Author Topic: Tell me I'm being a ridiculous market-timer  (Read 4518 times)

rocklebock

  • Stubble
  • **
  • Posts: 245
Tell me I'm being a ridiculous market-timer
« on: May 07, 2016, 10:15:13 AM »
My husband I had $20k burning a hole in our pocket, and now it's all lined up for me to shovel it into VTSAX. But I don't want to right now because, yup, the "market is near an all-time high" thing. It always bums me out when I invest a bunch of money and lose a chunk of it right away, even though I'm well aware it's the long term that matters. So it's just been sitting there for 2 weeks now, waiting for me to pull the trigger.

I think I'm probably being a ridiculous market-timer, but I'm also not sure it really matters all that much in this particular scenario. What are the opportunity costs of just letting it sit until VTSAX goes under some arbitrary number I've decided = good deal?

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 7739
Re: Tell me I'm being a ridiculous market-timer
« Reply #1 on: May 07, 2016, 10:20:44 AM »
What are the opportunity costs of just letting it sit until VTSAX goes under some arbitrary number I've decided = good deal?

Opportunity costs:

- inflation effects
- lost dividends
- risk you don't reach arbitrary goal in a reasonable period of time
- having to spend time thinking about that $20K until you invest it


JJsfr

  • Stubble
  • **
  • Posts: 245
Re: Tell me I'm being a ridiculous market-timer
« Reply #2 on: May 07, 2016, 10:22:37 AM »
I wonder how many threads you can find here that say "I'm worried that the market is at an all time high, so I want to wait"?

Just put it in and forget about it. Check on it in 5-10 years.

Cycling Stache

  • Bristles
  • ***
  • Posts: 471
  • Age: 44
Re: Tell me I'm being a ridiculous market-timer
« Reply #3 on: May 07, 2016, 10:24:02 AM »
You're market timing.

I have $103k that's going into VTSAX on Monday from a rollover from a previous retirement account.  Of course, it could go down.  But I don't know when, and I know that over time, it's (almost certainly) going to go . . . up!

These decisions are easy once you accept that you're not smarter/better informed than all the money in the market.  And as many people have pointed out before, believing it's going to go down is one thing, but knowing when it's going to go back up--and therefore when you're going to buy--is the part that most people don't have an answer for.
 

PhysicianOnFIRE

  • Bristles
  • ***
  • Posts: 458
  • Age: 44
  • Location: Up North
    • Physician On FIRE
Re: Tell me I'm being a ridiculous market-timer
« Reply #4 on: May 07, 2016, 11:08:31 AM »
You're being a ridiculous market-timer.

There are worse things to be, but some people have been on the sidelines since 2011 when the market  was "overvalued".  If you've uncomfortable investing it all at once, you can invest $10,000 now and dollar cost average the rest in over 5 to 10 months with $1000 or $2000 at a time.  Or DCA it all, but more often than not, the lump sum is the way to go.

Best,
-PoF

rocklebock

  • Stubble
  • **
  • Posts: 245
Re: Tell me I'm being a ridiculous market-timer
« Reply #5 on: May 07, 2016, 11:29:34 AM »
All right. I'm doing it. Thanks for the support!

P.S. I know some variation of this question gets asked here all the time, but it's sometimes hard to be dissuaded from thinking you're represent some kind of special circumstance. So I really appreciate the responses.

Classical_Liberal

  • Handlebar Stache
  • *****
  • Posts: 1164
  • Age: 44
Re: Tell me I'm being a ridiculous market-timer
« Reply #6 on: May 07, 2016, 11:30:43 AM »
I get it, I like to get deals too! 

What's your investment policy statement say?  and your current AA? Is your long term goal to have an international allocation?  If so VTIAX has sucked it up for a long time now and is selling for around 2011/2012 prices. Maybe start building up that part of your portfolio with some of the cash so you feel like you are getting a "deal".

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2742
Re: Tell me I'm being a ridiculous market-timer
« Reply #7 on: May 07, 2016, 12:04:06 PM »
One way to mitigate a bad day to invest is split it into two days, weeks apart.  When you invest half on each of two days, it's unlikely both days will be the highest point.  I mention that not as an alternative to investing now, but as an idea when anyone is holding back from the market and is willing to go halfway... twice.

Radagast

  • Handlebar Stache
  • *****
  • Posts: 1700
  • One Does Not Simply Work Into Mordor
Re: Tell me I'm being a ridiculous market-timer
« Reply #8 on: May 07, 2016, 01:12:57 PM »
Prices will probably still be near an all time high in a month. Who knows in a year. If you are super concerned about it you might want to consider one of the balanced funds, or a 50/50 split of admiral shares of two different funds such as total US and total international or total bond or something else.

thd7t

  • Handlebar Stache
  • *****
  • Posts: 1336
Re: Tell me I'm being a ridiculous market-timer
« Reply #9 on: May 07, 2016, 01:40:01 PM »
What are the opportunity costs of just letting it sit until VTSAX goes under some arbitrary number I've decided = good deal?

Opportunity costs:

- inflation effects
- lost dividends
- risk you don't reach arbitrary goal in a reasonable period of time
- having to spend time thinking about that $20K until you invest it
This is a good list, but I would add the obvious one: it may not hit your arbitrary number. We don't know what that is, or if it is reasonable. Stop timing the market. Dollar cost average, if you want (probably better than sitting on it), but get the money in the market.

JJsfr

  • Stubble
  • **
  • Posts: 245
Re: Tell me I'm being a ridiculous market-timer
« Reply #10 on: May 07, 2016, 01:45:30 PM »
All right. I'm doing it. Thanks for the support!

P.S. I know some variation of this question gets asked here all the time, but it's sometimes hard to be dissuaded from thinking you're represent some kind of special circumstance. So I really appreciate the responses.

Great job.

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1354
Re: Tell me I'm being a ridiculous market-timer
« Reply #11 on: May 07, 2016, 09:14:36 PM »
I'm curious how Canadians feel about the TSX.  Is it the same as the US market? 

(I just dropped $10k to VCN in my TFSA without a thought, other than I should add April's $5k to May's $5k before spending $9.95 to buy VCN)

http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=LMSCAN

« Last Edit: May 07, 2016, 09:19:38 PM by Heckler »

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 7739
Re: Tell me I'm being a ridiculous market-timer
« Reply #12 on: May 08, 2016, 08:05:19 AM »
I'm curious how Canadians feel about the TSX.  Is it the same as the US market? 

(I just dropped $10k to VCN in my TFSA without a thought, other than I should add April's $5k to May's $5k before spending $9.95 to buy VCN)

Same as the US market it what respect?

When it comes time to add money to my investments according to my asset allocation I don't treat my CDN or Int'l ETFs any different than my US one.

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3398
  • Location: WDC
Re: Tell me I'm being a ridiculous market-timer
« Reply #13 on: May 08, 2016, 08:55:16 AM »
Over the long term, sure - you're being a ridiculous market-timer.  But in the short-term, I get the same feelings you do.  The market has been pretty volatile lately, and it's not uncommon to have 100-point spreads from open to close.  I felt a bit "burned" on a few occasions when I decided to just dump a lump sum into VTSAX, and by the end of the day the market had surged.  So at a minimum, wait until 3:45pm before you decide, and look at VTI as a marker for how VTSAX will fare that day.  If it's surged, then wait a day or two.  If it's dropped (however much)...you'll feel better throwing that money in at a "dip", even if it's just a weekly dip. 

I know in the grand scheme of things, that 100 points doesn't matter much over 10 years time, but it sure helps me avoid the sinking feeling I get in the pit of my stomach when I make an irreversible decision that would turn out differently if I could have just waited a few more hours. 

I now have an alarm on my calendar to ping me at 3:45 each day to remind me to look at the charts to see if I want to throw some extra money in.  Call me a ridiculous market-timer too, but it helps me sleep better at night. 

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1354
Re: Tell me I'm being a ridiculous market-timer
« Reply #14 on: May 08, 2016, 10:59:31 AM »


Same as the US market it what respect?


History shows the S&P500 continually grows long term, so time in the market is better than timing the market. 

Is that also the case with the TSX all cap? 

The FTSE Canada All Cap Index was launched in 2003, but the factsheet only shows me the past 5 years.

http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=LMSCAN

nobodyspecial

  • Handlebar Stache
  • *****
  • Posts: 1468
  • Location: Land above the land of the free
Re: Tell me I'm being a ridiculous market-timer
« Reply #15 on: May 08, 2016, 02:58:26 PM »
"sell in May and go away"
So there should be lots of idiots selling in May, so prices should drop, so May is a great time to buy !

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 7739
Re: Tell me I'm being a ridiculous market-timer
« Reply #16 on: May 08, 2016, 03:53:35 PM »
History shows the S&P500 continually grows long term, so time in the market is better than timing the market. 

Is that also the case with the TSX all cap? 



This ^^^ doesn't include re-invested dividends. I wouldn't invest in any market where the expectation wasn't to experience growth. I can't see how the TSX would be any different.

Market timing only works if you believe you can effectively predict the future performance of the stock market in question.


Kaspian

  • Handlebar Stache
  • *****
  • Posts: 1535
  • Location: Canada
    • My Necronomicon of Badassity
Re: Tell me I'm being a ridiculous market-timer
« Reply #17 on: May 09, 2016, 10:13:35 AM »
My husband I had $20k burning a hole in our pocket, and now it's all lined up for me to shovel it into VTSAX. But I don't want to right now because, yup, the "market is near an all-time high" thing. It always bums me out when I invest a bunch of money and lose a chunk of it right away, even though I'm well aware it's the long term that matters. So it's just been sitting there for 2 weeks now, waiting for me to pull the trigger.

I think I'm probably being a ridiculous market-timer, but I'm also not sure it really matters all that much in this particular scenario. What are the opportunity costs of just letting it sit until VTSAX goes under some arbitrary number I've decided = good deal?

You're trying to make this exciting--trying it to an immediate joy/disappointment situation.  It's not.  Once you've tied emotion into your investment strategy you've already lost.
« Last Edit: May 09, 2016, 01:13:57 PM by Kaspian »

Cycling Stache

  • Bristles
  • ***
  • Posts: 471
  • Age: 44
Re: Tell me I'm being a ridiculous market-timer
« Reply #18 on: May 10, 2016, 05:45:40 PM »
All right. I'm doing it. Thanks for the support!

Did you put it all in and take your 1.23% profit for today?  Who knows how it will turn out the next day/week/month/year, but as for which way it could go the day after you put in, today was a nice one.

Now ignore the results for the next 20 years!  :)