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Best way to invest in stock market now

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  •  tintin 
    Participant
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    Joined: 01/07/2019

    @The White Coat Investor Does it then make sense to max out 401k account and EDP account also early in the year if we can afford to in Jan/Feb/March? We can follow the same logic for those investments.

    #179813 Reply
     Peds 
    Participant
    Status: Physician
    Posts: 2374
    Joined: 01/08/2016

    Yes. Many of us do that. Careful if match.

    #179816 Reply
     Tim 
    Participant
    Status: Accountant
    Posts: 809
    Joined: 09/18/2018

    1) When to invest- When you have funds to put to work.
    Time in the market is more important than market timing. While educated investors already know this thesis, many of them tend to forget how to apply it to their own portfolio on a regular basis. They foolishly try to determine where the market is heading next.
    2) How to invest – A diversified portfolio the Asset Allocation is suitable for your risk profile and timeframe.
    Individuals and professionals have great difficulty picking a stock or asset class that outperforms. Keep it simple. Pick an allocation in low cost funds that meets your needs. Start with 60/40 and dial up or down as needed.

    To illustrate ONLY, you can view the attached. Who would have guessed “Cash” would be the big winner in 2018? Holding cash has long term pluses and minuses. That is why you are investing it.
    https://awealthofcommonsense.com/2019/01/updating-my-favorite-performance-chart-for-2018/
    As you can see, there is no rhyme or reason that can be discerned in advance. Please note that different weights would result in different time frames: 1.3,5,10, and 30 are common. The more inclusive you track the total market, the better chance you have.

    #179822 Reply
    Liked by nachos31
    hatton1 hatton1 
    Participant
    Status: Physician
    Posts: 2733
    Joined: 01/11/2016
    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 y

    Click to expand…

    This is the strategy I used to get “rich” slowly.  Invest every month or week (if self-employed) and let it compound.

    #179826 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 3798
    Joined: 05/13/2011

    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.

    Click to expand…

    I disagree with your use of the terms. DCA can only be used when there is a lump sum. So it’s lump sum vs DCA. What most of us do is “periodically invest”, i.e. invest money each month when we get paid. That’s not technically dollar cost averaging in my view, but I’ve certainly seen the term used that way frequently. I think it’s important to distinguish between the two.

    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

    #179871 Reply
    Liked by G, Peds, Tim
     G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1169
    Joined: 01/08/2016

    @tintin, if you can full fund your 401k in the first quarter, go for it! I can’t afford that (yet); plus as @peds mentioned, I dont want to mess up the folks in the office re payroll as the only guy doing it. I suspect there is a fail safe in place to avoid over contributing, but I dont want to be the test case.

    Also, I wonder if you would need to already meet income requirements before maxing out? It would likely be a hassle to put in 56k and then not meet income because something happened (job loss, death).

    #179882 Reply
     bean1970 
    Participant
    Status: Physician
    Posts: 350
    Joined: 07/12/2017
    I disagree with your use of the terms. DCA can only be used when there is a lump sum. So it’s lump sum vs DCA. What most of us do is “periodically invest”, i.e. invest money each month when we get paid. That’s not technically dollar cost averaging in my view, but I’ve certainly seen the term used that way frequently.

    Click to expand…

    DCA is technically is taking FIXED dollar amount and buying on a regular schedule.  You can do it with a lump sum of money you have to spread out, or you can set your checking/savings to take out a FIXED dollar amount every week/day/month and invest it regardless of share price.   You don’t necessarily need to invest when you are paid or in any relation to your paycheck.  Some people are paid once per month, but yet buy FIXED amount every week.  it is the same thing to me as periodic investing.  One just refers to the time, and one refers to mitigating the share price cost. They both achieve the same result.

     

     

    #179893 Reply
    Liked by Zaphod
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 3798
    Joined: 05/13/2011
    I disagree with your use of the terms. DCA can only be used when there is a lump sum. So it’s lump sum vs DCA. What most of us do is “periodically invest”, i.e. invest money each month when we get paid. That’s not technically dollar cost averaging in my view, but I’ve certainly seen the term used that way frequently. 

    Click to expand…

    DCA is technically is taking FIXED dollar amount and buying on a regular schedule.  You can do it with a lump sum of money you have to spread out, or you can set your checking/savings to take out a FIXED dollar amount every week/day/month and invest it regardless of share price.   You don’t necessarily need to invest when you are paid or in any relation to your paycheck.  Some people are paid once per month, but yet buy FIXED amount every week.  it is the same thing to me as periodic investing.  One just refers to the time, and one refers to mitigating the share price cost. They both achieve the same result.

     

     

    Click to expand…

    What I’m saying is that most of us don’t have to make a decision between lump sum and DCA because we don’t have a lump sum. Lump sum isn’t an option.

    If you carry this all out to its illogical extremes, you’ll see how silly DCAing is.

    Instead of buying once a month, why not buy shares every day all month? Because it just doesn’t matter. If you invest monthly, by the time you retire you’ll have made 300 purchases. That will spread your risk of buying high out plenty. In fact, it’s the same if you buy once a year- 30 purchases.

    Lots of people asking if they should “lump sum in a $200K amount” forget that they’ll be investing $2M over their lifetime and that the $200K just doesn’t matter that much.

    I’ll bet far more has been lost in paralysis by analysis trying to decide between lump and DCA than by lump summing at a peak or by DCAing. Invest early and often. Time in the market matters, but how much you put in there in the first place matters most.

    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

    #179985 Reply
    Liked by tintin, Zaphod, Tangler
     jacoavlu 
    Moderator
    Status: Physician
    Posts: 1425
    Joined: 03/01/2018
    I’ll bet far more has been lost in paralysis by analysis trying to decide between lump and DCA than by lump summing at a peak or by DCAing.

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    And far more is lost by pulling out when the market goes down, and sitting on the sidelines. Lump summing is statistically best. Dollar cost averaging is ok too. Whatever you do, make a plan and stay the course.

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

    #180006 Reply
    Liked by Kamban, Peds
    nachos31 nachos31 
    Moderator
    Status: Physician
    Posts: 399
    Joined: 01/12/2016
    WCICon18

    @tintin, if you can full fund your 401k in the first quarter, go for it! I can’t afford that (yet); plus as @peds mentioned, I dont want to mess up the folks in the office re payroll as the only guy doing it. I suspect there is a fail safe in place to avoid over contributing, but I dont want to be the test case.

    Also, I wonder if you would need to already meet income requirements before maxing out? It would likely be a hassle to put in 56k and then not meet income because something happened (job loss, death).

    Click to expand…

    Many companies will offer a true up at the end of the year to give you the full match if you fully fund your retirement plan early. Just ask your benefits folks when you’re in a position to do so. Some require you contribute every pay period to get the full match.

    #180100 Reply
     Kamban 
    Participant
    Status: Physician
    Posts: 1783
    Joined: 08/01/2016
    And far more is lost by pulling out when the market goes down, and sitting on the sidelines. Lump summing is statistically best. Dollar cost averaging is ok too. Whatever you do, make a plan and stay the course.

    Click to expand…

    I find these actions more important than dollar cost averaging vs lump sum. Far more people who should be investing keep the money in their low interest savings because the market is too hot, market is in a downward spiral, saving for a house downpayment while in residency or medical school, an emergency savings far more than you need or just because you love plain crisp cash. I have been guilty of more than a couple of these too.

    A disciplined approach of regular investing gives much better return in the long run even though in abstract the lump sum might be better than DCA. That is why I still do the dividend reinvestment of my stocks because if I don’t the quarterly dividend will sit uninvested.

    #180107 Reply
    Liked by bean1970
     momentumstocks 
    Participant
    Status: Other Professional
    Posts: 7
    Joined: 10/31/2018

    GOOD TIME TO GET INTO INDEX FUNDS NOW… BUT we still might fall another 20%+ Who knows?

    With index funds you need to take a 10+ year view on them…..don’t even watch it… You are not timing the market.

    None can predict the future. So roll with the ebbs and flows

    #180760 Reply

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