too early?

The worst thing that can happen to a potential market timer is to get it right the first time. That's where the biggest danger lies.

What's worse, is that if she gets it right this time, the gains will be pathetic and irrelevant in the long term. Like really, how much of an impact would $1400/mo at this point actually have at the end of the day??

But down the line? When the sums are bigger? That's where her believing she can market time could cause huge impacts.

The junioroldtimer thread is a great example of this. Dude was right* on his 1st market timing effort, made a paltry sum, and now is down big due to a second attempt to time the market.

*Right in the sense that me made money. His thesis for why the market would drop failed to come to fruition, but the pandemic market drop bailed him out.

PDXTabs

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #19 on: August 11, 2021, 11:32:39 AM »
Big Question - My wife feels like we are putting too much money into VTSAX each week ($350 automatically going in each week) & not getting much “bang for our buck” with how high the market has been. She thinks we should have less going in now & save up the rest. The thought process is when the market crashes, we can then use that saved money to buy up more shares at a lower cost. I have always thought it was best to just put money in whenever possible & not worry about trying to time the market. So...who is “right”?!?! Should we keep plugging along & then use extra money to load up when the market does go down or would it make more sense for us to reduce our weekly investment & save the money for other things or for when the market crashes?

I would definitely diversify into international equities, something like 55/45 VTSAX/VFWAX personally. You don't have to sell and realize gains, you can just start buying VFWAX. I definitely wouldn't hold extra cash, inflation is up 5.4% in the last year.

EDITed to add Vanguard's whitepaper: Global equity investing: The benefits of diversification and sizing your allocation.
« Last Edit: August 11, 2021, 11:34:22 AM by PDXTabs »

dandarc

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #20 on: August 11, 2021, 11:37:48 AM »
Public school teachers often have access to a 401a or pension - usually with mandatory contributions you don't have control over, 403b (basically the same thing as the more-widely-known 401k), and 457(b). You mention the investments in the 403b are bad - how bad? Short of this being "terrible" like 2% annual fees, you're probably cutting your nose off to spite your face - tax savings can swamp most "fairly bad" 403(b).

If you do have a 457(b), it might well have completely different options from the 403(b), so maybe that makes sense instead of the 403(b), or maybe not. All things being equal, a traditional governmental 457(b) is often the best choice for someone targeting early retirement.
« Last Edit: August 11, 2021, 11:40:58 AM by dandarc »

dandarc

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #21 on: August 11, 2021, 11:46:37 AM »
Also - you have $250K, on your way to $1 million or more. How much could timing on $350 (1 week) or $18,200 (1 year), or even $182,000 (10 years) really matter? Better to spend your energy worrying about more important things. Invest the money as soon as you have it to invest and promptly ignore it.

Car Jack

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #22 on: August 11, 2021, 12:41:43 PM »
Here's your argument:

"Ok, so I will agree that VTSAX and the market are going to crash just like 2008.
But if I concede that, I think it's reasonable to simply superimpose the chart of VTSAX on top of today.
So looking at a chart, it went from a pre-crash high of $37 and dropped to about $16.  Sounds pretty horrible, right?  But by the start of 2013, it was back at $37 and today, it's at $111."

So the question is, will money in a bank account grow from $16 to $111 in 12 years.  I think that's easy to answer at 0.5% rates.

If the market doesn't fall off a cliff, then why does "all time high!!!! -run around with hair on fire" even matter?

JJ-

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #23 on: August 11, 2021, 08:17:14 PM »
Big Question - My wife feels like we are putting too much money into VTSAX each week ($350 automatically going in each week) & not getting much “bang for our buck” with how high the market has been. She thinks we should have less going in now & save up the rest. The thought process is when the market crashes, we can then use that saved money to buy up more shares at a lower cost. I have always thought it was best to just put money in whenever possible & not worry about trying to time the market. So...who is “right”?!?!

IMHO, you're both wrong. ;)

The obvious middle ground is to select an asset allocation that reduces investing risk on autopilot and rebalances when situations change without any need for market timing. There are plenty of excellent options that don't require 100% VTSAX to generate solid returns or heavy amounts of uninvested cash to avoid collapse. In fact, a good couples exercise might be to study different portfolio ideas and talk about which approach best meets your individual and mutual needs.

I have liked this response the most. This one made me think that OP has determined asset allocation for the family unit without engaging the family. It sounds like 100% VTI is good for OP but beyond risk tolerance of OPs DW, and OP may be not so secretly hoping this forum come running to his side :)

The portfolios linked there would likely fit some middle ground for you two as they are diversified beyond 100% TSM and you can see the value of that in the comparison charts where 100% TSM is often last. Granted , some of the other portfolios do not have the same straight return, but you don't see the same risks associated with it either.

Herbert Derp

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #24 on: August 11, 2021, 10:16:31 PM »
Big Question - My wife feels like we are putting too much money into VTSAX each week ($350 automatically going in each week) & not getting much “bang for our buck” with how high the market has been. She thinks we should have less going in now & save up the rest. The thought process is when the market crashes, we can then use that saved money to buy up more shares at a lower cost. I have always thought it was best to just put money in whenever possible & not worry about trying to time the market. So...who is “right”?!?! Should we keep plugging along & then use extra money to load up when the market does go down or would it make more sense for us to reduce our weekly investment & save the money for other things or for when the market crashes?

Holding on to cash during a period of high inflation seems like a really bad idea. At least, you need to park your money in some sort of inflation protected asset such as precious metals. Personally, I think stocks and index funds are a good idea.

MustacheAndaHalf

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #25 on: August 12, 2021, 08:32:42 AM »
The thought process is when the market crashes, we can then use that saved money to buy up more shares at a lower cost. I have always thought it was best to just put money in whenever possible & not worry about trying to time the market. So...who is “right”?!?!
If your wife was right, it wouldn't make sense to buy & hold the stock market.  If each crash removed all gains since the last crash, there would be no long term return.  But the market does give a good long term return - because the bull markets have bigger gains than the bear markets have losses.

The problem, to quote former Fed Chair Greenspan, is "how do we know when irrational exuberance has unduly escalated asset values"?
https://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm

That was a speech given Dec 1996, predicting at some point the dot-com crash would occur.  Which it did, with losses every year from 2000-2002 (-11% / -11% / -21%).  But Greenspan was wrong - someone investing right after his speech was ahead +26% by 2002, the last losing year of the crash.

If you tried to time it by stopping in 1998, and waiting for 2002 - a very nice bit of market timing... you avoided a 4% loss between 1998-2002.  If you bought in too early, you hit the last year's -21% drop.  Wait too long, and you miss the +31% rebound in 2003.  So a market timer who got the start of the crash right could still lose -21% extra by investing early or miss a +31% gain by waiting too long.

Zamboni

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #26 on: August 18, 2021, 07:21:20 PM »
If she's really that worried about it, then learn about the "couch potato" method of investing in a set asset ratio of stock funds and bond funds with an annual rebalance. That way if the stocks do go down, you'll have some bonds money to buy low (and vice versa) and that's exactly how the annual rebalance works: you are always buying the asset that has gone down with the profits of the one that has gone up to keep things balanced, but you only do it once a year, so ultimately it outperforms most of methods of more frequent rebalancing. A good explanation of this strategy can be found in the easy-to-read book Millionaire Teacher by Andrew Hallam.

To prove Swordguy's point, I had this weird little part time side hustle for four months in 2011. They let me put $250 per month in their 401K, for a grand total of $1000. I just left it there in that 401k in a stock index fund. Never reallocated anything, set it to auto-reinvest any earnings. I probably should roll it into my IRA, and I will eventually, but I enjoy watching what it does since it's so easy to remember that it was exactly $1000 invested exactly 10 years ago. It is indeed valued at just north of $3K now.

MaaS

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #27 on: August 19, 2021, 06:19:10 PM »
Over long periods of time, you're on the right side of this much more often than she is. But...

I agree with your wife. Studies and math be damned lol.

The US market is very expensive (Don't @ me, forum). Also, the US market is not the only market in the world. Maybe settle on buying an international index fund? Or total world?

Heckler

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #28 on: August 20, 2021, 11:14:29 AM »

RWD

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #29 on: August 20, 2021, 12:52:22 PM »
The US market is very expensive (Don't @ me, forum).
@MaaS

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BicycleB

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #32 on: August 20, 2021, 02:57:53 PM »
The US market is very expensive (Don't @ me, forum).
@MaaS

@MaaS
@MaaS

Oh, dear. Someone really nailed themselves to the mast this time.

PS. um - quoting an @ doesn't re-invoke it, does it? (If so, sorry MaaS).

RWD

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #33 on: August 20, 2021, 03:36:20 PM »
PS. um - quoting an @ doesn't re-invoke it, does it? (If so, sorry MaaS).
It does not.


Thanks so much for your time & any insights! Have a great day!
@Flyingstache it's been nearly two weeks, was this thread helpful? Did you have further discussions with your wife?

MaaS

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #34 on: August 20, 2021, 09:04:26 PM »
The US market is very expensive (Don't @ me, forum).
@MaaS

@MaaS
@MaaS

Oh, dear. Someone really nailed themselves to the mast this time.

PS. um - quoting an @ doesn't re-invoke it, does it? (If so, sorry MaaS).

No, but you say don't @ me when you want to be @'ed. :D

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #35 on: August 25, 2021, 08:44:53 AM »
Hello everyone!

Thank you SO much for the wonderful advice & I apologize for my delayed response. This thread has led to my wife & I having lots of really great conversations. The responses helped us both better understand each others point of view & she enjoyed all the comments!

We have not changed the amount allocated to the VTSAX since this post but are looking to diversify by possibly adding in an international index fund, looking into our school districts 403(b)/457 options, & also putting some of our savings to work.

We are also exploring refinancing back to 30yrs (currently at 15yrs) & if taking cash out to invest would be worthwhile.

Thank you all so much & have a great day!

RWD

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #36 on: August 25, 2021, 09:09:47 AM »
Thank you SO much for the wonderful advice & I apologize for my delayed response. This thread has led to my wife & I having lots of really great conversations. The responses helped us both better understand each others point of view & she enjoyed all the comments!
That's great to hear! Getting on the same page and understanding each other is more important than whether you make the absolute perfect financial decisions. Thanks for coming back with the update.

AccidentalMiser

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #37 on: August 25, 2021, 10:28:05 AM »
Good to hear.

Timing the market is like playing loose poker.  You may win when you choose to play that way but sooner or later, it will catch up to you.

I was a market timer for years but doing so injects emotion into the process and emotions are your worst enemy. 

Mechanical investments following an agreed-upon plan is the least stressful way to reach financial goals.  DW and I sit down once per year (or so) and plan our investment mix, size and timing of deposits.  Then that's what we do.  We're frugal but emotional and this is what works best for us.

Malcat

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #38 on: August 26, 2021, 05:32:25 AM »
Hello everyone!

Thank you SO much for the wonderful advice & I apologize for my delayed response. This thread has led to my wife & I having lots of really great conversations. The responses helped us both better understand each others point of view & she enjoyed all the comments!

We have not changed the amount allocated to the VTSAX since this post but are looking to diversify by possibly adding in an international index fund, looking into our school districts 403(b)/457 options, & also putting some of our savings to work.

We are also exploring refinancing back to 30yrs (currently at 15yrs) & if taking cash out to invest would be worthwhile.

Thank you all so much & have a great day!

Keep those conversations going.

I discovered MMM when DH and I first got married. We started doing regular long walks just to talk about finances, everything from specific investment approaches, to hopes and dreams for the future, to extensive conversations about happiness.

I would typically take some topic from a thread here and explain the different takes and it would start a whole in depth conversation.

It's not just helped us get on the same page financially, it's really helped us understand what fundamentally drives and motivates each other. And has made all major decisions and challenges easier for us, whether they're directly related to money at all, because, well, everything is related to money.

Keep up the conversations, they literally pay off down the line.

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #39 on: September 13, 2021, 09:27:46 AM »
I appreciate all the great advice!

The next big discussion is regarding our mortgage & whether we should refi/cash out refi.

Refinanced in March of 2020 to 15yr at 2.75%. House is worth $230-240k right now & remaining loan amount is $95k. We have no problem making the payment right now & could just keep things the same. We are likely going to move in the next 2-5yrs but plan on keeping the home as a rental. Have been quoted the following rates with $2k closing costs:

30yr - 2.875%
15yr - 2.2125%
10yr - 1.99%

Could cash out & use that money to invest or refi without cash out to lower the payment or yrs or do nothing! Another fun topic to discuss!

talltexan

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #40 on: September 13, 2021, 11:15:24 AM »
(**I am a card carrying member of the DNPYM club)

That fifteen year rate that's more than 50 basis points below where you are now looks pretty impressive. Are you able to swing that with cash-out? How would you be investing the cash you extract?

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #41 on: September 13, 2021, 12:05:20 PM »
@talltexan thanks so much for the insights!

From the quotes above the principal & interest payments would be as follows. This was based on a cash out of $20k (the lender just used this as an example) for a loan amount of $115k

30yr - $477 PI
15yr - $746 PI
10yr - $1,058 PI

We are currently paying $712 PI. Based on the quotes above we could make it work for all of those options.

We could do a larger cash out amount (especially if doing the 30yr option) & likely would put the majority of the money into VTSAX which is where all of our money goes in the stock market after we max out our Roth IRAs.

Closing costs for all of the above options would be $2k

talltexan

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #42 on: September 13, 2021, 01:33:53 PM »
Will they lower the rate if you don't cash out? What if you keep on 15-year schedule, use lower rate to get lower payments, then just agree that the delta from that will go into stock market every month?

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #43 on: September 13, 2021, 06:02:04 PM »
They said rates would stay the same since the total amount isn't that big.

That is certainly an option to not do a cash out & just take the lower rate & invest the extra. Wasn't sure if the $2k closing costs made that not as viable of an option but I guess that money would be made back in the savings.

Had never even considered the cash out option when we first started looking at refinancing but then a few folks on here suggested doing that & throwing that lump sum into the market to increase our FIRE timeline.

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #44 on: September 14, 2021, 06:05:31 AM »
Would love any thoughts or suggestions on this & what would make the most sense!

Malcat

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #45 on: September 14, 2021, 06:08:32 AM »
Would love any thoughts or suggestions on this & what would make the most sense!

What makes most sense is what makes most sense for you.

You will get better input if you ask questions about the aspects of doing this that concern you.

What factors are holding you back from just jumping in to a cash out? Answer that and people will better know what concerned to address.

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #46 on: September 14, 2021, 08:34:44 AM »
Appreciate the feedback! Here are the biggest questions my wife & I have -

1) How to figure out how many years to do in this situation?
      Sounds like many would say always go back to 30yrs. Would that make sense if there is a chance we do sell the house
      within a few years or would it not matter because of the returns from the cash out?

     If we can get some cash out & still pay essentially the same as what we are paying now with our 15yr would it make more
     sense to do that vs. going back to 30yrs?

2) How to figure out how much to cash out?
     If going back to 30yrs should we take out as much as we can vs. taking out less to keep payment down (should goal be to
     make sure payment is less than what we're currently paying or to get as much cash out as possible?)

3) What to do with the cash?

       Invest it all? - All our investments (other than IRAs) are in VTSAX & currently have about $92k in VTSAX & about $181k in
       Vanguard total

      Save some as cash? - Currently have about $60k in cash

Really appreciate all the questions & suggestions as they have really helped lead our conversations & ensure we are covering all of our bases. Thanks so much!

Radagast

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #47 on: September 14, 2021, 10:18:30 PM »
Any of these options (except maybe 10 year, depending) are better than your current mortgage, so pull the trigger soon one one of them. If you plan to sell the house soon, then the amount you save monthly before then should total up to more than your closing costs with a nice fat margin of error. Otherwise, don't let the perfect be the enemy of the good.

The 30-year both improves cash flow, and also gives you a lump of cash. The worst case for debtors is a deflationary recession like the Great Depression or the Great Recession. However, in either of those cases you obviously would have been better of with both more cash and a lower payment. You could take a 30-year without cash out and have even less payment, but less cash, which is up to you.

Personally, I decided I will always try to get maximum cash out, but I won't accept a higher rate unless I have a good reason. I also decided that the improved cash flow of a 30-year loan is the only option that makes sense. I prefer to have the maximum amount of liquid assets for as long as possible. If for some reason I decide to pay off the mortgage, I will do it all at once with a mountain of money which had been doing more useful things than paying a low rate mortgage until then.

Invest an asset allocation that suits your needs. You don't need to outrun the bear (the best performing thing out there, which we can't know in advance anyhow), you just need to outrun your friend (mortgage) ideally with room to spare. See:
I'm about to do a big cash out Refi. From 8 years left on a 15yr to new 30yr. 20% LTV to 70% LTV. Seems hard like I could have huge regrets if we are on the precipice of a dot com bust.  Investing in VT/VTI.  Mentally you have to just keep telling yourself its the right decision and the math works?
Choose a good asset allocation IMO. See link below, showing 100% VTSA(M)X, the Buffet Portfolio, my version of the Three Fund Portfolio, and my version of the No-Brainer Portfolio. Recently everyone has been dwelling on the hockey-stick ending of the US-stock heavy portfolios:
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&benchmark=-1&benchmarkSymbol=VTSMX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VTSMX&allocation1_1=45&symbol2=VGTSX&allocation2_1=30&allocation2_2=25&symbol3=VBMFX&allocation3_1=25&symbol4=VFITX&allocation4_2=25&symbol5=DFSVX&allocation5_2=25&symbol6=VFINX&allocation6_2=25&allocation6_3=90&symbol7=VFISX&allocation7_3=10

But no-one seems to remember this period:
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=1&endYear=2016&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&benchmark=-1&benchmarkSymbol=VTSMX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VTSMX&allocation1_1=45&symbol2=VGTSX&allocation2_1=30&allocation2_2=25&symbol3=VBMFX&allocation3_1=25&symbol4=VFITX&allocation4_2=25&symbol5=DFSVX&allocation5_2=25&symbol6=VFINX&allocation6_2=25&allocation6_3=90&symbol7=VFISX&allocation7_3=10

Personally I'd choose the red line.

Flyingstache

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #48 on: September 29, 2021, 06:06:59 AM »
Just wanted to follow up & say thanks again for all the advice!

We went with a 30yr cash at refi. Stayed at 2.75% but now back to 30yrs vs. 15yrs & we also did a cash out of $55k. We are set to close tomorrow.

Thank you again for all of the wonderful advice & insights! Have a great day!

talltexan

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Re: The Great Marital Dispute - Who is "right" about how to invest?!
« Reply #49 on: September 29, 2021, 08:06:51 AM »
sounds fantastic, making cash flow better is always nice in those early kids years.