Hi. I am very glad I found this forum. I am fairly new to the investment and will really appreciate any advice.
I live outside the US, in a relatively low cost of living country in the Eastern Europe. I have a well paying and relatively stable job (considering the average wages in this country). I live quite frugally with monthly spending of no more than $2500 and am a good saver. I have no debt. I have been saving money to buy my own house; however, opted not to buy, so I am all in cash, which is sitting in the savings accounts, earning nothing. The reason I have not been investing is perhaps my lack of knowledge (being outside the US is not really helpful also) and very uncertain economic situation. However, I also understand that I need to start some investing, otherwise inflation will eat everything. So any advice here will be appreciated.
My main concern (and has been in the past few years) is whether now is the right time to buy. I personally believe equity markets are significantly overvalued due to the vast amounts of cheap/printed money and major correction is on its way (however, I had similar thoughts in the past years as well, so due to being afraid, missed a golden opportunity to significantly increase my net worth!). I felt that what has happened in August and September was a major correction starting and decided that I will start buying if stocks go down at least 25-30%; yet, the markets came back and are now again on track to reach all time high. I still believe there are no fundamental reasons for such amazing stock market growth in the past few years , the only reasons - QE and other government policies.
I have around US$570K in cash sitting in the various savings accounts, earning nothing. I realise that I am losing value due to inflation and due to my ignorance, am not increasing my net worth. Additional information:
Age: 31
Income: about $95-110k (net of tax)
Emergency funds: I would like to keep at least 12months in case I lose my job. My monthly spending is not huge – just around $2,500, so having $30,000 as emergency funding should be sufficient.
No debt
Status: single
Tax rate: 0%
State: n/a as I left US about 8 yrs ago and live outside the US
Cash: Savings accounts: $570,000
Investment money (linked to my employer):
Money contribution plan = $68,000 (this is an investment account with almost 80% contributed by the employer. The funds are invested in the USD biased fund)
Defined benefit plan: balance as of today is about $190,000. This amount I can receive if I leave my current employer. The amount depends on the final gross annual salary and number of years worked.
Desired Asset allocation: 80% stocks / 20% bonds. Ideally, I can even tolerate 100% in equity, but am concerned with the timing. The markets are almost at all time high, so I am very unsure if it is the right time to buy now.
I am also considering buying a property for myself for around no more than $180,000-200,000 in early 2016; so, really need to find a proper investment strategy for the remaining amount of ca. $370,000-400,000
Questions:
- How should I start investing? Buying at once or during a certain period of time?
- Is it a right time to buy now, given the uncertainty in the markets and generally not so good fundamental reasons for the stocks to continue their growth? In my view, major correction might be coming, but, as I said before, I thought so a few years ago as well and basically missed the boat.
- If I choose to invest into equity, can you recommend any ETFs which I should consider?