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Best way to invest in stock market now

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  • Avatar tintin 
    Participant
    Status: Spouse
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    Joined: 01/07/2019

    I want to invest about 200k  in stock market in Vanguard index funds in a personal brokerage account.

    What is the best way to invest given that the market is down 20% in last 3 months or so?

    Does it make sense to pour money into the market in one day or should I buy over a few days/weeks/months.

    Please advise.

     

    #179370 Reply
    Avatar jacoavlu 
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    Status: Physician, Small Business Owner
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    Joined: 03/01/2018

    there is no right or wrong answer because no one knows whether the market will go down in the coming days/weeks/months.

    Statistically the market goes up over time so the data would suggest lump sum.

    Personally I would choose to dollar cost average over the next 6-12 months.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179371 Reply
    Liked by tintin
    Avatar RocDoc 
    Participant
    Status: Physician, Small Business Owner
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    Joined: 06/20/2016

    I received a large lump sum of cash from the Aetna/CVS merger in late November in my taxable account. I cash flowed the capital gains tax from pay checks (owned the Aetna stock for a long time.) I dumped all the Aetna cash proceeds back into the market at the end of December and divided it up into large cap, mid cap, small cap. The PE ratios at the time of the new investments are pretty good. I normally dollar cost average with large lump sums but the current lower market made prices seem fair. We may get another 10 or 20 % drop or even larger drop. But in my old age, I figured a fair market price is good enough for me.

    #179385 Reply
    Liked by hatton1, Zaphod
    Avatar G 
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    Status: Physician, Small Business Owner
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    Joined: 01/08/2016

    Lump sum. (And this is coming from someone who lump sum super-funded a 529 this fall! Ugh!!)

    #179408 Reply
    Liked by hatton1, RocDoc
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2121
    Joined: 06/24/2016

    The good old Vermont Saxophone. (VTSAX)

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    DMFA DMFA 
    Moderator
    Status: Physician
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    Joined: 06/24/2016

    …and no one knows, but I think lump sum beats averaging like 85% of the time fttomh (don’t remember actual study).

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #179413 Reply
    Avatar Tangler 
    Participant
    Status: Physician
    Posts: 107
    Joined: 08/23/2018

    VTSAX, lump sum.

    That is what I would do.

    If you are new and want simplicity, I suggest Reading  JL Collins simple path to wealth.

     

    3 fund portfolio is also great:

    https://www.bogleheads.org/wiki/Three-fund_portfolio

    #179538 Reply
    Liked by saildawg, RocDoc
    CordMcNally CordMcNally 
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    Status: Physician
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    Joined: 01/03/2017

    I’d lump sum it.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #179540 Reply
    Liked by RocDoc
    Drop it into MD Drop it into MD 
    Participant
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    I agree with VTSAX lump sum.  I did the same a few days ago, just with not quite so much money 😉

    #179549 Reply
    Liked by RocDoc
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4191
    Joined: 05/13/2011

    I want to invest about 200k  in stock market in Vanguard index funds in a personal brokerage account.

    What is the best way to invest given that the market is down 20% in last 3 months or so?

    Does it make sense to pour money into the market in one day or should I buy over a few days/weeks/months.

    Please advise.

     

    Click to expand…

    Dollar cost averaging is an emotional/behavioral technique to minimize regret. i.e. it’s for wimps.

    Dollar Cost Averaging Is For Wimps

    I’d lump sum it today. And in fact, THAT’S EXACTLY WHAT I DO every month when I see how much money I have left to invest after taxes, charity, and living expenses. Over time, I end up “periodically investing” and some months my money buys more shares and some months it buys less depending on what the market does.

    But I would submit if you are nervous to put your money into the market that you probably have too aggressive of an asset allocation. Dial it back until your fear of missing out equals your fear of loss. That’s the right asset allocation for you. Even if it is 25% stocks and 75% bonds, lump sum it and then stick with it.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #179553 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3344
    Joined: 01/08/2016

    Lump sum is the mathematically correct answer.
    DCA is the behavioral answer.

    So split the difference since you care:
    50% now.
    Some percentage the next few months (10% x5, etc etc).

    #179608 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7129
    Joined: 01/09/2016

    Lump sum. DCA is used when you don’t have a lump sum. Even if you contribute your whole $19k limit to your 401k in January of each year, you are still doing DCA over time. It’s the 2nd best choice out of the 3 ways to invest.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #179610 Reply
    Liked by Zaphod, hatton1, Tim
    Avatar bean1970 
    Participant
    Status: Physician
    Posts: 445
    Joined: 07/12/2017
    ’d lump sum it today. And in fact, THAT’S EXACTLY WHAT I DO every month when I see how much money I have left to invest after taxes, charity, and living expenses.

    Click to expand…

    I prefer the mantra in the opposite direction.  Pay yourself first (ie save/invest) and then spend whatever is left……rather than spend and invest the rest.  Too many people spend too much leaving little to save/invest…..if you skim that money off the top first (after taxes only)….you learn to live on whatever is left.      We skimmed off at least 5K/month before we figured in mortgage, bills, etc….

    that’s how we did it anyways…i guess as long as someone is saving vs not saving…it all works out…..

    for the poster, if you have the money now, throw it in….

    #179617 Reply
    Liked by hatton1
    Avatar IntensiveCareBear 
    Participant
    Status: Physician
    Posts: 91
    Joined: 12/22/2018

    It depends what side of the tracks you live on; neither view is wrong. If you are an active trader who enjoys following the market and are wanting to buy downtrodden AAPL or Ford or a consumer staples sector ETF or something, average down and sell covered calls all the way. If you are just getting VOO or VTI and taking the passive “set-it-and forget it” approach, then just do lump sum. If you’re talking foreign indexes like VWO or VEA that are broad yet downtrodden, it’s not as clear-cut.

    DCA monthly or weekly or even intra-day is generally the best way to go when you are tracking and buying something which is trending down. That is what alpha hedge funds, growth funds, and professional managers generally do: they “build a position,” not just buy a huge chunk of company X in one fell swoop. Sure, news suggests that Berkshire, Bridgewater, etc grab huge chunks since they only report their holdings quarterly, but those positions were usually nibbled at (in fairness, their individual nibbles are still many times our lifetime earnings, though… lol). DCA is certainly the logical move when “catching a falling knife” like FB or GE or a financial sector ETF or something right now. You don’t know what the bottom is (nobody does), so you want to average all the way down and then slow up buying once you get the target amount or when it rebounds strong and sustained. If it has a dividend, you can take that into consideration as to what timespan you choose to DCA, but the market price generally anticipates the dividends anyways… so that “strategy” of buying based on ex-dates is pretty overrated imo.

    If you are just set on US market indexing (seems to be the primary religion around these parts), it really doesn’t matter. I would agree with preferring lump sum for that beta strategy. There are many more sunny days than rainy days, so the correct forecast is sunny… even though the USA markets just had a rock star week last week. Volatility is so low and dividends relatively low on total market index funds (esp mutual fund versions that only update daily, but even ETF versions also) when compared to single stocks or sectors or commodities that it doesn’t really matter much. DCA is generally a waste of time or will cost you gains if you are an indexer. Grab a bunch of SPY or VOO or something and check on it when summer arrives.

    If you want emerging indexes, which have been on a rocky ride down for the past couple years, I think DCA or lump could both work… your choice. GL

    #179633 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4191
    Joined: 05/13/2011

    It depends what side of the tracks you live on; neither view is wrong. If you are an active trader who enjoys following the market and are wanting to buy downtrodden AAPL or Ford or a consumer staples sector ETF or something, average down and sell covered calls all the way. If you are just getting VOO or VTI and taking the passive “set-it-and forget it” approach, then just do lump sum. If you’re talking foreign indexes like VWO or VEA that are broad yet downtrodden, it’s not as clear-cut.

    DCA monthly or weekly or even intra-day is generally the best way to go when you are tracking and buying something which is trending down. That is what alpha hedge funds, growth funds, and professional managers generally do: they “build a position,” not just buy a huge chunk of company X in one fell swoop. Sure, news suggests that Berkshire, Bridgewater, etc grab huge chunks since they only report their holdings quarterly, but those positions were usually nibbled at (in fairness, their individual nibbles are still many times our lifetime earnings, though… lol). DCA is certainly the logical move when “catching a falling knife” like FB or GE or a financial sector ETF or something right now. You don’t know what the bottom is (nobody does), so you want to average all the way down and then slow up buying once you get the target amount or when it rebounds strong and sustained. If it has a dividend, you can take that into consideration as to what timespan you choose to DCA, but the market price generally anticipates the dividends anyways… so that “strategy” of buying based on ex-dates is pretty overrated imo.

    If you are just set on US market indexing (seems to be the primary religion around these parts), it really doesn’t matter. I would agree with preferring lump sum for that beta strategy. There are many more sunny days than rainy days, so the correct forecast is sunny… even though the USA markets just had a rock star week last week. Volatility is so low and dividends relatively low on total market index funds (esp mutual fund versions that only update daily, but even ETF versions also) when compared to single stocks or sectors or commodities that it doesn’t really matter much. DCA is generally a waste of time or will cost you gains if you are an indexer. Grab a bunch of SPY or VOO or something and check on it when summer arrives.

    If you want emerging indexes, which have been on a rocky ride down for the past couple years, I think DCA or lump could both work… your choice. GL

    Click to expand…

    Most docs have better things to do than intra-day DCA.

    Buying individual stocks is just taking on uncompensated risk. Not sure why one would “try to do what professional managers generally do” given their track record.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #179734 Reply
    Liked by nachos31

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