Author Topic: Investment Money  (Read 5001 times)

GHG7F0

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Investment Money
« on: March 11, 2016, 10:12:47 PM »
I'm 48 and have another 8 years until I retire and will have a federal pension. I have about 200K cash and another 172K I have in a TSP tax differed G bond fund. I also have about 50K in tax differed accounts in Vanguard Total Stock Market. I also have a condo worth about 475K and it has a 267K loan. I realize I have way to much cash and this needs to be invested.

I have read it's best to lump sum the money. I read the stock series and it makes sense. Is it really best to just move that much into VTI all at once? I have also read about the market being supported by Fed and that has added to my fears. I wished I would have taken advantage of the recent correction, but that is past.

Any thoughts?

Trevor Reznik

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Re: Investment Money
« Reply #1 on: March 11, 2016, 10:58:13 PM »
You will be told it's best to lump sum the money.  I believe there's nothing wrong with averaging it in over time.  Going from 200K in cash to 200K in stocks is a huge adjustment for you to make psychologically.

PhysicianOnFIRE

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Re: Investment Money
« Reply #2 on: March 12, 2016, 05:22:03 PM »
Decide on an asset allocation that best suits your situation, and go from there.  Even better would be an IPS (see signature).  Putting all $200k into Total Stock Market would put you roughly 60 /40 stock / bond, which would be reasonable given your age and pending pension.

About 6 weeks ago would have been a better time to jump in, but we only know that in hindsight. 

I say go for it.  Make sure you've got your emergency fund in place, of course.

Best,
-PoF

Peter Parker

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Re: Investment Money
« Reply #3 on: March 12, 2016, 05:36:14 PM »
I think you do what you feel most comfortable...I don't think there is really a right or wrong approach.

What would I do?

I'm much like you with a pension.  Having a (almost) guaranteed income stream with a pension, I'm more inclined to put money directly into stocks and not DCA it.   I don't have to worry as much as to whether I timed it correctly, because Im counting on my pension for my retirement cash flow--not my stock portfolio.

MustacheAndaHalf

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Re: Investment Money
« Reply #4 on: March 13, 2016, 01:21:07 AM »
You have 0% international, so you might consider 20% to diversify.  The easiest way to change that is with Total International, which holds a sample of stocks from around the world.

Is your 200k cash in tax deferred, or a taxable account?

AlmstRtrd

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Re: Investment Money
« Reply #5 on: March 13, 2016, 06:34:06 AM »
I'm 48 and have another 8 years until I retire and will have a federal pension. I have about 200K cash and another 172K I have in a TSP tax differed G bond fund. I also have about 50K in tax differed accounts in Vanguard Total Stock Market. I also have a condo worth about 475K and it has a 267K loan. I realize I have way to much cash and this needs to be invested.
...
Any thoughts?

My first thought is to ask why you haven't invested any money in stocks up until now. Lots of folks are afraid to do so because they are really loss averse. If that label describes you, I would say to DCA into stocks and not necessarily go with a really high percentage. You want to have a level of stock exposure that you can stick with if/when the market goes down 50%... and, I would argue, some cash at that point to scoop up lower priced shares.

Also, if stocks were a good investment six weeks ago, they are still a good investment now. At age 48 you could be around another 40-50 years so that is the time frame you are trying to set yourself up for.

Also, I wouldn't be too hard on yourself for not being in stocks in recent years. Yes, the market had a great run from March of 2009 through 2014 but inflation has been low as well.


thedayisbrave

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Re: Investment Money
« Reply #6 on: March 13, 2016, 08:10:22 AM »
You have 8 years until retirement (with a pension might I add), so you can stand to be a little more aggressive by adding stocks.  You've received good advice here.

Even though your TSP offers international, the principles of tax-efficient asset allocation suggest keeping any international funds in your taxable account,  because of the foreign tax credit.  You'd lose that if you put any of your international funds in tax-deferred accounts such as the TSP.  You can read more about tax efficient allocation here: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

PhysicianOnFIRE

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Re: Investment Money
« Reply #7 on: March 13, 2016, 06:16:44 PM »
Decide on an asset allocation that best suits your situation, and go from there.  Even better would be an IPS (see signature).  Putting all $200k into Total Stock Market would put you roughly 60 /40 stock / bond, which would be reasonable given your age and pending pension.

About 6 weeks ago would have been a better time to jump in, but we only know that in hindsight. 

I say go for it.  Make sure you've got your emergency fund in place, of course.

Best,
-PoF


I made a copy of your IPS and will modify to my needs. I would rather be more aggressive than 60/40 and i just need to start pulling the trigger. The good part is we are still down more than when I received a large part of the 200K. I would also like to move more of the TSP over. I was thinking at least 80/20 and possibly 90/10. It looks like the rates won't go up until at least June so hopefully the markets will keep moving up. I do max my TSP every year now and I am maxing my HSA. I also am maxing my traditional IRA.

Excellent!  Glad I could help.  I am 90 / 10 currently.

International is a good option for additional diversification, but not required.  Bogle says you don't need it, but Vanguard includes a fair amount in their target date funds.  I have 20% of my portfolio in international, split between developed and emerging markets.

webguy

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Re: Investment Money
« Reply #8 on: March 14, 2016, 09:05:49 AM »
VTI has international exposure as many of the companies do business overseas. Do you still think I should add additional international?

Absolutely. Owning shares of a company doing some business overseas isn't the same as owning shares in an overseas company. There are hundreds of really great companies that are based outside of the US I would want to also own shares in. Right now based on valuation I'd be buying more international than US. I'd recommend at least 20% international, but probably more like 40% so that you're globally diversified and not so dependent on the U.S. economy.

MustacheAndaHalf

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Re: Investment Money
« Reply #9 on: March 14, 2016, 10:36:54 AM »
While John Bogle certainly stirs up debate from active market participants, for those who favor indexing I'd say his most controversial stance is 0% international.  You should definitely know why you're doing it if you choose it.

Take the flip side of your "US companies have overseas income"... don't overseas companies sell in the US?  Which means you can buy both, and not worry about which products cross the oceans in which direction.  Like owning total stock market, you aim to own it all.  But you can always opt for a lower percentage than the world's stock markets - even 20% international could diversify your portfolio.  Note when times are bad, diversification will sometimes work and sometimes not.  So a lower allocation (20%) can make sense if you're afraid of selling out of fear during bad times.  But when US markets fall and developed markets rise (Europe, Japan) you can wind up ahead.  Not predictable, but it's likely international stocks will smooth out your portfolio's returns.

2Birds1Stone

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Re: Investment Money
« Reply #10 on: March 16, 2016, 07:03:43 AM »
You have 8 years until retirement (with a pension might I add), so you can stand to be a little more aggressive by adding stocks.  You've received good advice here.

Even though your TSP offers international, the principles of tax-efficient asset allocation suggest keeping any international funds in your taxable account,  because of the foreign tax credit.  You'd lose that if you put any of your international funds in tax-deferred accounts such as the TSP.  You can read more about tax efficient allocation here: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

^ This

Think of your pension as an Annuity or Bond portion of your portfolio. Do you have a rough idea of how much you will get in 8 years? is it COLA?

I would say if the pension will cover a majority of your expenses, throw half of that cash into a stock fund. Spread your risk.

markbike528CBX

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Re: Investment Money
« Reply #11 on: March 16, 2016, 11:54:56 AM »
I'm 48 and have another 8 years until I retire and will have a federal pension. I have about 200K cash and another 172K I have in a TSP tax differed G bond fund. I also have about 50K in tax differed accounts in Vanguard Total Stock Market. I also have a condo worth about 475K and it has a 267K loan. I realize I have way to much cash and this needs to be invested.
...
Any thoughts?

..... are really loss averse. If that label describes you, I would say to DCA into stocks and not necessarily go with a really high percentage. You want to have a level of stock exposure that you can stick with if/when the market goes down 50%... and, I would argue, some cash at that point to scoop up lower priced shares.

Also, if stocks were a good investment six weeks ago, they are still a good investment now. At age 48 you could be around another 40-50 years so that is the time frame you are trying to set yourself up for.
.....

I was invested with my TSP acocunt and got out right when the market starting going down in 2008. I lost about 2K only as I timed the market pretty good mostly by fear. I was thinking about getting back in near the bottom but ultimately fear stopped me from acting. Then I saw it going up but was hoping it would go back down and finally I did go back in after missing out on much of the gains.

The 200K is actually from a inheritance and much of it is from over a year ago and luckily the market hasn't done so well during this time so my 1% account wasn't so bad. I finally got a great opportunity to get back in recently but I kept reading it was going down further and I didn't want to lose principal. I'm worried now that the Fed has taken away the free money and the markets will reverse. Now I see I am making the same errors again.

I like the JlCollins stock series and this makes sense to me so I think I will aggressively start moving into the market. As he says the market always goes up and I need to have the discipline to let it ride. I have a Vanguard account as well as a Capitol One account. I appreciate all the advice and will continue to read.

Based on your past behavior/fears (which are still current-- see bold/italic), I agree that some very minimal amount of stocks (20% ?) to start with is best and DCA in from there.    The underlined part is in great contrast to previously, and sounds great, but can you avoid " aggressively start moving OUT of the market".

Just because you've read something on the internet will not automatically help you sleep at night when the market tanks.

I'm at 90+% stocks, but I've proven to myself that I won't panic and sell or "re-write my Investment plan" - same thing.
2002 - 30% down after 1st stock input.
2007-2009 50% down of much greater number
2012 dip worried, but no functional change
2014  Oct, fast dip nearly missed it in the news
2015 summer, bought a bit on the dip 5K in
2016 Feb, almost pulled the big trigger to buy stocks, but missed it (only 5K in)

All that and I still worry/watch my accounts too much.

PS stocks don't always go up in 10-15 year spans.