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Learning, Sharing, and Teaching => Investor Alley => Topic started by: illiterate on September 26, 2016, 04:26:57 AM

Title: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 04:26:57 AM
Hello all. I am 32 and have been a very good saver. On an ordinary income, I managed to save about USD 750,000 mostly due to a very high savings rate and living outside the United States in a country with very low income tax – this amount is not invested and is sitting as cash (both in the US accounts and abroad) earning nothing. There were always reasons for me not to invest, but it was mostly due to lack of financial education and my own ignorance.

First, I was saving money to buy a house as mortgage rates in the country where I live are extremely high and it was logical to buy a house with 100% cash. Then, the stock market crashed and as a young professional I was very hesitant to invest as I could be subject to a redundancy without any severance package as I was not vested. Therefore, due to the great recession and very uncertain economic situation, I was saving cash for the house and was scared to invest – nobody could predict such amazing stock growth between 2009 and 2014. In summary, I simply missed the bull market of the last 4-5 years mostly due to my ignorance and lack of financial education.

I am US citizen (although I have not lived in the US more than 10 yrs now), working for a subsidiary of the UK company in Eastern Europe. I do have an intention to return to the US. I have US bank accounts and US address, but am not US resident at the moment.

My main dilemma is how to invest my money now and where to start. Of course, given the all-time high for the markets and all the negative reports about the economy and another “bubble”, I am not sure this is a right time to enter the market with a lump sum. It would be very painful to miss the bull market of last years and all upside, invest lump sum now at (possible) a peak and lose 20-30-40% in the next 1-2 years if the market indeed corrects/crashes. Ideally, I will be happy with AA of 80stocks/20bonds, but not sure whether now is the right time to enter the market with a lump sum.
My figures are:

Current income: about USD 100,000 per year (no US tax as I live outside the US)
Expenses: USD 36,000-40,000 per year
Cash: USD 640,000 (in USD), USD equivalent 110,000 (in UK pounds – already lost some due to Brexit and devaluation of UK pound this year)
Defined benefit pension: ca. USD 200,000 lump sum if I leave my employer today
Defined contribution plan: ca. USD 85,000 (invested by my employer) with asset allocation of 20% UK equities, 30% developed markets equities, 30% UK fixed interest bonds and 20% UK cash.

I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 26, 2016, 06:54:24 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 07:21:18 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.

I understand the inflation thing. Of course, I am very concerned about the situation - partly thanks to the central banks who printed tons of money, are keeping interest rates at 0% and fuelled the stock bubble. But this is my fault - this is the game plan now and the one which I am losing. I know I need to INVEST. I am just afraid I will invest today and there will be a crash of 30-40-50-60% and it will take YEARS for me to just recover my investment. I lost the game once. Cannot afford to lose it again.

Many thanks for the links - will start reading
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: NoStacheOhio on September 26, 2016, 07:22:48 AM
I think the first thing you need to decide is whether or not you're going to buy a house. If what you said about mortgage rates is still true, then that will sort of nudge you in a direction with the giant pile of cash.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 26, 2016, 09:15:33 AM

I understand the inflation thing. Of course, I am very concerned about the situation - partly thanks to the central banks who printed tons of money, are keeping interest rates at 0% and fuelled the stock bubble. But this is my fault - this is the game plan now and the one which I am losing. I know I need to INVEST. I am just afraid I will invest today and there will be a crash of 30-40-50-60% and it will take YEARS for me to just recover my investment. I lost the game once. Cannot afford to lose it again.

Many thanks for the links - will start reading

It's entirely possibly that you will invest today and the market will drop.  It's also possible that it will go up, or sideways for a while.  All the while at the very least you are being paid dividends on your investment.
As for investing right before a major crash, perhaps what will help is to look at the hypothetical case of "Bob, the world's worst market timer (http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/)".  Investing only just before crashes he still did ok. This is literally your fear but Bob comes out just fine in the end.

Another thing that should comfort you is that the average time to recovery after a major crash is about 18 months if you just leave the money alone.  Put another way, while you might loose 20 or 30% of your net worth on paper, two years later chances are you'll be better off than you were when you started.

Or understand that 75% of 3 year period resulted in real positive returns, 80% of 5 year periods and 90% of 10 year periods.  By holding cash you are betting that your guaranteed loses to inflation will be better than the progressively shrinking chance that your investments will not reap positive returns.

Or..."the market always goes up!*" (http://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: totoro on September 26, 2016, 09:28:34 AM
I would look at buying real estate as well.  If you know where you are going to land when you return buying a home and renting it out in the interim will give you some return on your money.  If you want to diversify you could also look at investing in rental properties for cash flow in the US - there are several posters on this site who have done this and are doing well - arebelspy comes to mind.

I completely understand your anxiety about investing it all at once now - I am in the same boat.  I have about $500,000 that I need to invest asap.  We are looking for a rental property for part of the funds but the rest needs to go into the market I think.  I haven't done very well with these types of investments historically, or even recently, so I have to work to get over the fear of losing the funds.  I think reading the links posted above and maybe reaching out personally to some of the bloggers who are in the markets for their views would be good given the amount you are sitting on.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 26, 2016, 09:48:19 AM

I completely understand your anxiety about investing it all at once now - I am in the same boat.  I have about $500,000 that I need to invest asap. We are looking for a rental property for part of the funds but the rest needs to go into the market I think.  I haven't done very well with these types of investments historically, or even recently, so I have to work to get over the fear of losing the funds.  I think reading the links posted above and maybe reaching out personally to some of the bloggers who are in the markets for their views would be good given the amount you are sitting on.

There's an emotional component to dropping large sums into the market all at once.  For some, dollar-cost-averaging (DCA) can help with that.  While lump-sum investment typically beats out DCA, a perfectly fine strategy would be to divide your cash into ~12 equal portions and then invest those portions on a specific day each month.  You will still wind up with your money invested but emotionally it can be easier seeing only ~8% of your cash reserves converted every month.

Three posts on the subject:
http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/ (http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/)
http://www.mikeandlauren.com/what-is-your-emotional-threshold-when-investing/ (http://www.mikeandlauren.com/what-is-your-emotional-threshold-when-investing/)
https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiS6uTLsK3PAhVnw4MKHdN1DCEQFggkMAA&url=https%3A%2F%2Fpressroom.vanguard.com%2Fnonindexed%2F7.23.2012_Dollar-cost_Averaging.pdf&usg=AFQjCNEHt7rk1y3ZS7cd6lWJ19ErnkBLcA (https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiS6uTLsK3PAhVnw4MKHdN1DCEQFggkMAA&url=https%3A%2F%2Fpressroom.vanguard.com%2Fnonindexed%2F7.23.2012_Dollar-cost_Averaging.pdf&usg=AFQjCNEHt7rk1y3ZS7cd6lWJ19ErnkBLcA)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Mother Fussbudget on September 26, 2016, 09:59:47 AM
As nereo says, there are studies proving that lump sum investing beats out DCA.

I like MDM's "Generic investment order rules of thumb" - perhaps this will help...

Quote from: MDM
Generic investment order rules of thumb:

WHAT   
0. Establish an emergency fund to your satisfaction   
1. Contribute to 401k up to any company match   
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
3. Max HSA
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level   
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)   
6. Fund mega backdoor Roth if applicable   
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.   
8. Invest in a taxable account with any extra.   
   
WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks   
1. Company match rates are likely the highest percent return you can get on your money   
2. When the guaranteed return is this high, take it.   
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.    (see also:  http://www.madfientist.com/hsa/ (http://www.madfientist.com/hsa/))
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   THIS (http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/) if you want even more details on that topic).  See also
   https://www.bogleheads.org/forum/viewtopic.php?f=2&t=182081 (https://www.bogleheads.org/forum/viewtopic.php?f=2&t=182081),
   http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-overwhelming-student-loan-debt-how-would-you-get-started/msg868845/#msg868845 (http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-overwhelming-student-loan-debt-how-would-you-get-started/msg868845/#msg868845)
   and other posts in that thread about exceptions to the rule.
5. See #4 for choice of traditional or Roth for 401k   
6. Applicability depends on the rules for the specific 401k   
7. Again, take the risk-free return if high enough   
8. Because earnings, even if taxed, are beneficial   
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Seppia on September 26, 2016, 10:30:52 AM

We are talking about a ton of money here.

Lump sum may statistically beat DCA, but what good does it make to you to know that "on average" it does if you're on the losing side?

It would be more interesting to learn how DCA has performed vs lump sum in periods of history with a similar CAPE valuations than those of today.

I would definitely NOT dump everything in the market now, but regardless of valuations staying 100% cash makes little sense also.

Maybe start by investing a piece of the money (20%?), use another chunk to buy an apartment in the USA (if that's your thing) and keep the rest in cash.

This way you will have diversified a bit stocks - real estate - cash.

At today's inflation (basically zero) the opportunity cost of holding cash is not too high, so I would not mind keeping some.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dougules on September 26, 2016, 10:31:42 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.

I understand the inflation thing. Of course, I am very concerned about the situation - partly thanks to the central banks who printed tons of money, are keeping interest rates at 0% and fuelled the stock bubble. But this is my fault - this is the game plan now and the one which I am losing. I know I need to INVEST. I am just afraid I will invest today and there will be a crash of 30-40-50-60% and it will take YEARS for me to just recover my investment. I lost the game once. Cannot afford to lose it again.

Many thanks for the links - will start reading

There might be a big crash when interest rates get back to normal, but it doesn't matter if you're planning long-term.  If you still want to buy the house I'd keep that money out.  Anything else should go in.  The market will eventually recover from whatever crash unless the end of the world comes.  And if the end of the world comes your cash won't be worth anything either. 

Plus you're not only losing out to inflation, but you're also losing dividends.  Dividends aren't that great right now, but even at a mediocre 2%-ish it's still around $15k every year on top of your inflation losses. 

And +1 on using DCA or whatever helps to get past the emotional component of it. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: CheapskateWife on September 26, 2016, 10:38:48 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 01:27:01 PM
I think the first thing you need to decide is whether or not you're going to buy a house. If what you said about mortgage rates is still true, then that will sort of nudge you in a direction with the giant pile of cash.

I decided against it. If I buy, I will buy something cheap (maybe to retire in a low cost of living country) - ca. USD 150-200k. I will definitely not buy an expensive one.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 01:29:23 PM

I understand the inflation thing. Of course, I am very concerned about the situation - partly thanks to the central banks who printed tons of money, are keeping interest rates at 0% and fuelled the stock bubble. But this is my fault - this is the game plan now and the one which I am losing. I know I need to INVEST. I am just afraid I will invest today and there will be a crash of 30-40-50-60% and it will take YEARS for me to just recover my investment. I lost the game once. Cannot afford to lose it again.

Many thanks for the links - will start reading

It's entirely possibly that you will invest today and the market will drop.  It's also possible that it will go up, or sideways for a while.  All the while at the very least you are being paid dividends on your investment.
As for investing right before a major crash, perhaps what will help is to look at the hypothetical case of "Bob, the world's worst market timer (http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/)".  Investing only just before crashes he still did ok. This is literally your fear but Bob comes out just fine in the end.

Another thing that should comfort you is that the average time to recovery after a major crash is about 18 months if you just leave the money alone.  Put another way, while you might loose 20 or 30% of your net worth on paper, two years later chances are you'll be better off than you were when you started.

Or understand that 75% of 3 year period resulted in real positive returns, 80% of 5 year periods and 90% of 10 year periods.  By holding cash you are betting that your guaranteed loses to inflation will be better than the progressively shrinking chance that your investments will not reap positive returns.

Or..."the market always goes up!*" (http://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/)

Interesting example with Bob, but still... thinking about buying at peak and having say even 70% of the investment amount is really devastating. However, this was my thinking last few years and the market is simply going up.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 01:30:52 PM

I completely understand your anxiety about investing it all at once now - I am in the same boat.  I have about $500,000 that I need to invest asap.  We are looking for a rental property for part of the funds but the rest needs to go into the market I think.  I haven't done very well with these types of investments historically, or even recently, so I have to work to get over the fear of losing the funds.  I think reading the links posted above and maybe reaching out personally to some of the bloggers who are in the markets for their views would be good given the amount you are sitting on.

Yes, I am reading the articles now. Very good start. I really need to get some education before doing anything major.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 01:38:02 PM

We are talking about a ton of money here.

Lump sum may statistically beat DCA, but what good does it make to you to know that "on average" it does if you're on the losing side?

It would be more interesting to learn how DCA has performed vs lump sum in periods of history with a similar CAPE valuations than those of today.

I would definitely NOT dump everything in the market now, but regardless of valuations staying 100% cash makes little sense also.

Maybe start by investing a piece of the money (20%?), use another chunk to buy an apartment in the USA (if that's your thing) and keep the rest in cash.

This way you will have diversified a bit stocks - real estate - cash.

At today's inflation (basically zero) the opportunity cost of holding cash is not too high, so I would not mind keeping some.

Thanks for very good input. Honestly, I do not think inflation is zero - this is what the government is telling us, but I do not believe. Perhaps the gas prices are lower, the food prices have not changed much; but look at other middle class type items: housing (significant increase with many all time highs in many markets), healthcare, education, paper assets, entertainment - all these categories are up significantly - isn't this inflation?

I was thinking about investing part of the cash into the market. This is what I am asking advice on. In terms of the rental property - I live outside the US, I do not think I will be able to get a mortgage.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 01:39:23 PM
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.

Any specific suggestions? what are the rates now? something around 1%?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Retire-Canada on September 26, 2016, 01:53:52 PM
Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

This ^^^. Get that money invested. In 3yrs your $750K will be worth something like $695K in today's dollars and if you even get a modest 4% return after inflation you would have $844K. That's $149K lost value.

There is always an unlimited amount of fear available to keep you out of the market and there will always be some reason to wait and somebody who is also afraid telling you waiting is the smart move.

Read this and the JL Collins page: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 01:56:49 PM
Thanks!
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: ooeei on September 26, 2016, 01:57:58 PM

We are talking about a ton of money here.

Lump sum may statistically beat DCA, but what good does it make to you to know that "on average" it does if you're on the losing side?

It would be more interesting to learn how DCA has performed vs lump sum in periods of history with a similar CAPE valuations than those of today.

I would definitely NOT dump everything in the market now, but regardless of valuations staying 100% cash makes little sense also.

Maybe start by investing a piece of the money (20%?), use another chunk to buy an apartment in the USA (if that's your thing) and keep the rest in cash.

This way you will have diversified a bit stocks - real estate - cash.

At today's inflation (basically zero) the opportunity cost of holding cash is not too high, so I would not mind keeping some.

This.  With a "regular" lump sum of a $10k bonus or even $50k inheritance, go all in because over your lifetime you'll have a few of those, and even if one of them bombs, the others will make up for it.  For a lifetime of saving, dumping it all in on one day when you're already scared of the market is a recipe for disaster.  You dump it in, it drops 5% the first month, then another 10%, then it's down 20%, then you freak out and sell it all, and miss when it recovers.

DCA is not mathematically optimal, but it might be psychologically optimal for some people.  Another option is holding more bonds than you normally would, and gradually shifting to stocks.

From another thread:

A Bill Bernstein interview I thought was worth a read:

http://www.aaii.com/journal/article/investing-to-avoid-the-consequences-of-being-wrong.mobile

The conclusion:
For most people, over the long term it probably is optimal to be 100% in stocks, but almost nobody can execute that optimal strategy. So, a suboptimal strategy that you can execute is better than an optimal one you can’t. For most people, the best path is one that involves owning a large amount of bonds so they can sleep at night during the bad times.

Edit:

And the problem with the "world's worst market timer" article is that guy invested every year at the worst time over a long time frame.  This is far different than investing everything at once, where you could be down significantly.  Someone who invested at the peak in 2000 didn't see any positive return on their initial investment until around 2013.  That's a long time for a fearful investor to "stick it out."

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: seattlecyclone on September 26, 2016, 02:38:13 PM
My main dilemma is how to invest my money now and where to start. Of course, given the all-time high for the markets and all the negative reports about the economy and another “bubble”, I am not sure this is a right time to enter the market with a lump sum. It would be very painful to miss the bull market of last years and all upside, invest lump sum now at (possible) a peak and lose 20-30-40% in the next 1-2 years if the market indeed corrects/crashes. Ideally, I will be happy with AA of 80stocks/20bonds, but not sure whether now is the right time to enter the market with a lump sum.

The market is at an all-time high more often than not. During such periods there are always people claiming that a downturn is right around the corner. Sometimes they're right, but they're quite often wrong as well.

You mention it would be "painful" to invest a lump sum now and see the value go down if there's a stock market correction. Would it be any less painful to invest slowly over a period of a year or two, see the market continue to increase all the while, only to have a correction right after you invested your last dollar? I think not! I hate to break it to you, but if you would experience extreme regret about having the value of your investments go down in the short term, perhaps an 80% stock portfolio isn't for you.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: CheapskateWife on September 26, 2016, 02:48:44 PM
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.

Any specific suggestions? what are the rates now? something around 1%?

Please disregard my suggestion, further research indicates that this idea blows...man, I had no idea how low those rates had gotten.  I had some laddered CDs a few years ago while sitting on some fat cash and it worked out to 2-3% annually depending on the time frame I selected. I'm with USAA and their best CD is at 1.07 for a 7 year CD.  You might be better off putting it under your mattress.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Retire-Canada on September 26, 2016, 02:53:55 PM
The market is at an all-time high more often than not. During such periods there are always people claiming that a downturn is right around the corner. Sometimes they're right, but they're quite often wrong as well.

Yes. The-market-is-about-to-crash-big-time threads are a regular feature on this forum and they continue to be wrong. For sure one day they'll be right once just like a broken watch shows the correct time twice a day.

The suggestion to hold a proportion of bonds and then shift your AA towards whatever you want to hold long term is a reasonable approach if that makes you comfortable getting that cash invested. The only good thing about hording cash is when you look at various investing options it's hard to do worse over any length of time. ;)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: BlueHouse on September 26, 2016, 02:59:32 PM
That IS a lot of cash.  Personally, I wouldn't invest it all at once.  I would plan to put $10,000 per month in.  If the market tanks, then double that amount.  I know we're not about market timing, but you also don't have to buy on the most expensive day of the month.  Check the Dow or VTI at about 3:30 every day to make sure you don't miss out on a big (400-1000 point) drop. Expect a lot of volatility, especially through the election.  But I would get started now. 

Being in another country, can you buy Vanguard Index Funds?  If so, open an account today and buy some VTSAX.  Don't even waste your time with any transactions under $10K.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 04:06:46 PM
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.

Any specific suggestions? what are the rates now? something around 1%?

Please disregard my suggestion, further research indicates that this idea blows...man, I had no idea how low those rates had gotten.  I had some laddered CDs a few years ago while sitting on some fat cash and it worked out to 2-3% annually depending on the time frame I selected. I'm with USAA and their best CD is at 1.07 for a 7 year CD.  You might be better off putting it under your mattress.

well , this is a whole problem. In the current environmental, there are no alternatives :(
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 04:08:21 PM
That IS a lot of cash.  Personally, I wouldn't invest it all at once.  I would plan to put $10,000 per month in.  If the market tanks, then double that amount.  I know we're not about market timing, but you also don't have to buy on the most expensive day of the month.  Check the Dow or VTI at about 3:30 every day to make sure you don't miss out on a big (400-1000 point) drop. Expect a lot of volatility, especially through the election.  But I would get started now. 

Being in another country, can you buy Vanguard Index Funds?  If so, open an account today and buy some VTSAX.  Don't even waste your time with any transactions under $10K.

Thanks. I hope I can open Vanguard account as I still have US docs and address, but am not sure.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 04:09:59 PM
Open a Vanguard account.  I would DCA over the course of 18-30 months.  Sounds slow, but obviously there is a huge psychological barrier that needs to be dealt with if you've built a cash position this large.  Personally if I had this much to invest and had 0 in the market right now, I would do this:

Buy $15k of VTI this month.  Next month buy VTI 2 times, once between the 1st and 15th and once between the 16th and 30th.  15k per investment seems about right ($30k per month).

Thank you. This is actually a very good suggestion - hopefully I can open an account with Vanguard.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Tyson on September 26, 2016, 05:04:17 PM
The market is at an all-time high more often than not. During such periods there are always people claiming that a downturn is right around the corner. Sometimes they're right, but they're quite often wrong as well.

Yes. The-market-is-about-to-crash-big-time threads are a regular feature on this forum and they continue to be wrong. For sure one day they'll be right once just like a broken watch shows the correct time twice a day.

I vote we start putting those chicken little threads on the Wall of Anti-Mustachian Shame and Comedy. 

The market is alway at (or near) it's all time high.  If it didn't go up (and up and up), then it wouldn't make much sense to invest in it.....
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: robartsd on September 26, 2016, 05:13:38 PM
I managed to save about USD 750,000 mostly due to a very high savings rate and living outside the United States in a country with very low income tax.
According to the IRS, US Citizens owe taxes based on all income regardless of where earned or where they reside. You could face a very large tax bill (with penalties/interest) in the US.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: oldtoyota on September 26, 2016, 05:15:51 PM
How did you legally not pay U.S. income tax while residing abroad?

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: totoro on September 26, 2016, 05:57:16 PM
Canadians can become non-residents and exclude foreign income.  For Americans don't you have this?

"The Foreign Earned Income Exclusion allows qualified expats to exclude the first $100,800 of foreign wages from their 2015 US expat tax return"
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: chesebert on September 26, 2016, 06:29:23 PM
Canadians can become non-residents and exclude foreign income.  For Americans don't you have this?

"The Foreign Earned Income Exclusion allows qualified expats to exclude the first $100,800 of foreign wages from their 2015 US expat tax return"

This is correct subject to inflation adjustment.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 08:43:29 PM
You do not pay tax if your earned income is less than USD 100,000 (changes each year).
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 26, 2016, 08:44:29 PM
I managed to save about USD 750,000 mostly due to a very high savings rate and living outside the United States in a country with very low income tax.
According to the IRS, US Citizens owe taxes based on all income regardless of where earned or where they reside. You could face a very large tax bill (with penalties/interest) in the US.

Yes, but you can exclude around USD 100,000.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Cycling Stache on September 27, 2016, 01:35:59 AM

We are talking about a ton of money here.

Lump sum may statistically beat DCA, but what good does it make to you to know that "on average" it does if you're on the losing side?

It would be more interesting to learn how DCA has performed vs lump sum in periods of history with a similar CAPE valuations than those of today.

I would definitely NOT dump everything in the market now, but regardless of valuations staying 100% cash makes little sense also.


This is one of those persistent logical fallacies that traps people like OP.  Every dollar you already have in the market you are making the same "choice" whether to lump sum in.  You (and OP) see the possible "pain" of investing everything on day 1 and then market crashes on day 2.  But if you have the exact same amount of money in the market on day 1 already invested, you are making the same "choice" to keep the money in or take it out and go to cash.  So long as you're in the market, that dynamic will never change.

Most of us are basing FIRE on large investment holdings.  $750k is sort of minimum for most.  If you or OP cannot get comfortable with the idea of the possibility of that amount significantly dropping on any particular day, it's never going to work.  So the thing that OP needs to realize is that (1) being in the market is long-term the best option, and (2) every day in the market is the same choice (and the same potential downside) of leaving it in the market versus pulling it out and going to cash.

People deal with (2) by knowing about (1).
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: mxt0133 on September 27, 2016, 02:06:26 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: MrRealEstate on September 27, 2016, 02:54:15 AM
I would also suggest VFIAX(S&P 500 admiral), VDADX(dividend admiral), and possibly another admiral mutual fund if you went with vanguard. Most admiral funds have a 10k minimum, but have .05% expense ratios which help your investment grow by not eating away with fees. Be sure to read up on each one and look at the last few days and months to get an idea of how it moves so you can be comfortable if it drops a few percentage points in a day.

There are a few good blog posts on MMM of where he invested 100k and various sums of money that would be great starting points.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dougules on September 27, 2016, 10:58:10 AM
Try real-estate, bonds, peer-to-peer lending, or bit coin. 

This is kind of a nitpick, but bit coin is just another form of cash.  Buying it to make money is speculation not investment.   

And real estate is only an investment if you're getting rent. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 27, 2016, 11:08:50 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: seattlecyclone on September 27, 2016, 11:15:28 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: des999 on September 27, 2016, 11:15:45 AM
I would get it in the market one way or another, dca or lump sum.  My personally, I'd do a few lump sums till I got it all in.  But, maybe start off with a little more bonds and a little less stocks, and then after a couple years if it feels better to you increase equities and lower bonds.  Do this until you get to a point you feel comfortable (you say 80% equities, but it doesn't sound like you are comfortable). 

As someone else said, you saved a lot of money in a short time, I think you'll be fine, just the money invested and you'll be Fire before long.  Good luck!
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Mother Fussbudget on September 27, 2016, 11:29:05 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.
+1 - pick your allocation, and invest.  You may pick an 80/20, or 70% stocks, 20% REIT's, 10% bonds, or... something else.

The key thing is those investing dollars are losing value to inflation if they're not invested. 
And don't let emotion rule your head.  Dollar Cost Averaging for a large LUMP SUM is not the best investment strategy mathematically.
http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/ (http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/)
http://affordanything.com/2012/04/23/why-dollar-cost-averaging-stinks/ (http://affordanything.com/2012/04/23/why-dollar-cost-averaging-stinks/)
https://amp.cnn.com/money/2016/03/23/retirement/dollar-cost-averaging/index.html (https://amp.cnn.com/money/2016/03/23/retirement/dollar-cost-averaging/index.html)

Dollar Cost Averaging makes sense for the dollars you contribute monthly to your investment accounts, but for a lump sump the math doesn't pencil out.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman on September 27, 2016, 02:33:04 PM
While you're figuring out what to do, you might as well junk it all in BSV (Vanguard short term government bonds - the safest thing around pretty much) and get the monthly payouts.

According to my calculations you should get at least: 750000/80.83 * 0.09 = $835 a month, a crappy return, but better than your checking account.

If you buy it before October 3rd you'll get the October payout.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dougules on September 27, 2016, 02:43:30 PM
While you're figuring out what to do, you might as well junk it all in BSV (Vanguard short term government bonds - the safest thing around pretty much) and get the monthly payouts.

According to my calculations you should get at least: 750000/80.83 * 0.09 = $835 a month, a crappy return, but better than your checking account.

If you buy it before October 3rd you'll get the October payout.

Ironically it's probably safer, too.  The FDIC only insures up to $250K, assuming the money is in the US.  I imagine OP's country of residence is probably similar if the money is parked there. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Ramparts on September 27, 2016, 03:26:32 PM
And the problem with the "world's worst market timer" article is that guy invested every year at the worst time over a long time frame.  This is far different than investing everything at once, where you could be down significantly.  Someone who invested at the peak in 2000 didn't see any positive return on their initial investment until around 2013.  That's a long time for a fearful investor to "stick it out."

How did you calculate this? Are you just using the price index? If so you aren't accounting for the dividends paid over the years. If you include those, I believe you would see a gain starting around 2006, then back down during the financial crisis, and you'd see gains again starting at the end of 2010. By 2013 you're up about 25-30%. Either way it's a long time to stick it out, but not quite as bad as you might initially think.

I'm looking at: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=8&endYear=2013&lastMonth=1&endDate=09%2F26%2F2016&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=0&showYield=false&reinvestDividends=true&symbol1=VFINX&allocation1_1=100
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 04:36:09 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 04:41:53 AM
While you're figuring out what to do, you might as well junk it all in BSV (Vanguard short term government bonds - the safest thing around pretty much) and get the monthly payouts.

According to my calculations you should get at least: 750000/80.83 * 0.09 = $835 a month, a crappy return, but better than your checking account.

If you buy it before October 3rd you'll get the October payout.

How did you calculate 0.09? Is this the monthly dividend per share?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 04:42:55 AM
While you're figuring out what to do, you might as well junk it all in BSV (Vanguard short term government bonds - the safest thing around pretty much) and get the monthly payouts.

According to my calculations you should get at least: 750000/80.83 * 0.09 = $835 a month, a crappy return, but better than your checking account.

If you buy it before October 3rd you'll get the October payout.

Ironically it's probably safer, too.  The FDIC only insures up to $250K, assuming the money is in the US.  I imagine OP's country of residence is probably similar if the money is parked there.

Most of the money is in the US.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: BlueHouse on September 28, 2016, 04:50:56 AM

If you buy it before October 3rd you'll get the October payout.
I don't know much about dividend investing, but I often hear the advice "don't buy the dividend", meaning something Along the lines of the value of the stock goes down to pay that dividend and then there are tax implications on the dividend. (Or something to that effect?).

Could someone please explain the concept better than I have and explain why it would or wouldn't apply in this case?  I've just don't have a grasp on what it really means practically.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman on September 28, 2016, 09:53:28 AM

If you buy it before October 3rd you'll get the October payout.
I don't know much about dividend investing, but I often hear the advice "don't buy the dividend", meaning something Along the lines of the value of the stock goes down to pay that dividend and then there are tax implications on the dividend. (Or something to that effect?).

Could someone please explain the concept better than I have and explain why it would or wouldn't apply in this case?  I've just don't have a grasp on what it really means practically.

The concept is basically that the stock, on the dividend ex date (the day the stock trades exclusive of the dividend), goes down by the amount the dividend is as a percentage of the company. Essentially, the market is calculating in the fact that the company is losing so much cash of value in the dividend. I agree you shouldn't use dividend timing approaches to buy and sell stocks.

It doesn't really apply in this case that heavily because BSV is a short term government BOND index, not a collection of stocks. The monthly payout is primarily coming from interest payments from the bonds it holds, not dividends.

As for how I came up with $0.09, I just looked at the last 1 year of distributions and saw it was always $0.1 or $0.09. Nothing really scientific about it. I'm sure there is a more precise way to gauge the distributions. So yes, it is the monthly interest payment per unit.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 28, 2016, 10:12:22 AM
can i just point out the appropriateness of dividendman explaining the effects of buying a dividend?  awesome.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Mother Fussbudget on September 28, 2016, 10:18:55 AM
can i just point out the appropriateness of dividendman explaining the effects of buying a dividend?  awesome.

+1.  Yep.  Awesome. (Thanks dividendman!)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: seattlecyclone on September 28, 2016, 10:20:59 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?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 01:06:31 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 01:08:48 PM

If you buy it before October 3rd you'll get the October payout.
I don't know much about dividend investing, but I often hear the advice "don't buy the dividend", meaning something Along the lines of the value of the stock goes down to pay that dividend and then there are tax implications on the dividend. (Or something to that effect?).

Could someone please explain the concept better than I have and explain why it would or wouldn't apply in this case?  I've just don't have a grasp on what it really means practically.

The concept is basically that the stock, on the dividend ex date (the day the stock trades exclusive of the dividend), goes down by the amount the dividend is as a percentage of the company. Essentially, the market is calculating in the fact that the company is losing so much cash of value in the dividend. I agree you shouldn't use dividend timing approaches to buy and sell stocks.

It doesn't really apply in this case that heavily because BSV is a short term government BOND index, not a collection of stocks. The monthly payout is primarily coming from interest payments from the bonds it holds, not dividends.

As for how I came up with $0.09, I just looked at the last 1 year of distributions and saw it was always $0.1 or $0.09. Nothing really scientific about it. I'm sure there is a more precise way to gauge the distributions. So yes, it is the monthly interest payment per unit.

Thank you. Do you guys recommend transferring all amount into one brokerage account or to 3 different accounts (each USD 250,000) with Vanguard, Schwab and Fidelity, for example?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Mother Fussbudget on September 28, 2016, 01:18:02 PM
One (Vanguard) account.  Lowest possible fees.  No 'stockholders' to satisfy.  Easier to track.

And I found three other articles on "why lump-sum investing beats DCA", if you're still reading:
http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/ (http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/)
http://www.rickferri.com/blog/investments/6-things-to-consider-when-investing-a-lump-sum/ (http://www.rickferri.com/blog/investments/6-things-to-consider-when-investing-a-lump-sum/)
https://livingafi.com/2015/12/18/home-ownership-a-retrospective-and-beyond/#more-5794 (https://livingafi.com/2015/12/18/home-ownership-a-retrospective-and-beyond/#more-5794)
(this last one references the other two, and Dr. Doom's retrospective of home ownership is a great read)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 01:21:54 PM
One (Vanguard) account.  Lowest possible fees.  No 'stockholders' to satisfy.  Easier to track.

And I found three other articles on "why lump-sum investing beats DCA", if you're still reading:
http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/ (http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/)
http://www.rickferri.com/blog/investments/6-things-to-consider-when-investing-a-lump-sum/ (http://www.rickferri.com/blog/investments/6-things-to-consider-when-investing-a-lump-sum/)
https://livingafi.com/2015/12/18/home-ownership-a-retrospective-and-beyond/#more-5794 (https://livingafi.com/2015/12/18/home-ownership-a-retrospective-and-beyond/#more-5794)
(this last one references the other two, and Dr. Doom's retrospective of home ownership is a great read)

Thanks. What if I also want to buy individual stocks (in the future) - is Vanguard still good for this and are their fees lowest for this as well?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 28, 2016, 01:31:14 PM
One (Vanguard) account.  Lowest possible fees.  No 'stockholders' to satisfy.  Easier to track.

And I found three other articles on "why lump-sum investing beats DCA", if you're still reading:
http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/ (http://www.mrmoneymustache.com/2014/08/20/how-to-invest-in-overvalued-market/)
http://www.rickferri.com/blog/investments/6-things-to-consider-when-investing-a-lump-sum/ (http://www.rickferri.com/blog/investments/6-things-to-consider-when-investing-a-lump-sum/)
https://livingafi.com/2015/12/18/home-ownership-a-retrospective-and-beyond/#more-5794 (https://livingafi.com/2015/12/18/home-ownership-a-retrospective-and-beyond/#more-5794)
(this last one references the other two, and Dr. Doom's retrospective of home ownership is a great read)

Thanks. What if I also want to buy individual stocks (in the future) - is Vanguard still good for this and are their fees lowest for this as well?

You can set up a brokerage account with Vanguard and its extremely competitive.  Depending on your account balance and frequency of trades you can buy individual ETFs or stocks with no commission.
To be sure, there are other brokerages out there that offer similar levels of service and fees.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: mxt0133 on September 28, 2016, 01:45:53 PM
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.

I was in a similar situation during 2011-13, I decided to keep whatever I had in the market fully invested, but I also didn't add to them.  I contributed to my 401k but kept it in bonds.

What helped was following the low information diet post.

http://www.mrmoneymustache.com/2013/10/01/the-low-information-diet/ (http://www.mrmoneymustache.com/2013/10/01/the-low-information-diet/)

All of it really is noise.  As long as you believe the today's companies are providing value and are producing a profit then all the PE, negative interest rates, elections, ect, are irrelevant in the long run.

That along with coming to terms with taking the long term view of these investments really help me make the leap of being fully committed.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 28, 2016, 02:21:12 PM
Thank you guys for your help and amazing links. I wish I could find MMM site and these forums and was more interested in this thing 6-7 yrs ago. Links to MMM articles are just amazing- the guy is a genius.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: seattlecyclone on September 28, 2016, 09:00:17 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.

You seem to still be under the belief that "My money is invested in the market, should I leave it there?" and "My money is in cash, should I put it in the market?" are fundamentally different questions. They are not. Forget about your past decisions. Would have been nice if you had invested earlier, but you didn't. Can't change that. What you can do today and every other day is ask yourself whether you really believe the stock market is likely to provide the best returns over the long run from this point forward. If you believe it will, you should put your money in the market, whether your money was there yesterday or not. If you believe it won't, you should put your money elsewhere, whether your money was in the market yesterday or not.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: PizzaSteve on September 28, 2016, 11:33:55 PM
My 2 cents. 

There is nothing wrong with sitting in cash until your are confident in your plan.

Educate yourself and don't feel rushed.  There is a reason you are holding cash.  You have a low risk tolerance and also thought you might need it for a large purchase (home). 

Maximizing investment returns is a good goal, but not at the expense of peace of mind.  You can hit your goals with 0% returns, if you save and spend within your means.  Learn and be confident, then move.

Worst case, there are online banks paying 1%.  Park the money there while your read the bogleheads wiki.  Good luck.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 12:40:47 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.
I would hold off jumping into the market a a little bit since we are in a bubble. I dont believe in market timing but I sure dont believe in jumping in when its in an obvious bubble.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 12:42:28 AM
That IS a lot of cash.  Personally, I wouldn't invest it all at once.  I would plan to put $10,000 per month in.  If the market tanks, then double that amount.  I know we're not about market timing, but you also don't have to buy on the most expensive day of the month.  Check the Dow or VTI at about 3:30 every day to make sure you don't miss out on a big (400-1000 point) drop. Expect a lot of volatility, especially through the election.  But I would get started now. 

Being in another country, can you buy Vanguard Index Funds?  If so, open an account today and buy some VTSAX.  Don't even waste your time with any transactions under $10K.
Very good advice, you took the words out of my mouth.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 29, 2016, 07:32:02 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.
I would hold off jumping into the market a a little bit since we are in a bubble. I dont believe in market timing but I sure dont believe in jumping in when its in an obvious bubble.

well, the problem is that I have heard this for the last  3 yrs, but the market is not cooling down, is it? ;)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Retire-Canada on September 29, 2016, 08:10:55 AM
well, the problem is that I have heard this for the last  3 yrs, but the market is not cooling down, is it? ;)

You'll keep hearing it after a crash as well. People will say this wasn't the big one hang onto your cash a few more years and a few more years after that and a few more years after that. It's easy to look back and pick the best time to invest. It's far harder to do so in real time.

Look at various asset allocations. Find one that can withstand a significant crash well enough that you won't lose your mind and then invest your money. If you can't find a portfolio you can be okay riding through a crash than consider that investing in the stock market may not be for you and look at your alternatives to find something that does make you feel comfortable.

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 08:47:00 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.
I would hold off jumping into the market a a little bit since we are in a bubble. I dont believe in market timing but I sure dont believe in jumping in when its in an obvious bubble.

well, the problem is that I have heard this for the last  3 yrs, but the market is not cooling down, is it? ;)
I think a lot longer term than a short 3 years myself, I think in the terms of at least 10 years cycles.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 08:49:29 AM
well, the problem is that I have heard this for the last  3 yrs, but the market is not cooling down, is it? ;)

You'll keep hearing it after a crash as well. People will say this wasn't the big one hang onto your cash a few more years and a few more years after that and a few more years after that. It's easy to look back and pick the best time to invest. It's far harder to do so in real time.

Look at various asset allocations. Find one that can withstand a significant crash well enough that you won't lose your mind and then invest your money. If you can't find a portfolio you can be okay riding through a crash than consider that investing in the stock market may not be for you and look at your alternatives to find something that does make you feel comfortable.
Personally I dont invest in the stock market period. I dont trust people and there is a ton of people behind each company. I only trust myself so I make my own companies. I can trust myself and my books.   
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 29, 2016, 09:49:22 AM
Quote
I am lost where to start and will appreciate any suggest and if you can recommend some very good books/courses/sites for beginners.


For people just starting out I always recommend JL Collins stock series. 
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)

Good lord you have a lot in cash.  Understand that every year that goes by your money is worth less due to inflation; with that much cash on hand you are literally loosing about $18k every single year.

Don't worry about whether "now" is a better time to get into the market than yesterday/tomorrow/next-month/last-year.  Time in the market is more important than the time you get into the market.

ON another note, you are very, very close to being completely FI - with a few tweaks to your budget or another couple of years you'll never have to work again, provided you actually INVEST that money.
G'luck.
I would hold off jumping into the market a a little bit since we are in a bubble. I dont believe in market timing but I sure dont believe in jumping in when its in an obvious bubble.

well, the problem is that I have heard this for the last  3 yrs, but the market is not cooling down, is it? ;)
I think a lot longer term than a short 3 years myself, I think in the terms of at least 10 years cycles.

This is exactly why you shouldn't concern yourself with current valuations.  IF your timeline is 10+ years, the important thing is that you are actually invested.  As Retire-Canada has indicated, people have been talking about whether or not we are in a bubble for years, just as they will talk about whether we've reached the bottom during a downturn.  Neither is predictable (hence why market timing doesn't work).
The time IN the market is what matters.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: waltworks on September 29, 2016, 10:17:10 AM
Personally I dont invest in the stock market period. I dont trust people and there is a ton of people behind each company. I only trust myself so I make my own companies. I can trust myself and my books.

That's great, but that's not investing, it's working.

-W
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Spork on September 29, 2016, 10:34:52 AM
Personally I dont invest in the stock market period. I dont trust people and there is a ton of people behind each company. I only trust myself so I make my own companies. I can trust myself and my books.

That's great, but that's not investing, it's working.

-W

And it is difficult to form your own company in such a way as to not utilize any other company.  Even the guy that just mows the lawn buys a Honda lawnmower and Exxon gasoline.

The real answer for non-trust is, of course, extremely wide diversification in something like a total market fund.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Fishfindr on September 29, 2016, 02:03:46 PM
I'm in the same boat as you (almost to the dollar) and what I've been doing is looking at the charts of various stocks and how they have behaved
in relation to the Dow over the last 10/20 years. Not every stock takes a dive along with the general market, but some drift a little bit lower. Go to
Yahoo Finance and pull up the chart for AWK (American Water Works) for example. Then, choose the compare button and select "Dow". You'll
see that some equities perform quite well (or don't give up much) even in a flat to down market. I'm looking to compile a list of about 10 of these,
especially the ones paying decent dividends and invest about half of my cash in them. The other 50% will be divided between a rental fixer upper,
emergency reserve and a nice chunk to buy and sell deals as I find them - especially on cars and motorcycles.

I'm sure there will be naysayers and that this methodology may not work for this or that reason. But, hey, it's something that feels comfortable
to me.

Find your zone and sleep tight at night.


Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 29, 2016, 02:16:02 PM
I'm in the same boat as you (almost to the dollar) and what I've been doing is looking at the charts of various stocks and how they have behaved
in relation to the Dow over the last 10/20 years. Not every stock takes a dive along with the general market, but some drift a little bit lower. Go to
Yahoo Finance and pull up the chart for AWK (American Water Works) for example. Then, choose the compare button and select "Dow". You'll
see that some equities perform quite well (or don't give up much) even in a flat to down market. I'm looking to compile a list of about 10 of these,
especially the ones paying decent dividends and invest about half of my cash in them. The other 50% will be divided between a rental fixer upper,
emergency reserve and a nice chunk to buy and sell deals as I find them - especially on cars and motorcycles.

I'm sure there will be naysayers and that this methodology may not work for this or that reason. But, hey, it's something that feels comfortable
to me.

Find your zone and sleep tight at night.

Isn't individual stock picking more risky than index investing? Of course, if you can find a 1992 Starbucks you will do amazing, but I do not think there are such companies now due to a very hot market :)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Fishfindr on September 29, 2016, 02:28:19 PM
I'm sure there is less risk in an index fund. But, plot AWK (just one example), against VTSAX and the Dow chart for 10 years.
You would have enjoyed less dramatic falls during the worse times and a tremendous advantage during the good times.

Just my humble opinion. Everyone has to do what makes them sleep better.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on September 29, 2016, 03:08:03 PM
I'm sure there is less risk in an index fund. But, plot AWK (just one example), against VTSAX and the Dow chart for 10 years.
You would have enjoyed less dramatic falls during the worse times and a tremendous advantage during the good times.

Just my humble opinion. Everyone has to do what makes them sleep better.

In fact, this is interesting. I need to try plotting a few of these stocks myself ;) Not sure if this is a good strategy for me, but definitely worth doing some analysis
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: waltworks on September 29, 2016, 03:26:11 PM
I'm sure there is less risk in an index fund. But, plot AWK (just one example), against VTSAX and the Dow chart for 10 years.
You would have enjoyed less dramatic falls during the worse times and a tremendous advantage during the good times.

Just my humble opinion. Everyone has to do what makes them sleep better.

Plot every stock in the S&P 500. You'll find a bunch like that. Because (wait for it!) RANDOMNESS.

Don't pick stocks, especially with the level of understanding you've displayed here.

_W
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman on September 29, 2016, 03:43:56 PM
I'm sure there is less risk in an index fund. But, plot AWK (just one example), against VTSAX and the Dow chart for 10 years.
You would have enjoyed less dramatic falls during the worse times and a tremendous advantage during the good times.

Just my humble opinion. Everyone has to do what makes them sleep better.

Ah yes, proof by anecdote!
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Fishfindr on September 29, 2016, 03:58:46 PM
Dividendman, maybe i need to look up the definition of that word.
But, I don't think that 10 years of solid performance is anecdotal.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Spork on September 29, 2016, 04:47:09 PM
Dividendman, maybe i need to look up the definition of that word.
But, I don't think that 10 years of solid performance is anecdotal.

I believe his point is that you can historically find a while lot of companies with 10+ years of solid performance that are out of business today.

Indexing lets you invest tiny shares of ALL OF THEM, which is, IMO, much safer.

I do play with individual stocks.  But I have less than 10% of my stash in them.  I have actually gotten really good returns from them.  Why?  Mostly just lucky.

The wording you used makes it sound like you're planning on tossing a few hundred thousand dollars into "one good stock."  I believe that is what is making dividendman (and myself, for that matter) a little worried about your approach.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman on September 29, 2016, 04:48:31 PM
Dividendman, maybe i need to look up the definition of that word.
But, I don't think that 10 years of solid performance is anecdotal.

Yeah, I wasn't referring to that. Spork got it. I was referring to the picking of the one stock vs other stocks that did poorly. I can pick out google and say the last 10 years had pretty solid performance. I don't know if 10 years ago I would have picked it over, say, yahoo, or picking apple over blackberry.

So, the anecdote is saying that you could have picked a stock that did better than the index, but of course, you could have just as easily picked one that did worse.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 07:36:59 PM
Personally I dont invest in the stock market period. I dont trust people and there is a ton of people behind each company. I only trust myself so I make my own companies. I can trust myself and my books.

That's great, but that's not investing, it's working.

-W
Very true sir but the returns are astronomically worth the extra work.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: waltworks on September 29, 2016, 09:28:30 PM
]Very true sir but the returns are astronomically worth the extra work.

Awesome. Keep working...forever? I'll be out riding my bike, because I trust, you know, other people in the aggregate as part of a capitalist system of goods/services exchanges. But to each their own.

-W
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 10:33:34 PM
]Very true sir but the returns are astronomically worth the extra work.

Awesome. Keep working...forever? I'll be out riding my bike, because I trust, you know, other people in the aggregate as part of a capitalist system of goods/services exchanges. But to each their own.

-W
Yes I will keep working, but for me its really not work !!!! Its my hobby !!!! MONEY IS AND ALWAYS WILL BE MY HOBBY !!!! I Love the having money for a hobby because there is always something new to learn and it never gets boring !!!!!
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: waltworks on September 29, 2016, 10:43:04 PM
Yes I will keep working, but for me its really not work !!!! Its my hobby !!!! MONEY IS AND ALWAYS WILL BE MY HOBBY !!!! I Love the having money for a hobby because there is always something new to learn and it never gets boring !!!!!

Why on earth are you posting this on an *early retirement* forum in an *investing* thread?

Seriously, WTF?

-W
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 10:53:12 PM
Yes I will keep working, but for me its really not work !!!! Its my hobby !!!! MONEY IS AND ALWAYS WILL BE MY HOBBY !!!! I Love the having money for a hobby because there is always something new to learn and it never gets boring !!!!!

Why on earth are you posting this on an *early retirement* forum in an *investing* thread?

Seriously, WTF?

-W
I dont know maybe I am lost, I once was lost, but now maybe you have found me oh great one. Please direct me to the proper place before I jump off a bridge and go nutty eating cherries in dandelion soup. Am I at the end of the road of gobbily gook ? Why does the pistons in my engine have a knocking noise while the red head lady is stalking me in this forum ?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: doug111 on September 29, 2016, 10:55:22 PM
]Very true sir but the returns are astronomically worth the extra work.

Awesome. Keep working...forever? I'll be out riding my bike, because I trust, you know, other people in the aggregate as part of a capitalist system of goods/services exchanges. But to each their own.

-W
Why would you ride a bike ? Too much risk because people can crash into you in the bike lane.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: nereo on September 30, 2016, 08:10:56 AM
]Very true sir but the returns are astronomically worth the extra work.

Awesome. Keep working...forever? I'll be out riding my bike, because I trust, you know, other people in the aggregate as part of a capitalist system of goods/services exchanges. But to each their own.

-W
Why would you ride a bike ? Too much risk because people can crash into you in the bike lane.

well, the benefits are thoroughly discussed throughout this forum and expounded upon by MMM, but they include:
1) riding a bike is extremely enjoyable for many of us
2) it's a great form of exercise, something the vast majority of us need more anyway
3) bikes are better for the environment
4) bike infrastructure costs far less than car infrastructure
5) bike fatalities are proportionately less than car fatalities, particularly when appropriate infrastructure is considered
6) total commuting cost is far less using a bike
7) the purchase cost of bikes is orders of magnitude less, as is maintenance and storage costs.

...there are others, but those are the big ones off the top of my head.
note: this is getting very far off the OP's topic.  If you wish to continue this discussion I suggest you create a new thread.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on October 01, 2016, 12:59:24 PM
Dividendman, maybe i need to look up the definition of that word.
But, I don't think that 10 years of solid performance is anecdotal.


I do play with individual stocks.  But I have less than 10% of my stash in them.  I have actually gotten really good returns from them.  Why?  Mostly just lucky.

well, if you can find a nice undervalued company with good growth potential, strong cash flow and good strategy... and the stock does well - this is not lucky
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: seattlecyclone on October 01, 2016, 02:47:13 PM
Dividendman, maybe i need to look up the definition of that word.
But, I don't think that 10 years of solid performance is anecdotal.


I do play with individual stocks.  But I have less than 10% of my stash in them.  I have actually gotten really good returns from them.  Why?  Mostly just lucky.

well, if you can find a nice undervalued company with good growth potential, strong cash flow and good strategy... and the stock does well - this is not lucky

Sure, but that's a pretty big "if." Remember, the mutual fund industry is full of people whose full-time job is to find undervalued stocks, and yet on the whole they aren't very good at it. They studied this stuff in school and then spend years immersed in information about different companies. They use that education and experience and time to pick stocks that do no better than index funds before the fund managers take their cut. If you, as an amateur, manage to do better than the pros, I'll say it's probably due more to luck than strategy.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on October 01, 2016, 03:36:30 PM
Dividendman, maybe i need to look up the definition of that word.
But, I don't think that 10 years of solid performance is anecdotal.


I do play with individual stocks.  But I have less than 10% of my stash in them.  I have actually gotten really good returns from them.  Why?  Mostly just lucky.

well, if you can find a nice undervalued company with good growth potential, strong cash flow and good strategy... and the stock does well - this is not lucky

Sure, but that's a pretty big "if." Remember, the mutual fund industry is full of people whose full-time job is to find undervalued stocks, and yet on the whole they aren't very good at it. They studied this stuff in school and then spend years immersed in information about different companies. They use that education and experience and time to pick stocks that do no better than index funds before the fund managers take their cut. If you, as an amateur, manage to do better than the pros, I'll say it's probably due more to luck than strategy.

good argument.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: drio on October 02, 2016, 02:00:59 PM
Very good thread. Thank you.

All the replies suggest using Vanguard for your investments. I haven't seen any comments regarding
Betterment or Wealthfront. Could you comment on that or point us to a relevant thread? From what
I have read I don't see major differences as the underlying index funds are from Vanguard. I am still
trying to get my head around Tax loss harvesting and the tax implications.

Congratulations on all those savings. Pretty impressive.

I am in a similar, but a much modest situation. I have 200k I want to invest. I am considering creating
two targets at betterment. One 80/20 and a 50/50. Then invest 75% in my the first and 25% in the other.

Looking forward to seeing what you think about the Betterment/Wealthfront option.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Roland of Gilead on October 02, 2016, 03:06:24 PM
DCA all the way.  Screw the statistics.   Statistics also say you are unlikely to get hit by lightning but I don't hold up a golf club in a thunderstorm.  If the coming election in November is not a thunderstorm, I don't know what is.

With dividends fairly low and inflation fairly low, it is not like you are losing very much by a modest DCA over lump sum.   

And yes, I have pulled back some stock investments to cash, which is really the same as suggesting someone DCA a lump sum of cash.  I am about 50% stocks, 10% bonds, 40% cash, which is about where I would say you want to DCA.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: MustacheAndaHalf on October 03, 2016, 01:54:30 AM
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.
The sentiment you read online or see in TV news reflects what's already priced in.  Those people already sold and are refusing to buy, and now stock prices reflect their actions.  You don't really gain from using information that the stock market already knows.  Think of it this way: would you invest right now as if "brexit" was the major news story?  Probably not because of how long has passed.  But the computers hooked up to the stock market respond in fractions of a second.  It's like your information is always months old by the time you want to put it to use.

The average investor sells when the stories scare them, and buys when stories are excited about the market.  And that approach is always too late.  It's why the average investor doesn't get the returns of the funds they own - their "dollar averaged returns" are much worse because of bad timing.  Unfortunately, news stories either need to scare or excite you about the stock market or they won't attract viewers.  So you aren't going to see good, dull advice on TV.

I favor Larry Swedroe's books, because he takes 30+ year performance to reach his main conclusions.  His book "What Wall Street Doesn't Want You To Know" might give you a new perspective on the market news.


Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: robartsd on October 03, 2016, 10:10:19 AM
All the replies suggest using Vanguard for your investments. I haven't seen any comments regarding
Betterment or Wealthfront. Could you comment on that or point us to a relevant thread? From what
I have read I don't see major differences as the underlying index funds are from Vanguard. I am still
trying to get my head around Tax loss harvesting and the tax implications.
Vanguard is simply the place to invest with the absolute lowest fees. Betterment and Wealthfront add on services to automate some portfolio maintenance tasks, but add fees to pay for this. Most here prefer to DIY and save some money - on average this is the best strategy for long-term investors.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: zephyr911 on October 03, 2016, 10:35:20 AM
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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dougules on October 03, 2016, 11:25:45 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.  That doesn't mean we're not in a bubble, but ask yourself if you think you're smarter than millions of talented people put together. 

I personally think the market is way high but there are several reasons that it doesn't matter:

a) I could be completely wrong. 

b) Most other things you can invest in right now are doing pretty pitifully.  You're getting almost no interest on your cash for instance. 

c) There are scenarios in which the market could correct itself without a crash. 

d) Major companies are nervously sitting on huge piles of cash right now just like you.  That cash is part of a company's value as much as their earnings.  Also, when they overcome their fears and invest, the market might very well take off. 

e) If you're in it for the long term, today's valuations aren't really that important. 

f) Don't forget the basic idea that you're buying pieces of companies.  Those companies are churning out profits every day, and every day you wait is a day you're missing out on that. 

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: ooeei on October 03, 2016, 01:50:40 PM
And the problem with the "world's worst market timer" article is that guy invested every year at the worst time over a long time frame.  This is far different than investing everything at once, where you could be down significantly.  Someone who invested at the peak in 2000 didn't see any positive return on their initial investment until around 2013.  That's a long time for a fearful investor to "stick it out."

How did you calculate this? Are you just using the price index? If so you aren't accounting for the dividends paid over the years. If you include those, I believe you would see a gain starting around 2006, then back down during the financial crisis, and you'd see gains again starting at the end of 2010. By 2013 you're up about 25-30%. Either way it's a long time to stick it out, but not quite as bad as you might initially think.

I'm looking at: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=8&endYear=2013&lastMonth=1&endDate=09%2F26%2F2016&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=0&showYield=false&reinvestDividends=true&symbol1=VFINX&allocation1_1=100

That's a good point, I forgot about dividends. I always forget the dividends...

I still maintain that 6 years is a long time for someone who's as fearful as OP to not sell.  Choosing a more conservative AA or DCA into the market seem like good ideas, if only for psychological reasons.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: MVal on October 03, 2016, 03:12:53 PM
For the record, six figures is well beyond an "ordinary income," at least in my world! Good Lord, that's a wad of cash. Then again, maybe I'm easily impressed as my FIRE number is a little over half of what you've got now.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Ramparts on October 04, 2016, 08:34:53 AM
I still maintain that 6 years is a long time for someone who's as fearful as OP to not sell.  Choosing a more conservative AA or DCA into the market seem like good ideas, if only for psychological reasons.

Agreed on all points!
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on October 04, 2016, 04:33:37 PM
Very good thread. Thank you.

All the replies suggest using Vanguard for your investments. I haven't seen any comments regarding
Betterment or Wealthfront. Could you comment on that or point us to a relevant thread? From what
I have read I don't see major differences as the underlying index funds are from Vanguard. I am still
trying to get my head around Tax loss harvesting and the tax implications.

Congratulations on all those savings. Pretty impressive.

I am in a similar, but a much modest situation. I have 200k I want to invest. I am considering creating
two targets at betterment. One 80/20 and a 50/50. Then invest 75% in my the first and 25% in the other.

Looking forward to seeing what you think about the Betterment/Wealthfront option.

I am not very familiar with Betterment/Wealthfront, but am looking at them now. I wish I had some knowledge on the index funds/Vanguard 5-6 yrs ago and found these forums much earlier. I have not entered the markets after the financial crisis due to losing some money and being very scared of the individual stocks. Had I known about the Vanguard funds, I would have definitely entered and benefited greatly as 2009-2011 was probably once in a lifetime opportunity. 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. There are just too many factors why this is happening - low interest rates, trillions of printed money granted to the banks, record levels of share buybacks by the corporates, everyone is forced to buy equity to keep with the inflation. The situation is absurd - the savers are really the ones who have taken a major hit. In the past, you could put money in the bank and keep up with inflation. Now they force you to buy stocks.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate on October 04, 2016, 04:36:15 PM
With dividends fairly low and inflation fairly low, it is not like you are losing very much by a modest DCA over lump sum.   


I disagree that the inflation is low. Look at the prices. Perhaps the gas is cheaper due to the oil prices and the food prices have not increased much, but everything else - rents, healthcare, education, services? This is not 2% inflation.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: robartsd 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: seattlecyclone 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: waltworks 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
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman 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).




Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: zephyr911 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: MoseyingAlong 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman 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
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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 :)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: neo von retorch 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?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Telecaster 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. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dividendman 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: tommie 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
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: radram 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.




Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: zephyr911 on October 06, 2016, 08:51:14 AM
With this stash and a likely high SR, e-fund is debatable.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: radram 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: zephyr911 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Bryan_in_Ger 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 (http://forum.mrmoneymustache.com/investor-alley/us-ger-mustachian-couple-needs-us-investment-advice/msg1013356/#msg1013356).

Cheers,
Bryan
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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 :)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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 (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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: radram 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dougules 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. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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?
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: dougules 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. 
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: radram 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.


Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: GreenEggs on October 08, 2016, 09:58:05 AM
Great thread. 

So many good opinions, links, & advice. 

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Telecaster on October 08, 2016, 11:39:37 AM
The savers have been punished by this government.

Not necessarily:

(https://moneygtl.files.wordpress.com/2010/09/cpi_bonds_2000.gif)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: JackReacher on October 10, 2016, 12:01:45 PM
Wow - I'm new here, lots of great links to read

-Very good thread. Thank you.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: illiterate 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
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Telecaster 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.   

(https://moneygtl.files.wordpress.com/2010/09/cpi_bonds_1955.gif)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Retire-Canada 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: minority_finance_mo 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
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: waltworks 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
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: Fireball 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: gerardc 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)
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: pumpkinlantern 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.
Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: FrugalFisherman10 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

Title: Re: USD 750,000 of cash, not invested, need advice.
Post by: jmwagner5 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.