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Old 06-24-2014, 02:38 PM   #21
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I had this dilemma too about 6 months ago or so. I had a most of my portfolio in a MM after selling off at the market bottom in '08. I worried we were (are?) at the market top, but who knows? I have a long time horizon (I'm almost 50 - but hope to live into my early 80s).

I got good advice here to establish my AA and either dollar cost average in over a period of time that felt comfortable to me, or just lump sum in. After doing some research on this board and others, I figured out that it is actually better to lump sum in if you can stomach it. So that is what I did. (And, it turns out that the market still went up. But if it went down, that is ok, too. I have the AA I am comfortable with and I have time).
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Old 06-24-2014, 03:13 PM   #22
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I'm no historian, but even if (when) there is another correction/crash, it ALWAYS recovers. Only exception is the dotcom bubble that I know of. The longest periods are around 4 years or so.

I believe that is why I have always been told keep 5 years in cash equivalents so as not to touch the long term investments and make a mistake.

Yes it is hard, but if you live/invest by a set of rules and can STICK TO THEM, you will be better off. That is the boglehead philosophy. Yes, I will be nervous if the market drops 50% again BUT if I have planned correctly, I shouldn't panic because there will be no need. If anything, it will be (historically) an amazing buying opportunity.
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Old 06-24-2014, 03:24 PM   #23
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Or you can embrace losses because they let you buy stocks on sale. I look forward to losses for just that reason: index funds go on sale.
Buy on sale is best. Over five years into a bull market it is hard to buy. The best things that can be said for this market are, the public isn't wildly enthusiastic, and don't fight the Fed.

Does OP have a plan how to get "fully invested"? Say OPs fears are well founded, and, like Jim Rogers, Jim Grant, and Harry Dent predict, the Dow is around 6000 in 2017 (that's Harry's number). When will OP start buying? When would you run out of cash to take advantage of the "sale"?

And then, What if the stocks you are buying don't come back up?

Maybe better call your local brokerage and get yourself a VA. Lol.

Full disclosure, personal cash up to about 33%, been adding gold and gold mining stocks to bring gold related towards 10%.
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Old 06-24-2014, 03:33 PM   #24
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(I'm almost 50 - but hope to live into my early 80s).
Is this based on a health concern?

Recommendations I followed are to base retirement funding calcs on living to age 95, or even 100, which cranks out a much more substantial portfolio than what you'd need to live to your early 80's. I also don't expect to live much past my early 80's, yet that's the advice I followed -either my heirs get a nice inheritance, or living longer I won't be a burden on them (the basis for my decision).

Predicting a "Retire From Retirement Age" may not be more accurate than predicting a market correction. Better to be conservative.

Started to DCA in today, and see what happened to the markets?!
Maybe that's all it took to get a correction started!
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Old 06-24-2014, 04:54 PM   #25
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Is this based on a health concern?
Not really. Just the SSA's thoughts on my life-span. Planning into your 90s just means your investment timeline is even longer. You really better have some equity exposure because a MM isn't going to keep up with inflation.

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Started to DCA in today, and see what happened to the markets?!
Maybe that's all it took to get a correction started!
Thanks for the warning! I'm selling everything.
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Old 06-24-2014, 04:57 PM   #26
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Started to DCA in today, and see what happened to the markets?!
Maybe that's all it took to get a correction started!
Thanks for that. Today's action made my rebalancing posted in "LOL!'s Market Timing Newsletter" last week look good.
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Old 06-24-2014, 06:20 PM   #27
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Comment I got from the boglehead forum from someone way smarter about finances than I am. Granted it was dealing with a much smaller amount of money but I think it still applies.

"You will not be using this money on the first day of your retirement so it may actually be invested for 20 or 30 years. Will the market be higher at that time than it is today? I hope so. If not, there is no reason to be investing at all."
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Old 06-24-2014, 10:09 PM   #28
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Financial planners advised me to retire, based on their view that the trend in 2014 and beyond would be rising rates, which would eat into my retirement lump sum. Wrong so far, but maybe not for long -who knows.

Any help providing perspective, or recalibrating my psychology on this appreciated.
I guess this refers to the discount rate that would be used to convert your pension to a lump sum. I guess they are right in this one regard, providing they are right about their forecast of rising rates. However, if that were a gimme, the rates would already have risen.

I didn't notice if you said anything about your expenses or your retirement assets. But remember that the decision to retire and decisions about how to invest are two separate things. Nothing to stop you from staying in your money market fund when you retire. If you have adequate resources, it takes a long time to hurt yourself much solely from an under-earning portfolio. OTOH, a 50% drop the year after you retire can definitely smart a bit.

Ha
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Old 06-24-2014, 10:13 PM   #29
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Comment I got from the boglehead forum from someone way smarter about finances than I am. Granted it was dealing with a much smaller amount of money but I think it still applies.

"You will not be using this money on the first day of your retirement so it may actually be invested for 20 or 30 years. Will the market be higher at that time than it is today? I hope so. If not, there is no reason to be investing at all."
Sequence of Returns examples illustrate how devastating a bear market in the first few years of retirement are on your returns 20-30yr later. Therefore, although odds are good that the market will be higher in 20-30 years, when you invest can have a big impact. That's been the reason for my concern. Once invested I will hold -I just want to get started on the right foot.

It's not easy to follow the Conventional Wisdom and invest because "you can't predict the market" when you can't shake the feeling that a large correction is imminent. I can't predict the market, but by the same logic there's no assurance that in 1-2 years I won't regret investing now and that MM returns over that time would look good.

Regardless, I've started to DCA in, and I may be glad I did.
-or NOT!
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Old 06-24-2014, 10:22 PM   #30
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Once I buy, I'll hold/rebalance. There won't be any market timing.
But you are market timing... right now.
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Old 06-24-2014, 10:43 PM   #31
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Nothing to stop you from staying in your money market fund when you retire. If you have adequate resources, it takes a long time to hurt yourself much solely from an under-earning portfolio. OTOH, a 50% drop the year after you retire can definitely smart a bit.Ha
An under-earning portfolio vs a 50% drop was the basis for "standing-by" in MM. I decided I could do that for a year or so to wait for a correction, and it didn't cause much concern until now. I'm going to slowly DCA in and hope for the best.
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Old 06-24-2014, 10:49 PM   #32
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But you are market timing... right now.
And you repeat an observation in other posts...and acknowledged.
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Old 06-24-2014, 11:16 PM   #33
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An under-earning portfolio vs a 50% drop was the basis for "standing-by" in MM. I decided I could do that for a year or so to wait for a correction, and it didn't cause much concern until now. I'm going to slowly DCA in and hope for the best.
If you can live off all or mostly COLAed income streams like SS, TIPS, I bonds and pensions you may not have to invest in stocks at all. Then you don't have to worry about sequence of returns risk and losing 50% of your portfolio in any given year.
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Old 06-24-2014, 11:32 PM   #34
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If you have can live off all or mostly COLAed income streams like SS, TIPS, I bonds and pensions you may not have to invest in stocks at all. Then you don't have to worry about sequence of returns risk and losing 50% of your portfolio in any given year.
That would be nice, but I need to be in the stock market over the long term. I determined I would be OK standing by in MM for a year or so, assuming another year of 30% gains isn't in the cards.
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Old 06-25-2014, 02:55 PM   #35
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Another article that shows you are not alone:

http://finance.yahoo.com/blogs/daily...162438252.html
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Old 06-25-2014, 03:30 PM   #36
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If you have a lump sum in MM and the rates go up, wouldn't that be better for returns on cash?

Of course higher rates may mean higher inflation, eating into buying power of that cash.
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Old 06-25-2014, 04:42 PM   #37
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I'll take the contrary view here... and agree with you (the original OP). There are very good reasons to be deeply concerned about current market conditions. There are some unique macro economic factors at play across the globe today. Some of us think they don't bode well.

Might stocks continue on their upward trajectory over the next 12-36 months? Sure, absolutely. And wouldn't it be deeply disappointing to miss out on, say, another 20+% bump. You bet.

But... is there an equal or better chance that they might tank, and might do so in a very serious way? Some of us think so.

Cash is not always a bad place to be.
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Old 06-25-2014, 05:14 PM   #38
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We sold off most of the stocks earlier in the year. We decided even a 15% drop would be equal to a number of years of low key retirement living expenses for us, and we'd rather not lose that kind of financial security at our ages.
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Old 06-25-2014, 05:26 PM   #39
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Jager-

I've received a lot of wrist slaps for market timing in this thread, so thanks for your support!

Investors enjoying big gains from the past 18mos find it much easier to shrug at the potential for a large correction.

Someone just retired and mostly in MM has a lot to think about when considering the possible outcomes of going all in right now to achieve their financial plan asset allocation in stocks/bonds!
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Old 06-25-2014, 06:48 PM   #40
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Just watched a video by Robert Schiller and his view that we might be at a peak as well. One thing that occurred to me is that if you feel scared to invest you could step into the part of your allocation that is foreign stock based, where the CAPE is low. Then gingerly approach domestic. This might help you overcome the stuck feeling that you have.

The big question for you is, if you invest tomorrow, and the market dives 5-10%, will you sell again saying " I knew it". . Every one of us know what we are supposed to do, but actually doing it is different.
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