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Still have not put my money in the market. Advice?
Old 05-15-2013, 12:37 PM   #1
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Still have not put my money in the market. Advice?

I posted earlier this year regarding about $200,000 I have in my 401K. It is still in cash. I was advised to put it in the market by posters on this forum, and I have not yet done that. And now, I watch the market go up and up, and I'm still hoping for a pullback that may not come so I can put the money in.

I'm 55, retired, and I will not need this money for fifteen years may not need it even then as I will have enough guaranteed income to live on and will have other savings. If I don't need it, it will go to my kids.

So why can't I bring myself to put the money in? I keep thinking as soon as I put it in, the market will have a big pullback, and I'll regret not waiting. But then I think, so what if it does? After all, I don't need the money for 15 years, if then. In that time, it's logical to believe the market will be much higher, isn't it? Or will it be higher? The market is at its high now. Some people say not to buy in, the insiders are taking their money out. I don't want to buy high. Others say it could be another big bull market. I know nobody really knows what will happen. I keep thinking there will be another crash, and I'd lose it. The market didn't do too much between 2000 and 2012.

I've made mistakes in the last crash. I kept it in until Dow was at 11,000, then I took it out. I also had money in a taxable account that I took out during the crash in early November, 2008. I took the loss and paid off my house, car, and land with the balance. I should have kept that in there, but I panicked big time. I'd have a lot more if I kept it in. Not very logical, I know. I believe I'm watching too much CNN. I know now the right thing to do is to let it ride until the market comes back.

Again, I'd like some advice on what I should do and why it makes sense to do it. I'm just really afraid of making another big mistake with my money. Thanks for any and all advice.
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Old 05-15-2013, 12:43 PM   #2
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I think you should do what ever allows you to sleep at night or not beat yourself up, but with a 15 year or maybe never need time horizon, its hard to understand just sitting on cash.
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Old 05-15-2013, 12:43 PM   #3
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Originally Posted by jmzf1958 View Post
I've made mistakes in the last crash. I kept it in until Dow was at 11,000, then I took it out. I also had money in a taxable account that I took out during the crash in early November, 2008. I took the loss and paid off my house, car, and land with the balance. I should have kept that in there, but I panicked big time. I'd have a lot more if I kept it in. Not very logical, I know. I believe I'm watching too much CNN. I know now the right thing to do is to let it ride until the market comes back.

Again, I'd like some advice on what I should do and why it makes sense to do it. I'm just really afraid of making another big mistake with my money. Thanks for any and all advice.
Buy low, sell high, as the saying goes. But if you can predict highs and lows, you are smarter than the rest of us. If you panic every time the markets drop, perhaps equities are not right for you.
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Old 05-15-2013, 12:43 PM   #4
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I believe I'm watching too much CNN.
Yes you are.......and you are watching the market too much as well.

Ask yourself what you want to accomplish with the money; decide on an appropriate AA and implement it. The value of the markets should have almost nothing to do with your actions.
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Old 05-15-2013, 12:47 PM   #5
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Hindsight is 20/20, so stop beating yourself up. I would suggest that you value average in $15,000 a month. Put in $15,000 today. A month from now add as needed to get your balance to $30,000. Another month later, add as needed to bring your balance to $45,000. Repeat until the $200,000 is fully invested.

If the market correction happens you will be putting in more money and buying more shares at lower prices, if it increases you will be buying less shares.

Once you decide on an approach, just stick to it.
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Old 05-15-2013, 12:52 PM   #6
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Again, I'd like some advice on what I should do and why it makes sense to do it. I'm just really afraid of making another big mistake with my money. Thanks for any and all advice.
IMO it is foolish to give you or anyone else advice of this type. We don't know any better than you do what is going to happen. And you undoubtedly know as much as we do about the long term probabilities.

So how would "advice" help anything?

Ha
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Old 05-15-2013, 12:59 PM   #7
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I would hang on to $100k cash, and invest the rest at $25K per quarter, you decide the AA.
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Old 05-15-2013, 01:06 PM   #8
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I would venture to guess that the market will be higher 15 years from now. If you just put the money into a dividend ETF you could collect about 3% a year for 15 years. If that's too much for you to handle you can do a 5 year CD ladder.
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Old 05-15-2013, 01:06 PM   #9
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Others have given great advice. Mine will be the same as those who told you to invest a year ago.

Even when the market is overbought, like it appears to be today, it still will do a better job than cash in the long run. Example... I'm sure people in 1998 thought the market was overbought too. In fact that was incredibly overbought. The biggest bubble. Now look where we are 15 years later... approaching double what we were at in 1998.

If we assume inflation of 3.24% (the average for the last 80 years) moving forward. Then keeping your $200,000 in cash is going to diminish it's value by $76,031.87. That is, you can reasonable assume that in 15 year you will only be able to buy about $124,000 worth of stuff with it. Over no 15 year period in history has the stock market ever lost value...

If you really aren't going to touch it for 15 years, just invest it in a safer index fund (maybe one of those 15 year target retirement funds that auto balances) and turn out the lights. Don't look at it. I guarantee you'll end up with a heck of a lot more than $200,000 after 15 years. In fact, strong chances are it'll double or triple in that time frame - in a safe investment.
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Old 05-15-2013, 01:15 PM   #10
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What if you just put it in, a little bit at a time? Say, $2000 per month? Just do it consistently, and that $2K will buy a little more when the market is down, a little less when it is up.

I'm in a somewhat similar situation, where I started cashing out somewhat, as the market kept hitting new highs, thinking I'd just buy some back on the dips. But, it never dips enough! So, in the meantime I've just been doing other things with it, like paying down the mortgage some.

Also, while the market itself might not have gone up much from 2000-2012, there have still been enough peaks and valleys that, if you've rebalanced here and there, bought on the dips, sold on the peaks, and so forth, there was still money to be made.

I just did a quick calculation, and from 12/31/1999 to 12/31/2012, roughly 41.5% of my net worth's gain has been from appreciation, dividends, capital gains, etc. 58.5% of it was from additional money I invested.

So, when you figure that we've gone through two serious recessions in that timeframe, plus the fact that not all of my money has been in the market those entire 13 years, I'd say that's not half bad for a relatively "lost" decade.

If I stretch out the period to span 12/31/1998 to 5/14/2013, it looks even better...48.5% of the gain is from appreciation/reinvested dividends, versus 51.5% from additional money I put in. I started 1999 with almost nothing, so while it was a very good year in general, I didn't have much money to invest, so I lost out somewhat. And, 2013 has been phenomenal. So far at least.
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Old 05-15-2013, 01:22 PM   #11
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I agree with dollar cost averaging, having your money sit and get eaten away by inflation is just crazy. Your money needs to work for you! Besides, the DJIA is a poor way to judge the entire market.
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Old 05-15-2013, 01:42 PM   #12
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Yes, what everybody else says

By the time I get to these threads, anything I was going to say has usually already been said by others.

I too find it a bit more disconcerting to dump a large sum of money into the market at one time, as opposed to the way I was dribbling it in via my 401K and IRA's over the years. However, like you, I knew I wasn't going to need that particular chunk for a while and just dumped it in all at once (into 2 Vanguard index funds in my case). At the moment I made the decision to do it, I also made the decision not to second-guess or look back. I don't have the patience to dribble a large chunk in bit by bit, but that's me. YMMV, as they say.

You have the ability to take a long-term view with this particular chunk of money, so feel free to do just that.

EDIT - However, if you are the type of person who is likely to second-guess yourself and pull it out if the market goes down, then question whether you should be in equities at all,
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Old 05-15-2013, 01:45 PM   #13
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I agree with the some of the other suggestions, in the sense that if you do decide to put some of your money into the stock market you should dollar cost average, or maybe value average your way into the market. But I am far from being sold that you are a good candidate to invest in stocks. Based on your post from January, you have a history of making exquisitely ill-timed investing decisions. More importantly, you have a lot of disability income that makes you at least partially, and perhaps entirely, independent from needing to live off of your investments.

According to the January post, you have been out of the stock market since the middle of 2010, so you have already missed a roughly 50% increase in the market. Sure, you could dollar cost average your way back into the market, but the fact that you are still trying to time your reentry strongly suggests that you aren't immune from pulling your money out again at just the wrong time. I suggest that you take a long hard look at yourself and try to decide how you'll react the next time the market takes a nose dive. If you can't honestly say that you've reformed and are now committed to buy-and-hold, then you probably should forget about stocks and look at TIPS, CDs, and maybe bonds to preserve your wealth and forget about trying to add to it.
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Old 05-15-2013, 01:45 PM   #14
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Originally Posted by jmzf1958 View Post
I believe I'm watching too much CNN.
Anything greater than zero...

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So how would "advice" help anything?

Ha
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Old 05-15-2013, 01:54 PM   #15
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Hindsight is 20/20, so stop beating yourself up. I would suggest that you value average in $15,000 a month. Put in $15,000 today. A month from now add as needed to get your balance to $30,000. Another month later, add as needed to bring your balance to $45,000. Repeat until the $200,000 is fully invested.

If the market correction happens you will be putting in more money and buying more shares at lower prices, if it increases you will be buying less shares.

Once you decide on an approach, just stick to it.
My prior response above was based on an assumption that you wanted to be in the market (stocks) and your trepidation was process/timing.

Since it is long term money and you don't think you'll ever need it there are two extremes.

One extreme suggests that since you don't ever realistically expect to need this money and it will be inherited by your kids that you can take a risk and invest in in equities. If things go to hell in a handbasket you will still be fine and if stocks do well your kids will benefit. In a sense you are investing it on their behalf.

The other extreme says that since this is gravy money, you don't need to take any risk with it so you would put it all in the best yielding FDIC insured bank account you can find, probably a long term CD.

A middle road solution would be to value average as I described in the previous post into Wellseley, Wellington or some other mutual fund that allows you to sleep well at night.
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Old 05-15-2013, 02:34 PM   #16
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As others have said, you do not seem like a person that should be in the market...


DCA is fine... and it MIGHT allow you to invest.... however, history has shown that DCA is not as good as putting the whole amount in at one time and letting it ride... sure, if you did that in 2008 it might not look good, but I am talking about the last 100 years (or so)...
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Old 05-15-2013, 03:50 PM   #17
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I like the value average idea. That is what got me into the market with a large amount of cash last year, even though I was worried the market was a bit high (it is 15% higher than that now).

On the other hand, I don't see inflation going above 2% for the next 3 to 5 years, so it is not like you are losing a ton of purchasing power in cash. Heck, we may even get deflation the way things are going.
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Old 05-15-2013, 04:02 PM   #18
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I posted earlier this year regarding about $200,000 I have in my 401K. It is still in cash. I was advised to put it in the market by posters on this forum, and I have not yet done that. And now, I watch the market go up and up, and I'm still hoping for a pullback that may not come so I can put the money in.

I'm 55, retired, and I will not need this money for fifteen years may not need it even then as I will have enough guaranteed income to live on and will have other savings. If I don't need it, it will go to my kids.

So why can't I bring myself to put the money in? I keep thinking as soon as I put it in, the market will have a big pullback, and I'll regret not waiting. But then I think, so what if it does? After all, I don't need the money for 15 years, if then. In that time, it's logical to believe the market will be much higher, isn't it? Or will it be higher? The market is at its high now. Some people say not to buy in, the insiders are taking their money out. I don't want to buy high. Others say it could be another big bull market. I know nobody really knows what will happen. I keep thinking there will be another crash, and I'd lose it. The market didn't do too much between 2000 and 2012.

I intend to begin pulling around $10,000 (pre-tax) per year from this account, pretty much from day one of retirement. If I were going to wait 15 years before I tapped it, there's no way on earth I'd let it sit there not earning in the market. How about at least looking at a Vanguard Target Retirement account of a fairly conservative nature? Wife & I have IRA's there in the 2015 Target accounts, & I believe we earned around 10% or so on those last year too. Yes, you're gonna lose some money here & there. You can't panic when it drops though because if you pull your money at that point, you're toast. You ride the coaster up the hills & down the hills...when it gets to the bottom, it's gonna come back up. With 15 years, you need to just ride.

I've made mistakes in the last crash. I kept it in until Dow was at 11,000, then I took it out. I also had money in a taxable account that I took out during the crash in early November, 2008. I took the loss and paid off my house, car, and land with the balance. I should have kept that in there, but I panicked big time. I'd have a lot more if I kept it in. Not very logical, I know. I believe I'm watching too much CNN. I know now the right thing to do is to let it ride until the market comes back.

Again, I'd like some advice on what I should do and why it makes sense to do it. I'm just really afraid of making another big mistake with my money. Thanks for any and all advice.

I am also 55 years old, not retired but will be retired before the end of this year. On January 1st this year, I had almost exactly the same amount in a 401k type account. $199,998.00 to be exact. Today is May 15th, and I have $232,000 in that same account, due to the performance of the market over the last 4 1/2 months. Today, I did pull back from Mr. Market, but will be at least partially in the market even after I retire. Ya have to be or you'll soon lose ground to inflation. I pulled out today in anticipation of a correction. Once I get back in, I'll be much more diversified than I have been in the recent past, but I do want my money to keep growing. I will admit that most of last year and so far this year, I've been MUCH riskier than most on this board would advise. I've been mostly 100% in a single index fund. Time to throttle back now to around 55% to 60% stocks, small & large caps.
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Old 05-15-2013, 04:10 PM   #19
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You've had a lot of good advice, now just follow what you think is best.

I have a lot of cash and buy index funds each month. Decide what amount you want to invest and over what period of time. Then do it like you buymilk.......some each week but you double up when it goes on sale.

What would I do? I'd probably have a goal to have 70% in stocks over a two year period of time......just over $5000.00 per month. I'd pick a good index fund....total stock or if you want bonds, a balanced fund that has both stocks and bonds.

Then every month I'd buy my 5 K EXCEPT if the market went down, I'd double my buy. After your two years is up, you would still have 30% in cash and I'd invest that in short term bonds, (can't lose or make much) and have it ready to go if the market tubed. Then, since you buy low and maybe, sell high, you'll find yourself doing well most of the time.

There are no guarantees and I won't say my way works.....but, friends used to say I was too conservative.....and, buying every month, more when you market goes down has made me a lot of money over the years.

I'm not a market timer.....I try to keep emotion out of it.....I don't try to hit home runs.....I know I'm not as smart as other individuals think they are....but I've won and if I woud have lost, I probably would have lost less than most others.

Good Luck to you....you've had a lot of great posts......just pick one or two and move off of dead center......you'll be glad you did.
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Old 05-15-2013, 04:35 PM   #20
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Consider doing what I did this year with a significant amount of money that was not invested in the market.

#1) Setup an automatic schedule to move a certain percentage each month into the market.

#2) Choose a balanced fund to go into (or perhaps a target date fund). This way, you won't need to worry about balancing in the future, but you will automatically get the advantage of balancing due to the way that these funds operate!

-gauss
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