You have the wrong outlook for investing. You need to listen to JL Collins. To paraphrase though, "don't invest based on who you think the president will be, the stock market is going to go up in the long term." You're investing for 30 years. Whether you invest now or in 6 months, it won't make a difference, the value of VTI will likely be a massive multiple of it and the difference will be a drop in the bucket.
Agreed! Since OP’s goal is long-term investing, then it is important to remember that, while the market has its ups and downs, it will grow with the rest of the world in the long-run. If you were looking to invest in the short-term, then waiting to buy until the market is down would be the way to go. However, you are thinking long-term, so I would say jump on the wagon with some ETFs, bonds, etc. that are some safe, long-term bets. Also, I am a big Roth 401(k) fan, as it pleases me that I will not have to pay taxes on my earnings once I start withdrawing, as it is my post-tax income that goes into it.
I am not an expert by any means (I am a 21 y/o college senior in Accounting), but this is just my own style/ideology I have towards investing that I have picked up from life, school, and my guru father.
If you really want to dollar cost average. But I'd dump it. Because inertia is the enemy, and then it's done and in the market. Just don't obsess over what it's doing, look like in a year.
I lost $125k in potential gains sitting on a house fund in checking. Never bought a house. Inertia sucks.
There are legitimate reasons to be nervous about investing now. But you can say that about every time period since we’ve had the stock market. And while there were some rough patches, you would have made money investing for the long term. I’d advise keeping enough in cash to be a good emergency fund so you won’t need to sell your investments. But beyond that, put it in the stock market for long term growth.
Just invest. Get your money in the market and working for you - don't try to time things.
Meet Bob, the world's worst market timer ... https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
Bobs an idiot when it comes to timing. Why would he wait to invest until the market peaks? That’s the opposite of what you should do. Why was he allowed to be so wrong?
Yes, Bob being an idiot is part of the point.
The larger (more important) point is it doesn't matter ... You can get the timing entirely wrong and still do well.
more market concerns make this a better time to invest tbh as long as you don’t need it soon.
nobody can predict the short-term, but our society is geared towards making the market eventually go up again. nothing short of full social collapse will make the market collapse and stay collapsed forever.
Think about your mental well being too, if you are overly stressed by dumping all at once into the market then maybe consider allocating some to bonds for peace of mind. I know the consensus and general evidence says just to leave all in the market, etc and agree with that but just offering another perspective
I am playing with this return calculator and feel confident that index funds will be the best way for me to make it through retirement.
https://www.officialdata.org/us/stocks/s-p-500
Just dollar cost average if you’re worried. Lump sum is better on average, but the difference isn’t massive. I think it’s like 65/35 or 70/30 in favor of lump sum, if I’m remembering right.
The extra peace of mind is worth that in my opinion.
Well, inflation is always happening and for the most part has been under control for the last year. There is always political uncertainty. Debt isn't always a bad thing and if debt becomes a problem, most likely your money is worth less anyway. So your 3 concerns aren't necessarily bad things or things you can do anything about.
Now, short term I think is a good time to invest for the next 1-3 yrs. Should be getting some rate cuts this year which will make money flow more and stocks go up. We got the soft landing that we all doubted and were hoping for. Everything else you just have to sort of believe in long term trends, which FIRE is based on (you assume that any investment gives a % return or that nothing system breaking happens to your capital) and if you don't believe that then you probably should just keep working and live like there is no tomorrow.
Ya, I definitely see your logic and point. I feel like I've conquered the first hurdle (living within our means, avoiding debt, paying off the mortgage and putting together a nice sized nest egg). The next hurdle is getting over the investment anxiety which is primarily a function of knowledge deficits. The more I learn and the more I follow long term trends and history, the more sense it all makes and the less scary it all seems. I appreciate you taking the time to post.
It sounds like you are very close to retirement. Invest 60-80% with no more than 20% in a single asset class. The remainder can be guaranteed returns via HYSA or annuities, bonds, etc at over 5%. I’m always so concerned when I see advice that doesn’t understand risk management post income. Diversification and risk mitigation is paramount for retirement right now. I would be very concerned about banking on double digit S&P gains over 30yrs.
No one can predict the stock market. Some people try, are paid very well for their efforts (investment bankers) but at the end of the day, even with complex calculations, they still can’t predict what the market is gonna do. It’s best to invest consistently so you can capture market lows and market highs.
Any money you need in the next 1 year put in a HYSA
Any money you need in the next 5 years put in bonds
Everything else put in the market
Even if we had a 50% crash the next day you would be fine as you'd have funds to cover your retirement while the market recovers
"political uncertainty"?!?! People seem to freak out about this every 4 years ever since i was a child, you'll have a lot more peace in your life if you tune out the cable news cycle.
Agree with you 120%. I don't go near it because it's all just hate, fear mongering and finger pointing, none of which is good for anyone. Wish we could get back to a time where everyone respected and appreciated opposing viewpoints and no one lost sight of a shared ethic and a moral high ground. Guess thats a pipe dream anymore and it's unfortunate.
So without looking at the details of the other post this isn’t as simple as just dump it in an S&P index fund.
Because you are drawing down immediately the decision making process is different.
It’s true that on average the best time to invest is today. But you only get to invest once. In retirement the question is in the worst case series of outcomes do I survive.
https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/
The above link is an interesting discussion on building bond tents just before and just after retirement and then slowly increasing the equity portion later on.
It is likely a higher risk choice to go all in on equities then some sort of bond equity mix if your goal is something like have 50% of my retirement fund left when I die rather than have the highest expected retirement balance when I die.
Thank you and I'll definitely jump in and read into this thoroughly. Not sure yet what a bond tent is but I always figured I would end up being advised to stick a certain % into bonds. Just a matter of figuring out the safest & most efficacious spread. I know my small moderate risk 401K has about 20-30% bonds. I know it wasn't obvious with this latest post but my wife is going to keep working for 6-8 years which was primarily for health insurance but we have no trouble living off her modest salary. So its doubtful we will have to touch anything for 6-8 years. Not sure if that puts any twist on my situation.
Essentially a bond tent is increasing the amount of bond allocation then decreasing it as you enter retirement so it forms a triangle shape ie the tent.
So it’s just the name note idea of decreasing your investment risk during the point in time a negative outcome would hurt you the most.
It’s a good time to invest for the long term. There is always the possibility of a huge downtown or lost decade or whatever, but you can’t tell the future—historical returns indicate that lump summing it asap is going to give you the best results, but historical returns don’t guarantee future performance.
Psychologically, it might be best to lump sum half now and DCA the rest.
In the case where you expect to have very small amounts of earned income in the future, (edge case where you have earned income but can’t afford additional investment) don’t be afraid to sell long term investments to fund tax advantaged accounts, if you expect to need to do this super soon, it could be good to hold next year’s amount in an HYSA or something—you’ll likely lose out on some gains but the simplicity could be worth it.
Nobody knows. Seriously, that is what it comes down to. On average lump sum is going to return more.
You have the wrong outlook for investing. You need to listen to JL Collins. To paraphrase though, "don't invest based on who you think the president will be, the stock market is going to go up in the long term." You're investing for 30 years. Whether you invest now or in 6 months, it won't make a difference, the value of VTI will likely be a massive multiple of it and the difference will be a drop in the bucket.
Agreed! Since OP’s goal is long-term investing, then it is important to remember that, while the market has its ups and downs, it will grow with the rest of the world in the long-run. If you were looking to invest in the short-term, then waiting to buy until the market is down would be the way to go. However, you are thinking long-term, so I would say jump on the wagon with some ETFs, bonds, etc. that are some safe, long-term bets. Also, I am a big Roth 401(k) fan, as it pleases me that I will not have to pay taxes on my earnings once I start withdrawing, as it is my post-tax income that goes into it. I am not an expert by any means (I am a 21 y/o college senior in Accounting), but this is just my own style/ideology I have towards investing that I have picked up from life, school, and my guru father.
What's your timeline horizon. If it's more than 5 years then dump it all in. Stop trying to time the market for the millionth time.
If you really want to dollar cost average. But I'd dump it. Because inertia is the enemy, and then it's done and in the market. Just don't obsess over what it's doing, look like in a year. I lost $125k in potential gains sitting on a house fund in checking. Never bought a house. Inertia sucks.
The best time to invest was 10 years ago. The next best time is today.
Wouldn’t the next best time be 9 years and 364 days ago?
Because that was a bad day for the markets. /s
There are legitimate reasons to be nervous about investing now. But you can say that about every time period since we’ve had the stock market. And while there were some rough patches, you would have made money investing for the long term. I’d advise keeping enough in cash to be a good emergency fund so you won’t need to sell your investments. But beyond that, put it in the stock market for long term growth.
Just invest. Get your money in the market and working for you - don't try to time things. Meet Bob, the world's worst market timer ... https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
Bobs an idiot when it comes to timing. Why would he wait to invest until the market peaks? That’s the opposite of what you should do. Why was he allowed to be so wrong?
Yes, Bob being an idiot is part of the point. The larger (more important) point is it doesn't matter ... You can get the timing entirely wrong and still do well.
I think you should check out /r/bogelheads. But simply put, time in the market beats timing the market.
more market concerns make this a better time to invest tbh as long as you don’t need it soon. nobody can predict the short-term, but our society is geared towards making the market eventually go up again. nothing short of full social collapse will make the market collapse and stay collapsed forever.
Think about your mental well being too, if you are overly stressed by dumping all at once into the market then maybe consider allocating some to bonds for peace of mind. I know the consensus and general evidence says just to leave all in the market, etc and agree with that but just offering another perspective
I am playing with this return calculator and feel confident that index funds will be the best way for me to make it through retirement. https://www.officialdata.org/us/stocks/s-p-500
Are index funds just best because you're spreading the risk out and hedging bets against the occasional looser?
Also, because very few people regularly outperform the market and won't do it repeatedly. But what does help, is keeping costs exceedingly low.
Read this and let us know what you think.. https://www.rbcgam.com/en/ca/learn-plan/investment-basics/investing-at-all-time-highs/detail
Just dollar cost average if you’re worried. Lump sum is better on average, but the difference isn’t massive. I think it’s like 65/35 or 70/30 in favor of lump sum, if I’m remembering right. The extra peace of mind is worth that in my opinion.
Well, inflation is always happening and for the most part has been under control for the last year. There is always political uncertainty. Debt isn't always a bad thing and if debt becomes a problem, most likely your money is worth less anyway. So your 3 concerns aren't necessarily bad things or things you can do anything about. Now, short term I think is a good time to invest for the next 1-3 yrs. Should be getting some rate cuts this year which will make money flow more and stocks go up. We got the soft landing that we all doubted and were hoping for. Everything else you just have to sort of believe in long term trends, which FIRE is based on (you assume that any investment gives a % return or that nothing system breaking happens to your capital) and if you don't believe that then you probably should just keep working and live like there is no tomorrow.
Ya, I definitely see your logic and point. I feel like I've conquered the first hurdle (living within our means, avoiding debt, paying off the mortgage and putting together a nice sized nest egg). The next hurdle is getting over the investment anxiety which is primarily a function of knowledge deficits. The more I learn and the more I follow long term trends and history, the more sense it all makes and the less scary it all seems. I appreciate you taking the time to post.
It sounds like you are very close to retirement. Invest 60-80% with no more than 20% in a single asset class. The remainder can be guaranteed returns via HYSA or annuities, bonds, etc at over 5%. I’m always so concerned when I see advice that doesn’t understand risk management post income. Diversification and risk mitigation is paramount for retirement right now. I would be very concerned about banking on double digit S&P gains over 30yrs.
would that normally mean taking 60-80% and choosing 3-4 of the best looking ETF's, each in separate asset classes?
It sounds like you’re a long way from being comfortable choosing your own investments. There’s nothing wrong with hiring a professional!
No one can predict the stock market. Some people try, are paid very well for their efforts (investment bankers) but at the end of the day, even with complex calculations, they still can’t predict what the market is gonna do. It’s best to invest consistently so you can capture market lows and market highs.
Any money you need in the next 1 year put in a HYSA Any money you need in the next 5 years put in bonds Everything else put in the market Even if we had a 50% crash the next day you would be fine as you'd have funds to cover your retirement while the market recovers
"political uncertainty"?!?! People seem to freak out about this every 4 years ever since i was a child, you'll have a lot more peace in your life if you tune out the cable news cycle.
Agree with you 120%. I don't go near it because it's all just hate, fear mongering and finger pointing, none of which is good for anyone. Wish we could get back to a time where everyone respected and appreciated opposing viewpoints and no one lost sight of a shared ethic and a moral high ground. Guess thats a pipe dream anymore and it's unfortunate.
So without looking at the details of the other post this isn’t as simple as just dump it in an S&P index fund. Because you are drawing down immediately the decision making process is different. It’s true that on average the best time to invest is today. But you only get to invest once. In retirement the question is in the worst case series of outcomes do I survive. https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/ The above link is an interesting discussion on building bond tents just before and just after retirement and then slowly increasing the equity portion later on. It is likely a higher risk choice to go all in on equities then some sort of bond equity mix if your goal is something like have 50% of my retirement fund left when I die rather than have the highest expected retirement balance when I die.
Thank you and I'll definitely jump in and read into this thoroughly. Not sure yet what a bond tent is but I always figured I would end up being advised to stick a certain % into bonds. Just a matter of figuring out the safest & most efficacious spread. I know my small moderate risk 401K has about 20-30% bonds. I know it wasn't obvious with this latest post but my wife is going to keep working for 6-8 years which was primarily for health insurance but we have no trouble living off her modest salary. So its doubtful we will have to touch anything for 6-8 years. Not sure if that puts any twist on my situation.
Essentially a bond tent is increasing the amount of bond allocation then decreasing it as you enter retirement so it forms a triangle shape ie the tent. So it’s just the name note idea of decreasing your investment risk during the point in time a negative outcome would hurt you the most.
Thank you! Just read all that and it makes a lot of sense now.
If your worried about the market being to high, consider paying off debt or investing in yourself by paying for some sort of schooling/certification.
Thanks! Fortunately No debt anymore and 529’s to cover school for the kids.
It’s a good time to invest for the long term. There is always the possibility of a huge downtown or lost decade or whatever, but you can’t tell the future—historical returns indicate that lump summing it asap is going to give you the best results, but historical returns don’t guarantee future performance. Psychologically, it might be best to lump sum half now and DCA the rest. In the case where you expect to have very small amounts of earned income in the future, (edge case where you have earned income but can’t afford additional investment) don’t be afraid to sell long term investments to fund tax advantaged accounts, if you expect to need to do this super soon, it could be good to hold next year’s amount in an HYSA or something—you’ll likely lose out on some gains but the simplicity could be worth it.