Feeling dumb and poor as the market goes up?!

[dex]

I think I have been doing the prudent things as I transitioned from working to ER (4 months now).
I have the following mix of my net worth as I didn't think it was wise to make major investments while transitioning.

21% home - paid in full
55% foreign currency - This is not as a risky investment as it sounds - I bought at a good price and earning interest
24% cash

As the stock market keeps going up I'm feeling I made a mistake and should have had the 24% invested in the stock market. I plan to sell the foreign currency in the first quarter of the year.
So I will be averaging into the market next year. If I'm investing in the stock market; expect a downturn!

I can't wait until I have my investments set up (4-5 mutual funds & 3 years of living expenses in short term bond funds) and I don't have to think about this!

I keep saying to myself I did the right thing and to have patience.

Any others feeling the same way?

 

[Cut-Throat]

Not me! - You have got to get your emotions out of your investing plan or you'll drive yourself nuts and broke!

Once you realize that your emotions are the enemy, you can admit defeat and embark on a plan that does not involve second guessing etc. -

If you have not read Berstein's Four Pillars or Swedroe books, now would be a good time. If you did read them, what were you thinking?

Asset Allocation of funds and rebalancing and then enjoy life! Like Bob Smith said yesterday, I spend very little time thinking about investments.

 

[uncledrz]

I second what CT has to say. Have a plan and asset allocation (I suggest write it out so you can go back and refer to it) and stick with it. Sometimes it won't work so well, sometimes it'll be great, but if you stick with it, it should work out in the long run.
Oh, by the way, if it doesn't, my wife says I have lots of skills and can always go back to work!!

 

[Alex]

Not me! - You have got to get your emotions out of your investing plan or you'll drive yourself nuts and broke!

Once you realize that your emotions are the enemy, you can admit defeat and embark on a plan that does not involve second guessing etc. -

If you have not read Berstein's Four Pillars or Swedroe books, now would be a good time. If you did read them, what were you thinking?

Asset Allocation of funds and rebalancing and then enjoy life! Like Bob Smith said yesterday, I spend very little time thinking about investments.

that is the truth. Set your Asset Allocation and forget about it for at least year ( i rebalance every 13 months for tax reasons). Like Ron Popeil says : set it and then FORGET IT!!!

 

[samclem]

I have the following mix of my net worth as I didn't think it was wise to make major investments while transitioning . . .

Well, not to pile on, but you did make investments while transitioning: you chose to invest in your home, in cash, and in "foreign currency." Just because you didn't put it into the stock market doesn't mean you weren't investing.

I'm sure there's a story behind the "foreign currency" investrment, but to have that much of your nest egg in that one type of investment as you approach retirement doesn't sound prudent on the face of it, it sounds like you are taking a big dose of uncompensated risk. If you are getting a high interest rate, then there must be a reason. Unless there's some type of tax rationale or other reason to hold off, it would seem to make sense to build a balanced portfolio as soon as practical. If you can't stand to build it all at once, at least start DCAing into the asset classes you'll want to have for the long term.

 

[donheff]

Dex:

Are you the poster who started a thread a while back about getting out because the market was set for a downturn? If so, it will happen - just not when you expect it.

What the other posters said... Get your emotions out of it and settle on a reasonable asset allocation. Or just pick a life style fund. Don't even worry about averaging into it -- that is an accumulation phase strategy. Get invested in your allocation and then DO NOT TOUCH IT - except for planned withdrawals for expenses and periodic re-balancing.

You will go through some down markets. Expect it and do not react! If you pull money because "it is looking bad" and then try to get back in, you will inevitably miss big run-ups (like now). You will never be able to make them up -- just like you won't make this one up. If you get properly invested today, the market may take a dive next week -- but that does not mean you made a mistake.

 

[RockMiner]

Dex:

Don't feel bad, prior to leaving my job a few months ago I went to 100% cash in my 401k...Not my only equity exposure but still irritating IMO this may not be the best time to correct the imbalance since it feels like chasing an aging bull but that's just me and my DMT record isn't very good.

Like you, I need to re-balance my portfolio but I plan to take some time to do it. I don't think an "all-in" approach always makes sense, especially if sleeping at night is an issue. I know others will disagree but that's my 2 cents.

 

[Spanky]

Well, you are not alone. I sold my REIT and International Value funds, both of which are still going up.

 

[mountaintosea]

Feel dumb? No I think you still have lots of time to get into the market. I think a down turn would happen if we have one of those horrific events that we keep being told is going to happen. But who can predict?

I keep thinking that I don't have enough in the market. I have about 35% of my portfolio in the market. I think my mix ought to be at least 50/50! I've let several months go by and not done a darn thing! And I believe that the next election is going to be a real blockbuster. It's going to be a real fight between the Dems and the Repubs. So interest rates will be kept low and we will ride the wild bull! (or not)

 

[Mr._johngalt]

Dex:

Don't feel bad, prior to leaving my job a few months ago I went to 100% cash in my 401k...Not my only equity exposure but still irritating IMO this may not be the best time to correct the imbalance since it feels like chasing an aging bull but that's just me and my DMT record isn't very good.

Like you, I need to re-balance my portfolio but I plan to take some time to do it. I don't think an "all-in" approach always makes sense, especially if sleeping at night is an issue. I know others will disagree but that's my 2 cents.

If it makes anyone feel better, I've been 100% out of equities for many years now and don't care if the DJIA goes to 24000. I sleep just fine.

JG

 

[donheff]

Not to diverge back into a controversial thread but, for those who get nervous and are inclined to jump in and out of the market while actually retired, the risk of destroying your portfolio seems severe enough that you really should consider putting a large portion in an inflation protected SPIA.

 

[astromeria]

Dex, I forget--did you deal with foreign currency in your j-o-b? If you actually know something about it that most people don't, you could consider keeping a small (I said small!) position in it as part of your cash/fixed income allocation. (Oh, and if you know something about it, would you inform the rest of us? ahead of any big moves? )

 

[dmpi]

Here's how it works. Suppose your 50% in stocks & 50% in bonds.

If the market goes up, you kick yourself for not being 100% in stocks.
If the market goes down, you kick yourself for not being 100% in bonds.

For good measure you also kick yourself for the MSFT, GOOG, etc that you didn't buy during the IPO.

Then you look around.... everyone's getting rich except me!

Listen to the other posters, Your emotions will drive you nuts! It's a perception thing. You can look at the world and everything is bad. Another person can see the same thing and it's all good.

 

[Mr._johngalt]

You can look at the world and everything is bad. Another person can see the same thing and it's all good.

Everything looks rosy through these old glasses.

JG

 

[Sheryl]

I keep thinking that I don't have enough in the market. I have about 35% of my portfolio in the market. I think my mix ought to be at least 50/50! I've let several months go by and not done a darn thing!

This could have been me. I'm taking next week off work, and my intent is to spend some time researching several potential funds, rebalancing, selling stinkers, and getting a good portion of my excess cash back into the market. I am at 61% stocks, 13% bonds, 26% cash.

 

[azanon]

dex, you should always own some stock. I could never advise going below 30% stock, even in the worst of markets. If you were really bearish, just make sure that "30%" is in value stock. A lot of value stuff did great even in 2000-2002, esp small cap value.

JG's advise is proof that wisdom and intelligence are mutually exclusive.

 

[Mr._johngalt]

JG's advise is proof that wisdom and intelligence are mutually exclusive.

I don't believe I ever "advised" anyone to do it my way. I happen to be quite comfortable with my own system.

JG

 

[tryan]

I could never advise going below 30% stock, even in the worst of markets.

I am only 20% in stocks (mega corp 401k mainly) ... no regrets; the rentals feed us just fine.

 

[azanon]

I am only 20% in stocks (mega corp 401k mainly) ... no regrets; the rentals feed us just fine.

So lack of regret = wise financial decisions? No? Then i fail to see your point.

We can talk about contentment and happiness which, i agree, should have next to nothing to do with how much money you have, or we can talk about wise financial decisions. Lets not make the mistake of thinking these topics are related.

 

[Patrick]

JG's advise is proof that wisdom and intelligence are mutually exclusive.

Really? Which one do you have then?

 

[brewer12345]

Really? Which one do you have then?

He's not old enough for wisdon (Latin word for "wrinkles"), and I am still waiting for signs of intelligence...

 

[tryan]

So lack of regret = wise financial decisions? No? Then i fail to see your point.

We can talk about contentment and happiness which, i agree, should have next to nothing to do with how much money you have, or we can talk about wise financial decisions. Lets not make the mistake of thinking these topics are related.

Well, my NW has appreciated well above any index fund I've seen - due to the real estate appreciation - for the last 15 years ... I'ld say that = wise financial decisions.

 

[FinanceDude]

dex, you should always own some stock. I could never advise going below 30% stock, even in the worst of markets. If you were really bearish, just make sure that "30%" is in value stock. A lot of value stuff did great even in 2000-2002, esp small cap value.

Hey Az, maybe we don't know the whole story if what dex needs.........seems to me you're pretty sure of what to do, even though you only know 25% of the story........

JG's advise is proof that wisdom and intelligence are mutually exclusive.

I find JG's logic perfectly acceptable..........as long as he applies it to his circumstance, which he implies always...........

 

[kcowan]

Well, my NW has appreciated well above any index fund I've seen - due to the real estate appreciation - for the last 15 years ... I'ld say that = wise financial decisions.

I have a little difficulty with that claim. Fortuitous is how I would describe it. No one here can forecast the future.

What is your current annual ROI based on current market valuations?

 

[FinanceDude]

Well, my NW has appreciated well above any index fund I've seen - due to the real estate appreciation - for the last 15 years ... I'ld say that = wise financial decisions.

Could be.........how does the future look now?? Keep in mind that real estate has liquidity flows that change from year to year, unlike open end funds or Treasuries............

As long as you are net cash flowing.............