Invest 120K now or wait for the crash?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
User avatar
JoeRetire
Posts: 8065
Joined: Tue Jan 16, 2018 2:44 pm

Re: Invest 120K now or wait for the crash?

Post by JoeRetire »

ballasowjanya18 wrote: Sun Apr 18, 2021 6:59 pm I am lucky to have 120K more cash. Should I keep it as spare cash for a possible next crash?
Since you haven't felt the need to do anything with the $120k so far, why change?
Maybe you'll get lucky. Probably you won't.
Last edited by JoeRetire on Mon Apr 19, 2021 7:38 pm, edited 1 time in total.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
l1am
Posts: 428
Joined: Wed Mar 02, 2016 2:27 pm

Re: Invest 120K now or wait for the crash?

Post by l1am »

nisiprius wrote: Sun Apr 18, 2021 7:27 pm My personal suggestion would be to put the 120K into your settlement account at the brokerage and set up an automatic purchase of $10,000 per month for the next twelve months. That way, you get the decision made, you've taken the action, and you're not staking absolutely everything on one a single moment in time.
Solid post btw, but I don't agree with the suggestion. Imagine the market keeps going up aggressively for the next 12 months and then crashes after a year, to current levels. This outcome is as plausible as any other timing argument.

OP, just put it all in the market now according to your AA, and get over any psychological dispositions you have. Even if you're right about the market being extended, you have no idea when it'll correct.
rustymutt
Posts: 3992
Joined: Sat Mar 07, 2009 12:03 pm

Re: Invest 120K now or wait for the crash?

Post by rustymutt »

6U7a9Zfym64CRBB8gY3v wrote: Mon Apr 19, 2021 1:13 pm
rustymutt wrote: Mon Apr 19, 2021 9:53 am Amen! I'm with you on this. We're in a Covid induced bubble, and it's going to break at some point. But who knows when? I don't, but we're be ready to invest when it happens, and it will happen.

Don’t try market timing. I can fund hundreds or thousands of posts on this very forum back to 2010 about the “looming crash”

If you are so risk averse to be so scared of the ever-imminent crash, I wonder when you would feel safe to jump into a market that is crashing? or would you just keep convincing yourself that an even larger crash is coming? How would you know?
You must be patient. What about the looming crash from back in 2008. Cherry picking.
Even educators need education. And some can be hard headed to the point of needing time out.
livelovelaugh00
Posts: 89
Joined: Sun Dec 25, 2016 8:15 pm

Re: Invest 120K now or wait for the crash?

Post by livelovelaugh00 »

ballasowjanya18 wrote: Sun Apr 18, 2021 6:59 pm 60% VTI, 20%QQQ, 10% AMZN, 10% others in it.
+1
Hustlinghustling
Posts: 298
Joined: Mon Jul 25, 2016 12:09 am

Re: Invest 120K now or wait for the crash?

Post by Hustlinghustling »

ballasowjanya18 wrote: Sun Apr 18, 2021 7:14 pm . Trying to probabilistically maximize my chances (or minimize the downside).
if you are truly speaking in probabilities that means lump sum.
User avatar
arcticpineapplecorp.
Posts: 7913
Joined: Tue Mar 06, 2012 9:22 pm

Re: Invest 120K now or wait for the crash?

Post by arcticpineapplecorp. »

nisiprius wrote: Sun Apr 18, 2021 7:27 pm (Expanding on hithere's remark) ballasowjanya18, here's an exercise you should definitely try. It will be invalid and won't work if you remember 2000-2003 in too much detail. And backtesting has its limits, but you should try it anyway.

First, without looking at the data, write down as carefully as you can the exact rule you will use to decide that the crash has happened and that it is time to buy.

Then, go to the most detailed data source you can find--if you post the rule here and it really is detailed and precise, people here, including me, may be willing to help you with it--and find out when your rule would have told you to buy a) in 2000-2003, b) in 2008-2009, and c) in 1937-1945. I'm mentioning the third one specifically because many people don't even know that it happened, because 1929-1936 was so much worse.

What I expect you to find is that some simple rule that seems as if obviously will work, will surprise you by how poorly it works. If your rule says you are waiting for the market to drop 20%, it will perversely drop 19.7%... that sort of thing.

My personal suggestion would be to put the 120K into your settlement account at the brokerage and set up an automatic purchase of $10,000 per month for the next twelve months. That way, you get the decision made, you've taken the action, and you're not staking absolutely everything on one a single moment in time.

I don't want to go down the rabbit hole of "DCA versus lump sum," many will say it is better to put it all in and not wait, but this is a workable way to get it done and quit trying to figure out when the crash is going to be. You can miss out on a lot of growth waiting for "the" crash. For example, Alan Greenspan made his famous "irrational exuberance" speech at the end of 1997, but the crash didn't occur until three years later.
Good post. One minor correction, I believe Greenspan's irrational exuberance speech was in Dec 1996 not 1997.

source: https://www.google.com/search?client=fi ... exuberance
Last edited by arcticpineapplecorp. on Mon Apr 19, 2021 9:18 pm, edited 1 time in total.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
TheDDC
Posts: 1278
Joined: Mon Jan 08, 2018 11:11 am

Re: Invest 120K now or wait for the crash?

Post by TheDDC »

livelovelaugh00 wrote: Mon Apr 19, 2021 7:25 pm
ballasowjanya18 wrote: Sun Apr 18, 2021 6:59 pm 60% VTI, 20%QQQ, 10% AMZN, 10% others in it.
+1
Now THAT's a 60/40 plan I like.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks, minimize amount given to medical-industrial complex
S4C5
Posts: 243
Joined: Sat May 05, 2018 11:49 am

Re: Invest 120K now or wait for the crash?

Post by S4C5 »

The next crash may or may not happen soon. Inflation will definitely happen due to govt spending shenanigans. Do you really want to hold cash? I was in your same shoes back in the fall and tried to time the market expecting a pullback and missed a massive run up in small caps. Got back in in feb. You don’t need the money for 30 years. Lump sum invest it now. If market tanks 20% next day, you’ll still come out ahead in the end.
smalliebigs
Posts: 224
Joined: Wed Jan 04, 2017 10:48 am

Re: Invest 120K now or wait for the crash?

Post by smalliebigs »

All in VTSAX now. Then 5k every month. Then go enjoy life.
TropikThunder
Posts: 2830
Joined: Sun Apr 03, 2016 5:41 pm

Re: Invest 120K now or wait for the crash?

Post by TropikThunder »

mnsportsgeek wrote: Sun Apr 18, 2021 8:51 pm What crash?
windaar wrote: Sun Apr 18, 2021 11:06 pmWhat crash?
mille424 wrote: Mon Apr 19, 2021 12:16 am What crash?
Solid posts there, appreciate your contribution to the thread. /s
TropikThunder
Posts: 2830
Joined: Sun Apr 03, 2016 5:41 pm

Re: Invest 120K now or wait for the crash?

Post by TropikThunder »

ballasowjanya18 wrote: Sun Apr 18, 2021 7:10 pm I know nobody can predict a crash, but don't feel like buying at an all time high.
If this is really an ATH, then what to do with the $120,000 is kinda the least of your worries, isn’t it? :P
MotoTrojan
Posts: 11082
Joined: Wed Feb 01, 2017 8:39 pm

Re: Invest 120K now or wait for the crash?

Post by MotoTrojan »

If you don't invest it all tomorrow you'll have to justify to yourself why you don't also move your 401k's equities to money market.
Paradise
Posts: 129
Joined: Mon Dec 18, 2017 6:15 am

Re: Invest 120K now or wait for the crash?

Post by Paradise »

razorbacker wrote: Sun Apr 18, 2021 7:05 pm Can you tell me when the crash will happen so I can have extra cash to buy in?
2012+, or so I’ve been hearing :D
50% VTI | 20% VXUS | 20% BND | 10% QQQ
dboeger1
Posts: 579
Joined: Fri Jan 13, 2017 7:32 pm

Re: Invest 120K now or wait for the crash?

Post by dboeger1 »

I think it's interesting that so many posts suggest getting into the market is a problem at the same time as having money out of the market is a problem. You can only be in or out with any given dollar, not both. OP knows they don't want to be in cash with this $120k, but they're also afraid to invest. Put more simply, they want all the upside with none of the downside risk. That's a pretty common human desire, but it's not based in any sort of practical reality. OP, I think it's important to recognize that if you have a job and you continue to make money and you don't invest this $120k now, that number is likely to go up. Are you okay with $150k sitting in cash a few months from now? Because that's the direction you'll be headed in if you're not willing to take market risk.

I won't quote it because it might not be considered appropriate for this board, but Woody Harrelson's character in the Zombieland movies has a funny quote that I think offers an applicable lesson for investing and also life in general. He basically says "man up" in no uncertain terms, and while his words have an explicit male association, I think the idea as it applies to investment risk is gender-neutral. You can't have your cake and eat it too. If you want the potential for gains, you need to accept the risk that comes with it. In my experience, people who engage in market timing are trying to bend reality to their will so they always win more than they really believe the market is about to drop. I'm still a relatively young investor, but even I can confidently say there probably hasn't been a single year on record where there wasn't a bunch of people predicting the market was at a peak about to crash. And while I can't speculate too much on the future, I think it's fair to say that central banks and governments have only increased their support of asset bubbles over the past several decades, so those predictions went against huge fundamental shifts global economics.logically, expecting the next Great Depression around the corner just hasn't made much sense in recent history, but loss aversion is a powerful human bias nonetheless.

I'm so against trying to time buys and sells that I would rather reframe OP's proposal entirely. Rather than trying to time getting in and out of the markets, why not get in with a conservative asset allocation that will eliminate their cash drag and let them sleep at night while they acclimate to market risk on a larger portfolio? I think it's fair to adjust asset allocation as people come into lump sums that they are not yet comfortable putting all in on stocks. After all, people change risk tolerance as they approach retirement, and this $120k presumably puts OP that much closer to retirement in one fell swoop. I think it's totally fine to lump sum it with say 50% in bonds. That should be enough to avoid any regret due to the impending crash while minimizing cash drag, and then maybe as new money comes in, OP will realize that $120k was just like the rest of their portfolio and they can gradually adjust to take on more market risk. It's still timing in a way, but I think fundamentally it's better to time one's emotions (which are known) than to time market crashes (which are not).
mnsportsgeek
Posts: 384
Joined: Mon Jan 19, 2015 1:39 pm

Re: Invest 120K now or wait for the crash?

Post by mnsportsgeek »

TropikThunder wrote: Mon Apr 19, 2021 9:58 pm
mnsportsgeek wrote: Sun Apr 18, 2021 8:51 pm What crash?
windaar wrote: Sun Apr 18, 2021 11:06 pmWhat crash?
mille424 wrote: Mon Apr 19, 2021 12:16 am What crash?
Solid posts there, appreciate your contribution to the thread. /s
Happy to provide as much value as this topic is worth.
25feelingold
Posts: 19
Joined: Sat May 05, 2012 9:49 pm

Re: Invest 120K now or wait for the crash?

Post by 25feelingold »

I'm in a similar situation, post home sale, with some concerns about what happens when all these new retail investors experience their first crash, that we could have a rough pull back from this ATH...

This thread has been really helpful to read through. Given those concerns, and having read multiple times what you all have said:

I have closer to 500k that needs to be invested.... Was planning to keep 20k in savings / checking accounts as my emergency fund. I'm single, 34, renting with no plans to make any big purchases in the foreseeable future.

Does it make sense to just keep 20k in cash and invest the rest?

Was planning to have a recurring investment 2x/month as I'm saving money into Vanguard funds calculated along the lines of my AA -- so my cash accounts would never get much higher than 20k. At this point, I don't see a reason to touch the 500k anytime soon. Who knows, life could evolve, could get married some day and have kids and higher expenses and need access to more than 20k, but as of now, I don't.

And yes, I'm one of the idiots that expected the market to crash more and missed out on what would have been 6 figure returns in the past six months. :x
PDX_Traveler
Posts: 135
Joined: Mon Nov 14, 2016 2:18 am

Re: Invest 120K now or wait for the crash?

Post by PDX_Traveler »

ballasowjanya18 wrote: Mon Apr 19, 2021 12:00 am
000 wrote: Sun Apr 18, 2021 11:48 pm
ballasowjanya18 wrote: Sun Apr 18, 2021 10:42 pm
MindBogler wrote: Sun Apr 18, 2021 9:42 pm Put it all in now. If it crashes soon then you have a great tax loss harvest opportunity.
Never though this way. But, what you said makes sense
It makes no sense to deliberately lose money to pay less taxes unless one's tax rate is >100%. At best tax loss harvesting is deferral.
Let's say I buy VOO and the market crashes. Then if I sell it at a loss and immediately buy VTI.

Now the loss on VOO is realized. But market goes up eventually and this is not money that I need.

So, it makes sense from tax loss harvesting perspective.
It's not quite as simple a 'free lunch' as that...
You've now reset your cost basis in VTI at a commensurately low level (as goes VOO, largely so will VTI). So, as you say if the 'market goes up eventually' back to pre-crash levels, you have incurred new cap gains that are roughly comparable to the cap losses you realized earlier.
I suspect this is what poster 000 was referring to.
Of course, TLH has its place.
Topic Author
ballasowjanya18
Posts: 19
Joined: Sun Dec 06, 2020 8:23 pm

Re: Invest 120K now or wait for the crash?

Post by ballasowjanya18 »

smalliebigs wrote: Mon Apr 19, 2021 9:48 pm All in VTSAX now. Then 5k every month. Then go enjoy life.
MotoTrojan wrote: Mon Apr 19, 2021 10:09 pm If you don't invest it all tomorrow you'll have to justify to yourself why you don't also move your 401k's equities to money market.
TropikThunder wrote: Mon Apr 19, 2021 9:59 pm
ballasowjanya18 wrote: Sun Apr 18, 2021 7:10 pm I know nobody can predict a crash, but don't feel like buying at an all time high.
If this is really an ATH, then what to do with the $120,000 is kinda the least of your worries, isn’t it? :P
S4C5 wrote: Mon Apr 19, 2021 9:05 pm The next crash may or may not happen soon. Inflation will definitely happen due to govt spending shenanigans. Do you really want to hold cash? I was in your same shoes back in the fall and tried to time the market expecting a pullback and missed a massive run up in small caps. Got back in in feb. You don’t need the money for 30 years. Lump sum invest it now. If market tanks 20% next day, you’ll still come out ahead in the end.
Thank you all for your replies.

I put 80K into VOO and the rest into VTI on 03/19.

The VOO position is already down $600. But I am hoping I don't regret it in 1 year time.
VtsaxParade
Posts: 71
Joined: Sat Jan 30, 2021 9:19 am

Re: Invest 120K now or wait for the crash?

Post by VtsaxParade »

Our first big taxable lump sum was also voo back in January 2018. Fell the next day. And quite a lot the next few weeks. That was such a small blip on the radar, though. Now that position is worth quite a bit and I barely think about it.
Topic Author
ballasowjanya18
Posts: 19
Joined: Sun Dec 06, 2020 8:23 pm

Re: Invest 120K now or wait for the crash?

Post by ballasowjanya18 »

VtsaxParade wrote: Tue Apr 20, 2021 10:53 pm Our first big taxable lump sum was also voo back in January 2018. Fell the next day. And quite a lot the next few weeks. That was such a small blip on the radar, though. Now that position is worth quite a bit and I barely think about it.
:sharebeer

Love your user name. So much for being a boglehead :D
b.lock
Posts: 81
Joined: Mon Jan 16, 2017 11:56 am
Location: Scottsdale, AZ

Re: Invest 120K now or wait for the crash?

Post by b.lock »

I have about the same amount of money being deposited into a Roller IRA sometime this week. I think mathematically the answer is to invest it all at once, but I'm planning to invest 20% of it per week for the next five weeks purely for psychological reasons.

Maybe you could do something like that?
User avatar
AspireToRetire
Posts: 78
Joined: Sat Jun 10, 2017 6:35 pm

Re: Invest 120K now or wait for the crash?

Post by AspireToRetire »

ballasowjanya18 wrote: Sun Apr 18, 2021 6:59 pm I max out my 401k and my employer also contributes to it. I am 65% FSKAX, 20% FSPSX, 15% FXNAX in it.

I also plan to invest 5k per month in my brokerage account. I am 60% VTI, 20%QQQ, 10% AMZN, 10% others in it.

I am lucky to have 120K more cash. Should I keep it as spare cash for a possible next crash?

Note that I am not trying to time the market because I am sticking to my plan of 5K per month. I am simply asking if I should put the 120K additional amount as a lump sum into VTI or should I hold off and keep it as a "cash to dump when there is a crash"?
I’m curious what you did last year? Did you dump all available cash into the market in March 2020? Because that was the biggest “crash” of the decade.
investingsaga1
Posts: 2
Joined: Wed Apr 21, 2021 4:09 am

Re: Invest 120K now or wait for the crash?

Post by investingsaga1 »

the stock market crash is been overdue for a while now. Personally, I will be waiting for it, regardless of if it happens within a week or within a year. The potential returns from investing right after the crash far overweight the modest returns of being fully invested in an over-saturated and almost stagnant market.
snowox
Posts: 499
Joined: Wed Nov 08, 2017 9:17 am

Re: Invest 120K now or wait for the crash?

Post by snowox »

Nothing wrong with a little compromise in my view. Plan on 10k a month for 12 months and buy the ETF so you can get the know price. If the market is up for month carry over and do 20 the next month instead. If the market dips 10% in a month then deposit 20k. Two up months then 30k either way. And so on.
User avatar
JoeRetire
Posts: 8065
Joined: Tue Jan 16, 2018 2:44 pm

Re: Invest 120K now or wait for the crash?

Post by JoeRetire »

TropikThunder wrote: Mon Apr 19, 2021 9:58 pm
mnsportsgeek wrote: Sun Apr 18, 2021 8:51 pm What crash?
windaar wrote: Sun Apr 18, 2021 11:06 pmWhat crash?
mille424 wrote: Mon Apr 19, 2021 12:16 am What crash?
Solid posts there, appreciate your contribution to the thread. /s
Insightful comment, that.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
smalliebigs
Posts: 224
Joined: Wed Jan 04, 2017 10:48 am

Re: Invest 120K now or wait for the crash?

Post by smalliebigs »

ballasowjanya18 wrote: Tue Apr 20, 2021 10:47 pm Thank you all for your replies.

I put 80K into VOO and the rest into VTI on 03/19.

The VOO position is already down $600. But I am hoping I don't regret it in 1 year time.
Man, $600 is trivial. It also helps to not look at it at all.

80 % of VTI is basically VOO. So effectively, it's the same thing.

All the best. Keep the course!
Post Reply