ROTH IRA Question-Calling LetsRun Investing Gurus

Dollar cost average, bro. $400-500 a month, consistently.

mathematically, just put all of it in a Total Market Index Fund and dont worry about it. check in once a year to see if you need to rebalance (go to bonds, cash as you get older). dont worry about daily, monthly, or even yearly fluctuations. in the long run you should do ok.

i stagger my contributions (200 every two weeks) on the weeks when i dont have a 401k contribution. That way i am putting something in every week.

IChoseD2,

The market valuation is at one of the highest levels in the last 130 years. So I would make my contribution and leave it in money market. I would also evaluate my stock position in light of valuation extremes. The downside risk to those positions is down 50-60% over the completion of this market cycle.

Igy

Ghost of Igloi wrote:

IChoseD2,

The market valuation is at one of the highest levels in the last 130 years. So I would make my contribution and leave it in money market. I would also evaluate my stock position in light of valuation extremes. The downside risk to those positions is down 50-60% over the completion of this market cycle.

Igy

This just has to be a troll response. Otherwise, this is some of the most ridiculous investing advice I've ever read.

First of all, the market isn't at "one" of its highest valuation levels. It's pretty clear that it's at its highest ever as of a business day or two ago. There is no wiggle room needed here, syntax-wise.

Second, this is irrelevant. Excepting a few intervening years, the market was always at its highest point at almost any year in time between roughly the 1950s and 2000. Should the OP and everybody else have skipped stocks for this 50-year stretch of time because the market was at its highest at almost any point during this time? Laughable.

Finally, the OP is presumably on the young, 20-ish side. For anybody in this demographic with arguably 40+ years until retirement, the notion that they should go full bore into money market investments runs counter to almost every piece of investment & portfolio planning logic known to man.

OP, do your own homework online or talk to a professional. Don't listen to garbage like this.

Ghost of Igloi wrote:

IChoseD2,

The market valuation is at one of the highest levels in the last 130 years. So I would make my contribution and leave it in money market. I would also evaluate my stock position in light of valuation extremes. The downside risk to those positions is down 50-60% over the completion of this market cycle.

Igy

yeah, Ghost of Ogloi is right, judging by your post you are savvy enough to time the market.

fidvanguard wrote:

mathematically, just put all of it in a Total Market Index Fund and dont worry about it. check in once a year to see if you need to rebalance (go to bonds, cash as you get older). dont worry about daily, monthly, or even yearly fluctuations. in the long run you should do ok.

i stagger my contributions (200 every two weeks) on the weeks when i dont have a 401k contribution. That way i am putting something in every week.

Correct answer here. Put it all in a total market index fund and don't look at it. Somewhere down the line you'll want to add a bond fund in, but not for 10 years probably.

Put it all in immediately... you aren't touching this money for 35-40 years and time in market matters more than trying to dollar cost average. Stop trying to time the market with your nest egg.

Horrible advice 3/2000 and horrible advice 10/2007, and horrible advice today.By the way, at a market top, the annualized return of the S&P 500 since 3/2000 is 4.7%, and NASDAQ 1.7%.

Ghost of Igloi wrote:

Horrible advice 3/2000 and horrible advice 10/2007, and horrible advice today.

Impressive. You looked in your rear-view mirror, plucked out two dismal days for stocks, and then decided to use that to drive your boilerplate advice for a young investor about how to invest for the foreseeable future.

No, you used your misguided beliefs and the mantra of the industry that pays no attention to stock valuations, and always wants you to buy stocks, no matter the price.

Oh, by the way those were Bear markets that lasted 3/2000-10/2002 and 10/2007-3/2009.

Actually, I used my data-supported beliefs that nobody can consistently beat the market by playing the timing games you advocate based on Shiller P/E or any other measure.

Feel free to post a thread on the day when you think we all should jump back into stocks. We'll see how right you turned out to be.

Idbouga wrote:

Actually, I used my data-supported beliefs that nobody can consistently beat the market by playing the timing games you advocate based on Shiller P/E or any other measure.

Feel free to post a thread on the day when you think we all should jump back into stocks. We'll see how right you turned out to be.

idhouga,

That was never my point. On the other hand, many profess to be "buy and hold" and sell at the bottom. That is why the average investor return is so poor. With the strong market performance of low cost ETFs these investment products have become answer to all . Perhaps in the near future these investments will be the low cost way to lose a lot of money. As I pointed out the buy and hold strategy since the market peaked 3/2000 has been pretty mediocre. So, the question one should ask is the future more representative of the past 130 years of market returns or the last 17. If you plan on living 130 years, the odds are in your favor.

Igy

Ghost of Igloi wrote:

So, the question one should ask is the future more representative of the past 130 years of market returns or the last 17.

Sure, a great question. I have no idea, and honestly, neither do you.

So what to do? Well, if I'm a young 20-something with a long investment horizon, am I really better off going full tilt into the money market? Until when... I see the billboard one day telling me it's safe now to jump back into stocks? Or when the rear-looking Shiller PE ratio suggests things are undervalued now? Compared to when... and why then?

To be sure, if the OP buys money market funds for the foreseeable future, he likely won't lose a dime. Then again, he won't earn one either. To me, that risk is far more significant - and certain - than the risk you suggest someone assumes by buying stocks today.

Spot on. Yes, your account value will go down, but in the long run it will go up much more. Since you're 27, you have a long time horizon and you will be able to ride out these bumps in the road and enjoy the magic of compounding.

Ignore the troll who said to put your savings into a money market fund. That is a guaranteed way to lose purchasing power.

The best advice from above is to dollar cost average and check your account maybe once each year. Otherwise, invest and forget it. In 30 years, you'll be in good shape.

45 year old who grew up in section 8 housing with no financial support whatsoever. Worked me way through professional school and started contributing to my 401(k) as soon as I was allowed to - basically age 28 or 29. Maxed out my contributions most years, with the exception of the year I was saving for my first house (I get that is against conventional wisdom, but it worked out nicely as I sold the house in 2007 paid for law school with the profits, and still had money left to roll into a new home).

Dumped all of my money into an S&P index fund. Lowest cost fund by far. 16-17 years later, and my account has a balance of about $690k (a mix of traditional and Roth accounts), and even with a growth rate (let's call it 5.5%)and no additional contributions (I see the potential flaws in those assumptions, but they are useful for the limited purpose for which I am using them), I will have nearly $2,000,000 in that account when I hit age 64. Assuming I keep contributing at the same rate (including a $10,000 a year match), I will be at over $2.8m at that age.

All of that is to say that when you have a long investment horizon and are patient, you should just dump your money in consistently over time and let the market do its thing.

I am not a troll. I am a CFP with over 20 years in the business and manage over $130 million for individual investors. Most of the views expressed here represent the view that you are better off just buying the market. The OP has expressed this comment:

" I had them choose what to invest in after telling them I was basically moderate but on the slightly more aggressive side, they put it into a fund/whatever that was high at the time compared to the 52wk range. It dropped and I was on like a 400-700 dollar loss for a while."

Naturally, the OP was relieved when sometime later his account value recovered. The reality is that most investors will pull the plug when down significantly. The poster Ms. CFA decries the lost purchasing power of allocating the contribution to money market, but evidently has no problem in an investor suffering losses that could represent decades of purchasing power. I would argue that at current valuations T-Bills will outperform the S&P 500 over the next 10 years. I would not stay there for the next 10 years, but I see no evidence that being cautious is a mistake. Keep in mind a 25% loss in principal requires a 33% gain to get back to even.

Igy

Congratulations on the CFP. Among other credentials, I have a CFA.

But back to the point, enough evidence & data point to the fact that both sophisticated & everyday Joe investors alike ARE better off buying the market (and a low-cost version of it at that). This is not nearly as irrational as you seem to suggest it is.

Further, you also seem hung up on this notion that people buy & hold and then sell low, and that this is the problem with buying in the first place. This is of course a problem - selling low - but why is this relevant to the issue at hand of whether the OP should or shouldn't buy stocks? If you want to do the OP a favor and tell him not to buy stocks only to sell them low when the market stumbles one day, fine. But you do him no favors by taking this advice to the extreme and saying that he - with presumably 40 years until retirement - simply shouldn't buy stocks at all today.

I started a Betterment Roth IRA 2+ years ago... I had no prior financial experience.

Basically for a .25% fee, they spread out your investments. You chose the risk level.

I chose 100% stocks but if you want to be more conservative you can put some percentage into bonds. Of the $5500, I usually I do $3000 on first of the year and then spread out the rest of the $2500 bi-weekly. This allows more time in the market but spreads some risk. Is this the best way to do it? I have no idea. But seems to be working well so far!

I have invested $15,300 and have gotten a $3,200 return... (21% simple earnings, 24% time-weighted return)

I am sure you realize that a significant portion of your portfolio is your savings. Also, I would assume the $3.5 Trillion the Fed added to their balance sheet bailed you and many other investors out, thru QE and other programs. So, the next 19 years investment returns may be less generous.

Igy