Author Topic: Where to invest my cash NOW?  (Read 6240 times)

walkerstudios

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Where to invest my cash NOW?
« on: November 25, 2019, 08:16:26 AM »
First post, so hello to all! New here.
I am sitting on a sizable amount of cash [for me] waiting for a correction that just won't seem to come. I've been waiting 3+ years!
Anyway, the market is at an all-time high and I'm one of those guys who thinks I can crash the market simply by buying in :), so I am looking for thoughts on where to place cash - non-retirement money - that hasn't been touched [thank God]. Any thoughts are welcome. I've dipped my toe in bitcoin [the recent crash over the last several days? Yup, that was me.}
Looking forward to exploring the board and thanks in advance.
Walker

GuitarStv

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Re: Where to invest my cash NOW?
« Reply #1 on: November 25, 2019, 08:19:15 AM »
A mix of total market index funds and bonds as your investment allocation plan dictates.

Don't gamble on individual stocks, bitcoin, magic beans, or Nigerian princes.

Stimpy

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Re: Where to invest my cash NOW?
« Reply #2 on: November 25, 2019, 08:37:19 AM »
First post, so hello to all! New here.
I am sitting on a sizable amount of cash [for me] waiting for a correction that just won't seem to come. I've been waiting 3+ years!
Anyway, the market is at an all-time high and I'm one of those guys who thinks I can crash the market simply by buying in :), so I am looking for thoughts on where to place cash - non-retirement money - that hasn't been touched [thank God]. Any thoughts are welcome. I've dipped my toe in bitcoin [the recent crash over the last several days? Yup, that was me.}
Looking forward to exploring the board and thanks in advance.
Walker

Hmm, and here I thought it was me, though I was only considering buying into bitcoin..... (something like $100, but still)

GuitarStv has it right, tossing it in to VTI (VTSAX) and BND (VBTLX) would be fine.   

If your truly scared of a market drop, I suggest to just start making small consistent purchases, over say, a year.  That way your in if they goes up, or down, and if the market DOES drop dramatically, your buying small chunks at a discount that will eventually come back and make you MORE money!

terran

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Re: Where to invest my cash NOW?
« Reply #3 on: November 25, 2019, 09:05:11 AM »
The market spends much of its time at an all time high (that's what happens to something that usually goes up). See https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/. Short version: as long as you buy and hold, even if you ONLY invested at the very peak, you'd still do pretty well.

It sounds like you're trying to be a market timer. And you're bad at it (don't worry, most of us would be, which is why we don't try).
« Last Edit: November 25, 2019, 09:07:04 AM by terran »

walkerstudios

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Re: Where to invest my cash NOW?
« Reply #4 on: November 25, 2019, 09:24:24 AM »
I am just as bad at timing as most are, probably worse. My thinking has been - I can't spot a top or a bottom, but I know what a 10-20% retracement from a high looks like. I can do THAT math! Aside from last Christmas, and that lasted for a split-second, there hasn't been much downdraft.
Usually I am in Vanguard total market, total bond/higher yield bond packaging.

Rob_bob

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Re: Where to invest my cash NOW?
« Reply #5 on: November 25, 2019, 04:27:47 PM »
Well what is your timeline for this money?  Will you need it in a few years or not for many? Do you have a good emergency fund?

If you don't need it for many years and you already have a good sized portfolio you could just sit on it like you have been doing, there will be a good market correction at some time, of course the bottom of that correction might be higher than the current market.  Or just lump sum or DCA in, whatever works for you.

Telecaster

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Re: Where to invest my cash NOW?
« Reply #6 on: November 25, 2019, 05:41:09 PM »
I am just as bad at timing as most are, probably worse. My thinking has been - I can't spot a top or a bottom, but I know what a 10-20% retracement from a high looks like. I can do THAT math! Aside from last Christmas, and that lasted for a split-second, there hasn't been much downdraft.
Usually I am in Vanguard total market, total bond/higher yield bond packaging.

What does a 50% increase from the high look like?  Because that's what you gave up (including dividends) by waiting for a better deal.


Buffaloski Boris

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Re: Where to invest my cash NOW?
« Reply #7 on: November 25, 2019, 06:02:46 PM »
There are significant differences in opinion regarding what investments make sense. Most, but by no means all here at MMM forums are of the view that you should put a large portion into a cap weighted US equities index fund or ETF.  Iím in the minority. Speaking for myself, being heavy cash is just a fine place to be. Thatís also a reflection of of my own personal situation (close to retirement, few options in my 401k), and having a very contrarian/skeptical worldview.

Iím not an investment advisor, and am loathe to provide specific investment advice. My thoughts are that in the end, the best portfolios are highly diversified across asset classes, countries, and styles. And cash is not necessarily a bad place to be. As for cap weight funds, everyone should understand what theyíre getting into. The big 500 stock funds and the so called total market funds are usually cap weighted meaning most of what youíre getting is the top 50 or 60 stocks, with a minuscule percentage allocated to the rest. Iím not interested in cap weighted funds, at least in the US. YMMV.

nancyfrank232

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Re: Where to invest my cash NOW?
« Reply #8 on: November 25, 2019, 06:56:16 PM »
First post, so hello to all! New here.
I am sitting on a sizable amount of cash [for me] waiting for a correction that just won't seem to come. I've been waiting 3+ years!
Anyway, the market is at an all-time high and I'm one of those guys who thinks I can crash the market simply by buying in :), so I am looking for thoughts on where to place cash - non-retirement money - that hasn't been touched [thank God]. Any thoughts are welcome. I've dipped my toe in bitcoin [the recent crash over the last several days? Yup, that was me.}
Looking forward to exploring the board and thanks in advance.
Walker

Put it in a HISA and stop picking at it ;)

MustacheAndaHalf

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Re: Where to invest my cash NOW?
« Reply #9 on: November 26, 2019, 01:58:55 AM »
@walkerstudios - I recall a quote from John D Rockefeller saying he knew to get out of the stock market when his shoe shine boy started giving him stock tips (before the great depression).  Everyone always buying is not sustainable... but that's the most likely time for you to hear good things about the stock market.

Couldn't you solve the timing problem by investing slowly?

For example, every month you could move 2% of your assets into low-cost stock funds.  After a year, you'd have about 1/4th of your assets in stocks (most years, stocks outgrow cash, so it will likely be more).  You can stop at 50-60% equities, which is a common allocation for people who have retired (60% equities / 40% bonds).

It may help to read books based on the history of the stock market.  There's a really short book (under 100 pgs) called "The Investment Answer" that is probably at your local library.  As you see the history of the stock market, you might gain a better understanding of it.

MDM

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Re: Where to invest my cash NOW?
« Reply #10 on: November 26, 2019, 07:25:41 PM »
Anyway, the market is at an all-time high....
As of a few years ago, there was an average of about 12 new highs every year.

One question: can you do better than the worldís worst market timer?

Car Jack

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Re: Where to invest my cash NOW?
« Reply #11 on: November 27, 2019, 06:40:14 AM »
If it feels like the market keeps hitting all time highs, it's because it has.  This isn't new.  Going back 100 years, the market hits a new high every 18 days.  So if you're waiting, you missed the bus already.  Get in now so you can at least take the late bus in.  The longer you wait for the "correction", "drop", "crash", whatever, the more you're missing out.

habanero

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Re: Where to invest my cash NOW?
« Reply #12 on: November 27, 2019, 06:55:41 AM »
The main problem for most people is that they don't really know what their actual risk tolerance is because it hasn't been tested properly as there has been no large (and lasting) correction in the last 10 years. And even some who witnessed the last first-hand might not have had that much riding in the market back then. A drawdown of 50% probably feels quite different is the nominal sum it corresponds to is 1 million dollars rather than 25k dollars or whatever.

The theory and math is fairly straightforward, in the long run it almost always to jump in as soon as possible, but that is contingent on the fact that you do not freak out and sell at a Bad Time and don't get back in before you have missed out on a lot of the rebound.

100% equities has the highest expected returns, which must not be confused with actual returns in your own personal timeframe. However, 100% equities also by far has the highest volatility. Having somewhere in the 10-30% range in bonds does not reduce historical returns by very much but greatly reduces volatility. But the bond yields these days are unprecedented so that might not be a very good guide for future returns.

But regardless of AA, evidence shows throwing it all in is generally the best way to do it in the long term.
« Last Edit: November 27, 2019, 07:49:30 AM by habaneroNorway »

walkerstudios

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Re: Where to invest my cash NOW?
« Reply #13 on: November 27, 2019, 07:54:55 AM »
Thanks for all the replies. I freely admit that I bungled the Trump Bump, but what's done is done. We can only go forward from here! I've waited this long, I am thinking about waiting for the next election cycle. I think the market is pricing in a Biden/moderate vs Trump runoff, which would lead me to think it's time to start plowing back in Ö slowly. If Warren were to get the nod, I think the market would be faltering by now. Who knows though.
While money is money, this money is not tied to retirement/inheritance [that is all secured] so I can be a bit riskier with it, aggressive, so my tolerance for risk may be higher than others. I'm 50, wife, no kids, no massive debts, so that affects my rationalizing of market timing. But everyone is right. I could pick a bottom tomorrow that is still higher than if I'd stayed in 3+ years ago. Se la vie.
I am thinking about putting in 1% per week which would give me about two years for things to falter. I'm not trying to pick a bottom but buy into a downdraft that won't seem to come.
Thanks again - I really do appreciate people's thoughts on the matter. They all have their merits. I also enjoy the snark-free zone of this forum. Like sports talk shows and blogs, financial chatrooms can be rife with 'haha bag-holder' childishness.
Happy investing everyone, and good luck and happy Thanksgiving to all!
Walker

frugal_c

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Re: Where to invest my cash NOW?
« Reply #14 on: November 27, 2019, 11:41:36 AM »
I think the 1% / week idea is not bad at all.

I have decided that our cash reserve is way too high and want to invest it, so I am in a similar situation.  I am really thinking about using a 60/40 stock/bond fund.  I would then move the bond allocation way down (by moving between funds) if there is a recession.   It's just psychologically easier for me to hit the buy button with this strategy and like you, I can afford to give up some gains.

Buffaloski Boris

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Re: Where to invest my cash NOW?
« Reply #15 on: November 27, 2019, 06:07:53 PM »
I think the 1% / week idea is not bad at all.

I have decided that our cash reserve is way too high and want to invest it, so I am in a similar situation.  I am really thinking about using a 60/40 stock/bond fund.  I would then move the bond allocation way down (by moving between funds) if there is a recession.   It's just psychologically easier for me to hit the buy button with this strategy and like you, I can afford to give up some gains.

Dittoes. If the OP has decided on a strategy like this, DCAing makes sense.

MoneyQuirk

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Re: Where to invest my cash NOW?
« Reply #16 on: December 01, 2019, 10:33:20 PM »
I'm going to jump on the 1% DCA over 2 years. That is really good (assuming minimal brokerage fees - in my personal experience a lot of brokerages eat up fees pretty badly when you put in small amounts. For example, if you're paying $5 commission, and putting in $1000 you're automatically losing 0.5%. On the other hand, if you're dropping in $5000 at a time, then you're only losing 0.1% on the spot.)

So my only recommendation might be to spread it out if your brokerage fees are relatively high. (Like 3% every quarter).

Now if only I could convince my brother to do this. He's sitting on cash saying "oh yeah, I'm waiting for the next crash."

GuitarStv

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Re: Where to invest my cash NOW?
« Reply #17 on: December 02, 2019, 08:21:13 AM »
Most of the time, investing all the money you have to invest right away is better than dollar cost averaging.

Telecaster

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Re: Where to invest my cash NOW?
« Reply #18 on: December 02, 2019, 03:38:12 PM »
Most of the time, investing all the money you have to invest right away is better than dollar cost averaging.

And eventually you are all in anyway.   The OP didn't say what his investing horizon is, but if we are talking retirement then it could be 20-30 years or more.  In that case, the starting point almost doesn't matter. 

Bernard

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Re: Where to invest my cash NOW?
« Reply #19 on: December 02, 2019, 06:37:50 PM »
It's almost impossible to time the market. But if you see the elections next year as an event that can trigger a big correction, you'll have to know who wins. If Trump wins again, all is good. If a Democrat wins, the market may correct. Or not. So would it make sense to keep all cash till the end of October? Maybe. Or maybe not.

habanero

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Re: Where to invest my cash NOW?
« Reply #20 on: December 03, 2019, 01:38:30 AM »
Before the 2016 elections a large US banks published expected movements for 10 assets (stocks, bonds, oil, etc) in the case of a Trump victory. Out of the 10 estimates, they not only got the magnitude wrong, but even the direction of 9 out of 10. The only thing they got right is was that the Mexican Peso would weaken against the USD, and frankly that does not give you any points to get right.

Just as a remainder on how difficult it is to predict what markets will do.

vand

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Re: Where to invest my cash NOW?
« Reply #21 on: December 03, 2019, 03:32:15 AM »
OP is asking the wrong question.
The real question is not if I should invest right now (to which the answer is YES), the question is what should my asset allocation be?

Not the first time I've posted this, probably won't be the last time:

https://ofdollarsanddata.com/the-cost-of-waiting/

MTBmustachian

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Re: Where to invest my cash NOW?
« Reply #22 on: December 03, 2019, 03:49:57 AM »
https://ofdollarsanddata.com/the-cost-of-waiting/

Oh my god I needed to read that. Been lurking on this thread because I have a big lump sum that I need to invest, and have been debating how much cash to keep (or not keep) on hand.

Thanks!

Linea_Norway

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Re: Where to invest my cash NOW?
« Reply #23 on: December 03, 2019, 04:08:24 AM »
https://ofdollarsanddata.com/the-cost-of-waiting/

Oh my god I needed to read that. Been lurking on this thread because I have a big lump sum that I need to invest, and have been debating how much cash to keep (or not keep) on hand.

Thanks!

It is indeed interesting. But the article writes about a 2% inflation on not invested money. We can put money in a savings account that gives 2% interest and we have a 2,5% inflation. So our nett inflation would only be 0,5%.

Just as a test, I bought a small sum of some bonds a while ago. They have only been underperforming (became worth less than what I put in), while my stocks have gone up. The bonds that I chose are in a low cost fond that contains loans to countries with good credit rating.

In maybe half a year, we will have a large sum to invest (2/3 of our nett worth). We plan to set half of it at least on a savings account, as we will probably need it within 1-2 years. And we are still figuring out where to put the rest. Some (maybe half) probably in stock. But do I trust bond funds available in my country enough to buy a lot of those?

Scandium

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Re: Where to invest my cash NOW?
« Reply #24 on: December 05, 2019, 08:14:46 AM »
I am just as bad at timing as most are, probably worse. My thinking has been - I can't spot a top or a bottom, but I know what a 10-20% retracement from a high looks like. I can do THAT math! Aside from last Christmas, and that lasted for a split-second, there hasn't been much downdraft.
Usually I am in Vanguard total market, total bond/higher yield bond packaging.

What does a 50% increase from the high look like?  Because that's what you gave up (including dividends) by waiting for a better deal.
Pretty spot on. From 2015 until now a 100% US fund would have increased 64%. A 50/50 US/world fund would have increased 45%. That's the money OP has missed out on (so far..). Or; in 2015 the S&P 500 was around 2000, it is now at 3100.

So OP better be hoping for a drop of more than 30% just to make up the growth they missed out on in that time. But that would of course just put you at the same spot you would have been had you invested 3+ years ago. So by waiting for a 10-20% drop, you now need a 40%+ drop for that to make any sense. Now of course if there had been a drop in that time you could have patted yourself on the back and been smarter than all of us here. But since the market goes up more than it goes down (if it didn't why would anyone invest in it..?) that's less likely than not to happen.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults

FrankExchangeOfViews

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Re: Where to invest my cash NOW?
« Reply #25 on: December 08, 2019, 04:13:12 PM »
I'm in a similar position as far as having too much cash. Im parking in a savings account to us for living expenses and maxing out 403b contributions. In two years I'll exhaust the savings account (poor grad student), so I'll essentially be dollar cost averaging the balance into a tax-sheltered account.

If something like that doesn't work for you find another way to ladder the money into the market that works for your risk tolerance. I.e  drop it into a 20/80 stocks/bonds account and up the stocks allocation by 5% every month or two so that you decrease your exposure to timing risk. You could also do something similar with call options on SPY that expire at different dates so you buy your way in slowly but can avoid buys at bad prices. Not saying these are the best way to max returns but that they might work for your mindset to investing.

Financial.Velociraptor

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Re: Where to invest my cash NOW?
« Reply #26 on: December 08, 2019, 04:55:42 PM »
If you have to ask where to invest, the answer is probably "in a low cost index fund".  A more sophisticated answer might be in a "mix of low cost index funds that includes a predetermined bond/fixed income allocation."

I'm one of the more notorious active traders here but I recommend time in the market versus timing the market if you do not have enough market knowledge to have confidence to answer the question for yourself.  Be glad to talk via PM if you want some ideas on allocation, risk tolerance, the market cycle, etc.

frugalnacho

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Re: Where to invest my cash NOW?
« Reply #27 on: December 09, 2019, 10:44:53 AM »
Thanks for all the replies. I freely admit that I bungled the Trump Bump, but what's done is done. We can only go forward from here! I've waited this long, I am thinking about waiting for the next election cycle. I think the market is pricing in a Biden/moderate vs Trump runoff, which would lead me to think it's time to start plowing back in Ö slowly. If Warren were to get the nod, I think the market would be faltering by now. Who knows though.
While money is money, this money is not tied to retirement/inheritance [that is all secured] so I can be a bit riskier with it, aggressive, so my tolerance for risk may be higher than others. I'm 50, wife, no kids, no massive debts, so that affects my rationalizing of market timing. But everyone is right. I could pick a bottom tomorrow that is still higher than if I'd stayed in 3+ years ago. Se la vie.
I am thinking about putting in 1% per week which would give me about two years for things to falter. I'm not trying to pick a bottom but buy into a downdraft that won't seem to come.
Thanks again - I really do appreciate people's thoughts on the matter. They all have their merits. I also enjoy the snark-free zone of this forum. Like sports talk shows and blogs, financial chatrooms can be rife with 'haha bag-holder' childishness.
Happy investing everyone, and good luck and happy Thanksgiving to all!
Walker

So basically you made a terrible mistake and bungled it for the last 3 years and missed out on tremendous growth and you know it, and your conclusion is compound this mistake by waiting even longer because you think you can time the market? What makes you think you have a better assessment of price of stocks and their anticipated future value than literally everyone in the world that is currently investing? You can't buy stocks below the current market price because no one that currently owns them is willing to sell them for less than that price.  If they believed the market was going to decrease they would be willing to sell for less and you'd be able to buy for less...but you can't because they won't because they don't. 

To me your entire argument sounds like "I can't time the market.  I tried, and failed. ...but I might just be able to time the market moving forward"

Systems101

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Re: Where to invest my cash NOW?
« Reply #28 on: December 09, 2019, 07:09:00 PM »
I've waited this long, I am thinking about waiting for the next election cycle

Politics and Investing don't mix

talltexan

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Re: Where to invest my cash NOW?
« Reply #29 on: December 10, 2019, 02:10:27 PM »
The problem is that understanding politics is done through a sense of filters about what is and is not important.

The filters that can lead you to long-term value creation most reliably are about ignoring that noise. So the filters for one are the noise for the other.

MTBmustachian

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Re: Where to invest my cash NOW?
« Reply #30 on: December 11, 2019, 09:11:21 AM »
Thanks for all the insight guys! Here's my update based on all the research I've been doing. and the discussion here. Originally posted on this thread (https://forum.mrmoneymustache.com/investor-alley/how-much-cash-do-you-keep-on-hand-for-an-emergency-fund/50/) , but sharing here because it's relevant:

Thanks so much everybody for chiming in and sharing your opinions and numbers. This has proved super helpful!

Iíve personally decided to keep about $10,000-ish in fully-liquid cash kept in a money market account that currently pays 2.05%. Iíll probably also keep a couple grand in my checking account (also bears a little interest, but not much) as a buffer for expenses coming and going.

The rest of the lump sum Iím moving into the market, but since Iím dropping a huge amount in for my personal position in life (about 6x what I already had invested, about 1.5x my annual salary), Iím starting with a much higher bond allocation than is my target (about 40%). Iím using this to protect against a major market downturn in the near term, in case I really want or need to access some of my funds. (For example, if I change my mind and decide I want to buy a house sooner rather than later.) Then, Iíll use my regular ongoing investments to bring my asset allocation slowly back to where I want it to be, about 90/10.
 
This strategy was influenced in part my this article: https://ofdollarsanddata.com/the-cost-of-waiting/ and all of my other research on DCA vs lump sum investing.

So thatís where Iím at right now 🙂 May reduce the amount of emergency fund cash over time if Iím feeling comfortable with it.

Dumdriver

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Re: Where to invest my cash NOW?
« Reply #31 on: December 19, 2019, 05:13:23 PM »
I wouldn't worry too much about timing the market. If you pick good companies then you know the stock will probably bounce back after the correction, if said stock is even effected at all. If it were me I would start buying. If there is a correction I could always buy more when it happens. Some stocks may not correct. They might just loiter where they have good support for a time, but not ever drop a noteworthy range, causing you to miss out on growth.

I did well buying NVDA after Cryptocurrency crashed it a bit. I bought it when it dropped pretty much to its lowest and I've been seeing gains there since. Over all though, I am not all that bright about market timing.

BUT that's just me. My brother who knows a lot about stock investing will tell you to hang on to your cash because a correction is coming. And when it comes you'll have a lot of buying opportunity. He also told me to sell my bonds. He explained it to me but it's a bit over my head. I haven't sold anything yet though.

P.S. Quit crashing the market. lol ;)
« Last Edit: December 19, 2019, 05:15:59 PM by Dumdriver »

talltexan

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Re: Where to invest my cash NOW?
« Reply #32 on: December 30, 2019, 02:01:25 PM »
So monthly DCA (per pay period) is obviously the Mustachian gold standard.

But what if someone is contemplating a $6,000 IRA contribution this week? It sure feels tempting to wait.

But we have the money now.

MDM

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Re: Where to invest my cash NOW?
« Reply #33 on: December 30, 2019, 02:25:40 PM »
So monthly DCA (per pay period) is obviously the Mustachian gold standard.
Obviously?  Many would demur. :)

E.g., see http://www.schwab.com/public/schwab/nn/articles/Does-Market-Timing-Work.

Rob_bob

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Re: Where to invest my cash NOW?
« Reply #34 on: December 30, 2019, 07:21:45 PM »
So monthly DCA (per pay period) is obviously the Mustachian gold standard.

But what if someone is contemplating a $6,000 IRA contribution this week? It sure feels tempting to wait.

But we have the money now.

If I had new money to put in an IRA I would lump sum it ASAP.

frugalnacho

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Re: Where to invest my cash NOW?
« Reply #35 on: December 31, 2019, 06:58:45 AM »
I would also invest lump sum instead of DCA.  I get the emotional reaction of "OMG the market is at or near the top (because it frequently is)", but statistically it's better to put it in ASAP so that's what I do. 

EliteZags

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Re: Where to invest my cash NOW?
« Reply #36 on: January 02, 2020, 12:08:13 PM »
Quote
Where to invest my cash NOW?

did you call J.G. Whitworth?
« Last Edit: January 02, 2020, 02:00:18 PM by EliteZags »

GreenEggs

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Re: Where to invest my cash NOW?
« Reply #37 on: January 02, 2020, 01:58:47 PM »
Walker,


Why not at least put 50% into an index fund today?  That way you'll only be "half wrong" if your fears materialize.  As it is you've been 100% wrong. 


I just noticed that VIGAX posted over 37% gains for 2019.  I already have a lot of VTSAX and VITAX, and have been sitting on a pile of cash hoping for a correction like you have.  Multiplying my pile X 37% makes me feel quite foolish today, but hey "I didn't lose it, right?". 


So, go ahead and open an account and make an initial investment.  After you get started it's easier to continue.