What index and at what price would you buy?

[modhatter]

If you got a sudden unexpected inheritance of a few hundred thousand, what would you be looking at now and considering as approaching good buy opportunities. Energy has taken a big tumble this year, but with concerns naturally. Emerging Markets keep coming down, but with China's slow down, it will effect emerging markets to an even greater extent.

So if you had to play. Where would you play now, and at what price would it become enticing. Not talking about individual stocks by the way, which make finding bargains a little easier.

 

[hnzw_rui]

Value average in and use the cash to rebalance to the normal asset allocation. And maybe like 1-2% on a Health Care Index Fund as my hedge for LTC.

 

[sengsational]

Here is a thought experiment* that suggests dollar cost averaging into the market is not the right choice.

What would you do if hackers got into your accounts and sold a few hundred thousand, but leaving your asset allocation targets in tact (except cash, of course)? Presuming you had no plans to move that money out of the market yesterday, shouldn't you put it all back where it came from, all at once?

If the answer is "yes", one may also say that the right move would be to chunk the entire influx of cash into your portfolio such that your asset allocation targets are maintained.

There are external (tax) things that might make you change your approach, though. Say your after tax money is in highly appreciated stock, and you have been putting off buying a motor home because you didn't want to trigger big cap gains right now. Well, now with the influx, you can buy your RV without tax consequences.




* For this thought experiment, let's ignore tax consequences.

 

[hnzw_rui]

Here is a thought experiment* that suggests dollar cost averaging into the market is not the right choice.

What would you do if hackers got into your accounts and sold a few hundred thousand, but leaving your asset allocation targets in tact (except cash, of course)? Presuming you had no plans to move that money out of the market yesterday, shouldn't you put it all back where it came from, all at once?

If the answer is "yes", one may also say that the right move would be to chunk the entire influx of cash into your portfolio such that your asset allocation targets are maintained.

Never said it was the right choice. Just the one that will me sleep better at night.

What would you do if hackers got into your accounts and sold a few hundred thousand, but leaving your asset allocation targets in tact (except cash, of course)? Presuming you had no plans to move that money out of the market yesterday, shouldn't you put it all back where it came from, all at once?

If the answer is "yes", one may also say that the right move would be to chunk the entire influx of cash into your portfolio such that your asset allocation targets are maintained.

To be honest, no idea how I'll react if the above scenario happens but knee-jerk reaction is to put it back in the portfolio lump-sum. I know it's irrational and that money is fungible but somehow, for me "new" money feels different than one that's already sitting in the portfolio.

 

[NW-Bound]

Here is a thought experiment* that suggests dollar cost averaging into the market is not the right choice.

What would you do if hackers got into your accounts and sold a few hundred thousand, but leaving your asset allocation targets in tact (except cash, of course)? Presuming you had no plans to move that money out of the market yesterday, shouldn't you put it all back where it came from, all at once?

If the answer is "yes", one may also say that the right move would be to chunk the entire influx of cash into your portfolio such that your asset allocation targets are maintained...

Hmmm... I think I would put it back, but not choosing the same stocks or ETFs.

So, why have I not sold the ones I do not like right now? The same reason that most people have: inertia.

I have read that to buy and hold individual stocks, one must constantly evaluate whether he would buy that stock anew. If not, it should be sold.

And I do not follow that advice religiously and act decisively. Else, I think I might do better. Of course, one must be careful not to become a day trader.

 

[modhatter]

Well to clarify, I never took money out of the market yesterday. I added some. Just thinking of diversifying more and looking at anything that might be considered a bargain now, as I think the market even with this weeks drop is still pricey so always prefer to add new funds (either new or to existing ones) when and if I think a fund is at a reasonable cost. Don't you?

I previously had two different acts. with Schwab. One I managed - buying individual stocks, and another one with an adviser from when I first got into the market back in 2007. The adviser did lousy. I beat him hands down.
I don't have him any more, and I sold most of those stocks last year, and moved over to Vanguard to simplify things for myself. I also sold two rentals this year, as I just can't do it anymore. So yes, I've been dealing with lots of cash all at once. I have been gradually adding to the funds every couple of months.

I wish we could have a conversation about this instead of everyone always jumping down the posters throat about trying to time the market. Sometimes people just want to tweak their portfolio in hopes of improving it.

Lets be truthful, everyone considers price whenever they buy a stock or a fund, as well as diversification. People with long time horizons who are contributing monthly to accounts don't have this concern quite as much, but for those in retirement all ready or near it, or those with large sums to invest when the market is rather frothy, you do think once or twice or thrice (I made that word up) before hitting that buy button.

I have bought 4 funds so far, Total US Stock, Total International, Total Bond and some Intermediate Tax Exempt. I know I could stop with those 4 funds, but I don't need it quite that simple, if I can improve on it. I do need income, as the rentals I sold this year produced good income, that I no longer have (2% dividends hardly replace the rental income) so letting go of them was a double edged sword. So with explaining the story of my life, does anyone have any thoughts on some possible depressed funds that may make sense now or with a little further drop might be considered?

I am feeling the inclination to go individual stock shopping, and I don't want to go that route again. I know what will happen, and I don't want to wind up with 50 stocks again to try and monitor. I'm like a stock alcoholic. I just can't have one.

 

[NW-Bound]

... does anyone have any thoughts on some possible depressed funds that may make sense now or with a little further drop might be considered?

I am not sure what you are looking for. There are many depressed sector ETFs right now, but they may go down more or stay depressed for a long time. Even if posters have some favorite ones in their pocket, they are reluctant to recommend it because they would feel responsible if it does not work out. The only ones people would mention are the broadbased ones, and you have them already.

There are so many ETFs right now, you can easily become an ETF'holic if you had 50 stocks before.

PS. I still have more than 50 stocks/ETFs/MFs. And I have sold off quite a few.

 

[rayinpenn]

I never try to time the market... It is folly. Someone once said a bell doesn't gong when it reaches the bottom so studies have shown many will miss the bounce... Having said that if I were lucky enough to be sitting with a pile of cash:

There are many index funds out there I'd buy a couple of the low cost vanguard funds and perhaps some IDV, DVI just because I prefer dividend shedding investments... I've got it on my mind that the ability to pay dividends year after year is the best litmus test of a companies financial health...


Sent from my iPad using Early Retirement Forum.

 

[Dawg52]

I wish we could have a conversation about this instead of everyone always jumping down the posters throat about trying to time the market. Sometimes people just want to tweak their portfolio in hopes of improving it.

I am feeling the inclination to go individual stock shopping, and I don't want to go that route again. I know what will happen, and I don't want to wind up with 50 stocks again to try and monitor. I'm like a stock alcoholic. I just can't have one.

I never try to time the market... It is folly. Someone once said a bell doesn't gong when it reaches the bottom so studies have shown many will miss the bounce...

It didn't take long modhatter, heh heh.

SCHD is a dividend etf that has a yield approaching 3%. Might be there soon.

 

[target2019]

Well to clarify, I never took money out of the market yesterday. I added some. Just thinking of diversifying more and looking at anything that might be considered a bargain now, as I think the market even with this weeks drop is still pricey so always prefer to add new funds (either new or to existing ones) when and if I think a fund is at a reasonable cost. Don't you?

I previously had two different acts. with Schwab. One I managed - buying individual stocks, and another one with an adviser from when I first got into the market back in 2007. The adviser did lousy. I beat him hands down.
I don't have him any more, and I sold most of those stocks last year, and moved over to Vanguard to simplify things for myself. I also sold two rentals this year, as I just can't do it anymore. So yes, I've been dealing with lots of cash all at once. I have been gradually adding to the funds every couple of months.

I wish we could have a conversation about this instead of everyone always jumping down the posters throat about trying to time the market. Sometimes people just want to tweak their portfolio in hopes of improving it.

Lets be truthful, everyone considers price whenever they buy a stock or a fund, as well as diversification. People with long time horizons who are contributing monthly to accounts don't have this concern quite as much, but for those in retirement all ready or near it, or those with large sums to invest when the market is rather frothy, you do think once or twice or thrice (I made that word up) before hitting that buy button.

I have bought 4 funds so far, Total US Stock, Total International, Total Bond and some Intermediate Tax Exempt. I know I could stop with those 4 funds, but I don't need it quite that simple, if I can improve on it. I do need income, as the rentals I sold this year produced good income, that I no longer have (2% dividends hardly replace the rental income) so letting go of them was a double edged sword. So with explaining the story of my life, does anyone have any thoughts on some possible depressed funds that may make sense now or with a little further drop might be considered?

I am feeling the inclination to go individual stock shopping, and I don't want to go that route again. I know what will happen, and I don't want to wind up with 50 stocks again to try and monitor. I'm like a stock alcoholic. I just can't have one.

It's impossible to tell you where to go, since I don't know where you've been!


Actually, I do know a bit more now, so thanks for the added information. I understand not wanting to have individual stocks again. It is messy.

If I had $300K, I would look at my AA and decide if it needs changing. Use AA as a guide. Don't drift away from that. Use ETFs.

1. Less in EM, and simplify with Total Int'l. Done. 20%.
2. Total Bond, no way. This is taxable, right?
3. Int Tax Free, yes. 25%. If I needed income, I would do it right now. Otherwise, take 2-3 years, invest as the price falls.
4. Total US, 40%. I would go larger buy now, with smaller investments along the way as the market recovers.
5. Small/Mid US completion, 15%. I might do that in 15 payments. LOL!

I'd do this in a way that complements what I have now. If I felt having this 300K allowed me more certainty, I would change my AA for a bit more risk, 5-10% more equities.

However, the devil in me really wants to identify 30 dividend growth companies and build a portfolio of that will generate 4% qualified dividends right now. That would be immensely more fun...

 

[nun]

My only criterion for buying or selling is when I have to rebalance. I did some of that the day before yesterday by selling some Intermediate Investment Grade Bond fund and buying some Total Stock Market Index. So I would take a lump sum and invest it to maintain my AA....I probably wouldn't bother to DCA.

The requirement to transfer TIAA-CREF stock funds into TIAA-Traditional earlier this summer to buy into a state pension fund and my laziness in not immediately rebalancing makes me a bit more sanguine about the recent correction. Getting 4% a year guaranteed on 25% of my portfolio looks like a good deal now......whether I'll think that in 1, 5, or 10 years is the question.

 

[Animorph]

I stick to my AA, including multiple equity fund target percentages. So any new money goes into the portfolio in a way that rebalances it to my targets. By doing this you limit the chances of chasing the hot funds only to have them disappoint you as their gains slow down.

If your total international doesn't include emerging markets then that's one area you could fill in. I also have 10% allocated to energy and 10% to real estate. I've had to rebalance into both EM and energy recently, so it's not a terrible time to add them. Real estate has been holding up OK.