Ok to start investing now?

[savingintexas]

Hi All,

For the last several months I’ve been preparing to invest about 50,000 I currently have in a savings account. I was just about ready to put the money in Vanguard index funds when Covid struck. I’ve been waiting, but I’m wondering if I should go ahead and invest the money now. Or is it better to leave the money where it is for a while longer?

Thanks! I am new to all of this and really appreciate the info I’ve found here.

[ixtap]

What is the purpose of this money? Do you want to use it next year? 10 years? 20 years?

How does your plan for this money work with any other funds you may have?

Have you determined an asset allocation? An investment plan?

[Rdy2Fire]

March was probably the best time IMO but I think it really depends on your goal.

If it's long term investment i.e set it and forget it then I think, overall, any time will be good as history shows markets will keep rising. However there could be some bumpy road ahead with ups and downs over the next year (maybe longer). If you're looking short term, guessing you aren't, then, personally, I think a fund probably isn't the best way to go.

[MDM]

I’m wondering if I should go ahead and invest the money now.

Do you think you could do at least as well as the world’s worst market timer?

[savingintexas]

Hi, thanks for the replies. Yes, I am thinking long-term investing. I would like to move in the direction of FI and, potentially, living off investments. But I am a long way from that.

I got the idea for index funds because I read that MMM (and others) think index funds are the best bet for those that want to invest and leave the money, without having to do too much managing on a regular basis. That idea was corroborated by a few other things I’ve read. I just finished reading Vicki Robin’s Your Money or Your Life and she suggests the same thing. Open to hearing other thoughts and ideas, though!

Thanks!

Ps. I can’t figure out what the sixth word from the first blog posit

[savingintexas]

I’m wondering if I should go ahead and invest the money now.

Do you think you could do at least as well as the world’s worst market timer?

That’s an interesting piece. Thanks! I take from it that as long as you leave your money invested for the long haul, you should be ok. But I’m hoping to do a little better than the world’s worst market timer! So looking for some guidance to that end :)

[MDM]

I’m wondering if I should go ahead and invest the money now.

Do you think you could do at least as well as the world’s worst market timer?

That’s an interesting piece. Thanks! I take from it that as long as you leave your money invested for the long haul, you should be ok. But I’m hoping to do a little better than the world’s worst market timer! So looking for some guidance to that end :)

Then don't invest at the absolute peaks along the way. ;)

You probably couldn't, even if you tried. :)

[savingintexas]

Thanks! Clearly we’re not at a peak now. I’m just wondering how much farther we coud fall at this point. But I guess we all are 🤷🏻‍♀️

I appreciate the comments :)

[MrThatsDifferent]

I guess the thing I learned and accepted when I started this journey is: you can’t time the market so don’t try. Sure, some people get “lucky” but it’s not about luck, it’s about: if you don’t play, you don’t win. So, just dive in and have a plan to dollar cost average and keep adding to it. The money goes and up and down along the way, but it almost always go up.

[savingintexas]

I guess the thing I learned and accepted when I started this journey is: you can’t time the market so don’t try. Sure, some people get “lucky” but it’s not about luck, it’s about: if you don’t play, you don’t win. So, just dive in and have a plan to dollar cost average and keep adding to it. The money goes and up and down along the way, but it almost always go up.

Thanks, MrThatsDifferent. That’s aligned with what I’ve been reading, so I’m glad to hear it. I’m about ready to take the plunge!

[savingintexas]

I guess the thing I learned and accepted when I started this journey is: you can’t time the market so don’t try. Sure, some people get “lucky” but it’s not about luck, it’s about: if you don’t play, you don’t win. So, just dive in and have a plan to dollar cost average and keep adding to it. The money goes and up and down along the way, but it almost always go up.

About dollar cost averaging... I understand the idea, but not exactly how to put it in practice. Does it mean that I should only invest a small amount of the 50,000 I have in savings at a time? And then should continue to add to that amount over time?

If I’m planning on investing in index funds, does this mean I should start investing say only 1000 a week for the next 50 weeks?

Does anyone know if there is a good post about DCA somewhere on the MMM site (or elsewhere)?

Thanks!

[MDM]

Does anyone know if there is a good post about DCA somewhere on the MMM site (or elsewhere)?

Perhaps Does Market Timing Work?.

[Frankies Girl]

I guess the thing I learned and accepted when I started this journey is: you can’t time the market so don’t try. Sure, some people get “lucky” but it’s not about luck, it’s about: if you don’t play, you don’t win. So, just dive in and have a plan to dollar cost average and keep adding to it. The money goes and up and down along the way, but it almost always go up.

About dollar cost averaging... I understand the idea, but not exactly how to put it in practice. Does it mean that I should only invest a small amount of the 50,000 I have in savings at a time? And then should continue to add to that amount over time?

If I’m planning on investing in index funds, does this mean I should start investing say only 1000 a week for the next 50 weeks?

Does anyone know if there is a good post about DCA somewhere on the MMM site (or elsewhere)?

Thanks!

https://www.bogleheads.org/wiki/Dollar_cost_averaging

Direct quote: DCA is a technique to overcome fear in investing by mitigating the risk of loss over the short term

https://www.cbsnews.com/news/take-plunge-or-drip-by-drip/

There is a good solution to this dilemma, one that addresses both the logic and the emotional issues. Investors should write a plan for their lump sum. It should define a schedule with regularly planned investments. The following are some suggestions:

    - Invest one-third immediately and the remainder invested one-third each of the next two months or next two quarters
    - Invest one-quarter immediately and the remainder spread equally over the next three quarters
   -  Invest one-sixth each month for six months, or every other month

The important issue is writing down and adhering to the schedule, not the specific schedule itself. (With the new year, it’s a great time to create a plan or to amend an existing one.) The only caveat is that investors should not make the schedule too long, because the longer the schedule, the more likely it is that the investor will miss out on market gains.

Doing it slow - using dollar cost averaging in other words- is primarily just for the psychological effect. It is logically an inefficient way to invest, but telling someone that, and dealing with all the FEELINGS of panic and doubts are hard to logic your way out of. So DCA is a good way to get new/nervous investors into the pool - think of it as wading into the shallows in instead of a cannonball into the deep end. ;)


If you are understanding the whole concept of index funds - buy and hold forever - then you should also try to work round to the idea that now (actually last month) is a fantastic time to buy in. When you have money to invest is the right time. 6 or even 9 months from now, it may still be a good time to buy in as far as the market being "on sale" but we can't know for sure. (and even if it's not on sale - "when you have the money to invest" is always a decent time to buy if you have funds slated for long-term investing)

There's an old saying floating around regarding investing: "Time IN the market is more important than timing the market." Get it in there, in whatever manner you feel comfortable. Do more reading as you dollar cost average (the bogleheads site is a FANTASTIC resource) and don't panic if the market goes down again. It will do that, and it will likely do that many more times over the decades you'll be investing.

[utaca]

I guess the thing I learned and accepted when I started this journey is: you can’t time the market so don’t try. Sure, some people get “lucky” but it’s not about luck, it’s about: if you don’t play, you don’t win. So, just dive in and have a plan to dollar cost average and keep adding to it. The money goes and up and down along the way, but it almost always go up.

About dollar cost averaging... I understand the idea, but not exactly how to put it in practice. Does it mean that I should only invest a small amount of the 50,000 I have in savings at a time? And then should continue to add to that amount over time?

If I’m planning on investing in index funds, does this mean I should start investing say only 1000 a week for the next 50 weeks?

Does anyone know if there is a good post about DCA somewhere on the MMM site (or elsewhere)?

Thanks!

You could invest $1000 a week for 50 weeks. Or $5000 a month for 10 months. Or $2500 a month for 20 months. Heck, you could also invest $1000 a month for 50 months - or $1000 a day for 50 days! I'm aware of no hard and fast rule but hopefully you can see the first few options are fairly simple and straightforward while the latter two are kind of silly.

[MrThatsDifferent]

Regarding DCA: my thinking would be to invest the entire $50k now, just jump. You DCA with the set amount you decide to take from your paychecks. The same way your retirement accounts are paid. I don’t get caught up in the DCA concept beyond the simple idea of continually adding to my investments on a regular schedule whether the financial news is good or bad.

That said, I’m taking a 18 month break from investing to save for potentially buying a place and/or having a suitable EF if I need it because of Covid or to take advantage of any bargains. Once I accomplish that goal, I’ll return to investing my set amounts.

Best advice I took in was to make everything as simple as possible, and aligned to your appetite for being involved. I’m not great with this stuff, so I went super simple with a Lifestrategy account, my regular checking account, a HISA, and my retirement account. Uncomplicated and straightforward, just fill your buckets and let it do its thing.

[savingintexas]

Thanks to all for this help. I feel like I have a much better idea of where to start. Many thanks!!