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I disagree. Suppose someone comes into an inheritance and wants to invest it? With the markets at these levels would you go all in or DCA over 12 months?
Agree with John. But I think it all depends on where the market is valued. I'm not going all in with the market at an all time high.
I'm in the process of a 401k to IRA rollover now. I put 25% towards my equity goal to start. Plan to DCA over the next 6 months or so to get to my goal but will accelerate that if we get a "nice" correction. Got to correct some time. Sooner the better I hope.
I do plan to deviate a little from that plan with my 'alpha' bucket. May start putting a little into Europe.
I have enjoyed reading how others currently see and are managing their own portfolios during these uncertain times.
For me … During periods of high market valuations I feel more comfortable with a high cash position, a moderate equity position and a low fixed income position since interest rates are now at historic lows. One of the things that is presently a major driver for equities is that fixed income, in general, is currently paying very little to own and has driven some investors to purchase the higher paying dividend equities. This has lead to some high P/E Ratio for equities with them becoming overbought by my thinking due to this strong demand.
So … What is an investor to do?
For me … I have made some adjustments from my normal asset allocation targets. Currently, I am heavy in cash and in the growth allocation to equities within my portfolio. In addition I favor large caps (65%) over mid caps (25%) and small caps (10%). I am light in the income area and a little light on the international side but overweight emerging markets. In my global growth sleeve I am about 40% emerging markets and the other 60% is invested towards a global developed market theme split between the US, Canada, Greater Europe and Asia.
So Far … So Good … as I am currently up, overall, 7.11% which is bettering my benchmarks the Lipper Balanced Index which is up ytd 5.26% and Morningstar’s Moderate Target Risk Category which is up ytd 5.92%. It appears the adjustments I made to my portfolio's overall asset allocation are currently favoring me well with the better returns along with some good jingle in my pocket from the profits of recently sold positions.
My perference with new money is to position cost average into a targeted position until the position is fully funded rather to fully fund the position at the time of inital purchase. There are several ways one can position cost average into a position. One is to buy in using an over time strategy, another is to buy in at certain predetermined price targets, and another is to use some combination of both. I very seldom go all in with a bulk purchase.
While I like the phrase: "It's time in the market, not timing the market," I can't ignore Schiller's assessment of the market. My children's IRAs spring contributions languish in cash, earning far less than the 3+% quoted in the article, but I think there will be an entry point in the next 6 months that even I can recognize.
OTOH, I'm ambivalent about the timing of my one-time contribution to my new grandchild's retirement fund. $3K now presumably produces over $4M at 70, if it's shifted into a Roth when she starts earning money. I might open the account and add most of the money later. Guess it all depends on her parent's ability to keep her from closing the account prematurely.
........ but I think there will be an entry point in the next 6 months that even I can recognize.
.......one-time contribution to my new grandchild's retirement fund. $3K now presumably produces over $4M at 70, if it's shifted into a Roth when she starts earning money.
Yeah, the math is pretty compelling. Assuming any taxable distributions are paid from outside the account. Here's what happens to a one time investment of $3,000 assuming a rate of return of 10%, allowing for 70 years of compounding: $3,000 invested at 10.0% annually for 70 years yields: $2,369,241
Interesting, that $3,00 is just the amount needed to invest in the Vanguard Total Stock Market Index Fund.......and imagine if the person holds that investment for 70 years. [Actually, you can invest in VTI, the etf version, with no minimum].
Regarding "I think there will be an entry point in the next 6 months".....just wondering what gives you this confidence of what will happen in the next 6 months? How much of a drop are you expecting, and how much would be an acceptable entry point for you?
rjb112, on a roll over to Schwab the money went first to a sweep account for me to redistribute into funds of my choice. There was a minimum hold time of I believe 8 days before I could repurchase. I made the decision to put money back into funds not all at once but over time since I felt the market was high right now.
There was no option for a direct transfer in-kind into funds as you mentioned. In fact, I held back money in my 401k because I could not transfer into 2 closed funds I owned and wanted to keep, GPGOX and FAAFX. I stayed with them in the 401k.
One of the things I came to realize many years ago is that investing for the average retail investor, like myself, is a marathon and not a sprint although I do, at times, do a little trading around the edges within my own portfolio (sprint) when I feel inclined to do so.
Often times the conserative well thought out avenue is the better choice over an agressive all in avenue type approach that throws caution to the wind.
It's your money ... Put it to work as you feel best!
@MikeM, I think your plan has a lot if merit. Sure it's a sideways move and the plan is usually a direct rollover from one fund to the other. But if you do catch a correction in the process with your plan you will be in the catbirds seat. There is very little to lose in this scenario and as Old_Skeet said, it's a marathon.
@rjb112 Level of confidence is moderate based on Schiller's comments and the presidential cycle (granted that the drop had better hurry, since it usually occurs in the 2nd or 3rd quarters of this year). I was looking for 7 to 10%, but it may be impossible to fight the FED. So this time it may be different. The amounts are too small to dca.
In 35y I have never had conservative well thought-out plan (maybe cuz I ever had one?) be preferable to all-in. Unless you need the money soon, forget it, just do it and don't look back. Looking back causes all the heartache.
Comments
Dropping 20% will take a while to recover back.
Have a good weekend , Derf
I'm in the process of a 401k to IRA rollover now. I put 25% towards my equity goal to start. Plan to DCA over the next 6 months or so to get to my goal but will accelerate that if we get a "nice" correction. Got to correct some time. Sooner the better I hope.
I do plan to deviate a little from that plan with my 'alpha' bucket. May start putting a little into Europe.
Your idea actually matches my style. Kind of a value DCA.
I have enjoyed reading how others currently see and are managing their own portfolios during these uncertain times.
For me … During periods of high market valuations I feel more comfortable with a high cash position, a moderate equity position and a low fixed income position since interest rates are now at historic lows. One of the things that is presently a major driver for equities is that fixed income, in general, is currently paying very little to own and has driven some investors to purchase the higher paying dividend equities. This has lead to some high P/E Ratio for equities with them becoming overbought by my thinking due to this strong demand.
So … What is an investor to do?
For me … I have made some adjustments from my normal asset allocation targets. Currently, I am heavy in cash and in the growth allocation to equities within my portfolio. In addition I favor large caps (65%) over mid caps (25%) and small caps (10%). I am light in the income area and a little light on the international side but overweight emerging markets. In my global growth sleeve I am about 40% emerging markets and the other 60% is invested towards a global developed market theme split between the US, Canada, Greater Europe and Asia.
So Far … So Good … as I am currently up, overall, 7.11% which is bettering my benchmarks the Lipper Balanced Index which is up ytd 5.26% and Morningstar’s Moderate Target Risk Category which is up ytd 5.92%. It appears the adjustments I made to my portfolio's overall asset allocation are currently favoring me well with the better returns along with some good jingle in my pocket from the profits of recently sold positions.
My perference with new money is to position cost average into a targeted position until the position is fully funded rather to fully fund the position at the time of inital purchase. There are several ways one can position cost average into a position. One is to buy in using an over time strategy, another is to buy in at certain predetermined price targets, and another is to use some combination of both. I very seldom go all in with a bulk purchase.
I wish all … “Good Investing.”
Old_Skeet
Any money that was in equities in the 401k would typically just be put into equities in the IRA as a lateral transfer, lump summed in, no?
Dollar cost averaging in this case applies to money that has not been in equities but will be put there now.
Another example is selling one actively managed equity mutual fund and doing a lateral lump sum transfer to a different equity mutual fund.
OTOH, I'm ambivalent about the timing of my one-time contribution to my new grandchild's retirement fund. $3K now presumably produces over $4M at 70, if it's shifted into a Roth when she starts earning money. I might open the account and add most of the money later. Guess it all depends on her parent's ability to keep her from closing the account prematurely.
$3,000 invested at 10.0% annually for 70 years yields: $2,369,241
Interesting, that $3,00 is just the amount needed to invest in the Vanguard Total Stock Market Index Fund.......and imagine if the person holds that investment for 70 years. [Actually, you can invest in VTI, the etf version, with no minimum].
Regarding "I think there will be an entry point in the next 6 months".....just wondering what gives you this confidence of what will happen in the next 6 months? How much of a drop are you expecting, and how much would be an acceptable entry point for you?
There was no option for a direct transfer in-kind into funds as you mentioned. In fact, I held back money in my 401k because I could not transfer into 2 closed funds I owned and wanted to keep, GPGOX and FAAFX. I stayed with them in the 401k.
One of the things I came to realize many years ago is that investing for the average retail investor, like myself, is a marathon and not a sprint although I do, at times, do a little trading around the edges within my own portfolio (sprint) when I feel inclined to do so.
Often times the conserative well thought out avenue is the better choice over an agressive all in avenue type approach that throws caution to the wind.
It's your money ... Put it to work as you feel best!
I wish you the very best in the coming years.
Old_Skeet
Level of confidence is moderate based on Schiller's comments and the presidential cycle (granted that the drop had better hurry, since it usually occurs in the 2nd or 3rd quarters of this year).
I was looking for 7 to 10%, but it may be impossible to fight the FED. So this time it may be different.
The amounts are too small to dca.