Investing in this market

[RocketGirl]

I am wondering what people are doing right now if they have spare cash to invest. If I was 10 years younger I'd maybe be less hesitant -I'm 47 and would like to retire at 60. Due to some aggressive savings over the last few years and an inheritance I have about $275 k to invest. Ideally, I'd average that out and take advantage of dollar-cost averaging over a longer period but given my time horizon I'm not sure how to strategize (also complicating this is inflation and the current market). Additionally, I am likely going to sell an investment property in the next while which will put another sizable bit of cash in hand (not sure how much we'll get but my guess is about 150k after all expenses/ taxes).

We are in okay shape as we head for retirement. We have no mortgage, we have a few rental properties which will be paid off in the next few years (income generating with expenses more than paid for by tenants so no need to pay those down), maxed out RRSPs, TSFAs (with some room - which creates a tax-free investment for some of the cash mentioned above). I can get a moderate pension at 60 from work. What I'm hoping to do with this additional money is to create additional wealth for a more comfortable retirement. Likely we could wait to draw down on most of this until 65 if we needed to.

In any case, I know that no one can time the market or know what is going to happen but curious about how others are investing in these times and what others might do if you had cash sitting idle ready to invest.

 

[copyright1997reloaded]

Thirteen years is a lot of time and you are still working.

As negative as I am on the economy and trends, if I were in your shoes (and I'm not), I would slowly DCA into the market but make sure I had at least a year's living expenses in cash. $4k/month gives you over five years to systematically invest (and adjust if needed). If you are lucky, the market will continue to drop for awhile.

 

[corn18]

Invest when you have money, withdraw when you need money. It's just that simple.

 

[target2019]

$275K / 24 months = 11,458 monthly. I would do this.

When we inherited a similar amount, it was already invested. So we did not need to DCA on a schedule.

 

[NW-Bound]

Yes, as earlier posters said, young people should continue to DCA into the market.

If you are a stock picker, be careful not to be tempted by the stocks that have fallen hard.

From the lessons in the past, just because something is down to 25c or 10c on the dollar does not mean that it will go back to the dollar. It was never worth a dollar in the 1st place.

 

[FLSUnFIRE]

I'd DCA in as other's have said.



Small potatoes compared to the cash you are sitting on but for reinvesting my HSA after I liquidated it before transferring to another custodian. I am DCAing over two years and any month that is down 1% from the prior month I invest 150% of the planned amount and if down 2% I invest 200%. I don't like being out of the market so it accelerates me getting in the market and I'm buying a bit more when there was a recent decline. I did not backtest it but it felt better than throwing in the lump sum late in a bull market. Fun and games!

 

[NW-Bound]

I remember that during the market bull run, whenever someone asked whether he/she should DCA or go all in, the majority of the responses said to "go all in, all at once". It's "time in the market", and the sooner one goes in, the more he/she has.

So far, there's not yet a comment along that line.

 

[FLSUnFIRE]

I remember that during the market bull run, whenever someone asked whether he/she should DCA or go all in, the majority of the responses said to "go all in, all at once". It's "time in the market", and the sooner one goes in, the more he/she has.

So far, there's not yet a comment along that line.

I agree statistically that is the best option but we are each a sample size of one and the probability of buying at a high that will result in less than optimal returns is not zero. It also ignores psychology of money and risk aversion of humans/response to loss.


Statistically I will be dead at age X which is good for actuaries managing risk pools but not particularly useful for me to use in making major life decisions.

 

[NW-Bound]

I agree statistically that is the best option but we are each a sample size of one and the probability of buying at a high that will result in less than optimal returns is not zero. It also ignores psychology of money and risk aversion of humans/response to loss.

Statistically I will be dead at age X which is good for actuaries managing risk pools but not particularly useful for me to use in making major life decisions.

Exactly.

An investor must understand himself and his risk tolerance. Don't be swayed by the crowd chanting "buy, buy, buy", then "sell, sell, sell".

That's what I find investing an interesting challenge. You are fighting your own greed, then fear. You have to be able to ignore the siren lure of "getting rich" meme stocks.

And that's why buy-and-holders and indexers tend to do better than active investors, or should I say "most active investors". I ask myself, if the typical active investors do so poorly, can you do the reverse and be ahead?

 

[Freedom56]

I'm buying short term corporate notes. I did the same in March 2020 and made a lot of money. Many of the notes that I bought then have matured and the cash was sitting in a money market savings account. I just initiated another large transfer of cash to my brokerage account. You have to take the emotion out of investing and buy when fund managers are in a forced selling mode. I'm putting in low ball limit orders on short term notes maturing in 2023 and 2024 at bids prices yielding 8% waiting for funds to sell as they are forced to. If they fill great, if they don't tomorrow is another day. This time the Fed is helping this type of trade.

 

[RunningBum]

OK, I'll say it, I'd put it in the market now. You're getting a 20% discount from where it was.

Psychologically I'd have more regret tricking it in and missing out on a recovery (if it happens) than seeing it drop more after investing, mostly because on average, being in the market comes out better than market timing or DCAing.

If you don't feel that way, then DCA in. It's your money.

 

[RunningBum]

$275K / 24 months = 11,458 monthly. I would do this.

When we inherited a similar amount, it was already invested. So we did not need to DCA on a schedule.

See, that's my problem with the DCA choice. Why treat money differently when you inherit invested money vs. cash? If DCA was the right choice, shouldn't you sell the inherited investments and start over with the DCA?

But people don't. It's an emotional decision. They fear an active decision backfiring, but not a passive decision. I don't think financial decisions should be made emotionally. But again, that's me, others can do what they want. I wasn't even going to make this point but this captured my view on the lump sum vs. DCA decision perfectly.

 

[npage]

I'd DCA in as other's have said.



Small potatoes compared to the cash you are sitting on but for reinvesting my HSA after I liquidated it before transferring to another custodian. I am DCAing over two years and any month that is down 1% from the prior month I invest 150% of the planned amount and if down 2% I invest 200%. I don't like being out of the market so it accelerates me getting in the market and I'm buying a bit more when there was a recent decline. I did not backtest it but it felt better than throwing in the lump sum late in a bull market. Fun and games!

That's a good solid DCA strategy. Curious on a day like today down 3% or more are you tempted? Or are you able to stick to it, I am not strong and often can't help but buy a little on a dip like today to feel good regardless of my overall DCA strategy.

 

[corn18]

Yup, everyone lump sums into the market every day. Would you sell all of your current investments and then DCA back in (assuming no tax)? Nope. Like I said earlier, invest when you have money and withdraw when you need money.

 

[latexman]

I noticed my overall AA was 5% off it's 60/40 target this morning. Between my IRA and 401k, the 401k was off the most. So, to start setting things back to target, I sold some of my longest duration bond fund (VIPIX / -8% YTD) and bought more of a mid-cap stock fund (FSMAX / -27%) I have.

 

[Fermion]

Yup, everyone lump sums into the market every day. Would you sell all of your current investments and then DCA back in (assuming no tax)? Nope. Like I said earlier, invest when you have money and withdraw when you need money.

What if you invest in something and they use up all your money?

 

[corn18]

What if you invest in something and they use up all your money?

Are you asking what if an investment goes to $0?

 

[latexman]

What if you invest in something and they use up all your money?

That's a good reason why we diversify.

 

[Freedom56]

I wouldn't buy equities until the casino mentality is crushed. When meme stocks GameStop (GME), currently at $122 drops below $10 and investors buy companies that actually earn money, it will be okay to buy again. We have seen this movie before back in 2000 when earnings didn't matter until they did. We had cult financial experts like Henry Blodget who led his lemmings off a cliff. Today with have hucksters like Cathie Wood that have bulldozed their lemmings off a cliff.

 

[W2R]

I am wondering what people are doing right now if they have spare cash to invest. [...]

[...] curious about how others are investing in these times and what others might do if you had cash sitting idle ready to invest.

I'm doing nothing, since that has worked for me in during past times of market volatility/declines.

If I had a need to invest, I'd DCA into the market according to my pre-determined asset allocation.

 

[Magus]

I wouldn't buy equities until the casino mentality is crushed. When meme stocks GameStop (GME), currently at $122 drops below $10 and investors buy companies that actually earn money, it will be okay to buy again. We have seen this movie before back in 2000 when earnings didn't matter until they did. We had cult financial experts like Henry Blodget who led his lemmings off a cliff. Today with have hucksters like Cathie Wood that have bulldozed their lemmings off a cliff.

It is amazing to me that GME is only down 50% from its 52 week highs. Crypotos are down 65-100% depending on which. A lot of the casino stocks are down 80-95%, though, but I agree more pain is likely in the works. I'm still contributing max amount to 401k every week but have yet to start adding some beyond that. Another 15-20% drop and I will.

 

[OldShooter]

OK, I'll say it, I'd put it in the market now. You're getting a 20% discount from where it was. ...

+1

With a 13 year time horizon, volatility should not be much of a concern and you should be heavily into equities.. From history, it seems somewhat likely that a recovery will be underway beginning sometime in the next 24 months. A DCA strategy will result in purchases at increasingly higher prices.

Think about it this way: If you wanted to buy a car and you discovered that it was on sale for 20% off, would you run away in fear? I don't think so.

 

[NW-Bound]

Think about it this way: If you wanted to buy a car and you discovered that it was on sale for 20% off, would you run away in fear? I don't think so.

It depends on whether you are thinking it will be on sale for more, like 50% off.

That happened twice in the last 20 years.

PS. I don't know if that will happen this time. If I knew, I would sell everything right now, in order to buy back cheaper.

 

[Koolau]

I would be tempted to DCA but be ready to go all in if we get to 45% or so drop. I don't see your age as being any impediment to such a plan, but you must decide for yourself as YMMV.

 

[gayl]

I just entered an order for 500sh PWZ at 23.25. Ca Taxfree muni.

Thinking / looking at a few other bonds. Lowered exposure to 85% index ETF, 12% cash, 3% individual stocks (yes one is CCL but I'm in at 8.69 / have reaped 400obc / another 500obc future cruises so net +31). Uncomfortable having that much in cash (never count my EF)

If I had 275k like op I'd probably divide by 25 and put that much in every 4 weeks.