Author Topic: Facepunch me into taking the plunge  (Read 5301 times)

artistache

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Facepunch me into taking the plunge
« on: September 06, 2014, 07:54:45 AM »
I grew up with frugal parents, but there was no real investing in our home besides retirement/home mortgage. My father pays cash for EVERYTHING. They don't have debit cards. So while I got a great lesson in saving and living within your means, as an adult I find that I get deer-in-headlights-fear when it comes to doing anything with cash besides accruing it in a bank account.

I need some encouragement to actually invest money in something besides retirement (403b & vanguard IRAs, traditional and Roth, may get h a SEP but haven't fully explored that).

We're early 30s, living comfortably, debt free, and maxing out our retirement options. We have accumulated an "emergency fund" of well beyond what we'd need in an actual emergency: around $45k. We have decided against homeownership for the next few years. So it's time to take a big chunk of that cash and put it somewhere where it will earn more than $35/month in interest. I have all the steps of how to do this with Vanguard written down, and I've looked at their fund options, their advice, and the MMM forum advice. I just need the face punch to actually do it.

Please face punch me! Give me all the reasons why looking at the cash in a bank account is ridiculous!

MrsPotts

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Re: Facepunch me into taking the plunge
« Reply #1 on: September 06, 2014, 08:29:37 AM »
Happily!

The dollars earning .01% interest are LOSING VALUE because of inflation.   You are making  yourself poor!  When you retire you will have to eat cat food.

Did that hurt enough?

Suit

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Re: Facepunch me into taking the plunge
« Reply #2 on: September 06, 2014, 08:56:04 AM »
I suggest that you pick the stock you would have put the money in and calculate how much money you've lost by having it sit in a savings account this whole year rather than being invested in that stock. That should provide some motivation.

sandandsun

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Re: Facepunch me into taking the plunge
« Reply #3 on: September 06, 2014, 09:35:34 AM »
Same situation here... My grandparents, who were my money role-models, were very frugal, saved a ton, and kept it all in savings accounts or bank CDs... Was hard to get out of that mindset, but when I did for retirement account allocations, I became much more comfortable with it... I think about it like that- I wouldn't have my retirement money parked in a savings account, so why would I do that with any other money (except money I might need very short term or emergency cash- not a years living expenses, but honest to god, might need it for a day to day emergency amount)...

GizmoTX

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Re: Facepunch me into taking the plunge
« Reply #4 on: September 06, 2014, 11:41:58 AM »
On the other hand, the market is long overdue for a major correction, the economy & job situation is still not good, & inflation is very low right now. We're liquidating bonds & pulling back to more cash in our portfolio. Definitely have emergency & short term funds in a savings account; there are several online with FDIC insurance paying about 1%. After the correction, the stock market will be on sale.

Sdsailing

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Re: Facepunch me into taking the plunge
« Reply #5 on: September 06, 2014, 01:25:24 PM »

Just say no to market timing.

GizmoTX

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Re: Facepunch me into taking the plunge
« Reply #6 on: September 06, 2014, 02:48:57 PM »
I'm talking about risk management, not market timing. Allocation is important.

Davids

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Re: Facepunch me into taking the plunge
« Reply #7 on: September 06, 2014, 08:34:54 PM »
Figure out what you need for 6 monts and keep that in your savings and then just take the plunge. I am a lover, not a facepuncher.

TomTX

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Re: Facepunch me into taking the plunge
« Reply #8 on: September 06, 2014, 08:36:30 PM »
I'm talking about risk management, not market timing. Allocation is important.

You are market timing.

You are altering your asset allocation due to your perception of world events and expectation of a stock crash. The very definition of market timing.

Sure, there will be a crash - but will it be tomorrow? 5 years? 10 years? You don't know. I don't know. Historically, individual investors trying to time the market fail, and fail bigtime. They miss out on the big gains and their cash erodes away due to inflation.

Dodge

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Facepunch me into taking the plunge
« Reply #9 on: September 06, 2014, 09:07:47 PM »
I'm talking about risk management, not market timing. Allocation is important.

What you described is literally the definition of market timing.

While I don't know your personal situation, it is statistically very likely that your portfolio will end up like the ones highlighted in this thread:

http://forum.mrmoneymustache.com/investor-alley/are-individual-investors-really-this-bad/
« Last Edit: September 06, 2014, 09:10:58 PM by Dodge »

kyleaaa

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Re: Facepunch me into taking the plunge
« Reply #10 on: September 07, 2014, 07:13:51 AM »
If you're maxing out your retirement accounts every year I don't really think you need any facepunches. You seem to be doing it right.

GizmoTX

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Re: Facepunch me into taking the plunge
« Reply #11 on: September 08, 2014, 12:14:43 PM »
http://www.investmentu.com/article/detail/39284/investor-advice-warren-buffett-cash-stockpile#.VA3rP0uaEyI

It's called saving for the rainy day of market "opportunities" & avoiding arrows. Compounding & appreciation are very important, but so is the insurance of short term cash. There's a big difference in goals for millennials, boomers, & those in between.

For the record, we've used mustachian techniques for more than 4 decades, starting with practically nothing when we married. STEM degrees. High earnings, high savings. FI by 30. No inheritance or trust fund or handouts from anyone. Only child born at age 45. Current net worth in 8 figures. This stuff works.

Kaspian

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Re: Facepunch me into taking the plunge
« Reply #12 on: September 08, 2014, 12:21:31 PM »
How does that saying go? "The best time to invest was 20 years ago, the second best is today"?

Just do it!!  Appears there might be a little bit of a fire sale in the works this week anyway.  :)

Just watch a few videos from John Bogle--he definitely doesn't have the face of a liar.  I think one of the few men in investment I've ever seen who genuinely has the best interests of people in mind.

Dodge

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Re: Facepunch me into taking the plunge
« Reply #13 on: September 08, 2014, 01:45:24 PM »

http://www.investmentu.com/article/detail/39284/investor-advice-warren-buffett-cash-stockpile#.VA3rP0uaEyI

It's called saving for the rainy day of market "opportunities" & avoiding arrows. Compounding & appreciation are very important, but so is the insurance of short term cash. There's a big difference in goals for millennials, boomers, & those in between.

For the record, we've used mustachian techniques for more than 4 decades, starting with practically nothing when we married. STEM degrees. High earnings, high savings. FI by 30. No inheritance or trust fund or handouts from anyone. Only child born at age 45. Current net worth in 8 figures. This stuff works.

Are you claiming that, "saving for the rainy day of market opportunities" does not constitute "market timing"?

Someone saving $15,000 a year, without trying to time their investment for any rainy day market opportunity, would also have ended up with an 8 figure portfolio after 4 decades.