Author Topic: I have a ton of uninvested cash - is now a good time?  (Read 4114 times)

lwid

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I have a ton of uninvested cash - is now a good time?
« on: March 02, 2020, 07:57:24 AM »
Hi all,

I'm grateful for this community. I've been retired for 3 years, but received a windfall payment late last year that I've just had sitting there. I've started to wonder if now is a good time to start investing it into the stock market or if there may be a further hit coming. I'd appreciate any analysis or thoughts on this. For now, my strategy is to slowly buy up stocks over the coming weeks/months while observing the market and see if it's a good time period to reinvest it all/most of it now.

If you have any ideas or thoughts on this, I'd love your feedback, thanks!

May2030

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #1 on: March 02, 2020, 08:03:32 AM »
Paula Pant makes some interesting comments about market timing at the end of the latest Afford Anything podcast episode. From approx 60 mins on.

 https://affordanything.com/244-why-i-quit-my-job-with-no-savings-when-my-wife-was-five-months-pregnant-and-what-happened-next-with-grant-baldwin/

nereo

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #2 on: March 02, 2020, 08:07:01 AM »
Anytime you start looking at what the market is currently doing an making plans based on that you are - by definition - trying to time the market.  And that rarely works out very well.

Instead, I would sit down and write out an Investor Policy Statement, which describes your goals, risk threshold, timelines etc. 

Then decide how you would like all of your moeny to be allocated (this is your Asset Allocation, or AA).  Once you have made those determinations - invest your money based on those documents, and do NOT try to take into account all the various market wobbles and talking-head proclaimations. 

does that make sense?

lwid

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #3 on: March 02, 2020, 11:39:47 AM »
This is all very very helpful, thanks so much! I'm going to research a bit more around Investor Policy Statement - do you have any resources off the bat or simply googling will do? The Asset Allocation also makes a lot of sense, although I wonder if there's guidance on that based off of what I have in the investor policy statement? I'd imagine there naturally is...

Anytime you start looking at what the market is currently doing an making plans based on that you are - by definition - trying to time the market.  And that rarely works out very well.

Instead, I would sit down and write out an Investor Policy Statement, which describes your goals, risk threshold, timelines etc. 

Then decide how you would like all of your moeny to be allocated (this is your Asset Allocation, or AA).  Once you have made those determinations - invest your money based on those documents, and do NOT try to take into account all the various market wobbles and talking-head proclaimations. 

does that make sense?

nereo

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #4 on: March 02, 2020, 11:47:11 AM »
This is all very very helpful, thanks so much! I'm going to research a bit more around Investor Policy Statement - do you have any resources off the bat or simply googling will do? The Asset Allocation also makes a lot of sense, although I wonder if there's guidance on that based off of what I have in the investor policy statement? I'd imagine there naturally is...

resources:
https://www.investopedia.com/terms/i/ips.asp
https://www.bogleheads.org/wiki/Investment_policy_statement

one way of making an IPS:
https://www.morningstar.com/articles/808692/how-to-create-an-investment-policy-statement
another example:
https://www.investopedia.com/articles/investing/060515/example-investment-policy-statement.asp

come back if you have questions
~n`

lwid

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #5 on: March 02, 2020, 12:14:35 PM »
Great, great so helpful! I've started typing it out and it already feels empowering already. I'm excited to keep playing with this.

I still can't help but wonder about some timing aspects - right now seems like a unique time in some way, although it may just be my brain looking for the jackpot which is tricky territory.

Chris Pascale

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #6 on: March 02, 2020, 02:53:18 PM »
Per JL Collins, yesterday was the best day, and today is the next best.

Why not put 3% a month into the market until it's all in there 36 months from now?

Also, check out his ChooseFI interviews - there are 2 of them.

talltexan

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #7 on: March 02, 2020, 03:10:34 PM »
Hesitating because the market is too high is a sign that your chosen allocation is riskier than your emations can handle.

Would you jump in today at 40% stocks/60% bonds?


Garrett B.

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #8 on: March 03, 2020, 09:32:28 AM »
Anytime you start looking at what the market is currently doing an making plans based on that you are - by definition - trying to time the market.  And that rarely works out very well.

Instead, I would sit down and write out an Investor Policy Statement, which describes your goals, risk threshold, timelines etc. 

Then decide how you would like all of your moeny to be allocated (this is your Asset Allocation, or AA).  Once you have made those determinations - invest your money based on those documents, and do NOT try to take into account all the various market wobbles and talking-head proclaimations. 

does that make sense?
Everyone says this, but when the market is down 10-15% from its high, how can that not be a good time to time the market?  It's free money.  Even Warren Buffet and JL Collins timed the market last week.  I did as well. 

nereo

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #9 on: March 03, 2020, 11:05:27 AM »
Anytime you start looking at what the market is currently doing an making plans based on that you are - by definition - trying to time the market.  And that rarely works out very well.

Instead, I would sit down and write out an Investor Policy Statement, which describes your goals, risk threshold, timelines etc. 

Then decide how you would like all of your moeny to be allocated (this is your Asset Allocation, or AA).  Once you have made those determinations - invest your money based on those documents, and do NOT try to take into account all the various market wobbles and talking-head proclaimations. 

does that make sense?
Everyone says this, but when the market is down 10-15% from its high, how can that not be a good time to time the market?  It's free money.  Even Warren Buffet and JL Collins timed the market last week.  I did as well.

You have to look a bit deeper.
In order to take advantage of big drops like this, most people need to squirrel away a pile of cash.  hedge-funds etc. refer to this as 'opportunity liquidity'.  problem is, holding cash is a drag on your portfolio, as it has always lost out to inflation every single year (at least with a reserve currency like the USD$).
That's the problem the OP has faced - lots of cash sitting on the sidelines, and s/he likely lost out having it not invested over the previous several years (this is the opportunity cost). 


Now let's say that a person suddenly has a bunch of cash to invest from a windfall of some sort.  Here again you're left with a choice - invest it now or wait to see if the market falls another 5%, 10%, 20% before pulling the trigger.  There's been a LOT of studies that have shown that lump-sum investing blind (that is, without paying attention to the market) wins out over DCA about 80% of the time.

ericrugiero

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #10 on: March 03, 2020, 12:53:27 PM »
Anytime you start looking at what the market is currently doing an making plans based on that you are - by definition - trying to time the market.  And that rarely works out very well.

Instead, I would sit down and write out an Investor Policy Statement, which describes your goals, risk threshold, timelines etc. 

Then decide how you would like all of your moeny to be allocated (this is your Asset Allocation, or AA).  Once you have made those determinations - invest your money based on those documents, and do NOT try to take into account all the various market wobbles and talking-head proclaimations. 

does that make sense?
Everyone says this, but when the market is down 10-15% from its high, how can that not be a good time to time the market?  It's free money.  Even Warren Buffet and JL Collins timed the market last week.  I did as well.

You have to look a bit deeper.
In order to take advantage of big drops like this, most people need to squirrel away a pile of cash.  hedge-funds etc. refer to this as 'opportunity liquidity'.  problem is, holding cash is a drag on your portfolio, as it has always lost out to inflation every single year (at least with a reserve currency like the USD$).
That's the problem the OP has faced - lots of cash sitting on the sidelines, and s/he likely lost out having it not invested over the previous several years (this is the opportunity cost). 


Now let's say that a person suddenly has a bunch of cash to invest from a windfall of some sort.  Here again you're left with a choice - invest it now or wait to see if the market falls another 5%, 10%, 20% before pulling the trigger.  There's been a LOT of studies that have shown that lump-sum investing blind (that is, without paying attention to the market) wins out over DCA about 80% of the time.

True.  But IF you are already sitting on a big pile of cash now is probably a good time to be dumping it in the market. 

Just keep in mind that the current drop still leaves the market higher than it was a year ago.  So, you would have been better off putting the money in a year ago even though at the time the market felt "high" and now it feels "on sale". 

For me, I needed to open a Roth IRA for my wife (I've always used my 401K and my Roth IRA).  I went ahead and opened it up and put $6000 in a money market account.  $3000 of that I invested today into VTSAX (the minimum initial investment).  The other $3000 I plan to dollar cost average into the market over the next few weeks just in case it drops more.  That feels like I'm being smart and buying while the market is on sale.  In reality, I would have been better off to invest it a year ago. 

nereo

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #11 on: March 03, 2020, 01:32:57 PM »
Anytime you start looking at what the market is currently doing an making plans based on that you are - by definition - trying to time the market.  And that rarely works out very well.

Instead, I would sit down and write out an Investor Policy Statement, which describes your goals, risk threshold, timelines etc. 

Then decide how you would like all of your moeny to be allocated (this is your Asset Allocation, or AA).  Once you have made those determinations - invest your money based on those documents, and do NOT try to take into account all the various market wobbles and talking-head proclaimations. 

does that make sense?
Everyone says this, but when the market is down 10-15% from its high, how can that not be a good time to time the market?  It's free money.  Even Warren Buffet and JL Collins timed the market last week.  I did as well.

You have to look a bit deeper.
In order to take advantage of big drops like this, most people need to squirrel away a pile of cash.  hedge-funds etc. refer to this as 'opportunity liquidity'.  problem is, holding cash is a drag on your portfolio, as it has always lost out to inflation every single year (at least with a reserve currency like the USD$).
That's the problem the OP has faced - lots of cash sitting on the sidelines, and s/he likely lost out having it not invested over the previous several years (this is the opportunity cost). 


Now let's say that a person suddenly has a bunch of cash to invest from a windfall of some sort.  Here again you're left with a choice - invest it now or wait to see if the market falls another 5%, 10%, 20% before pulling the trigger.  There's been a LOT of studies that have shown that lump-sum investing blind (that is, without paying attention to the market) wins out over DCA about 80% of the time.

True.  But IF you are already sitting on a big pile of cash now is probably a good time to be dumping it in the market. 

Just keep in mind that the current drop still leaves the market higher than it was a year ago.  So, you would have been better off putting the money in a year ago even though at the time the market felt "high" and now it feels "on sale". 

For me, I needed to open a Roth IRA for my wife (I've always used my 401K and my Roth IRA).  I went ahead and opened it up and put $6000 in a money market account.  $3000 of that I invested today into VTSAX (the minimum initial investment).  The other $3000 I plan to dollar cost average into the market over the next few weeks just in case it drops more.  That feels like I'm being smart and buying while the market is on sale.  In reality, I would have been better off to invest it a year ago.

I addressed this in the second part of my post.  DCA loses out to lump-sum investing roughly 80% of the time. 
Put another, more general way, a good time to get into the market is "today" - a better time would have been "yesterday".  Is it better to get now that stocks have gone down ~10%? Sure.  But wasn't known two weeks ago, nor do we know where valuations will be in two weeks.

jim555

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #12 on: March 03, 2020, 05:34:41 PM »
Global pandemic with 3% mortality and you want to dump a ton of money in the market now?

ysette9

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #13 on: March 03, 2020, 08:44:18 PM »
Global pandemic with 3% mortality and you want to dump a ton of money in the market now?
Actually it is looking like it may be more like 1.4% or even lower. This article argues that with a better understanding of how many asymptomatic or mild cases are out there, the mortality rate may be more on par with a bad flu year.

https://www.nejm.org/doi/full/10.1056/NEJMe2002387

MasterStache

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #14 on: March 04, 2020, 05:56:35 AM »
Global pandemic with 3% mortality and you want to dump a ton of money in the market now?
Actually it is looking like it may be more like 1.4% or even lower. This article argues that with a better understanding of how many asymptomatic or mild cases are out there, the mortality rate may be more on par with a bad flu year.

https://www.nejm.org/doi/full/10.1056/NEJMe2002387
+1
I've seen numbers anywhere between 1-4%. I don't think there will be a good gauge of mortality rate until all is said and done.

habanero

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #15 on: March 04, 2020, 06:13:39 AM »
It is standard to list the official mortality rate as actual deaths divided by confirmed cases  as it takes out the guesswork. This is, as is rather obvious, likely to overstate the actual death rate as many with mild symptoms probably never see a doctor - especially in less developed countries.

mjr

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #16 on: March 05, 2020, 01:28:31 PM »
The actual mortality rate is irrelevant.  Two things are important, the effect it has on people's behaviour and the resulting impact on business.

With the media and governments whipping it into a frenzy, my guess (!) is that the markets have a way to fall yet over the next weeks/months.

habanero

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #17 on: March 05, 2020, 02:31:48 PM »
The 2018-19 seasonal flu in the US rsulted in the following as estimated by the CDC:

45 million diseases
810000 hospitalizations
61000 deaths

Sounds scary, right?

My guess it barely made the news.

ysette9

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #18 on: March 05, 2020, 05:05:01 PM »
The 2018-19 seasonal flu in the US rsulted in the following as estimated by the CDC:

45 million diseases
810000 hospitalizations
61000 deaths

Sounds scary, right?

My guess it barely made the news.
Exactly. Humans arenít great about putting risk into perspective. How many people are freaking out about corona but blasť about car accidents or guns?

jambongris

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #19 on: March 05, 2020, 05:16:29 PM »
Another way to look at is to ask yourself what you would do if, instead of having inherited cash, you had inherited a balanced portfolio of index funds. If that were the case, would you be asking the forum if you should sell everything and wait for a more optimal time to invest?

It wonít necessarily answer your question but I find that it changes how the question feels.

Dumping a lot of cash into the market all at once can be intimidating whereas simply leaving your funds invested can feel much simpler and safer.

dcheesi

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #20 on: March 06, 2020, 07:54:19 AM »
The 2018-19 seasonal flu in the US rsulted in the following as estimated by the CDC:

45 million diseases
810000 hospitalizations
61000 deaths

Sounds scary, right?

My guess it barely made the news.
Exactly. Humans arenít great about putting risk into perspective. How many people are freaking out about corona but blasť about car accidents or guns?
But all of those risks, including seasonal flu, are relatively stable background risks. COVID-19 currently represents a novel risk with the potential to multiply its threat level exponentially. That makes it worthy of monitoring and taking precautions against (but still not worthy of panic).

thesis

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #21 on: March 06, 2020, 08:26:29 AM »
Dang, thread mortality rate due to corona virus is higher than human mortality rate due to corona virus. /s

The truth is, you're close to death every day. We never know when we're going to be taken out. That doesn't mean we yolo our money on booze and drugs. Sure, keep a cash cushion to survive a downturn, a layoff, whatever. These things happen, so it helps to be a little prepared. But what the f* else are you going to do with that money otherwise if you already have a hedge, huh? I don't understand that. Having money sitting around just to be sitting around does nothing. If you don't need it, it can drop all it wants and what do you care? We have every reason to believe it will go back up at some point. Humanity moves on, things get created, markets continue. If a virus snuffs you out, that does suck, but all the money in the world can't guarantee your life anyway. I'm not going to sabotage my future by fear. If I die before FI, I won't really be around to care, will I? But if I reach the age that I could have FIREd but I can't because I was stupid with my money, well that REALLY sucks.

Sorry, kinda preaching to the air here. Just needed to express this. (also, "you" in the above paragraph was meant to be generic, I wasn't trying to single out the OP :) )

To the OPs point, have that cash cushion to your satisfaction. I like to shoot for having a year's worth of expenses, but this will vary for everybody depending on their personal level of risk. It's fine to gamble a bit and wait to invest some of your money - it could go cheaper. But you're already getting a nice little discount compared to a month ago.

soccerluvof4

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #22 on: March 20, 2020, 04:00:35 AM »
I'd be buying incrementally as we move down. No one can predict the bottom but its pretty safe to say there is going to be alot of volatility for a while since so many businesses have closed and no one can predict how much this is really going to effect us overall. I also think you have time so invest as you feel comfortable with your risk tolerance BUT imo this is a good time to start.

Fishindude

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #23 on: March 20, 2020, 07:32:31 AM »
I am sitting on a whole bunch of cash too.
No interest in dumping it the stock market, but if a sweet real estate deal comes along, maybe.

talltexan

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Re: I have a ton of uninvested cash - is now a good time?
« Reply #24 on: March 20, 2020, 12:13:18 PM »
How old are you? what kind of risk tolerance do you have?

Market could drop 50% from today. If you go all in, can you handle that?

SP could accelerate back up to 3000, or even 3600 by end of year. If you stay out completely and miss that, will it delay your financial plans for years?