VTSAX is pricey right now. Are you buying?

[Better Change]

After liquidating my high expense ratio Income Fund of America mutual fund (and more), I now have quite the chunk of change ready for purchasing Vanguard index funds.

I was planning on doing an 80/20 lazy portfolio.  But is now the time to be buying, or should I sit on my cash for a bit until the price of VTSAX comes down?  Am I overthinking this, and thus should go hog wild and buy everything RIGHT NOW?

Seeing all that cash sitting there doing nothing makes me sad. 

[Scandium]

Pricey compared to what?

[AlexK]

Wait for it to go up a few % and then buy, you will have learned a good lesson. If you buy now you won't learn anything.

[Better Change]

Compared to what it was a month or two ago.  Or ever.  It's at its highest ever now.  Do I wait a bit and see if it goes down, or accept that it's a good thing that it's on the way up and just buy now?

[dandarc]

You can't time the market.

I'm buying on Thursday.  That's when my paycheck comes in, so that's when I'll buy.

Stocks (and therefore stock mutual funds) are often at their "highest ever" pricing, because the market always goes up:

http://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/

[Philociraptor]

Compared to what it was a month or two ago.  Or ever.  It's at its highest ever now.  Do I wait a bit and see if it goes down, or accept that it's a good thing that it's on the way up and just buy now?

You buy now. What you're describing is market timing, which has been shown to drag down returns over a lifetime. Lump-sum investing beats dollar-cost-averaging 2/3rd of the time. Invest.

[Scandium]

Of course it's at its highest ever, that's what happens when something goes up most of the time. If the market didn't go up more than it goes down why would you invest in it?

[sol]

Yes, still buying.  Been buying every week since I started working,  will keep buying every week until I retire.

Money doesn't grow if you don't put it to work, and cash is guaranteed to lose value over time.

[NumberCruncher]

Compared to what it was a month or two ago.  Or ever.  It's at its highest ever now.  Do I wait a bit and see if it goes down, or accept that it's a good thing that it's on the way up and just buy now?

Someone on the forums actually did the figures and found that buying on an all time high gives slightly better returns than average. It probably wasn't even statistically significant, but I always think of that at times like these. :) 

we're going to put money into our IRAs in the next week or two as well as our normal weekly buys.

[skyrefuge]

If this money had just fallen out of the sky and into your lap, this market-timing strategy your proposing would still be wrong, but it would at least be slightly less-wrong than what you're actually proposing.

But this money didn't fall out of the sky. It fell out of another fund that was also "high"! Most of the stocks underlying AMECX are the very same stocks that are in VTSAX, so all you'll be doing is changing the conduit that's holding those "high" stocks for you. You've already bought when they are "low", so you aren't actually jumping in at a market peak anyway.

Furthermore, you probably shouldn't be putting all your money in VTSAX anyway. AMECX had only 70% stocks (and only 54% US stocks), so if you wanted to maintain that asset allocation, only about half your money should be going into VTSAX. Following the asset allocation in your Investment Policy Statement is a valid reason to not put all your money in VTSAX. Market-timing is not a valid reason.

[PathtoFIRE]

Buying and selling.

I am still in the accumulation phase, and as an overanalyzer, I keep track of my AA weekly. I am nearly at 81% stocks and 19% bonds(and cash and remaining junk that Morningstar reports is in most index funds). I'm about to make my monthly aftertax deposit, which I'm limiting myself currently to either VTSAX and VTIAX. Also, I'm a smidge heavy on international versus US (desired 70US/30international, actual 69.81/30.19), so that means VTSAX. So I sold within my 401k some for VBMPX, and then tomorrow will buy VTSAX.

Overall, it'll still be a net increase in VTSAX.

[James]

The idea you are looking for is "dollar cost averaging", but you don't need dollar cost averaging because, like skyrefuge said, this is coming from stocks and going into stocks. But you can read about dollar cost averaging here: http://en.wikipedia.org/wiki/Dollar_cost_averaging


Just place the money in whatever allocation you are choosing, don't wait and try to time the market.

[trailrated]

I for one, refuse to purchase VTSAX till it drops back down to it's August 2002 price of $18.70...it would have been foolish to purchase at any other time.

This is a joke, just throw it in and forget about it. Unless you plan on using it within the next few years, then you might want a shorter term investment.

[mtn]

As others have already said, just buy it (and possibly others) now rather than later.

The only time that I personally recommend trying to time the market is when the market is down, you should maybe could consider increasing the normal allocation until it goes back up. Or just increasing it until you retire, if you find that the increase in allocation hasn't changed your life at all.

[Scandium]

Buying and selling.

I am still in the accumulation phase, and as an overanalyzer, I keep track of my AA weekly. I am nearly at 81% stocks and 19% bonds(and cash and remaining junk that Morningstar reports is in most index funds). I'm about to make my monthly aftertax deposit, which I'm limiting myself currently to either VTSAX and VTIAX. Also, I'm a smidge heavy on international versus US (desired 70US/30international, actual 69.81/30.19), so that means VTSAX. So I sold within my 401k some for VBMPX, and then tomorrow will buy VTSAX.

Overall, it'll still be a net increase in VTSAX.

wow
a) weekly, or even monthly rebalancing is way too compulsive. Once per year is enough
b) rebalancing when off by 0.19% is also insanely excessive.

[Louisville]

Buying and selling.

I am still in the accumulation phase, and as an overanalyzer, I keep track of my AA weekly. I am nearly at 81% stocks and 19% bonds(and cash and remaining junk that Morningstar reports is in most index funds). I'm about to make my monthly aftertax deposit, which I'm limiting myself currently to either VTSAX and VTIAX. Also, I'm a smidge heavy on international versus US (desired 70US/30international, actual 69.81/30.19), so that means VTSAX. So I sold within my 401k some for VBMPX, and then tomorrow will buy VTSAX.

Overall, it'll still be a net increase in VTSAX.

wow
a) weekly, or even monthly rebalancing is way too compulsive. Once per year is enough
b) rebalancing when off by 0.19% is also insanely excessive.

Meh. What's the problem, as long as it's not incurring any fees?

[Scandium]

Buying and selling.

I am still in the accumulation phase, and as an overanalyzer, I keep track of my AA weekly. I am nearly at 81% stocks and 19% bonds(and cash and remaining junk that Morningstar reports is in most index funds). I'm about to make my monthly aftertax deposit, which I'm limiting myself currently to either VTSAX and VTIAX. Also, I'm a smidge heavy on international versus US (desired 70US/30international, actual 69.81/30.19), so that means VTSAX. So I sold within my 401k some for VBMPX, and then tomorrow will buy VTSAX.

Overall, it'll still be a net increase in VTSAX.

wow
a) weekly, or even monthly rebalancing is way too compulsive. Once per year is enough
b) rebalancing when off by 0.19% is also insanely excessive.

Meh. What's the problem, as long as it's not incurring any fees?

It's a PIA? Heard of a study that found yearly rebalancing have higher return then every 6 months, but will have to find it again

[PathtoFIRE]

wow
a) weekly, or even monthly rebalancing is way too compulsive. Once per year is enough
b) rebalancing when off by 0.19% is also insanely excessive.

I agree it's a bit compulsive or excessive, but the actual rebalancing is rare, I'm just always keeping an eye on where new funds should go and use that spreadsheet to decide, so I think that's far less crazy. It just so happened that my new purchase would push me over 81%, so I figured hey, it's all transaction and tax fee (essentially) to me, why not! I know this would drive my DW crazy to witness in real time, which is why I have no problem with her keeping her TSP in a lifecycle fund, and haven't asked for access in order to use that to keep our balances balanced.

[TheOldestYoungMan]

I actually did buy today!  Deposited rental income at the bank and put it in as soon as I got it.  I try not to wait.  You never know when the best day in the history of the market is coming!  My friends keep asking me to let them know when it drops so they can buy in, but the "recent history" low for VTSAX hasn't dropped below the "previous history high" in, like, awhile.

If you're really worried about it you can dollar cost average the money in over an arbitrary time period that gives you the warm and fuzzies.

https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf

It's vanguard research and yea they have a vested interest in getting you to give them your money but it seems like a solid analysis.

[Retire-Canada]

I'm buying every month. I agree with the PP if there is a crash I'll be saving as aggressively as I can to buy more equities.

Psychologically it's a bit tough to buy when the markets are high, but I think it would drive me more crazy to watch my investments grow while my cash account stagnates.

-- Vik

[hoodedfalcon]

Putting $5500 in this week to fund my Traditional IRA. JUST DO IT. :)

[hodedofome]

Someone on the forums actually did the figures and found that buying on an all time high gives slightly better returns than average. It probably wasn't even statistically significant, but I always think of that at times like these. :) 

This white paper would agree with you. https://drive.google.com/file/d/0BzyyTlvGE-T2MHlLbS1tbzNVVDA/view?usp=sharing

[RapmasterD]

OP - You're 30 years old. Buy the freakin' thing and let it simmer for 20-25 years or so as you keep on adding ingredients to the pot over time as you can....Then see how you're doin' in 2040. Then put the lid on the pot and let her cook for another 20 years.

[retireatbirth]

Buying and selling.

I am still in the accumulation phase, and as an overanalyzer, I keep track of my AA weekly. I am nearly at 81% stocks and 19% bonds(and cash and remaining junk that Morningstar reports is in most index funds). I'm about to make my monthly aftertax deposit, which I'm limiting myself currently to either VTSAX and VTIAX. Also, I'm a smidge heavy on international versus US (desired 70US/30international, actual 69.81/30.19), so that means VTSAX. So I sold within my 401k some for VBMPX, and then tomorrow will buy VTSAX.

Overall, it'll still be a net increase in VTSAX.

wow
a) weekly, or even monthly rebalancing is way too compulsive. Once per year is enough
b) rebalancing when off by 0.19% is also insanely excessive.

Meh. What's the problem, as long as it's not incurring any fees?

You should ride the momentum for a while. Indices dont just outperform for a week, usually there will be a trend for a while which is why you should only rebalance every once in a while.

[Grateful Stache]

OP - You're 30 years old. Buy the freakin' thing and let it simmer for 20-25 years or so as you keep on adding ingredients to the pot over time as you can....Then see how you're doin' in 2040. Then put the lid on the pot and let her cook for another 20 years.

This.

[Heckler]

If this money had just fallen out of the sky and into your lap, this market-timing strategy your proposing would still be wrong, but it would at least be slightly less-wrong than what you're actually proposing.

But this money didn't fall out of the sky. It fell out of another fund that was also "high"! Most of the stocks underlying AMECX are the very same stocks that are in VTSAX, so all you'll be doing is changing the conduit that's holding those "high" stocks for you. You've already bought when they are "low", so you aren't actually jumping in at a market peak anyway.

Thank you for this clear explanation that my accumulation plan is valid!  I'm regularly contributing to a work sponsored Sunlife plan of SP500 and EAFE index funds and then annually pulling it out into my self directed Vanguard account.

[Retire-Canada]

You guys got me motivated and I bought extra this month. :)

-- Vik

[2Birds1Stone]

I'll be dumping $21k in later this week when my rollover check clears. 80% Stock fund 20% bond fund.

 

You guys got me motivated and I bought extra this month. :)

-- Vik

[I'm a red panda]

It is best to use a time machine to go back and invest when the market was low.  Of course, by doing that, you'll have already invested when the market was low and no longer need to build the time machine to go back and do it.

So you should probably just buy now.