Cash on the sidelines, rules for getting in?

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IslandTime
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Cash on the sidelines, rules for getting in?

Post by IslandTime »

I happen to have large amount of my net worth in cash on the sidelines right now due to some private investments paying off. Early 50's. I'm thinking of putting a portion of that cash into the public stock market for money I do not need for 15 years. I'm guessing a total stock market index is the best place to be for this? How would you get into the market right now?

All at once? Or maybe 25% of what I want to invest now, another 25% if the market falls another 10%, and so on?

Not a typical 60/40 type investor. I do a lot of investing for yield in private real estate debt. But I was thinking of putting some money into some type equity index.
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Mullins
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Re: Cash on the sidelines, rules for getting in?

Post by Mullins »

I'd agree a total stock market index is a sound investment over the long term. And, because the market's made the share prices more attractive I'd agree now's a good time. As far as segmenting in portions and at what price drop points, nah - if it's for 15 years from now then I'd do one lump sum because 15 years from now it's not going to matter a whole lot and you'll never get it just so anyway.
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JoeRetire
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Re: Cash on the sidelines, rules for getting in?

Post by JoeRetire »

IslandTime wrote: Fri Jan 21, 2022 1:55 pm All at once?
Yup.
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IslandTime
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Re: Cash on the sidelines, rules for getting in?

Post by IslandTime »

Thanks for the responses. I won't need it in exactly 15 years, but I used that time line just to mean its not money I will need to access any time soon. I figure 15 years is pretty safe in the stock market index even if buy close to a peak. Unless the US becomes Japan after its 1989 peak! Than of course all bets are off even 33 years from now having more than you put it:)
deltaneutral83
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Re: Cash on the sidelines, rules for getting in?

Post by deltaneutral83 »

Putting money 8% off highs is a nice little cherry on the top. The markets are typically at highs more than half the time.
vtsnowdin
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Re: Cash on the sidelines, rules for getting in?

Post by vtsnowdin »

Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
tvubpwcisla
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Re: Cash on the sidelines, rules for getting in?

Post by tvubpwcisla »

I would typically say to get all in; however, I think patience might be good right now.
wetgear
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Re: Cash on the sidelines, rules for getting in?

Post by wetgear »

vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
And if markets climb to all time highs next week, what happens then? Market timing is usually more than a waste of time it’s a waste of money and should be avoided always not just usually.
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JIMX7
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Re: Cash on the sidelines, rules for getting in?

Post by JIMX7 »

It's always nice to have extra cash on the sidelines just ask the cash holders of 2008.
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IslandTime
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Re: Cash on the sidelines, rules for getting in?

Post by IslandTime »

vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
I'm thinking a total market fund or maybe 50% US total stock market fund and 50% international. I'm with Schwab so I'd probably get their versions of these. I am open to other ideas? I'm sure tech/nasdaq may do really well the next decade, or some other sector or factor like SCV. But I can't know the future. Maybe they fall a lot more first. Broad index I guess is best when you can't predict the future?

I know statistically its better to just buy all in one lump sum. But just to satisfy my faulty human psychology I could dollar cost in the next 4-6 mos. That way I win if it keeps falling and I keep getting in at lower prices, but lose if it rebounds quickly.
jgman
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Re: Cash on the sidelines, rules for getting in?

Post by jgman »

Hello,
Im in the same boat as you. I have a million dollars that Im transferring from my TSP Fed Govt. retirement to Schwab. Since it looks like a rough year for the market, I'm thinking lump sum 50 percent into a Total US Market index. and dollar cost the rest into it over the next 6 months. Curious to what others thoughts are on maybe allocating some to an International stock fund or maybe a Gold Fund.
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HomerJ
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Re: Cash on the sidelines, rules for getting in?

Post by HomerJ »

You guys should probably read the wiki...

https://www.bogleheads.org/wiki/Main_Page
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vtsnowdin
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Re: Cash on the sidelines, rules for getting in?

Post by vtsnowdin »

wetgear wrote: Fri Jan 21, 2022 3:03 pm
And if markets climb to all time highs next week, what happens then?
Then he will pay a little more then he could have paid a few weeks ago. Not exactly the end of the world.
vtsnowdin
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Re: Cash on the sidelines, rules for getting in?

Post by vtsnowdin »

IslandTime wrote: Fri Jan 21, 2022 4:10 pm
vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
I'm thinking a total market fund or maybe 50% US total stock market fund and 50% international. I'm with Schwab so I'd probably get their versions of these. I am open to other ideas? I'm sure tech/nasdaq may do really well the next decade, or some other sector or factor like SCV. But I can't know the future. Maybe they fall a lot more first. Broad index I guess is best when you can't predict the future?

I know statistically its better to just buy all in one lump sum. But just to satisfy my faulty human psychology I could dollar cost in the next 4-6 mos. That way I win if it keeps falling and I keep getting in at lower prices, but lose if it rebounds quickly.
I do not have enough information or experience to sort out which broker is better. And probably they are all pretty competitive, so it comes down to BH theory of buying a broad market index fund that is passively managed with a low turnover rate making it tax efficient and low cost. I am puzzled by the attraction to international funds as I see none of them making more returns then the USA market indexes and many of our USA stocks have extensive business in foreign markets so are seeking those profits where they exist without the (hopefully) corruption drag that many small countries have in their business cultures.
As to SVC I see little advantage to that as a whole market fund will contain all of the small caps and return what they get along with the probably higher and more stable large and mid cap companies returns.
I do expect that a lot of FAs and fund majors that have said they can exceed the market returns to prove it by exceeding the markets drop in the down direction.
But when we get to the bottom we will be able to buy stocks at much more reasonable P/E ratios then have existed in recent years. Of course that bottom might happen anytime between Monday and 2025 and there will be no way to tell when it has been reached.
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Re: Cash on the sidelines, rules for getting in?

Post by wetgear »

HomerJ wrote: Fri Jan 21, 2022 4:48 pm You guys should probably read the wiki...

https://www.bogleheads.org/wiki/Main_Page
+1
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windaar
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Re: Cash on the sidelines, rules for getting in?

Post by windaar »

Will you sell out low if the market loses 40+% next week? Then DCA or invest in other ways.
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IslandTime
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Re: Cash on the sidelines, rules for getting in?

Post by IslandTime »

vtsnowdin wrote: Fri Jan 21, 2022 5:17 pm
IslandTime wrote: Fri Jan 21, 2022 4:10 pm
vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
I'm thinking a total market fund or maybe 50% US total stock market fund and 50% international. I'm with Schwab so I'd probably get their versions of these. I am open to other ideas? I'm sure tech/nasdaq may do really well the next decade, or some other sector or factor like SCV. But I can't know the future. Maybe they fall a lot more first. Broad index I guess is best when you can't predict the future?

I know statistically its better to just buy all in one lump sum. But just to satisfy my faulty human psychology I could dollar cost in the next 4-6 mos. That way I win if it keeps falling and I keep getting in at lower prices, but lose if it rebounds quickly.
I do not have enough information or experience to sort out which broker is better. And probably they are all pretty competitive, so it comes down to BH theory of buying a broad market index fund that is passively managed with a low turnover rate making it tax efficient and low cost. I am puzzled by the attraction to international funds as I see none of them making more returns then the USA market indexes and many of our USA stocks have extensive business in foreign markets so are seeking those profits where they exist without the (hopefully) corruption drag that many small countries have in their business cultures.
As to SVC I see little advantage to that as a whole market fund will contain all of the small caps and return what they get along with the probably higher and more stable large and mid cap companies returns.
I do expect that a lot of FAs and fund majors that have said they can exceed the market returns to prove it by exceeding the markets drop in the down direction.
But when we get to the bottom we will be able to buy stocks at much more reasonable P/E ratios then have existed in recent years. Of course that bottom might happen anytime between Monday and 2025 and there will be no way to tell when it has been reached.
You make a good point on international with many US companies doing business there. I'm just thinking about what many folks like Burt Malkiel and Rick Ferri recommend in splitting your equity money between US and international, or at least some international. I guess there are a lot of different opinions on that. John Bogle was not big on international. I think something like 75%-80% of world GDP is outside of the USA though, and that will likely rise. There is a total world index fund out there too where you can buy the entire world.

I am a different type of investor than most. i do not have my savings in stocks and bonds like most. I do a lot of active private investing in niches that I nave many years experience in and control over. But for some of my cash on the sidelines right now I'd like to get a portion of my savings into equities for a long horizon. Especially if I can get a good entry price (I know that statement will make the bogleheads crazy....can't time the market....but maybe I'll get lucky on that entry point a good bit off the all time highs!).
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Re: Cash on the sidelines, rules for getting in?

Post by vtsnowdin »

IslandTime wrote: Sat Jan 22, 2022 6:36 am
vtsnowdin wrote: Fri Jan 21, 2022 5:17 pm
I am puzzled by the attraction to international funds as I see none of them making more returns then the USA market indexes and many of our USA stocks have extensive business in foreign markets so are seeking those profits where they exist without the (hopefully) corruption drag that many small countries have in their business cultures.


You make a good point on international with many US companies doing business there. I'm just thinking about what many folks like Burt Malkiel and Rick Ferri recommend in splitting your equity money between US and international, or at least some international. I guess there are a lot of different opinions on that. John Bogle was not big on international. I think something like 75%-80% of world GDP is outside of the USA though, and that will likely rise. There is a total world index fund out there too where you can buy the entire world.

I am a different type of investor than most. i do not have my savings in stocks and bonds like most. I do a lot of active private investing in niches that I nave many years experience in and control over. But for some of my cash on the sidelines right now I'd like to get a portion of my savings into equities for a long horizon. Especially if I can get a good entry price (I know that statement will make the bogleheads crazy....can't time the market....but maybe I'll get lucky on that entry point a good bit off the all time highs!).
Consider that Malkeil and Ferri are the Very "Helpers" that Bogel and Buffet warn about in the Gotrocks family Parable.
Your daily business and it's working capital aside your savings need to be properly allocated or AA.
Perhaps 70- 5-25 with 70 being US low cost broad index funds 5 being international funds if you wish and 25 being bond funds and the future value of your SS.
That is just what I, a newbi here ,would do and you of course have your own points of view and risk tolerances.
Whatever you do review it once a year and adjust for your age and changing risk tolerance as that tends to go down as we age.
Good luck.
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hiddenpower
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Re: Cash on the sidelines, rules for getting in?

Post by hiddenpower »

vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
Why ONEQ over QQQ, VUG, VGT?
vtsnowdin
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Re: Cash on the sidelines, rules for getting in?

Post by vtsnowdin »

hiddenpower wrote: Sat Jan 22, 2022 8:11 am
vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm
Why ONEQ over QQQ, VUG, VGT?
As my accounts are at Fidelity it was the first one I came to that tracked the whole NASDQ which was my aim.
Between it and QQQ it is a coil flip as the expense ratios are close 0.21 to 0.20 and the tracking error 7.61 to 8.05 would not push me to switch.
The other two are sector funds which I choose to stay away from. Both very good funds it appears from a quick research just not my cup of tea.
jand87
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Re: Cash on the sidelines, rules for getting in?

Post by jand87 »

Most everyone on this forum says all in immediately. That said, that can be very hard for a lot of people to do. Since the market just dropped about 8%, if you don’t want to go all in, maybe do half now, and half in a week. The market quickly rises back so good luck trying to time. If you’re not touching the money for years it really doesn’t matter. The market will be back at an ATH numerous times before then.
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Re: Cash on the sidelines, rules for getting in?

Post by MikeG62 »

IslandTime wrote: Fri Jan 21, 2022 1:55 pm
All at once? Or maybe 25% of what I want to invest now, another 25% if the market falls another 10%, and so on?
I am going to go against the grain here and say I would dollar cost average in (especially if this is a material amount of money relative to the rest of your portfolio).

25% now makes sense to me (FWIW, I invested some excess cash into the close yesterday). I don't think I would wait for another 10% down as the second trigger that may never happen. Maybe you want to set the trigger closer to 1/3rd of that and see what happens (and down another few points from there for the third trigger). Could use buy limit orders (well you can for ETF's and stocks, but perhaps not for MF's - I don't use MF's).

I do agree that much more often than not, the better course of action is to buy all at once. However, these are different times. We've never been heading into an environment where the Fed was not only going to be hiking interest rates (perhaps aggressively), but removing historic levels of emergency liquidity all at the same time - and at a time when inflation is higher than it has been in 40 years.

I would not sit and wait for some big down move that may not happen. Keep in mind as well that nothing that has happened so far this year has changed the dynamic of TINA. Where else are investors going to put money in an environment where cash has a large negative yield (due to inflation) and fixed income is almost certain to lose money (as interest rates are set to rise).
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Marseille07
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Re: Cash on the sidelines, rules for getting in?

Post by Marseille07 »

IslandTime wrote: Fri Jan 21, 2022 1:55 pm All at once? Or maybe 25% of what I want to invest now, another 25% if the market falls another 10%, and so on?
I would not time it based on the market movement unless it is small, like 1%. Something like 10% can take months to manifest.

If you don't want to lump sum, popular choices are 50% now 50% DCA, or DCA over 6~12 months.
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White Coat Investor
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Re: Cash on the sidelines, rules for getting in?

Post by White Coat Investor »

IslandTime wrote: Fri Jan 21, 2022 1:55 pm I happen to have large amount of my net worth in cash on the sidelines right now due to some private investments paying off. Early 50's. I'm thinking of putting a portion of that cash into the public stock market for money I do not need for 15 years. I'm guessing a total stock market index is the best place to be for this? How would you get into the market right now?

All at once? Or maybe 25% of what I want to invest now, another 25% if the market falls another 10%, and so on?

Not a typical 60/40 type investor. I do a lot of investing for yield in private real estate debt. But I was thinking of putting some money into some type equity index.
I stay fully invested. When I have cash, I invest it according to my written investing plan that I've been following with great success for the last 18 years. That happens every month. Sometimes it is more than other times. But I still do the same thing. Most of the time investing immediately works out best. Sometimes it doesn't. But over the last 216 times it has averaged out just fine.

My plan is 60/20/20 stocks/bonds/real estate with 25% of the portfolio in Total Stock Market Index Fund. So yea, if I were putting new money in, about 1/4 of it on average goes into Total Stock Market Index fund. Sometimes a little more when it has been lagging and sometimes a little less when it has been doing well.

Good luck investing!
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dbr
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Re: Cash on the sidelines, rules for getting in?

Post by dbr »

IslandTime wrote: Fri Jan 21, 2022 1:55 pm I happen to have large amount of my net worth in cash on the sidelines right now due to some private investments paying off. Early 50's. I'm thinking of putting a portion of that cash into the public stock market for money I do not need for 15 years. I'm guessing a total stock market index is the best place to be for this? How would you get into the market right now?

All at once? Or maybe 25% of what I want to invest now, another 25% if the market falls another 10%, and so on?

Not a typical 60/40 type investor. I do a lot of investing for yield in private real estate debt. But I was thinking of putting some money into some type equity index.
I am a very strong suspicion that as soon as a person starts to ask how they should get into the market that the real problem is that they don't really understand whether they should be invested in stocks at all, or at least not 100%.

It might be the best advice is change from " thinking of putting some money into some type equity index" to "I know I want this money invested in stocks." The constructive starting point is to make explicit what you are trying to accomplish.

A logical counter argument to the idea that there is an improvement in return according to how you enter the market would be that if this were true, then it would also make sense, once you are invested, to take everything out to cash and repeat your scheme for getting more money. The fact that militates against this working on average is that the expected return from stocks is higher than the expected return from cash and that therefore anything other than being fully invested works against a strong headwind of low returns, also called "cash drag."

The alternative that is implied by your thinking is that you actually know something about what the market is going to do and can time your investments to take advantage of that. Experience shows that this game usually does not work very well.

A different logical fallacy in thinking about these things is what I call "thinking by anecdotes." An example of that is "I won't invest everything now because if the market falls, I can avoid the loss and invest better later." This anecdote ignores the alternative anecdotes of the market not falling, the market rising and costing more to invest later, the market falling later after everything is invested, and so on. The whole process has to be done statistically rather than anecdotally, hence reference to average expected return, etc.

A final comment is that in actual fact it doesn't make much difference, which is also a statement that there is no such scheme.
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Re: Cash on the sidelines, rules for getting in?

Post by IslandTime »

Appreciate all the comments. I read them all thoroughly and took notes.

I think I read somewhere in Random Walk Down Wall Street a few years ago that statistically its better to invest a lump sum all at once b/c stocks go up more than they go down. But Malkiel said even though it doesn't make statistical sense, you could DCA a large lump sum in over time to prevent possible "buyers remorse" in the chance you bought at a market peak. If by chance you did put your lump sum all in early 2000 into a total stock market index, you would have watched it plummet and not break even again for 7-8 years. Same deal if you dropped the lump sum in fall of 2007. Of course you never can know if its a peak or not. And you can never know its a bottom or not. In the long run all that worked out of course, just gave you some indigestion along the way.
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Re: Cash on the sidelines, rules for getting in?

Post by johndoe33 »

If I have a large amount of cash (e.g. 1 million dollars) I would DCA (spread it over) for 4-5 years, once a month (on a certain date).
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Re: Cash on the sidelines, rules for getting in?

Post by climbingFool »

Perhaps it was implicit in other people's responses but an ETF index has advantage over a standard index fund - especially if you like to time your entry.
ETF's timing is right when you buy, Standard index fund is at market close. There has been some big intra-day swings lately. I believe some complicated tax advantages to ETF's also.

My wife just inherited some money 2 weeks ago and we have been buying into ETF''s every time the market is down - doubling down last Friday right at the end of the day.
If the market is clearly heading up then I'll put it all in at once.

I never time the market by going in and out but I always time the market somewhat on stock and ETF purchases. The more it's down the more I buy.

I also time IRA to ROTH conversions - this year I've been doing individual growth stocks as those are down much more than ETF's. I'm about half done with my planned conversions and have been doing bigger ones the more my growth stocks drop.
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Re: Cash on the sidelines, rules for getting in?

Post by vtsnowdin »

I know there have been a couple of really long bottoms to the market. 1930's etc. but in recent decades they have tended to be two to three years long 2000 to 20003 and 2007 to 2009.
Might we be looking at 2024 to get back where we were last November?
Of course for some of us that would mean two years of buying opportunities.
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Re: Cash on the sidelines, rules for getting in?

Post by arcticpineapplecorp. »

From Larry Swedroe:
Here is another way to think about DCA. Assume that staying fully invested in equities is suboptimal, meaning you should sell all your equities and then DCA back into the market. At the next investment period you have some money in the stock market already. While you planned to periodically reinvest in the market, you also determined that staying fully invested is suboptimal. You run into this difficulty: Do you continue to buy equities, sell your existing holdings, or do both? Logicaly, DCA cannot be effective...

While DCA is not an optimal investment strategy, it has value when facing the "lesser of two evils," that is, when an investor simply cannot "take the plunge" and invest all at once for fear of what could happen to the stock market. Fear causes paralysis. If the market rises after they delay, they think, "How can I buy now at even higher prices?" If the market falls, "I can't buy now. That bear market I was afraid of is here." Once deciding not to buy, how do you decide to ever buy again?

The Only Guide You'll Ever Need for the Right Financial Plan, by Larry Swedroe, page 182, appendix B
if you have a plan, just follow it. DCA makes one feel good because if they have some (but not all) invested and the market goes up, they made money (just on what was invested, not all). If the market falls, they feel smart because they didn't lose more money (because it wasn't all invested).

Larry says:
Investors and advisors do not always base decisions on logic or evidence. Emotions, such as fear often play a far greater role in decision making.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Metsfan91
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Re: Cash on the sidelines, rules for getting in?

Post by Metsfan91 »

IslandTime wrote: Fri Jan 21, 2022 1:55 pm
All at once?
No. Spread them over several days and buy on down days only.
"Know what you own, and know why you own it." — Peter Lynch
ddbtoth
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Re: Cash on the sidelines, rules for getting in?

Post by ddbtoth »

IslandTime wrote: Fri Jan 21, 2022 4:10 pm
vtsnowdin wrote: Fri Jan 21, 2022 2:57 pm Considering what this week has been for the markets I would wait a week to see if the slide continues. Market timing is a waste of time usually and often counter productive but when everyone is in a panic a calm head can save themselves a bit of cash.
OP are you thinking a whole market index fund or S&P 500?
I have FNILX ( Fedelity zero large capindex) which is down 6% YTD and also ONEQ which tracks the NASDAQ which is down 13% from its high on 11/19/2021. Vanguard and other brokerages have similar funds at similar expense ratios and I can not recommend one over another so shop around a bit.
I'm thinking a total market fund or maybe 50% US total stock market fund and 50% international. I'm with Schwab so I'd probably get their versions of these. I am open to other ideas? I'm sure tech/nasdaq may do really well the next decade, or some other sector or factor like SCV. But I can't know the future. Maybe they fall a lot more first. Broad index I guess is best when you can't predict the future?

I know statistically its better to just buy all in one lump sum. But just to satisfy my faulty human psychology I could dollar cost in the next 4-6 mos. That way I win if it keeps falling and I keep getting in at lower prices, but lose if it rebounds quickly.
I’ve been asking this same question too, DCA’ing into total stock mutual funds, and getting the same responses, but have been buying in at the drops. My retirement time frame is short, 12-18 months, but I have a pension in place. From a very recent inheritance, I have followed the conservative asset allocation model, 30% US stocks, and waiting a bit on the 20% international stocks to see what they are doing, then move on the bond mutual funds. Rising bonds rates are keeping me from buying there yet. Ultimately everyone will do what they are comfortable with. But I do understand the hesitancy at buying in now. Feds increasing interest rates, bond funds losing value. Market at all time high. Short time frame to retirement. So far its worked. But just as likely been losing money waiting for the dips.
jgman
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Joined: Thu Jan 03, 2019 2:11 pm

Re: Cash on the sidelines, rules for getting in?

Post by jgman »

johndoe33 wrote: Sat Jan 22, 2022 6:48 pm If I have a large amount of cash (e.g. 1 million dollars) I would DCA (spread it over) for 4-5 years, once a month (on a certain date).
This is my situation. Big chunk of my retirement in in the mail from the TSP to Schwab. Im leaning towards this approach rather than lump sum, although maybe DCA over one or two years. Looks like we may be in for an up and down year or two in the equity markets.
kuhio
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Joined: Mon Feb 15, 2021 5:19 pm

Re: Cash on the sidelines, rules for getting in?

Post by kuhio »

What does the historical data say about lump sum vs DCA if you only include starting dates where the market PE is more than a standard deviation above average?
Topic Author
IslandTime
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Location: New Hampshire

Re: Cash on the sidelines, rules for getting in?

Post by IslandTime »

"If the market highly valued historically dca in the lump sum. if the market is low historically put all in at once"

I had this in my notes from the Rick Ferri reading I've done over the years with regards to deploying a large lump sum of cash on the sidelines. The market is still historically very high even with recent drops (market cap to gdp, cape, price to sales, price to book, etc...). Of course some say these historic metrics are less applicable now due to such low rates.

So far this last week my analysis paralysis and procrastination is working to my favor!:) lol
dbr
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Joined: Sun Mar 04, 2007 8:50 am

Re: Cash on the sidelines, rules for getting in?

Post by dbr »

IslandTime wrote: Mon Jan 24, 2022 9:04 am "If the market highly valued historically dca in the lump sum. if the market is low historically put all in at once"

I had this in my notes from the Rick Ferri reading I've done over the years with regards to deploying a large lump sum of cash on the sidelines. The market is still historically very high even with recent drops (market cap to gdp, cape, price to sales, price to book, etc...). Of course some say these historic metrics are less applicable now due to such low rates.

So far this last week my analysis paralysis and procrastination is working to my favor!:) lol
While Rick may be technically correct, the argument is actually a circular one. He is really saying that you should DCA when conditions favor DCA and otherwise not. The "begging the question" or circular argument part is how are you really supposed to know if the conditions favor DCA. Keep in mind all of this is about short term market noise.

Probably a more accurate and practical notion is that for a short time period of DCA your choice doesn't make any difference. Then there is the advice that if you do think you should DCA then the time over which you should do it is 999 months.
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