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Obviously this is the definition of "timing the market but i've been putting some cash away for the CRASH everyone keeps talking about....(sitting in MMK at vanguard instead of being moved to the brokerage account)
The cash is currently around 50k and I told myself a few weeks ago that i won't buy into the market again so that i can build up the cash in case of a crash. (i'm still maxing 401k, IRA, and about 1200 a month in 529 accounts, so we're talking $ after all of that being saved as cash as opposed to ETFs)
Is this wise?
How much is too much?
When would you 'buy in'? 10% S&P discount?
Obviously this is the definition of "timing the market but i've been putting some cash away for the CRASH everyone keeps talking about....(sitting in MMK at vanguard instead of being moved to the brokerage account)
The cash is currently around 50k and I told myself a few weeks ago that i won't buy into the market again so that i can build up the cash in case of a crash. (i'm still maxing 401k, IRA, and about 1200 a month in 529 accounts, so we're talking $ after all of that being saved as cash as opposed to ETFs)
Is this wise?
How much is too much?
When would you 'buy in'? 10% S&P discount?
It isn't necessarily a bad decision. But it also might not work out in your favor, either. 50K is a lot of money to some people, but not to others. It really depends on what % of your net worth it is. I wouldn't let the dry powder go up to more than 10% of your investment money at this point.
I think Morningstar's market valuation graph is a good place to start. I always try to buy more stock fund shares when the graph hits .90. Right now it's at 1.01, meaning stocks in their coverage universe (a good enough proxy for the S&P 500) are 1% overvalued.
Dca for more than 6-12 months is statically a bad move as more often than not you'd be better off plowing the money all in at once. Even though you arent talking about dca the timing issue applies. The market tends to make higher highs overtime
It isn't necessarily a bad decision. But it also might not work out in your favor, either. 50K is a lot of money to some people, but not to others. It really depends on what % of your net worth it is. I wouldn't let the dry powder go up to more than 10% of your investment money at this point.
I think Morningstar's market valuation graph is a good place to start. I always try to buy more stock fund shares when the graph hits .90. Right now it's at 1.01, meaning stocks in their coverage universe (a good enough proxy for the S&P 500) are 1% overvalued.
$50k represent what % of your net worth? If it's less than 5% or so, perhaps it is fine as play money. However, if it represent a significant % of your net worth, then I don't think it's a good idea. Market timing is near impossible, sitting on cash and waiting for a crash may lose out on the potential gains (dividends, gain in price). No one can consistently predict the market; it is better to stay invested and maintain your asset allocation based on your risk tolerance level in my opinion.
I have tried to time the market in the past. It is pure speculation. I hate this kind of strategy because, in the long term, it is not sustainable. Ultimately, the best way for me is to stay invested.
i understand the temptation of marketing timing but it just doesn't work.
if you started saving last year, i think the market has gone up so you've already missed out on some returns.
it might go up another 10% before it corrects down 5% and then goes up another 15% and then crashes down 10%, etc.
it's hard to time the market because it's hard to predict where the top and bottom will be.
but hey, like others have said, if $50k is a small part of your net worth, it's just gambling money anyway so have fun with it. if it's your whole net worth, you probably should get it in the game and working for you instead of sitting on the sidelines.
i know folks who sold their homes in the early 2000s because they thought the market had peaked. they sold and rented with plans to buy when home prices crash. well home prices kept going up and then crashed but even the crash prices were a lot higher than when they sold...so they are still waiting for that big crash today.
As others have said, this probably does not make sense in the long run. The exception is when valuations are clearly at bubble levels. Even then, you should invest in some foreign countries' stocks that are not too overvalued rather than sitting on cash. If you want, you can then DCA the dividends on the foreign stock into domestic stock.
There is nothing wrong with having a substantial amount of ready money that is not invested, especially now in the piddling 1%-interest era. The questions that it raises are A) how to secure it, and B) what do you expect your money to do for you in such chaotic times, and C) will your paper fiat money actually represent any legal tender.
Somebody will have a great deal more wealth and power than you can ever hope to have, and it is they who will steer the ship of economics in such a way that they re the winners and you are a bottom feeder with "a bunch of ground up paper, lad".
In my opinion, I would be thinking about times that are highly troubled, but not catastrophic (when money wouldn't help), I'd see that I have enough cash to get me to Mexico and bribe my way across the border. Mexico will take a lighter hit than the USA in the event of an economic collapse, because rural Mexico depends much less on high-tech distribution of food and resources, and living there requires no energy-dependent protection from the climate.
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