The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: rylandking on August 11, 2016, 12:26:32 PM
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Hey family o'stachers!
I have $10,000 that I need to throw into VTI. $7k in a Roth. $3k in a brokerage.
The current Schiller PE (27.10) tells me the stock market is overpriced (median of 16). http://www.multpl.com/shiller-pe/
Should I wait for a drop or invest $10k in VTI today?
Me:
26 years old
$100,000 invested (3 years of work, baby!)
totally fine cash flow wise
financial independence goal at 35
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Today.
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Vanguard's white paper on the topic concludes that most of the time you are better off doing a lump sum investment right away. There will be times where that doesn't end up being the best result, but since neither you nor I have a market crystal ball, you can't know whether that is one of those times.
https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf (https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf)
Bottom line: since it is a dice roll anyway, why not go in the direction of the best odds?
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Just because some random metric tells you the stock market is overpriced, doesn't mean we'll ever see today's prices again.
Let me say that again. Even if the Schiller PE drops back down to 16 over the coming years, that still doesn't mean we'll ever see prices as low as today ever again. Prices could still keep going up and up, while the Schiller PE drops back down to 16.
Stop trying to time the market. You can't. Just put it in and forget about it.
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Magical 8 ball says: "Better not tell you now"
Hmm...
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This is exactly the confirmation I needed to hear. Thank you! Right when you try to play the market, the market plays you.
Love the 'magic 8 ball' comment, btw. Now off to Vngrd to invest $10k.
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This is exactly the confirmation I needed to hear. Thank you! Right when you try to play the market, the market plays you.
Love the 'magic 8 ball' comment, btw. Now off to Vngrd to invest $10k.
The other thing is a "HISTORIC" market cash of 40% would only cost you 4k if it happened the day after you invested.... Not that big of a deal
What's more likely to happen is that it will climb 40% and then drop 40% for a year and then climb 80%, and some doomsayers will call that a bad deal.
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Sounds like you made the right decision. Even Shiller says that with the market being overpriced, it could remain that way for an extended period. Maybe 20 years...
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With interest rates so low there's no other place to put your money. Everyone is being forced into stocks. Of course this will end badly at some point but that could be 5-10 years away or more.
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http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
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http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
Great article thanks for posting
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Just because some random metric tells you the stock market is overpriced, doesn't mean we'll ever see today's prices again.
Let me say that again. Even if the Schiller PE drops back down to 16 over the coming years, that still doesn't mean we'll ever see prices as low as today ever again. Prices could still keep going up and up, while the Schiller PE drops back down to 16.
Stop trying to time the market. You can't. Just put it in and forget about it.
Particularly a metric which has arguably changed over time anyways.
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Just because some random metric tells you the stock market is overpriced, doesn't mean we'll ever see today's prices again.
Let me say that again. Even if the Schiller PE drops back down to 16 over the coming years, that still doesn't mean we'll ever see prices as low as today ever again. Prices could still keep going up and up, while the Schiller PE drops back down to 16.
Stop trying to time the market. You can't. Just put it in and forget about it.
Particularly a metric which has arguably changed over time anyways.
Not only has it changed, 16 isn't the "Correct" value to be at anyway. We are not even close to the high. 16 is simply an average, as in, it has probably never sat at 16 for any length of time, rather, been way under or over for periods of DECADES.