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I am planning to move my entire portfolio from money market fund to vanguard index funds. should i wait for the washington circus to leave town or should i act now? inquiring minds need to know. thx
@Alex: October 3, 2016 at 2:30 PM. I'm revising my response because I don't want to sound like a smart ass. I think the market will move sideways until the last quarter begins in October. Regards, Ted
In response to Ted's revision, I too am revising my response.
I hope I didn't sound like a smart ass, but the subtle message embedded in my terse reply above is that the best time to invest is when things are cheap. So you easily could have bought twice as much of the S&P for the same amount of money back in '09 as today.
A second message meant to be conveyed is that markets are impossible to predict.
That said, all of the other responses are well considered and should be helpful to you. Had you included factors like age, years to retirement, and personal disposition towards risk, it would have helped in suggesting appropriate allocations and methods of deploying your cash.
Most studies indicate that lump sum investing beats dollar cost averaging over long periods. That being said, if it was my money and in order for me to sleep well at night, I would deploy the cash over the next 3-6 months.
Also, I would be reluctant to allow my portfolio to become fully invested in cash unless there were extreme circumstances. Even then, I would park the cash in something like FTABX or VWALX.
Long term should have nothing to do with it. What matters is the cost of entry to the market, not how long you stay in it. In this regard, lump sum usually beats buying in over a period of time (say a year, though the length is not important). That's because the market tends to go up, so the earlier you invest, the cheaper (on average) are your shares.
For example, suppose you invest $1,000/mo for the next twelve months, and compare that with investing $12,000 all at once. At the end of the year, you'll have X shares if you bought each month, and Y shares if you bought all at the beginning.
After that, no matter how long or short you're invested, if Y is greater than X, you'll have done better with lump sum investing (since the return on each share going forward is the same, and you have more shares this way). Conversely, if you got more shares by spreading out your purchases (X is greater than Y), then no matter what your subsequent holding period long or short, you'll have done better by spreading out your purchases.
Where long term vs. short term makes a difference is where you buy different investments. There long term matters, because you're looking at long term trends. That's why holding 100% equity is better than a stock/bond portfolio if you can wait long enough. The problems are (a) this makes people too uneasy, and (b) you may have to wait too long for the trend to manifest, and in the long run we're all dead.
My one word answer, given that you have made your decision, is "immediately".
Based on your post, you have fully explored all the "what if" scenarios and have concluded that a diversified portfolio of low cost Vanguard offerings satisfies your goals.
That's terrific. Good for you. But the decision making process is incomplete until you take action. Countless studies have demonstrated that market timing is a losing game. Over any arbitrary timeframe, market returns are likely positive. By acting immediately, you tilt the odds in your favor.
Of course, if you are uncomfortable with the current conditions, you should choose to delay until your discomfort is relieved. Never leave your comfort zone. Otherwise, sleepless nights will make you an unhappy camper.
I'm sure I have not helped much. Regardless, the very best of luck in overcoming your uncertainty. But note that uncertainty is always a part of the investment process. That will remain a constant.
Long term should have nothing to do with it. What matters is the cost of entry to the market, not how long you stay in it. In this regard, lump sum usually beats buying in over a period of time (say a year, though the length is not important). That's because the market tends to go up, so the earlier you invest, the cheaper (on average) are your shares.
For example, suppose you invest $1,000/mo for the next twelve months, and compare that with investing $12,000 all at once. At the end of the year, you'll have X shares if you bought each month, and Y shares if you bought all at the beginning.
After that, no matter how long or short you're invested, if Y is greater than X, you'll have done better with lump sum investing (since the return on each share going forward is the same, and you have more shares this way). Conversely, if you got more shares by spreading out your purchases (X is greater than Y), then no matter what your subsequent holding period long or short, you'll have done better by spreading out your purchases.
Where long term vs. short term makes a difference is where you buy different investments. There long term matters, because you're looking at long term trends. That's why holding 100% equity is better than a stock/bond portfolio if you can wait long enough. The problems are (a) this makes people too uneasy, and (b) you may have to wait too long for the trend to manifest, and in the long run we're all dead.
hear, hear! long term is for the birds. Patience is key. what I would say is think differently. think about moving cash to some multiple different funds, not just ONE fund. Chose all index funds and look at those that are not doing well. buy a chunk. wait to buy next chunk. and next. and next.
If its a taxable account buy after the fund has its year end capital distribution . If its not a taxable account any date could work out well or badly . If you believe the consensus wait till at least a month after the election as there will be a lot of noise in the market in the short run after election day.A slightly cautious move buy 1/4th now 1/4 Sept 27 (after the first debate 1.4th after election day and 1/4th after inauguration. This is the best chance to avoid the "washington nonsense"
As General Anthony McAulife famous said in the 1944 Battle of Bastogne "Nuts". Short but on target.
I felt the same way after initially replying to the question on this post. I said "Immediately" without proper research before responding. I gave a gut reaction and that's not good investment policy. So I did a little research, and fortunately it confirmed my seat-of-the-pants recommendation.
Here is a Link to a study by a reputable outfit that yields a confirmatory conclusion:
Sorry for my casual initial reply. Alex, I hope you decide quickly. The time for information gathering has past and a decision is waiting. Nobody can predict market turning points.
"Choose all index funds and look at those that are not doing well. buy a chunk......."
VintageFreak, which are those index funds that are not doing well, that you would buy now?
"wait to buy next chunk. and next. and next"
How long would you wait, and what are you waiting for/looking for?
What I meant was look at sectors that are out of favor now. If you are looking to increase your a location to that part of market go with corresponding index fund. You are not to compare index funds against each other like to compRe active funds. Needless to say don't buy index fuds from CrookedRUs funds. Stick with vanguRd,fido,trp,etc
I am planning to move my entire portfolio from money market fund to vanguard index funds. should i wait for the washington circus to leave town or should i act now? inquiring minds need to know. thx
If you have a long term investment plan, it doesn't matter much when you enter the market. But, seriously, do you think investing all your money in this market is rational? While timing the market may be for fools, fools are occasionally ingenious. The "presidential cycle" says you are late to the party. Cash doesn't go down. This market will. Even if you have a long term investment plan, waiting for a "correction", should add a few points to your return.
Look back at the last 5y of, say, DVY or TWEIX and check both the size and the number of the "corrections."
You can wait a long unprofitable time waiting for a supposedly better moment to invest.
I always keep the Japanese experience in the back of my mind. And many charts do not take into account inflation. A chart comparing an investment starting in 1980, for example, should have an inflation component to it to reflect the decline in purchasing power.
Although it has taken a number of informed comments, we have finally arrived at deploying the Presidential Cycle as a market entry/exit timing mechanism.
Like most market advice, it is not without considerable controversy. To be fair, I provide two Links, one that favors the proposition and one that opposes it:
The divergent opinions are not surprising. That mix is what makes for a dynamic marketplace.
Since I favor a Buy-and-Hold approach, I am a neutral on the matter. There certainly is evidence to support the proposition, but that evidence can be questioned from a statistically meaningful perspective.
It’s amazing how often experts offer faulty forecasts on significant matters. Their error quotient is disappointingly high. Remember the “x-rays are a hoax” statement by Lord Kelvin. And Thomas Edison’s prediction that “….. alternative current is just a waste of time. It could kill a man as quick as a bolt of lightning. Direct current is safe.” And the military is certainly not immune to bad projections. Recall RADM Clark Woodward exclaiming that “as far as sinking a ship with a bomb is concerned, it just can’t be done.”
So much for the accuracy of the expert class. That’s even more so in the financial community. The forecasts are often fun and entertaining, but I’m not convinced that they can be relied on in terms of action for positive outcomes. Forecasting is a risky business for both professionals and amateurs alike.
If VFINX was $27 in '88 it's 2016 value would be 54.92 and now it is 201. So it increased 4X in CPI adjusted number. But if you used the $27 it looks like 8X.
Maybe the official CPI is low. Should it be double?
What $10k bought in 1979 costs $33k today, $29k if you start in 1980. Say in your own case inflation was higher, so $10k from whatever start point you like is now $40k. VOO growth with divs reinvested went from $10k at the end of 1979 to $512k --- well over a half-mil.
Comments
Regards,
Ted
In response to Ted's revision, I too am revising my response.
I hope I didn't sound like a smart ass, but the subtle message embedded in my terse reply above is that the best time to invest is when things are cheap. So you easily could have bought twice as much of the S&P for the same amount of money back in '09 as today.
A second message meant to be conveyed is that markets are impossible to predict.
That said, all of the other responses are well considered and should be helpful to you. Had you included factors like age, years to retirement, and personal disposition towards risk, it would have helped in suggesting appropriate allocations and methods of deploying your cash.
Regards
Also, I would be reluctant to allow my portfolio to become fully invested in cash unless there were extreme circumstances. Even then, I would park the cash in something like FTABX or VWALX.
Kevin
For example, suppose you invest $1,000/mo for the next twelve months, and compare that with investing $12,000 all at once. At the end of the year, you'll have X shares if you bought each month, and Y shares if you bought all at the beginning.
After that, no matter how long or short you're invested, if Y is greater than X, you'll have done better with lump sum investing (since the return on each share going forward is the same, and you have more shares this way). Conversely, if you got more shares by spreading out your purchases (X is greater than Y), then no matter what your subsequent holding period long or short, you'll have done better by spreading out your purchases.
Where long term vs. short term makes a difference is where you buy different investments. There long term matters, because you're looking at long term trends. That's why holding 100% equity is better than a stock/bond portfolio if you can wait long enough. The problems are (a) this makes people too uneasy, and (b) you may have to wait too long for the trend to manifest, and in the long run we're all dead.
My one word answer, given that you have made your decision, is "immediately".
Based on your post, you have fully explored all the "what if" scenarios and have concluded that a diversified portfolio of low cost Vanguard offerings satisfies your goals.
That's terrific. Good for you. But the decision making process is incomplete until you take action. Countless studies have demonstrated that market timing is a losing game. Over any arbitrary timeframe, market returns are likely positive. By acting immediately, you tilt the odds in your favor.
Of course, if you are uncomfortable with the current conditions, you should choose to delay until your discomfort is relieved. Never leave your comfort zone. Otherwise, sleepless nights will make you an unhappy camper.
I'm sure I have not helped much. Regardless, the very best of luck in overcoming your uncertainty. But note that uncertainty is always a part of the investment process. That will remain a constant.
Best Wishes.
VintageFreak, which are those index funds that are not doing well, that you would buy now?
"wait to buy next chunk. and next. and next"
How long would you wait, and what are you waiting for/looking for?
As General Anthony McAulife famous said in the 1944 Battle of Bastogne "Nuts". Short but on target.
I felt the same way after initially replying to the question on this post. I said "Immediately" without proper research before responding. I gave a gut reaction and that's not good investment policy. So I did a little research, and fortunately it confirmed my seat-of-the-pants recommendation.
Here is a Link to a study by a reputable outfit that yields a confirmatory conclusion:
http://www.schwab.com/public/schwab/nn/articles/Does-Market-Timing-Work
Sorry for my casual initial reply. Alex, I hope you decide quickly. The time for information gathering has past and a decision is waiting. Nobody can predict market turning points.
Best Wishes.
Cash doesn't go down. This market will.
Even if you have a long term investment plan, waiting for a "correction", should add a few points to your return.
You can wait a long unprofitable time waiting for a supposedly better moment to invest.
I always keep the Japanese experience in the back of my mind. And many charts do not take into account inflation. A chart comparing an investment starting in 1980, for example, should have an inflation component to it to reflect the decline in purchasing power.
http://finance.yahoo.com/quote/^N225/?p=^N225
Although it has taken a number of informed comments, we have finally arrived at deploying the Presidential Cycle as a market entry/exit timing mechanism.
Like most market advice, it is not without considerable controversy. To be fair, I provide two Links, one that favors the proposition and one that opposes it:
http://gbr.pepperdine.edu/2012/10/presidential-cycle-and-stock-market/
http://www.marketwatch.com/story/the-presidential-cycle-is-nonsense-2012-01-20
The divergent opinions are not surprising. That mix is what makes for a dynamic marketplace.
Since I favor a Buy-and-Hold approach, I am a neutral on the matter. There certainly is evidence to support the proposition, but that evidence can be questioned from a statistically meaningful perspective.
It’s amazing how often experts offer faulty forecasts on significant matters. Their error quotient is disappointingly high. Remember the “x-rays are a hoax” statement by Lord Kelvin. And Thomas Edison’s prediction that “….. alternative current is just a waste of time. It could kill a man as quick as a bolt of lightning. Direct current is safe.” And the military is certainly not immune to bad projections. Recall RADM Clark Woodward exclaiming that “as far as sinking a ship with a bomb is concerned, it just can’t be done.”
So much for the accuracy of the expert class. That’s even more so in the financial community. The forecasts are often fun and entertaining, but I’m not convinced that they can be relied on in terms of action for positive outcomes. Forecasting is a risky business for both professionals and amateurs alike.
Best Wishes.
>> A chart comparing an investment starting in 1980, for example, should have an inflation component to it to reflect the decline in purchasing power.
Not quite following the point. Inflation "applies" to all investments. What $10k bought in 1979 costs $33k today, $29k if you start in 1980.
While VOO went from $10k at the end of 1979 to $512k --- well over a half-mil.
That's why we all invest.
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=27&year1=1988&year2=2016
If VFINX was $27 in '88 it's 2016 value would be 54.92 and now it is 201. So it increased 4X in CPI adjusted number. But if you used the $27 it looks like 8X.
Maybe the official CPI is low. Should it be double?
http://www.shadowstats.com/alternate_data/inflation-charts
https://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/
or just google
shadowstats bullshit
and read the next several hits
also
http://krugman.blogs.nytimes.com/2014/07/19/always-inflation-somewhere/
Whatever you "used", just doublecheck this:
What $10k bought in 1979 costs $33k today, $29k if you start in 1980. Say in your own case inflation was higher, so $10k from whatever start point you like is now $40k. VOO growth with divs reinvested went from $10k at the end of 1979 to $512k --- well over a half-mil.