Author Topic: Stategy for reinvesting semi-large stash  (Read 2579 times)

Barfbag

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Stategy for reinvesting semi-large stash
« on: November 28, 2016, 04:02:13 PM »
Hi everyone,
First post for me. I'd like to get some advice on re-investing a significant amount of cash in index funds. Mainly regarding timing but also which funds to go along with said timing.
I recently pulled back a sizable chunk of USD from some pre-mustache investments. I don't want to go into them since they were kind of dumb given the info I learned here. The money is sitting in a Money Market account waiting to be put to work.
There are a few scenarios I guess; 1. wait for the market to drop significantly and buy at that time when prices are low, 2. start buying now in increments, 3. dump it all now into Vanguard index funds.

Any suggestions on investment timing and funds to buy that support the timing? I'd really appreciate it. I'm stuck right now as I'm not a real savvy investor. Feels like I'm losing dollars each day that the money sits in a no-interest MM.

Financial.Velociraptor

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Re: Stategy for reinvesting semi-large stash
« Reply #1 on: November 28, 2016, 04:49:25 PM »
Time in the market usually beats market timing.   I think most Mustachians will recommend indexing it all immediately.

I personally recommend you give serious thought to what bond allocation  you want.

MDM

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Re: Stategy for reinvesting semi-large stash
« Reply #2 on: November 28, 2016, 05:36:14 PM »
Any suggestions on investment timing and funds to buy that support the timing?
Can you do better than this guy?  I knew you could.... :)

See also http://www.schwab.com/public/schwab/nn/articles/Does-Market-Timing-Work.

Metric Mouse

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Re: Stategy for reinvesting semi-large stash
« Reply #3 on: November 29, 2016, 03:36:23 AM »
Dump it all in right meow. Get that money to work!

Rubyvroom

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Re: Stategy for reinvesting semi-large stash
« Reply #4 on: November 29, 2016, 06:21:48 AM »
1. wait for the market to drop significantly and buy at that time when prices are low, 2. start buying now in increments, 3. dump it all now into Vanguard index funds.

Option #1 is not recommended. You could be waiting forever. Take a spin over at the Bogleheads forums to help strengthen your resolve on avoiding this option. They give rather significant and consistent facepunches about trying to time the market.

I was in a similar situation a few months ago and opted for #2, even though I know that wasn't technically the best option. It helped me sleep better at night having a few funds on the sidelines knowing the election was right around the corner. I made a very specific investment plan and have stuck to it, regardless of daily/weekly moves.

That said, investing immediately (on average) yields higher returns than dollar cost averaging. Just Google "Lump Sum vs Dollar Cost Averaging" and read a few articles if you're not convinced. Or you can be a weenie like me and invest slowly, knowing you will (on average) get a lower return, but might sleep better at night.

CBnCO

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Re: Stategy for reinvesting semi-large stash
« Reply #5 on: November 29, 2016, 07:01:22 AM »
I'm in a similar position and am skeptical that the current situation of stocks at record highs, debt at record highs, and the market valuation being about 60% above historical norms (using S&P 500 P/E ratio of 25 v. historical mean of 15) is sustainable. So, investing in stocks now would mean I believe in the thesis that the market has fundamentally changed and will continue forward with much higher valuations than in the past. Or, have faith in historical patterns and wait until it's more normally valued.

That said, I'm still working through what the best strategy is for non-stock investments that would be insulated from a 40% stock market drop, should it happen. Bonds are intriguing; but, in the face of a rising interest rate environment, bond prices would likely go down as well.

Who has suggestions?

FLBiker

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Re: Stategy for reinvesting semi-large stash
« Reply #6 on: November 29, 2016, 07:44:09 AM »
Personally I'd dump it all in now.  Trying to dollar cost average it in over the next 6 months or so is OK, too, though.

Timing is a fool's errand.

Car Jack

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Re: Stategy for reinvesting semi-large stash
« Reply #7 on: November 29, 2016, 07:52:49 AM »
Market high?  Did you know that the Dow hit 14 all time highs this year alone?  If you're going to wait around until the market falls, have fun figuring out what to do with the Dow at 25,000.  The market isn't a spring where it goes up and comes back down.  It goes up at a steady pace over the long term.  My strategy for when to buy is when I have the money available.  I don't wait for something in the market to happen and I don't even look at what the market is doing or where it is.  I simply put the money in.  All of it.  No namby pamby dollar cost averaging.  All in, right now. 

Where to put it?  Certainly, if you have bills or debts, put it towards them first.  I'm a firm believer of getting rid of debt first.  Once you are debt free, look at all the providers.  Vanguard is NOT the low cost leader anymore.  Schwab and Fidelity now eat their head for low cost options.  I have accounts at all three of these and do watch as everyone drops their ERs.  Vanguard has of late mostly become famous for bungling and worse customer service than cable TV providers.  Don't be afraid of ETFs which can give you the low ER without the higher minimums of mutual fund classes.  Without $5MM for the big dollar Fidelity funds, you can use Schwab ETFs without transaction fees to buy equity (SCHB) at 0.03% expense ratio.  Go find something at Vanguard that cheap.  You won't.  They don't offer anything that low.  (yes, I buy SCHB in my taxable account).

No go buy something!

Retire-Canada

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Re: Stategy for reinvesting semi-large stash
« Reply #8 on: November 29, 2016, 10:18:20 AM »
Buy today. Stop thinking about it.

Barfbag

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Re: Stategy for reinvesting semi-large stash
« Reply #9 on: November 29, 2016, 05:17:53 PM »
Thank you all. I think the consensus is buy NOW and don't just look at Vanguard. Will do.
Just a little more info that I should have probably provided in the first post to clarify where I'm at.
58 y/o. 4 months from FIRE. Actual already FI for a while but ready to get out of the rat race.
Amount to invest in this chunk of cash is about 380k.

To be honest I had the same main concern as CNcBO about a huge correction right after I pulled the trigger. But that goes to market timing so yadda yadda yadda and the circular argument continues. The face punches from all the other respondents convinced me to go now. 
Anyway I'm going for it in the next month or so when I get some time to nail down the research over the Christmas break.

Barfbag

mgarf

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Re: Stategy for reinvesting semi-large stash
« Reply #10 on: November 29, 2016, 07:32:33 PM »
That said, I'm still working through what the best strategy is for non-stock investments that would be insulated from a 40% stock market drop, should it happen. Bonds are intriguing; but, in the face of a rising interest rate environment, bond prices would likely go down as well.

Who has suggestions?

If you don't think you can stomach large market swings over your investment timespan (I'm assuming it's >20 years) bonds may make you sleep better at night, but at the cost of lower returns after that 20 years.

If you're scared of bond volatility due to rising rates, choose a short-term bond fund like VCSH. If you're REALLY scared, you can go ultra-short with VUSFX (note: 50k minimum investment for this one), but, at least according to my historical calculations, at around the 5-year holding mark, short-term bonds aren't much less volatile than ultra-short.

Kaspian

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Re: Stategy for reinvesting semi-large stash
« Reply #11 on: November 30, 2016, 07:28:32 AM »
Here's a question:  If all that money was currently sitting in investments right now, would you pull it out into cash?  If no, why not?  This is essentially the exact same question you just asked only framed differently.