keep in money market or invest now?

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lamechannel
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Joined: Fri Jun 09, 2023 10:50 am

keep in money market or invest now?

Post by lamechannel »

Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
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Beensabu
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Re: keep in money market or invest now?

Post by Beensabu »

Oh, you market timer... :)

Here's the obligatory Peter Lynch quote: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

I'm not going to tell you to go ahead and invest now according to your intended asset allocation, because then you'll be mad at me if the market goes down after you do that. But it might just keep going up, though. Who knows.

Just call it your second tier emergency fund with the option to partially or wholly tactically deploy at a moment that you consider to be opportune. Nothing wrong with having a 6-9 month emergency fund.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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lamechannel
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Re: keep in money market or invest now?

Post by lamechannel »

Thank you. YES...I admit I am market timing. This is an account that I want to maximize growth for about ten years and perhaps retire early...we shall see!
the_wiki
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Re: keep in money market or invest now?

Post by the_wiki »

lamechannel wrote: Fri Jun 09, 2023 12:28 pm Thank you. YES...I admit I am market timing. This is an account that I want to maximize growth for about ten years and perhaps retire early...we shall see!
What makes you think you or anyone else can guess what happens next?


Also, this is 15% of your portfolio. Meaning poor timing even a huge swing is only going to make a few percent difference in the overall portfolio. And it is also very normal to have 15% in cash or bonds to reduce volatililty.
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Wiggums
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Re: keep in money market or invest now?

Post by Wiggums »

Time in the market and your savings rate is the best way to reach your retirement portfolio goal. The market is forward looking and the S&P 500 hit a new 13 month high today. We are retired and have been buying additional stock for the past two years. People who stay invested, get rewarded over the long periods of time.

Nothing wrong with collecting 5% interest as part of your fixed income.
Last edited by Wiggums on Fri Jun 09, 2023 1:24 pm, edited 1 time in total.
"I started with nothing and I still have most of it left."
bloom2708
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Re: keep in money market or invest now?

Post by bloom2708 »

Earning 5% on that 12k isn't too bad.

Yes, the stock index funds might make more. They might make less. They might make nothing. They might lose a bunch. All over the short term.

Your question was a lot harder or easier when the MM was paying .6%.

Can't help you much. If you are 23 or 33 and have other cash savings, then invest it today.
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Re: keep in money market or invest now?

Post by Dottie57 »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
Do you have an emergency fund? Will you need to use the money for anything iin the near to mid term.? What if car is demolished? Job loss? Etc. if your are set then invest it.
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ruralavalon
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Re: keep in money market or invest now?

Post by ruralavalon »

Welcome to the forum :D .

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
lamechannel wrote: Fri Jun 09, 2023 12:28 pm Thank you. YES...I admit I am market timing. This is an account that I want to maximize growth for about ten years and perhaps retire early...we shall see!
I suggest just investing now, don't wait for some better time to invest.

Wiki article, Bogleheads® investment philosophy, Never try to time the market.

For what it's worth last week I invested an extra $20k I had in Vanguard Federal Money Market Investor (VMFXX), into my regular asset allocation.
Last edited by ruralavalon on Fri Jun 09, 2023 1:56 pm, edited 1 time in total.
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sailaway
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Re: keep in money market or invest now?

Post by sailaway »

They have been predicting that recession off and on for many years. No one knows when it is coming. Pick an asset allocation and stick to it.
KneeReplacementTutor
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Re: keep in money market or invest now?

Post by KneeReplacementTutor »

It’s so cliche’ but why wouldn’t you allocate it according to your overall target ratio of stocks, bonds, etc. ?

The other thing is that the title suggests it’s not invested in the m/m fund which isn’t necessarily the case.
gotoparks
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Re: keep in money market or invest now?

Post by gotoparks »

This has probably been the most anticipated and called recession in stock market history. I follow the financial news, but my advice is to not follow the financial news, especially if you are going to act on it.
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Kevin M
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Re: keep in money market or invest now?

Post by Kevin M »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
Does it matter what we would do? My goals and risk aversion certainly are different than yours.

If you want to know what we think you should do, you'd need to tell us more about your ability, willingness and need to take risk. Read Larry Swedroe if you haven't and don't know what I'm talking about. Reading Bill Bernstein will provide a similar context, although his terminology is somewhat different.

When I just read your title, my initial reaction was, "money market is investing." I know this is not what Jack Bogle said about "cash", but to me cash is just the shortest duration of fixed income.

Say you buy a 3-month Treasury bill. Is that investing? What about 6m or 12m? Two year Treasury? Five-year bond fund? Total bond? I guess you'd say "yes" to the latter, since it is part of a 3-fund portfolio.
If I make a calculation error, #Cruncher probably will let me know.
FootballFan5548
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Re: keep in money market or invest now?

Post by FootballFan5548 »

If you need to scratch the itch, why not put like $2k into VTI and keep the remaining $10k separate. Then if you get another itch in a month, do it again. And if you have some extra cash laying around put it back in MM.
That's what I do. Outside of my normal monthly contributions and 401k contributions, I always have about $20k cash sitting in MM, and every now and then dump $5k into VTSAX, then replenish MM, then rinse and repeat.
steadyosmosis
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Re: keep in money market or invest now?

Post by steadyosmosis »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
Been there, done that ... years ago.
I am no prophet, and I saw no profit.
Now I just maintain a steady AA, buying more stocks when cheap enough, and selling some when pricy enough.
Age<59.5. Early-retired. AA ~55/45. Taxable account, Roth IRA, HSA...all are 100% equities. 100% of fixed income is in tIRA. I spend from taxable and re-balance in tIRA.
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lamechannel
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Re: keep in money market or invest now?

Post by lamechannel »

THANK YOU, everyone. I am going to just stick with my AA, stay the course, and invest for the long run. I can see why staying the course is so hard!!! every fiber of my being wants to chase higher returns.
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Mullins
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Re: keep in money market or invest now?

Post by Mullins »

Whenever I have a batch of cash to invest I say to myself, "this is for ten, twenty years from now."
"The Quality of the Answer Depends on the Quality of Your Question."
adave
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Re: keep in money market or invest now?

Post by adave »

People are usually skeptical of bull markets when they are early. This could run for a while given the amount of cash on the sidelines in MMFs.
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Hacksawdave
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Re: keep in money market or invest now?

Post by Hacksawdave »

Okay, the next time you want to try timing an event that might not happen or already has, merely invest your gross $51 monthly MM dividend proceeds from the $12K into the fund you considered adding to. At least you would not have totally missed out. :)
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Sandtrap
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Re: keep in money market or invest now?

Post by Sandtrap »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
To OP:
question:

Can you please give the source and nature of these forecasts that you speak of?

j :D
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bmcgin
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Re: keep in money market or invest now?

Post by bmcgin »

Most of my ideas do not conform to the BH standards and I might also be considered a market timer. So this free advice is about worth what you paid for it :)

Anyway, when moving into the market, I want to take a position in something that is down and I understand why it's down. And hopefully, understand why it might go back up. And then, because it is darn impossible to call THE bottom, move into the position slowly.

And actually, I did that today. I've been enjoying the carefree returns of MM Funds lately and have been watching PEY. It's an ETF that has had a reasonable track record (not the best / not the worst), pays a monthly dividend (currently 4.47%) and took a drop when the banking sector came under pressure.

I took a small position and plan to DCA if conditions are favorable. The 4.47% yield will be taxed as qualified gains which after taxes is better than current MMF rates. I am hoping PEY will do well as the banking sector improves and in the meantime collect a monthly dividend.
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arcticpineapplecorp.
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Re: keep in money market or invest now?

Post by arcticpineapplecorp. »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
1. have you ever stopped and thought about a prediction that says we'll have a recession either later in 2023 or first quarter of 2024? Why would this be the case? I mean, really ask yourself what is to be so different later this year or first quarter of next year that will lead us into a recession and why would we not be in one now if they're predicting one? If everybody thought we were going into a recession, wouldn't everyone get out of the market and then we would have created the decline that we feared (self fulfilling prophecy)? Are people waiting until the last minute to take their money out of the market? Will they take it out later in 2023 and if so how much later? september? Oct? nov? Dec? You see how stupid the whole business of making predictions is, right? Because nobody knows anything. They're guessing. A stopped clock is right twice a day but you wouldn't want to rely on it for the time, would you?

2. Now how much cheaper do you want to buy? 15% 20% 30% 40%? Name the exact percentage that you would need to see the market fall before you would launch that sweet $12,000 into the market. Then ask yourself what if the market doesn't fall by that much? Say you want to wait until the market falls at least 20% to invest. Then the market falls 19% and you don't invest. And then the market goes up and never comes back down to that lower point ever again. There was a poster a few years ago who said that very thing. Then the market fell like 19% but not 20%. Whoops. A lot of people say "I'm not going to invest until the market falls 30%". they don't realize the market's only fallen that much or more since 1980 just 5 times. You could be waiting a while to launch that money. Meanwhile the market goes up and you could've been making money. And later when it does fall, it doesn't fall back down to where you were when you could have invested originally and will still be buying in at a higher future price (even after the market falls). As an example, if the price is $100 but you want to wait for it to fall 20% and instead it rises to $150 before falling 20% you'd then be buying in...at $120, 20% HIGHER than you could have if you had just bought when you had the money when the price was $100.

3. i've seen people on bogleheads over the years not invest because the market reach a "new high" or an "all time high" and they couldn't bring themselves to invest. Problem was the market went on to create even more all time highs. In 2021 the market reached either

68 new highs:
https://www.marketwatch.com/story/the-s ... 1640969701

or 62 new highs:
https://www.newsweek.com/how-joe-biden- ... ar-1664641

or 43 new highs:
https://lplresearch.com/2022/01/21/how- ... ent-biden/

pretty weird that three writers could come up with entirely different numbers when facts are supposed to be facts, right? But I guess that's the state of news today, which is why you shouldn't just accept whatever you read.

still, my point holds true, while you're waiting for a down day, you could have invested and the market will go higher thereafter (and that's a win, right?)

Tom Cock and Don MacDonald have said on their show (talking real money) that the market goes up on a daily basis about 51% of the days. But over a month it goes up around 60some percent and over a year 75% (since 1980 chart, souce: https://am.jpmorgan.com/us/en/asset-man ... e-markets/) and so on the longer the holding period.

So knowing that the market tends to go higher it makes more sense to get money invested sooner rather than later. Sure you can get lucky, but luck is not a strategy.

4. The Peter Lynch quote is a good one. Larry Swedroe mentions it in his piece titled, Better to Face the Correction

5. it's time IN the market, not timing the market that matters.

welcome to the group and thanks for reading.
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Beensabu
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Re: keep in money market or invest now?

Post by Beensabu »

bmcgin wrote: Fri Jun 09, 2023 5:56 pm Anyway, when moving into the market, I want to take a position in something that is down and I understand why it's down. And hopefully, understand why it might go back up. And then, because it is darn impossible to call THE bottom, move into the position slowly.
That's great advice for those committed to holding cash waiting for deployment, actually.

If they're going to do that anyway, they might as well know what you just said.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Mikosan
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Re: keep in money market or invest now?

Post by Mikosan »

If your timeline is ten years, any small dip you might buy on would be an insignificant speck of the overall growth curve. But, time away. This is the reason dollar cost averaging into the market is so effective.
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burritoLover
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Re: keep in money market or invest now?

Post by burritoLover »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
Complete waste of time to wait. The market is constantly pricing in the probability of something happening. If a recession was deemed a near-certainty, prices would already have declined. The market doesn't wait around to lose money. The market can be wrong because it's not omniscient but capitalizing on that consistently is near impossible. The way to beat short-term active traders is to take a long buy and hold position and buy when you have the money and keep buying no matter what happens. Forecasts are utterly useless for practically any portfolio decisions.

If you want to make yourself feel better, when the next big market drop happens, divert some of your planned discretionary money (say for big purchases) to the market instead - not dry powder you are keeping for years, but what you have designated for current year things that you can do without.
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my2p
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Re: keep in money market or invest now?

Post by my2p »

Say the recession does come and stocks fall 20% in the next six months. Will you invest then? Someone else will predict that the market will go down another 20% in the next few months. So you will most likely not invest and wait some more. And before you know it, market will go up. Finally, you will become tired of waiting and get into stocks. But alas, the market might fall again!

You might even want to dollar cost averaging over the next 12 months and move $1K each month. You have a 75% chance of doing worse than lump sum investing. It just happened to me over the last 12 months :-). Listen to "JL Collins on dollar cost averaging" on YouTube (https://www.youtube.com/watch?v=J3yd3owbkfQ).
“The simple path to wealth” — JL Collins.
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Hacksawdave
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Re: keep in money market or invest now?

Post by Hacksawdave »

The old saying goes “Experts have predicted 9 of the last 5 recessions”. Of course, there are the usual “but however…” disclaimers at the end of the headline as their hedge.
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Candor
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Re: keep in money market or invest now?

Post by Candor »

You haven't given us that much information but from what I can gather from your OP you have $77k designated for retirement in this account. If you perfectly market time this $12k and lump-sum it back into the market after a 20% drop (highly unlikely) you will have saved yourself $2400 as opposed to deploying this money now. That is 3.1% of your current $77,000 account.

You mention you would like to retire early in about 10 years which would indicate you have, or plan to have, a fairly high savings rate so the $2400 is not worth bothering with an attempt at market timing as it will have minimal effect on your portfolio in that time frame. You should just concentrate your efforts on maximizing your savings which will have a much larger effect on your retirement portfolio. I say this as a minor market timer myself so I understand the draw.
Last edited by Candor on Sat Jun 10, 2023 12:25 pm, edited 1 time in total.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
dissentmemo
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Re: keep in money market or invest now?

Post by dissentmemo »

lamechannel wrote: Fri Jun 09, 2023 11:01 am Hello, all,

I have about $12,000 in vanguard money market fund sitting in a taxable account. I believe the 7-day yield is about 5% as of today. I also have roughly $50,000 in VTI (vanugard total stock market) and $15,000 in VXUS (vanguard total international) in the same taxable account. I have been keeping the $12,000 in the money market waiting for this recession to start so I can buy cheap(er). Anyway, the S&P500 keeps going up and now it's gone up 20% since the low in Oct. 2022.

All the forecasts I'm reading now says that the recession will come later in 2023 or first quarter of 2024. I already have my 3-6 month emergency fund in a high yield savings account. My retirement funds are all 3-fund portfolio.

Would you all continue to keep some dry powder in the money market fund or just go all in on VTI/VXUS? (75%/25% ratio).

thank you in advance.
I quote honestly can't believe you asked this here. You are brave.
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