Author Topic: USD 750,000 of cash, not invested, need advice.  (Read 22381 times)

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #100 on: October 04, 2016, 04:40:50 PM »
I'd drop at least a couple hundred of that into multi-family properties in LCOL areas with decent job markets. Just my $.02.

Most of my current assets are in IRAs with nearly a 100% stock allocation, but my FIRE income will be a combination of rents and PT work, and most of my new investing is going into rentals.

Well, I cannot blindly buy real estate in the cities which I am not familiar with. Any suggestions/examples of the LCOL areas with decent job markets? Actually, I think I would be more comfortable to buy real estate than stocks in the current environment, but I currently live outside the US and my relatives are in LA- not the cheapest place , you cannot really buy multi family property there with a couple hundred k.

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #101 on: October 04, 2016, 04:44:51 PM »
You didn't lose the game, you just decided not to play for the past several years. However you still probably have a few decades of life ahead of you. The new game starts today. How you play is up to you. Educate yourself about how a bear market is not the end of the world when you're playing the long game and you might be more confident. However I stand by what I said earlier: you need to pick an asset allocation that you're comfortable sticking with through a bear market. Maybe 80/20 is not that allocation for you. The fact that you are concerned about investing a lump sum says that this might be the case.

I am not concerned about investing the lump sum. My main concern is entering the market with basically most of the net worth at the possible peak. I know you cannot time the market, but given all the hype about a major correction the media now - it is not the most comfortable time for me to enter. On the other hand, usually when most people expect a significant collapse, it does not happen.

When you're already in the market, each day you don't sell you're making an implicit decision that things are likely to go up from here. What if you had invested a year ago? Would the doomsday articles cause you enough concern to pull your money out today?

No, if I am already in, I wouldn't sell. It was my mistake not to enter due to my ignorance and lack of understanding... However, almost everyone is now screaming that the market is about to collapse - everything is overvalued, economy is not doing great, major correction is coming, etc.. It is mentally tough to enter the market, especially after missing on such an amazing bull run.

There are lots of people screaming about a crash, but they apparently aren't putting their money where their mouth is.  The market is this high because when people think it's worth it when they actually go to pull out their wallet. 

well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks. 

robartsd

  • Handlebar Stache
  • *****
  • Posts: 2179
  • Location: Northern California
Re: USD 750,000 of cash, not invested, need advice.
« Reply #102 on: October 04, 2016, 05:17:32 PM »
Now I am even scared to enter even with the index as I really believe that the market is well overvalued and it might take ages for the market just to get back to current levels if a major crash occurs.
While the market may be overvalued right now it is not that overvalued. You view the recovery from the last crash as a "once in a lifetime" opportunity - recovery from it only took a handful of years.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4732
  • Age: 34
  • Location: Seattle, WA
Re: USD 750,000 of cash, not invested, need advice.
« Reply #103 on: October 04, 2016, 05:47:29 PM »
Furthermore, even if the market is overvalued it is still reasonably likely that the market will never go significantly below where it is today. Suppose you think the market is overvalued by 20% and the intrinsic value of stocks will increase by a typical 7% per year. If the price stays flat for just three years, the intrinsic value will catch up to (and surpass) the price without any decline in price. Of course an immediate 20% correction is also reasonably likely, but it's far from an inevitable event even if you firmly believe stocks are overvalued at this moment.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3173
Re: USD 750,000 of cash, not invested, need advice.
« Reply #104 on: October 04, 2016, 06:03:15 PM »
P/E has a numerator and a denominator. You don't need a crash to come back to historical valuations.

-W

dividendman

  • Handlebar Stache
  • *****
  • Posts: 1125
  • Age: 36
Re: USD 750,000 of cash, not invested, need advice.
« Reply #105 on: October 04, 2016, 06:43:11 PM »
well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Hrm, you seem to be worried about the market valuation, interest rates, money printing, etc. All of these things are relatively benign compared to what has happened in the past 100 years or so:

1900 - Italy's king is assasinated
1901 - Queen Victoria dies, President McKinley is assassinated
1903 - plague in India and China, killing over 12 million pepole
1904 - Russia and Japan go to war
1905 - Russia has a bloody revolution
1906 - San Francisco burns down
1908 - a massive explosion mysteriously happens in Russia, leveling 830 square miles. Truks revolt in the Ottoman empire, a massive earthquake in Italy kills 150 thousand people
1909 - Japan's prince is assasinated
1911 - The Chinese bloody revolution
1912 - the Titanic Sinks
1913 - person income tax introduced in the US
1914 - WWI starts
1915 - WWI still going, millions dying, Armenian genocide is going on
1916 - yep, WWI still going, tanks and chemical weapons being used, airplanes for dropping bombs
1917 - another russian revolution, this time to communism, WWI still going and the US joins in
1918 - WWI still going, but who cares, the Spanish flu kills 100 MILLION people, 5% of the world's population
1919 - WWI finally ends, spanish flu still killing though
1920 - another plague in India, US outlaws alcohol
1921 - german hyper inflation going on, the Irish declare independence
1922 - some guy named Mussolini takes over Italy
1923 - some dude named Hitler has a failed coup in germany - woo, the world lucked out
1929 - the great depression starts
1930 - Stalin starts killing people all over the place, great depression
1931 - yup, still in the depression
1932 - still there, nothing is getting better
1933 - still depressed, and this time Hitler takes over germany
1934 - The dust bowl starts peaking... i.e. a decade of drought, no crops, everyone starving, this keeps going until 1939!
1935 - dangerous communist social program started in the US (Social Security)
1936 - spanish civil war begins, stalin ramps up his killings into the millions
1937 - Japan invades china
1938 - Hitler annexes Austria, at least he's stopping there
1939 - whoops, maybe, not WWII starts... millions killed, trillions infrastructure wiped out in Europe and across the world
1940 - Nazi's start murdering millions of civilian "undesirables", FDR takes 3rd term ignoring Washington's precedent
1941 - Japan bombs pearl harbor, world still f'd up in a huge war, Vietnam turns communist
1942 - is the warover? nope, just ramping up, millions more dying
1943 - everyone is still dying in WW2
1945 - woohoo, WWII is over, oh wait, that happened by droping devastating indiscrimate nuclear radiation bombs on civilians! oh, and FDR died in office
1946 - peace in our time! except the USSR annexes half of europe, which is a pile of rubble thanks to carpet bombing
1947 - India and Pakistan gain independence from Great Britian, and then go to war against each other
1948 - Israel founded, that won't cause any problems. Ghandi gets assassinated
1949 - China becomes communist, USSR, the nemesis of hte free world, gains nuclear weapons
1950 - whoops, another devastating total war, this time in Korea, but not between Koreans, a proxy war between the US/Russia/China and others
1952 - we get a polio vaccine... wait what? Oh yeah, people were getting f'd up by polio for the last forever years
1954 - segration is ruled illegal in the US, so race relations are finally fixed
1955 - Warsaw pact created, basically a bunch of countries banded together to defeat america/western capitalist democracies
1956 - Hungarian revoltion, Suez crisis
1957 - Russians beat everyone into space
1960 - a 9.6 magnitude earthquake, the biggest ever recorded hits chili, lots of people die, civil rights riots and protests start happening
1961 - US backed rebels unsuccessfully invade Cuba, Berlin wall goes up, more civil rights disruptions, Soviets get the first man in space, Tsar Bomba, the largest nuclear weapon ever denoted is denoted, we can now destroy the world
1962 - Now that we have the bombs to blow up the world, the Cuban missle crisis happens, which almost blows up the word
1963 - another president killed in office
1964 - civil rights act passed, ok, now race relations are good for sure, no more civil rights disruptions ever
1965 - US sends a few troops to Vietnam just in case, Malcom X is assassinated, India and Pakistan go to war again
1966 - Chairman Mao has a cultural revoltion in china, lots die, the US institutes the draft
1967 - the Australian PM disappears, the six day war between Israel and it's neighbours happens, civil rights unrest continues
1968 - MLK Jr. assassinated, RFK assasinated, Tet Offensive in Vietnam happens, yeah, the Vietnam war is going full speed ahead
1971 - the US capitalist system institues wage and price controls, India and Pakistan go to war again
1972 - Vietnam war still going on
1973 - US declares victory and leaves vietnam, the US can't get oil because of an embargo
1974 - the US president up and quits
1975 - big Cambodian genocide, Civil war in lebanon, the US president escapes two assassination attempts
1976 - Tangshan earthquake kills a quarter million folks, Vietnam is all communist now
1979 - Iranian revolution, a US nuclear reactor has a partial meltdown
1980 - mount st helens erupts, the US embargoes the USSR, US inflation hits 14%, Iran Iraq war starts, and goes on for 8 years
1981 - someone tries to kill the US president, again
1982 - Falkands war starts, Lebanon war starts
1983 - US embassy bombed, a bunch of coups happening, USSR downs a korean airliner, famin in ethiopia kills half million
1984 - India's PM assassinated
1986 - Russian nuclear reactor melts down
1987 - black monday in US markets
1989 - berlin wall falls, USSR breaking up
1990 - Persian gulf war, Germany reunites, US doing more coupy type things in south ameria
1991 - USSR officially collapses, Balkans war starts, bosian genocide starts
1994 - massive genocide in rwanda
1995 - Sarin gas is used in a Tokyo subway, Rabin assassinated
1996 - mad cow disease
1998 - india and pakistan test nukes
1999 - India and pakistan go to war and they have nukes
2000 - .com bust
2001 - 9/11
and you know the rest

I'm sure I missed a bunch of stuff (like various trade treaties, founding of the UN/WTO, etc that had major economic impacts and it's mostly US centric) but I got lazy. So... when it comes to just being afraid of inflation, I think the world has delt with worse and still came out on top (including stock market returns).





zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 40
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: USD 750,000 of cash, not invested, need advice.
« Reply #106 on: October 04, 2016, 07:43:02 PM »
I'd drop at least a couple hundred of that into multi-family properties in LCOL areas with decent job markets. Just my $.02.

Most of my current assets are in IRAs with nearly a 100% stock allocation, but my FIRE income will be a combination of rents and PT work, and most of my new investing is going into rentals.

Well, I cannot blindly buy real estate in the cities which I am not familiar with. Any suggestions/examples of the LCOL areas with decent job markets? Actually, I think I would be more comfortable to buy real estate than stocks in the current environment, but I currently live outside the US and my relatives are in LA- not the cheapest place , you cannot really buy multi family property there with a couple hundred k.
Mine is one, as well as many other Southeast towns. Midsized Midwest cities maybe. Hit the Real Estate and Landlording forum for more examples.

MoseyingAlong

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: USD 750,000 of cash, not invested, need advice.
« Reply #107 on: October 04, 2016, 08:05:41 PM »
well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Hrm, you seem to be worried about the market valuation, interest rates, money printing, etc. All of these things are relatively benign compared to what has happened.......,,
2001 - 9/11
and you know the rest

I'm sure I missed a bunch of stuff (like various trade treaties, founding of the UN/WTO, etc that had major economic impacts and it's mostly US centric) but I got lazy. So... when it comes to just being afraid of inflation, I think the world has delt with worse and still came out on top (including stock market returns).

Wow. What a great encapsulation of the 20th century. Amazing how much has happened. And it doesn't even include a lot of the technologocal breahthroughs. Great for some perspective.

Thanks for putting it together.

dividendman

  • Handlebar Stache
  • *****
  • Posts: 1125
  • Age: 36
Re: USD 750,000 of cash, not invested, need advice.
« Reply #108 on: October 04, 2016, 10:59:45 PM »
well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Hrm, you seem to be worried about the market valuation, interest rates, money printing, etc. All of these things are relatively benign compared to what has happened.......,,
2001 - 9/11
and you know the rest

I'm sure I missed a bunch of stuff (like various trade treaties, founding of the UN/WTO, etc that had major economic impacts and it's mostly US centric) but I got lazy. So... when it comes to just being afraid of inflation, I think the world has delt with worse and still came out on top (including stock market returns).

Wow. What a great encapsulation of the 20th century. Amazing how much has happened. And it doesn't even include a lot of the technologocal breahthroughs. Great for some perspective.

Thanks for putting it together.

Haha, yes. I was trying to focus on the negatives since that's what people tend to dwell on. If you looked at that century and tried to invest, it never seemed like a good time, except maybe 1928 :p

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #109 on: October 05, 2016, 02:43:05 PM »
well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Hrm, you seem to be worried about the market valuation, interest rates, money printing, etc. All of these things are relatively benign compared to what has happened in the past 100 years or so:

1900 - Italy's king is assasinated
1901 - Queen Victoria dies, President McKinley is assassinated
1903 - plague in India and China, killing over 12 million pepole
1904 - Russia and Japan go to war
1905 - Russia has a bloody revolution
1906 - San Francisco burns down
1908 - a massive explosion mysteriously happens in Russia, leveling 830 square miles. Truks revolt in the Ottoman empire, a massive earthquake in Italy kills 150 thousand people
1909 - Japan's prince is assasinated
1911 - The Chinese bloody revolution
1912 - the Titanic Sinks
1913 - person income tax introduced in the US
1914 - WWI starts
1915 - WWI still going, millions dying, Armenian genocide is going on
1916 - yep, WWI still going, tanks and chemical weapons being used, airplanes for dropping bombs
1917 - another russian revolution, this time to communism, WWI still going and the US joins in
1918 - WWI still going, but who cares, the Spanish flu kills 100 MILLION people, 5% of the world's population
1919 - WWI finally ends, spanish flu still killing though
1920 - another plague in India, US outlaws alcohol
1921 - german hyper inflation going on, the Irish declare independence
1922 - some guy named Mussolini takes over Italy
1923 - some dude named Hitler has a failed coup in germany - woo, the world lucked out
1929 - the great depression starts
1930 - Stalin starts killing people all over the place, great depression
1931 - yup, still in the depression
1932 - still there, nothing is getting better
1933 - still depressed, and this time Hitler takes over germany
1934 - The dust bowl starts peaking... i.e. a decade of drought, no crops, everyone starving, this keeps going until 1939!
1935 - dangerous communist social program started in the US (Social Security)
1936 - spanish civil war begins, stalin ramps up his killings into the millions
1937 - Japan invades china
1938 - Hitler annexes Austria, at least he's stopping there
1939 - whoops, maybe, not WWII starts... millions killed, trillions infrastructure wiped out in Europe and across the world
1940 - Nazi's start murdering millions of civilian "undesirables", FDR takes 3rd term ignoring Washington's precedent
1941 - Japan bombs pearl harbor, world still f'd up in a huge war, Vietnam turns communist
1942 - is the warover? nope, just ramping up, millions more dying
1943 - everyone is still dying in WW2
1945 - woohoo, WWII is over, oh wait, that happened by droping devastating indiscrimate nuclear radiation bombs on civilians! oh, and FDR died in office
1946 - peace in our time! except the USSR annexes half of europe, which is a pile of rubble thanks to carpet bombing
1947 - India and Pakistan gain independence from Great Britian, and then go to war against each other
1948 - Israel founded, that won't cause any problems. Ghandi gets assassinated
1949 - China becomes communist, USSR, the nemesis of hte free world, gains nuclear weapons
1950 - whoops, another devastating total war, this time in Korea, but not between Koreans, a proxy war between the US/Russia/China and others
1952 - we get a polio vaccine... wait what? Oh yeah, people were getting f'd up by polio for the last forever years
1954 - segration is ruled illegal in the US, so race relations are finally fixed
1955 - Warsaw pact created, basically a bunch of countries banded together to defeat america/western capitalist democracies
1956 - Hungarian revoltion, Suez crisis
1957 - Russians beat everyone into space
1960 - a 9.6 magnitude earthquake, the biggest ever recorded hits chili, lots of people die, civil rights riots and protests start happening
1961 - US backed rebels unsuccessfully invade Cuba, Berlin wall goes up, more civil rights disruptions, Soviets get the first man in space, Tsar Bomba, the largest nuclear weapon ever denoted is denoted, we can now destroy the world
1962 - Now that we have the bombs to blow up the world, the Cuban missle crisis happens, which almost blows up the word
1963 - another president killed in office
1964 - civil rights act passed, ok, now race relations are good for sure, no more civil rights disruptions ever
1965 - US sends a few troops to Vietnam just in case, Malcom X is assassinated, India and Pakistan go to war again
1966 - Chairman Mao has a cultural revoltion in china, lots die, the US institutes the draft
1967 - the Australian PM disappears, the six day war between Israel and it's neighbours happens, civil rights unrest continues
1968 - MLK Jr. assassinated, RFK assasinated, Tet Offensive in Vietnam happens, yeah, the Vietnam war is going full speed ahead
1971 - the US capitalist system institues wage and price controls, India and Pakistan go to war again
1972 - Vietnam war still going on
1973 - US declares victory and leaves vietnam, the US can't get oil because of an embargo
1974 - the US president up and quits
1975 - big Cambodian genocide, Civil war in lebanon, the US president escapes two assassination attempts
1976 - Tangshan earthquake kills a quarter million folks, Vietnam is all communist now
1979 - Iranian revolution, a US nuclear reactor has a partial meltdown
1980 - mount st helens erupts, the US embargoes the USSR, US inflation hits 14%, Iran Iraq war starts, and goes on for 8 years
1981 - someone tries to kill the US president, again
1982 - Falkands war starts, Lebanon war starts
1983 - US embassy bombed, a bunch of coups happening, USSR downs a korean airliner, famin in ethiopia kills half million
1984 - India's PM assassinated
1986 - Russian nuclear reactor melts down
1987 - black monday in US markets
1989 - berlin wall falls, USSR breaking up
1990 - Persian gulf war, Germany reunites, US doing more coupy type things in south ameria
1991 - USSR officially collapses, Balkans war starts, bosian genocide starts
1994 - massive genocide in rwanda
1995 - Sarin gas is used in a Tokyo subway, Rabin assassinated
1996 - mad cow disease
1998 - india and pakistan test nukes
1999 - India and pakistan go to war and they have nukes
2000 - .com bust
2001 - 9/11
and you know the rest

I'm sure I missed a bunch of stuff (like various trade treaties, founding of the UN/WTO, etc that had major economic impacts and it's mostly US centric) but I got lazy. So... when it comes to just being afraid of inflation, I think the world has delt with worse and still came out on top (including stock market returns).

Thanks. Your post is the most reassuring :)

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3310
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: USD 750,000 of cash, not invested, need advice.
« Reply #110 on: October 05, 2016, 03:04:23 PM »
...

Did you just up and write this list for this post? It's crazy cool!

But you managed to get all those assassinations in there and still omit JFK?

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1713
  • Location: Seattle, WA
Re: USD 750,000 of cash, not invested, need advice.
« Reply #111 on: October 05, 2016, 05:52:53 PM »

I am not concerned about investing the lump sum. My main concern is entering the market with basically most of the net worth at the possible peak. I know you cannot time the market, but given all the hype about a major correction the media now - it is not the most comfortable time for me to enter.

There is never a comfortable time.  March 2009 would have been a great time, right?   But at the time all the media were screaming "Doom!"   

Thing is, half the time the market is above average valuation, which means below average returns.  Right now, we're looking at below average returns.  But that's not "bad."  It is just below average.  It would be awesome to get above average returns most of the time, but math doesn't work like that. 

dividendman

  • Handlebar Stache
  • *****
  • Posts: 1125
  • Age: 36
Re: USD 750,000 of cash, not invested, need advice.
« Reply #112 on: October 05, 2016, 10:31:13 PM »
...

Did you just up and write this list for this post? It's crazy cool!

But you managed to get all those assassinations in there and still omit JFK?

Yeah I did. Haha, too much time doing nothing at work I guess. I didn't forget JFK! Look at "1963 - another president killed in office"

I did omit things like moving off of the gold standard though.

tommie

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: USD 750,000 of cash, not invested, need advice.
« Reply #113 on: October 06, 2016, 01:25:20 AM »
If i were to invest that sum now and was afraid of things such as overvaluation of the market i would diversify.
Read up on things such as "permanent portfolio" or just go 60/40 (60% broad index fund, 40% mix of short and longer bonds).

When you've read enough decide on what you think is best but make damn sure you do not try to over-optimize anything so that you start doing what is called "data fitting".
(short: one develops a strategy that's great for historical data but since historial data is historical.......).

You could also try things such as PortfolioVisualizer but, again, make sure you do not do anything to over-optimize any combinations.
https://www.portfoliovisualizer.com/backtest-portfolio

Here's a sample of PV (shortened with google because of huge link):
https://goo.gl/zMiHyZ

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #114 on: October 06, 2016, 03:49:10 AM »

I am not concerned about investing the lump sum. My main concern is entering the market with basically most of the net worth at the possible peak. I know you cannot time the market, but given all the hype about a major correction the media now - it is not the most comfortable time for me to enter.

There is never a comfortable time.  March 2009 would have been a great time, right?   But at the time all the media were screaming "Doom!"   

Thing is, half the time the market is above average valuation, which means below average returns.  Right now, we're looking at below average returns.  But that's not "bad."  It is just below average.  It would be awesome to get above average returns most of the time, but math doesn't work like that.

well, I think I learned my lesson. When the markets are collapsing and everyone is screaming "doom", you have to buy :) I didn't do it last time.

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #115 on: October 06, 2016, 03:53:08 AM »
If i were to invest that sum now and was afraid of things such as overvaluation of the market i would diversify.
Read up on things such as "permanent portfolio" or just go 60/40 (60% broad index fund, 40% mix of short and longer bonds).

When you've read enough decide on what you think is best but make damn sure you do not try to over-optimize anything so that you start doing what is called "data fitting".
(short: one develops a strategy that's great for historical data but since historial data is historical.......).

You could also try things such as PortfolioVisualizer but, again, make sure you do not do anything to over-optimize any combinations.
https://www.portfoliovisualizer.com/backtest-portfolio

Here's a sample of PV (shortened with google because of huge link):
https://goo.gl/zMiHyZ

Thank you for a very useful tool. I will definitely play with it.
However, I am thinking about bonds - are they worth investing at all? The interest rates are all time low and the current environment is really unprecedented. The stocks have potential, they can theoretically increase with no limit. The bonds are however fixed income - I understand their purpose is to protect your portfolio from volatility, but ... locking yourself with a negative yield after inflation? I mean, many of these articles/average returns discussions have been based on somewhat different environment - there were no 0% interest years for the 10yr period in the past.

radram

  • Pencil Stache
  • ****
  • Posts: 934
Re: USD 750,000 of cash, not invested, need advice.
« Reply #116 on: October 06, 2016, 08:18:36 AM »
Let me get this straight you missed the 2009 bull market because you were ignorant and lacked financial education and now you are asking us the same thing?

My advice to you would be to inform yourself and do what you think is best.  Statistically the answer is to invest it all now if you have a 10+ year time horizon for those investments.  But I don't think you believe that.  So let's try to apply some logic on the scenario where the market does tank 20-40% in the next few years.  If you are still working then you will be buying low which is good and since you don't need the initial money you invested it's just a paper loss and not a realized loss.  This assumes that you believe the market will have positive returns in the long term, again 10+ years.  So you just push it in all now and keep adding to it until you are FIRE. 

However if you don't believe that the money that you put in now will grow and that you will not be able to recover from a crash in the next few years then invest in elsewhere.  Try real-estate, bonds, peer-to-peer lending, or bit coin.  The question you should be asking is what are my investment alternatives and what is my expected return on them.  From there you pick the one with the highest return that you can sleep at night with.

If you can save up $750K at the age of 32, I honestly don't think you will have a problem recovering from a market meltdown in the next year or two even if it does go down 50-70%.  If you were 65 and about to retire, then NO you should not be investing 80% of you nest egg in the stock market tomorrow.

Thank you for your response. I agree - I missed the bull market simply due to lack of education and ignorance.

However, there are not so many alternatives in the current low interest rate environment:

Cash = 0% (negative return due to inflation)
Bonds = very low yields, also below inflation

Real estate perhaps? Due to the lack of alternatives, low interest rates and QE we are in a situation with overpriced stock market artificially created by Fed. Investors simply have no alternatives. However, this was my thinking all alone and I lost the game.

But it is now clear to me that you DO understand.  YOU, sir, know much more then you let on.  You just listed your choices perfectly.  Take another look at what you wrote here.  You get it.  Stocks MIGHT be a bad place to be today, but what are your alternatives?  LONG TERM, will stocks be a bad place to be? History says no.  History says that is the BEST place to be.  Even if the market SUCKS long term, what alternative would be better? Will the future be the same?  Who knows. That is why we diversify.  Maybe a home is in your future, but since you already saved for that and did not buy one, I would move on from that idea for now.

You clearly understand all your options, but so far have selected the ONLY option that is a GUARANTEE to lose money long term.  You need a facepunch.  Here you go:

TODAY - set your desired asset allocation.  Not tomorrow.... TODAY.  If you want that to be 100% cash... fine.  You are done.  Now you can move forward.  Use firecalc or some other tool to calculate your FIRE number based on 0% growth.  Now you have a plan.  If that plan works for you, then great. If not, then you have some work to do.  Here is what I recommend:

Start with a 60% stocks and 40% bonds.  We all know with your age it should be more stocks, but you are not ready for that yet.  Now run the simulation again.  You like it or change it a little.  It really doesn't matter at this point.  You just need to act.

Once you select your desired allocation, what is your FIRE date?  Post it here TODAY, along with the asset allocation you selected. TODAY.

Why did I choose 60/40?  So you can buy Vanguard Balanced Index Fund Admiral Shares (VBIAX).  That is all you need to buy.  .08% expense ratio. 2% dividend yield. You are DONE. As you learn more, you can buy different things, or just keep it as is.  If you chose a different allocation, fine.  Just buy the whole market index and a bond index in those percentages.


I lied, you are not done yet.


You should have an emergency fund.  Pick 6 months of spending.  Now buy a 3 month cd, and a 6 month cd, and put half in each.  You will earn about .4% interest.  Already a better return then you had.  Because of the small return, you do not have to do this today.  Do this one TOMORROW. If you lose your job on Monday, your severance should carry you until the first CD matures.



Also TODAY - Create a Vanguard account.  Not tomorrow. TODAY.  Now write the check and send the rest to your new Vanguard account.  ALL OF IT.  Let me repeat that. Here is the facepunch. Are you ready?   ALL. OF. IT. TODAY.

Keep sending in checks as you make more. If the market is crashing, you are getting more shares.

This inaction has got to stop. TODAY.

Congratulations on all your success. You are going to continue to kick ass no matter what happens to the market.

Keep us posted.

     -Radram drops handkerchief at your feet to sop up the blood.





zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 40
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: USD 750,000 of cash, not invested, need advice.
« Reply #117 on: October 06, 2016, 08:51:14 AM »
With this stash and a likely high SR, e-fund is debatable.

radram

  • Pencil Stache
  • ****
  • Posts: 934
Re: USD 750,000 of cash, not invested, need advice.
« Reply #118 on: October 06, 2016, 09:05:54 AM »
With this stash and a likely high SR, e-fund is debatable.

Completely agree, but it might help to get beyond the inaction paralysis the OP has.  3 months would be a great time to reevaluate whether to reinvest the 3 month CD, or move it to Vanguard.  Inaction on $20,000 is no big deal, especially if it puts $730,000 to work for you.

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 40
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: USD 750,000 of cash, not invested, need advice.
« Reply #119 on: October 06, 2016, 09:11:09 AM »
With this stash and a likely high SR, e-fund is debatable.

Completely agree, but it might help to get beyond the inaction paralysis the OP has.  3 months would be a great time to reevaluate whether to reinvest the 3 month CD, or move it to Vanguard.  Inaction on $20,000 is no big deal, especially if it puts $730,000 to work for you.

Valid point there.

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #120 on: October 06, 2016, 09:27:03 AM »
Let me get this straight you missed the 2009 bull market because you were ignorant and lacked financial education and now you are asking us the same thing?

My advice to you would be to inform yourself and do what you think is best.  Statistically the answer is to invest it all now if you have a 10+ year time horizon for those investments.  But I don't think you believe that.  So let's try to apply some logic on the scenario where the market does tank 20-40% in the next few years.  If you are still working then you will be buying low which is good and since you don't need the initial money you invested it's just a paper loss and not a realized loss.  This assumes that you believe the market will have positive returns in the long term, again 10+ years.  So you just push it in all now and keep adding to it until you are FIRE. 

However if you don't believe that the money that you put in now will grow and that you will not be able to recover from a crash in the next few years then invest in elsewhere.  Try real-estate, bonds, peer-to-peer lending, or bit coin.  The question you should be asking is what are my investment alternatives and what is my expected return on them.  From there you pick the one with the highest return that you can sleep at night with.

If you can save up $750K at the age of 32, I honestly don't think you will have a problem recovering from a market meltdown in the next year or two even if it does go down 50-70%.  If you were 65 and about to retire, then NO you should not be investing 80% of you nest egg in the stock market tomorrow.

Thank you for your response. I agree - I missed the bull market simply due to lack of education and ignorance.

However, there are not so many alternatives in the current low interest rate environment:

Cash = 0% (negative return due to inflation)
Bonds = very low yields, also below inflation

Real estate perhaps? Due to the lack of alternatives, low interest rates and QE we are in a situation with overpriced stock market artificially created by Fed. Investors simply have no alternatives. However, this was my thinking all alone and I lost the game.

But it is now clear to me that you DO understand.  YOU, sir, know much more then you let on.  You just listed your choices perfectly.  Take another look at what you wrote here.  You get it.  Stocks MIGHT be a bad place to be today, but what are your alternatives? 

Actually, there are 3 alternatives:

Option 1: staying in cash for short term. I already lost a lot due to inflation and obviously missed the bull run (which would probably allow me to FIRE with current markets), so I understand this is not really an option. However, entering the market at such peak (which may not be a peak after all, but who knows) is not very comfortable, especially after missing the bull run and extraordinary returns of 2012-2014. Of course, although there are many indicators the market is overvalued and we all know why, this bull run can continue for a long time (the bull run of the 1990s was 10yrs of positive returns before 2000-2002 collapse). Nobody knows what will happen because there has been no such monetary policy in the history of the markets. What is going on now with zero interest rates for 10yr and trillions of  printed $ in QE is unprecedented, so I believe that analysis based on the historical performance might be biased. The rules of the game have changed.

Option 2: entering the market with 50% now (Vanguard index fund, for example) and staying 50% in cash to time the market. I know it is not really possible to time the market, but it will protect me from the collapse in the short-medium term. For example, if the market crashes tomorrow by 30% - I will enter with the remaining cash , thus at lower valuations. I have no doubt that the market will be growing in the long term - it is a matter when to enter as I woke up perhaps too late.

Option 3: real estate. Perhaps buying 8-10 unit commercial property in LCOL area with good job potential. I am investigating this option now and am trying to get up to speed on real estate investing.

I am currently in the process of transferring funds to Vanguard. Many thanks for your post.

Bryan_in_Ger

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: USD 750,000 of cash, not invested, need advice.
« Reply #121 on: October 06, 2016, 09:29:32 AM »
Hey illiterate,

congrats on opening the Vanguard account.  Here's some further info which you should definitely look into in the form of another post I replied to: http://forum.mrmoneymustache.com/investor-alley/us-ger-mustachian-couple-needs-us-investment-advice/msg1013356/#msg1013356.

Cheers,
Bryan

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #122 on: October 06, 2016, 09:33:56 AM »
With this stash and a likely high SR, e-fund is debatable.

I do not really think I need an e-fund of more than 3 months. My expenses are not very high. Although I hate my job and have thought about quitting and maybe taking a year off :), it will be difficult for them to get rid of me. In any case, they will have to provide at least 3 month notice and if they decide to fire me, there will be a severance package of at least 1-1.5yr salary. Actually, this is something I will be very happy to accept :)

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #123 on: October 06, 2016, 09:37:29 AM »
Hey illiterate,

congrats on opening the Vanguard account.  Here's some further info which you should definitely look into in the form of another post I replied to: http://forum.mrmoneymustache.com/investor-alley/us-ger-mustachian-couple-needs-us-investment-advice/msg1013356/#msg1013356.

Cheers,
Bryan

Thanks Bryan. IRS is a big headache for expats indeed. The tax code is already complicated for everyone, but is very unclear and cumbersome for the US persons living abroad. I am keeping this in mind.

radram

  • Pencil Stache
  • ****
  • Posts: 934
Re: USD 750,000 of cash, not invested, need advice.
« Reply #124 on: October 06, 2016, 10:39:11 AM »
Let me get this straight you missed the 2009 bull market because you were ignorant and lacked financial education and now you are asking us the same thing?

My advice to you would be to inform yourself and do what you think is best.  Statistically the answer is to invest it all now if you have a 10+ year time horizon for those investments.  But I don't think you believe that.  So let's try to apply some logic on the scenario where the market does tank 20-40% in the next few years.  If you are still working then you will be buying low which is good and since you don't need the initial money you invested it's just a paper loss and not a realized loss.  This assumes that you believe the market will have positive returns in the long term, again 10+ years.  So you just push it in all now and keep adding to it until you are FIRE. 

However if you don't believe that the money that you put in now will grow and that you will not be able to recover from a crash in the next few years then invest in elsewhere.  Try real-estate, bonds, peer-to-peer lending, or bit coin.  The question you should be asking is what are my investment alternatives and what is my expected return on them.  From there you pick the one with the highest return that you can sleep at night with.

If you can save up $750K at the age of 32, I honestly don't think you will have a problem recovering from a market meltdown in the next year or two even if it does go down 50-70%.  If you were 65 and about to retire, then NO you should not be investing 80% of you nest egg in the stock market tomorrow.

Thank you for your response. I agree - I missed the bull market simply due to lack of education and ignorance.

However, there are not so many alternatives in the current low interest rate environment:

Cash = 0% (negative return due to inflation)
Bonds = very low yields, also below inflation

Real estate perhaps? Due to the lack of alternatives, low interest rates and QE we are in a situation with overpriced stock market artificially created by Fed. Investors simply have no alternatives. However, this was my thinking all alone and I lost the game.

But it is now clear to me that you DO understand.  YOU, sir, know much more then you let on.  You just listed your choices perfectly.  Take another look at what you wrote here.  You get it.  Stocks MIGHT be a bad place to be today, but what are your alternatives? 

Actually, there are 3 alternatives:

Option 1: staying in cash for short term. I already lost a lot due to inflation and obviously missed the bull run (which would probably allow me to FIRE with current markets), so I understand this is not really an option. However, entering the market at such peak (which may not be a peak after all, but who knows) is not very comfortable, especially after missing the bull run and extraordinary returns of 2012-2014. Of course, although there are many indicators the market is overvalued and we all know why, this bull run can continue for a long time (the bull run of the 1990s was 10yrs of positive returns before 2000-2002 collapse). Nobody knows what will happen because there has been no such monetary policy in the history of the markets. What is going on now with zero interest rates for 10yr and trillions of  printed $ in QE is unprecedented, so I believe that analysis based on the historical performance might be biased. The rules of the game have changed.

Option 2: entering the market with 50% now (Vanguard index fund, for example) and staying 50% in cash to time the market. I know it is not really possible to time the market, but it will protect me from the collapse in the short-medium term. For example, if the market crashes tomorrow by 30% - I will enter with the remaining cash , thus at lower valuations. I have no doubt that the market will be growing in the long term - it is a matter when to enter as I woke up perhaps too late.

Option 3: real estate. Perhaps buying 8-10 unit commercial property in LCOL area with good job potential. I am investigating this option now and am trying to get up to speed on real estate investing.

I am currently in the process of transferring funds to Vanguard. Many thanks for your post.

Now we are getting somewhere!

You have some maybes.  You just have to turn them into action.

A few more facepunches (face-slaps perhaps?)

Option 1 - This is not a new strategy.  This is EXACTLY your current strategy.  Choosing this option is choosing 100% cash.  Is that your preferred asset allocation?  You have proven for the past 7 years that this is the same strategy.  How many more years will convince you? (I think I see a drop of blood on your chin)

Option 3 - Real Estate - This could be a very good option at some point in your life, but right now I can not think of a WORSE time to begin a real estate career for you.  Why?  What is your FIRE date?  Where will you live then?  Is that a different place than you are living now? Do you buy where you are, or where you will be?  If you buy where you are, are you selling in a short time(not a good plan)? If you buy where you will be, who manages them now? Unless you have an Uncle letting his real estate empire go for pennies on the dollar, I would avoid this idea like the plague for now.  It is a very valid strategy to ACHIEVE FIRE, but you are already almost there.  You may choose real estate as your post FIRE career, but you need to read up more.  We have been landlords for the past 15 years.  By accident really.  Bought a new home and did not sell the old one in time for winter, so we decided to rent it out instead.  Only 2 months of no rent in 15 years, fantastic tenants, and it was purchased 1 and a half times over with other peoples money.  We are thinking about selling now that we are FIRE, because all that cash came with a few little headaches we might not want to deal with anymore.  If you do decide to buy real estate, buy mine at a premium price :)    (no punch here, not even a slap... just some solicited advice you can take or leave)

Option 2 - now THIS is a plan. 50% stocks and 50% cash.    Just a few little modification suggestions.  Since the cash is earning 0, why don't you buy something that at least gives you a LITTLE something with little to no  risk.  I have 2 ideas, short term CD's or .... wait for it.... BONDS.  One more little tweak, instead of 50-50, how about 60-40.  Do you see how I just returned to my suggestion?  That was fun.  Seriously, 50-50 and 60-40 are pretty much the same thing.  Do what you are most comfortable with that achieves your goals, but decide at Vanguard.  Just buy the index funds that gives you the percent of each that you want.
 
Now for the punch.

You said  "I am currently in the process of transferring funds to Vanguard."

Creating an account online takes 20 minutes.  Writing a check takes 1.  What the HELL does "in the process" mean?  Did you write $750, and then stop to write your post before adding the 000 part?  Are you stumped at how to write it out?  Does this help?
http://www.numbersinwords.info/750,000

Maybe you can't find a stamp? Or you forgot how US addresses look?   We are here to help!

I agree you do not need 6 months of spending in cash.  Your 3 month notice of termination should be all you need.

Enjoy the rest of your day.

dougules

  • Handlebar Stache
  • *****
  • Posts: 1514
  • Location: AL
Re: USD 750,000 of cash, not invested, need advice.
« Reply #125 on: October 06, 2016, 11:02:57 AM »
You didn't lose the game, you just decided not to play for the past several years. However you still probably have a few decades of life ahead of you. The new game starts today. How you play is up to you. Educate yourself about how a bear market is not the end of the world when you're playing the long game and you might be more confident. However I stand by what I said earlier: you need to pick an asset allocation that you're comfortable sticking with through a bear market. Maybe 80/20 is not that allocation for you. The fact that you are concerned about investing a lump sum says that this might be the case.

I am not concerned about investing the lump sum. My main concern is entering the market with basically most of the net worth at the possible peak. I know you cannot time the market, but given all the hype about a major correction the media now - it is not the most comfortable time for me to enter. On the other hand, usually when most people expect a significant collapse, it does not happen.

When you're already in the market, each day you don't sell you're making an implicit decision that things are likely to go up from here. What if you had invested a year ago? Would the doomsday articles cause you enough concern to pull your money out today?

No, if I am already in, I wouldn't sell. It was my mistake not to enter due to my ignorance and lack of understanding... However, almost everyone is now screaming that the market is about to collapse - everything is overvalued, economy is not doing great, major correction is coming, etc.. It is mentally tough to enter the market, especially after missing on such an amazing bull run.

There are lots of people screaming about a crash, but they apparently aren't putting their money where their mouth is.  The market is this high because when people think it's worth it when they actually go to pull out their wallet. 

well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Yes, exactly. The market is doing what it's supposed to do.  It's not immediately obvious that cash and bonds can actually be riskier than stocks.  Heaven forbid inflation really starts rolling. 

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #126 on: October 06, 2016, 11:14:37 AM »
You didn't lose the game, you just decided not to play for the past several years. However you still probably have a few decades of life ahead of you. The new game starts today. How you play is up to you. Educate yourself about how a bear market is not the end of the world when you're playing the long game and you might be more confident. However I stand by what I said earlier: you need to pick an asset allocation that you're comfortable sticking with through a bear market. Maybe 80/20 is not that allocation for you. The fact that you are concerned about investing a lump sum says that this might be the case.

I am not concerned about investing the lump sum. My main concern is entering the market with basically most of the net worth at the possible peak. I know you cannot time the market, but given all the hype about a major correction the media now - it is not the most comfortable time for me to enter. On the other hand, usually when most people expect a significant collapse, it does not happen.

When you're already in the market, each day you don't sell you're making an implicit decision that things are likely to go up from here. What if you had invested a year ago? Would the doomsday articles cause you enough concern to pull your money out today?

No, if I am already in, I wouldn't sell. It was my mistake not to enter due to my ignorance and lack of understanding... However, almost everyone is now screaming that the market is about to collapse - everything is overvalued, economy is not doing great, major correction is coming, etc.. It is mentally tough to enter the market, especially after missing on such an amazing bull run.

There are lots of people screaming about a crash, but they apparently aren't putting their money where their mouth is.  The market is this high because when people think it's worth it when they actually go to pull out their wallet. 

well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Yes, exactly. The market is doing what it's supposed to do.  It's not immediately obvious that cash and bonds can actually be riskier than stocks.  Heaven forbid inflation really starts rolling.

It is already rolling - education, healthcare, housing, services... haven't you noticed?

dougules

  • Handlebar Stache
  • *****
  • Posts: 1514
  • Location: AL
Re: USD 750,000 of cash, not invested, need advice.
« Reply #127 on: October 07, 2016, 10:29:29 AM »
You didn't lose the game, you just decided not to play for the past several years. However you still probably have a few decades of life ahead of you. The new game starts today. How you play is up to you. Educate yourself about how a bear market is not the end of the world when you're playing the long game and you might be more confident. However I stand by what I said earlier: you need to pick an asset allocation that you're comfortable sticking with through a bear market. Maybe 80/20 is not that allocation for you. The fact that you are concerned about investing a lump sum says that this might be the case.

I am not concerned about investing the lump sum. My main concern is entering the market with basically most of the net worth at the possible peak. I know you cannot time the market, but given all the hype about a major correction the media now - it is not the most comfortable time for me to enter. On the other hand, usually when most people expect a significant collapse, it does not happen.

When you're already in the market, each day you don't sell you're making an implicit decision that things are likely to go up from here. What if you had invested a year ago? Would the doomsday articles cause you enough concern to pull your money out today?

No, if I am already in, I wouldn't sell. It was my mistake not to enter due to my ignorance and lack of understanding... However, almost everyone is now screaming that the market is about to collapse - everything is overvalued, economy is not doing great, major correction is coming, etc.. It is mentally tough to enter the market, especially after missing on such an amazing bull run.

There are lots of people screaming about a crash, but they apparently aren't putting their money where their mouth is.  The market is this high because when people think it's worth it when they actually go to pull out their wallet. 

well, thanks to Bernanke and Yellen, there are simply no alternatives. You lose with cash, you lose with bonds, you can only bet on stocks.

Yes, exactly. The market is doing what it's supposed to do.  It's not immediately obvious that cash and bonds can actually be riskier than stocks.  Heaven forbid inflation really starts rolling.

It is already rolling - education, healthcare, housing, services... haven't you noticed?

Well, I guess I don't notice since I'm not spending on education, housing, or most services right now :)  Healthcare, yes, is going through the roof.  That's a conversation for a whole other thread that would probably get nasty, though. 

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #128 on: October 08, 2016, 07:37:08 AM »
well, that is the whole issue. If inflation was only 1-2% as the government claims, I will probably be somewhat less hesitant to invest and would probably will be happy to lose 1% in inflation to weather this unpredictable market for 1-2 years. But when you have real inflation going through the roof , this is another issue. The savers have been punished by this government.

radram

  • Pencil Stache
  • ****
  • Posts: 934
Re: USD 750,000 of cash, not invested, need advice.
« Reply #129 on: October 08, 2016, 08:51:50 AM »
well, that is the whole issue. If inflation was only 1-2% as the government claims, I will probably be somewhat less hesitant to invest and would probably will be happy to lose 1% in inflation to weather this unpredictable market for 1-2 years. But when you have real inflation going through the roof , this is another issue. The savers have been punished by this government.


I am not sure what else needs to be said.  Assume everything you have been saying is true.  EVERYTHING.

Where can you imagine the WORST place to put your money, long term, today.  My answer would be long term bonds.  Why would I tie up my money for 30 years to EDIT [under-perform] historical inflation rates.  My second answer is cash. Almost 0 return, but I would have the ability to move quickly if the opportunity presented itself.  That opportunity is worthless if I don't take advantage of it.  Were there missed opportunities for you the past 7 years?  What has changed so you will now take advantage of them.  You bought a 30 year 0% bond the day you saved your first dollar, you just don't know it yet.  Even at that you are STILL kicking ass!

The market is historically high. Yup.  Bonds are almost as low as they can get. Check.  Savings rates are near 0%.  You betcha.  I still own them all, in the ratios I choose, while re-balancing periodically.  As I get older, those percentages will likely change.

It sounds like you are stuck somewhere between 50-50 and 100% cash.  Well, that is not exactly true.  You have selected 100% cash until you change your desired allocation by moving your money.


So.... did you complete writing that check yet, or are you good :)

Keep us posted.


« Last Edit: October 08, 2016, 10:26:44 AM by radram »

GreenEggs

  • Pencil Stache
  • ****
  • Posts: 684
  • Location: Here & There
Re: USD 750,000 of cash, not invested, need advice.
« Reply #130 on: October 08, 2016, 09:58:05 AM »
Great thread. 

So many good opinions, links, & advice. 


Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1713
  • Location: Seattle, WA
Re: USD 750,000 of cash, not invested, need advice.
« Reply #131 on: October 08, 2016, 11:39:37 AM »
The savers have been punished by this government.

Not necessarily:


JackReacher

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: USD 750,000 of cash, not invested, need advice.
« Reply #132 on: October 10, 2016, 12:01:45 PM »
Wow - I'm new here, lots of great links to read

-Very good thread. Thank you.

illiterate

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: USD 750,000 of cash, not invested, need advice.
« Reply #133 on: October 14, 2016, 01:48:24 AM »
The savers have been punished by this government.

Not necessarily:


the chart only proves what i said above

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1713
  • Location: Seattle, WA
Re: USD 750,000 of cash, not invested, need advice.
« Reply #134 on: October 14, 2016, 05:56:50 AM »
the chart only proves what i said above

I suppose it depends on what it means by "this government."  That graph was 2000-2010.   My point is the 10-year treasury almost always lags below the inflation rate.  Here's a graph from 1955-2010 that's a better illustration of what I mean.  Conditions now aren't really much different in this area than have been in the past.   


Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6724
Re: USD 750,000 of cash, not invested, need advice.
« Reply #135 on: December 25, 2016, 11:18:53 AM »
well, that is the whole issue. If inflation was only 1-2% as the government claims, I will probably be somewhat less hesitant to invest and would probably will be happy to lose 1% in inflation to weather this unpredictable market for 1-2 years.

The market will not suddenly become more predictable in 1-2yrs. You'll just find new reasons to be afraid and worry. If the unpredictable nature of the market bothers you enough not to invest in it that's fair. Find something else you feel more confident in, but if you are waiting for the magic bullet that's going to change everything you'll be wait a long long time.

Hey It's Me

  • Pencil Stache
  • ****
  • Posts: 715
    • Moe's Journal
Re: USD 750,000 of cash, not invested, need advice.
« Reply #136 on: December 25, 2016, 11:51:38 AM »
If you settle in on a DCA scenario for injecting the cash into the market, you might consider investing the rest in some laddered CD's in the mean time.  Guaranteed returns on that much cash could potentially be significant.

+1

waltworks

  • Magnum Stache
  • ******
  • Posts: 3173
Re: USD 750,000 of cash, not invested, need advice.
« Reply #137 on: December 26, 2016, 08:12:31 AM »
No activity since Nov. 22 for the OP, so I doubt we'll hear back on this one.

Given his/her obvious discomfort with investing at a high point and concerns about basically everything (interest rates/inflation, geopolitics, etc) it is going to be very hard to start investing. But maybe it'll happen!

-W

Fireball

  • Stubble
  • **
  • Posts: 229
Re: USD 750,000 of cash, not invested, need advice.
« Reply #138 on: December 26, 2016, 11:15:59 AM »
Hey Illiterate - how about an update on you situation, it has been 3 months since your OP.  We're you able to put some of that cash to work in your vanguard account?  We'd like to hear any actions you've taken as a result of this thread!

I feel confident the action taken as a result of this thread was a cash allocation of 100%. Would love to be wrong. If so, OP is sitting on a much larger stache.
« Last Edit: December 26, 2016, 11:17:51 AM by Fireball »

gerardc

  • Pencil Stache
  • ****
  • Posts: 768
  • Age: 35
  • Location: SF bay area
Re: USD 750,000 of cash, not invested, need advice.
« Reply #139 on: December 26, 2016, 06:59:11 PM »
However, entering the market at such peak (which may not be a peak after all, but who knows) is not very comfortable, especially after missing the bull run and extraordinary returns of 2012-2014.

That's like saying you should bet on tails because you just flipped heads 5 times in a row, and it can't keep going like this!

The thing with the market, similarly to flipping coins, is that the conditional expected return at any given time is always positive (given our best statistical models; with better models, that might change)

pumpkinlantern

  • 5 O'Clock Shadow
  • *
  • Posts: 72
Re: USD 750,000 of cash, not invested, need advice.
« Reply #140 on: December 27, 2016, 11:00:08 AM »
No one can predict the future.  A stock market crash is always coming (it's just that no one knows when).  Statistically a large stock market crash will happen several times in your lifetime (and small corrections will happen many, many more!).  If you can't deal with that, you can't invest.  Statistically, there will also be inflation over your lifetime - it might be more than average too - the US government (and pretty much every government around the world) has historically high levels of debt, so they are motivated to inflate it away over the next couple of decades.

I think the key is to have enough buffer/cushion to be able to comfortably sit it out.  Leave yourself a large cash buffer (or cash equivalents) so that you can cover your costs for 5 years or so.  That way, psychologically you know you can just forget about it for 5 years if that's what it takes for the market to recover.

FrugalFisherman10

  • Bristles
  • ***
  • Posts: 309
    • Fly Fishing Photo Project
Re: USD 750,000 of cash, not invested, need advice.
« Reply #141 on: December 29, 2016, 12:23:59 PM »
Do you think 'illiterate' was a troll? I just can't understand why they kept saying they don't know anything when they were able to converse that intelligently about all this.
Regardless, I'm thankful for their questions and posts as I think this teased out some of the best, most holistic explanations for why we invest in the way we invest, from both a data/facts and psychology perspective. It was like putting everyone to the test.
This thread could be referenced again and again for people facing the same issues (i.e all of us every single day, as seattlecyclone so clearly states).  I want to send this to all my friends and be like "start asking me questions about this and don't stop until you understand all/most of it."

The only thing holding illiterate back/underlying all their posts was emotion, and a deep-seeded lean towards believing the "doomsdayers/media.

Sent from my SM-G900V using Tapatalk


jmwagner5

  • 5 O'Clock Shadow
  • *
  • Posts: 61
Re: USD 750,000 of cash, not invested, need advice.
« Reply #142 on: January 07, 2017, 07:08:49 PM »
Let me see if I read this correctly.. The fear of possibly losing some of that nest egg in the short term means guaranteeing to lose some of it permanently.  Right.