I know...I know...

[ARB57]

market timing is evil, BUT, I'm at 20% equities and would like to get to 35-40%. Would you take the plunge TODAY and get the equity position up to your allocation target (with the S&P at the top of it's recent trading range,) or wait for a pullback. If it were YOU...what what you do?

Retired...mid-fifties. No pension. Shouldn't need the equity money for several years.

Thanks.

 

[MichaelB]

Why not do half now and half in 3 or 6 months?

 

[brewer12345]

Over the very long term, it probably makes very little difference. If it makes you feel better, average in over 6 months to a year.

 

[kat]

You asked. I'd wait. But your question surprises me a little because we had some down days when you could have gotten in at better prices. I say wait for another one.

 

[eytonxav]

I'm not sure there is anything that could happen that would drive much larger upsides, but I suspect there is for the downside. I would try to average in on the dips. That said, no one has a crystal ball (I certainly do not) and there are no guarantees of what the market will do, but I suspect you'll see a better entry point in the not to distant future.

 

[Animorph]

I think the market will go lower 2012, so I'd be fine with delaying a bit. On the other hand, things are still nicely down from all-time highs, so I wouldn't wait forever for ideal timing.

Think about something like a DCA with market level triggers. Maybe half when down another 5% from recent peaks and the rest when down 10%. Or thirds down to 15% if you think it will get that bad and you feel greedy. With a plan for investing the remainder if the market doesn't go low enough. I'm retired, so I just spend the extra cash over the next few years. You might want to have a backup DCA, such that if you haven't invested enough by a certain amount of time you just do it at that time. Make sure you are able to invest while the market is falling! Don't chicken out.

The official way to do it is to go ahead and toss it all in now. On average markets go up, so you're only losing money (on average) by staying out. Plus, if you already had your AA set up years ago, you wouldn't have all this cash lying around now. Buying now just sets the AA to what it would have been had you started earlier. This will average out OK if you do this a lot, but is scarier for a one time shot.

Make your best guess and don't be too disappointed when it isn't totally optimum. Just try to gain a little advantage.

 

[utrecht]

I would just pile it in all at once, but if I was going to try to time it, I would certainly wait for a better spot. The SP500 is bumping up against its 200 day moving average so if you believe in technical analysis, you should find a better entry point in a few days.

 

[HpRyder]

Get you wish list current. Look back on the recent large market drop days, when everyone thought the markets were about to implode. For your wish list items, set a buy limit about 3% above the lowest price for each item. Then wait for the next market volatility to occur. I believe it will happen after the "Santa Clause Rally" ends.

 

[W2R]

Over the very long term, it probably makes very little difference. If it makes you feel better, average in over 6 months to a year.

+1 This can really help with peace of mind IME.

 

[Midpack]

Over the very long term, it probably makes very little difference. If it makes you feel better, average in over 6 months to a year.

Looks like the right answer to me since the OP said he shouldn't need the equity money for several years. OP also mentions waiting for a pullback, good luck. Hindsight is wonderful but knowing you're near the bottom of a dip in real time is difficult or impossible. Could you call the dip in 2008-2009?

Here's an article today, another opinion FWIW...http://finance.yahoo.com/news/put-cash-back-market-172600968.html

 

[Meadbh]

In the very long term it is best to spend the longest time in the market. That said, there is nothing wrong with taking a look at how the market has been behaving in the past month or two and buying in on a dip rather than a steep upswing. That's what I did a few months ago when I had some $$$ to invest.

 

[target2019]

Equity position means different things, or at least I think that way. As a for instance, look at US REIT (VGSIX). Then gander at Total Int'l. One has momentum up, one is clearly stuck at lows.

Some people buy on the dips, others buy in buckets while the trend is up. Some go in all at once.

 

[brewer12345]

If you are planning on buying on the dips, first make sure you have the intestinal fortitude to do so. It is psychologically very hard to buy on the dips (as I can tell you from personal experience). Much easier to just automate things and let them happen.

 

[LOL!]

What? You mean you aren't following the guidance of LOL!'s market timing thread? http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042.html

 

[akck]

Looks like the right answer to me since the OP said he shouldn't need the equity money for several years. OP also mentions waiting for a pullback, good luck. Hindsight is wonderful but knowing you're near the bottom of a dip in real time is difficult or impossible. Could you call the dip in 2008-2009?

I remember thinking the low in March 2009 would be the low point and might be a good time to get in. Then again, I thought October 2008 was the low too. At least hindsight showed me I got one right compared to all of the times I was wrong. Of course, the big secret is knowing when to get out of the market on a high. I haven't been too good at that either.

 

[Andre1969]

I remember thinking the low in March 2009 would be the low point and might be a good time to get in. Then again, I thought October 2008 was the low too. At least hindsight showed me I got one right compared to all of the times I was wrong. Of course, the big secret is knowing when to get out of the market on a high. I haven't been too good at that either.

Even October 2008 (well, late October, at least) would have been a good time to get back into the market. Most of the damage to my portfolio was done in the later part of August, September, and October of 2008.

I did end up losing a little more in November of 2008, and that's where I hit bottom, but November's loss was a pittance compared to the previous couple months.

Then in December and early January, the market seemed to roar back, but then fell again, and hit the official bottom around March 9, 2009. But it wasn't much worse than the November bottom, and my own portfolio was actually higher, because I had started cranking up my investing.

 

[Coolius]

I have been lightening up a little over the past 3 days. Many of my holdings have reached new highs, and I can see the chart is looking like a plateau.

I remain convinced that we will see some pullback in January, and also that there will be bad days in 2012; so I am raising dry powder to take advantage of that when ( not if ) it happens.

Remember, Europe is still in a mess, and the war rhetoric in the Middle east just keeps getting louder & louder. Interest rates have little downside left, if any. Then we have total dysfunction in Washington DC, and incredibly foolish and inefficient state governments in many states ( the worst being California, where I reside ).

And don't forget the Mayan Calendar!! All this investment may be moot.

 

[jayc]

DCA is always a good option and works out well math wise. I DCAed into stock drip plans for years. Timing is not evil, it is just another approach to investing.

Did you or someone you know get up early on black friday to go shopping? Timing

Do you stop and fill up your car when gas prices dip? Timing.

Do you ever buy a plane ticket on the same day you fly? Timing.

Do both. Take 1/2 and DCA over 6 months and take the other 1/2 and buy some on those 200-300 points drops.

 

[Alan]

You are retired and in your mid-fifties. If you proceed and double your equity position to 40%, you say you will need to draw from it in several years time.

I would be very sure as to why I want to put so much into equities for a short period. If the market is down in a few years when you have to draw from those funds can you take the loss and shrug it off?

 

[ARB57]

I know...I know

Realistically, it will probably be more like 15+ years before I'd consider tapping the equity portion of the portfolio.

 

[pb4uski]

I would probably put it in at once, but if a more gradual approach suits you you can value cost average over 6-12 months.

VCA is a bit different than DCA. You set a target balance and then invest the difference between you equity balance and the target each period. For example, let's say your current equity balance is 22 and you want to increase it to 42 in 12 months so your new investments would be 20. Adding a bit for growth, the target in 12 months might be 46. So the target would start at 22 and increase 2 each month; 22, 24, 26..... At the end of the first month you invest whatever is needed to bring your equity balance to 22, ditto the next month to 24, etc. When you get to the end you need to fudge it a bit depending on how equities performed over the period.

As a result if the market does well in a month you invest less and if it has a bad month you invest more and the end result is buying more while it is low and less when it is high.

I did this with my kids college fund and was pleased with the results. IIRC some backcasting analysis showed that the technique increased returns by about 50 bps. While some would think it isn't worth the effort and they may be right, I saw it as an interesting and entertaining game as well.

 

[Alan]

Realistically, it will probably be more like 15+ years before I'd consider tapping the equity portion of the portfolio.

That's certainly more than "several years".

If I was in your situation I would first ensure I was maxing out my tax advantaged contributions (401k, IRA etc), and have 9-12 months expenses in an emergency fund, then DCA the rest into paying off the house. Reason I'd be so cautious on the emergency fund is the poor job market.

 

[ARB57]

Thanks again for all the feedback. Re: the last post...I think that we have gotten our wires crossed. You reference 401k's, emergency fund, paying off house etc. That's not me. I'm retired. No mortgage. My question was about when and how to increase my equity position. Re: the post about Value Cost Averaging. That was very helpful...I had never thought about it that way. It seems to make a little more sense than simply dollar cost averaging. Thanks again to all.

 

[Meadbh]

Before we put this subject to bed....here's an article that shows how times of market volatility are the best times to invest, if you have the cojones.

The silver lining to volatile stock markets - The Globe and Mail

 

[clifp]

market timing is evil, BUT, I'm at 20% equities and would like to get to 35-40%. Would you take the plunge TODAY and get the equity position up to your allocation target (with the S&P at the top of it's recent trading range,) or wait for a pullback. If it were YOU...what what you do?

Retired...mid-fifties. No pension. Shouldn't need the equity money for several years.

Thanks.

I'll be a bit of contrarian and say do it now or at least 1/2 of it now.
To me a mid 50s retiree with no pension and 20% equity AA is as almost as a dangerous AA, as 75+ year old with near 100% equity position. There is certainly a possibility that January effect will be in force this year and if you DCA over the next 6 months you'll have missed a 10+% move.

On a practical level lets say you put 1/2 the money into several ETFs between now and the end of the year. If next Dec the market is down you can sell your losers and take the tax loss in 2012, if on the other hand you have one big winner that you think is over valued you have flexibility of still getting a long term capital gain in 2012 or 2013. Dec trades really help with minimizing taxes.