Author Topic: Opened your 1st Index Fund but when to invest in it based on Market Rise/Fall  (Read 1723 times)

Deleuze

  • 5 O'Clock Shadow
  • *
  • Posts: 10
I'm a newb, so have more newb questions.

Now that i've opened a VTSAX i'm wondering when is the right time to contribute
more to it. For example today the S&P ended high at 2,433.15, would today have
been a good or bad day to invest? Judging from the previous months, it seems
that the S&P has continued to rise, so the opportunity to wait for a day the S&P
will go down does not appear to be in the forecast necessarily.

I'd love to get some perspective on when to contribute more to this fund and
when not to based on the day to day rise & fall of the market.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3072
  • Age: 82
  • Location: The laboratory
  • Typical Ghoul Next Door
Worrying over the daily fluctuations and trying to wait for a down day is market timing. Classic market timing. We've all been a little guilty of it tho. ;)

One of the adages I was told when I started investing is: The best time to invest is 20 years ago. The second best time is right now.

Another one? Time IN the market is better than timing the market. 

Do not try to wait for what the market does day to day or week or month... you're not investing for days or weeks; you're investing for your lifetime, so waiting for moves up and down is just a waste of time. If you're lucky, you may catch the market on a down day and get a few dollars more that day, but it really isn't going to matter over the next decade if you earned a an extra $20 because you waited, and the thing to realize is that time waiting for it to go down might have cost you $25...

If you can't stomach the idea of throwing all your money in a lump sum, then pick a day of the week/month and dollar cost average into the chosen funds. Say every Tuesday or even the second Tuesday of each month, you invest another $500 until you are completely invested. That will smooth out the ups and downs. It isn't the best but at least you'd get all your money in there eventually. It has been shown in studies I've read that lump sum investing beats DCA - but I think most folks do understand how sucky it could be for a new investor to throw in your money in a lump sum and see it drop 2% the next week.

And when you say you've opened a "VTSAX" do you mean you've opened an investment account/IRA? Because VTSAX is Vanguard's mutual fund for their total stock market index, not a investment account. Think of it this way: a traditional IRA/Roth IRA/taxable account/401k/etc is just like having a checking or savings account - they are buckets you use to hold your actual investments in, and some of them may have special treatments and such to be aware of (like IRAs and 401ks). VTSAX goes into a bucket/account. It is not the actual account itself.

And I know how difficult this next part may be, but if you get upset or worried over the daily fluctuations, you may want to stop looking at the market. Most folks don't check their accounts every day, week or even month. Most folks only look at them when they're adding more or yearly to check if anything needs rebalancing.

Deleuze

  • 5 O'Clock Shadow
  • *
  • Posts: 10
TY Frankies Girl!

Deleuze

  • 5 O'Clock Shadow
  • *
  • Posts: 10
And @Frankies Girl the account I opened was a Vanguard Brokerage account, this is where i have my VTSAX

Hargrove

  • Pencil Stache
  • ****
  • Posts: 726
The stock market tends to go up.

Because the stock market tends to go up, new highs happen all the time.

People unaware of steady "new highs" are prone to panicking when they hear of new highs, which is completely unnecessary.

Guessing when the market will go up or down is something a handful of people have done for unbelievable sums of money which came from other people losing unbelievable sums of money. Statistically, you're highly likely to do much better with your index fund on regular investment intervals than you are with trying to time the market.

I like to describe the market as a horse race with 4 horses that all pay 500% for a winning bet. You'd be crazy not to bet on every horse all the time.

respond2u

  • Stubble
  • **
  • Posts: 119
I'm a newb, so have more newb questions.

Now that i've opened a VTSAX i'm wondering when is the right time to contribute
more to it. For example today the S&P ended high at 2,433.15, would today have
been a good or bad day to invest? Judging from the previous months, it seems
that the S&P has continued to rise, so the opportunity to wait for a day the S&P
will go down does not appear to be in the forecast necessarily.

I'd love to get some perspective on when to contribute more to this fund and
when not to based on the day to day rise & fall of the market.

Based on backtesting, Monday morning 6/19/2017 is the best available time for you to invest in the market.

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

There are other papers out there that show that lump-sum investing beats dollar-cost averaging, but I couldn't find them (maybe I have too many bookmarks?).

This assumes you have 30+ years. If you have less time, then there's no telling. (real returns of the S&P can go negative for decades).