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Post by anitya on Aug 12, 2021 19:58:58 GMT
I will be receiving a lump sum distribution (very low six figures) from a retirement plan that was accumulating interest at 6% per year. Sort of guaranteed and so I had left it there until now.
I want to put that amount into an equity fund(s) (OEF, though ideally ETFs so I can move fixed income from taxable to IRAs) and am not able to decide which one is likely to accumulate returns that match at least that of the SPY but with potentially lower downside. Not looking for sector or industry funds. Any suggestions would be appreciated. You can just list your favorite funds and do not worry about disclaimers - my responsibility to do further research.
P.S.: I am not suggesting daily low volatility (e.g., USMV, SPLV, etc.) when I say potentially lower downside. I am OK if it has daily higher volatility than the SPY. What counts is potentially lower draw downs than the SPY in a correction or bear market. I am also OK with funds that jump style boxes over time because of active management of the fund. I am fine with new funds which may not have existed during March 2020. I do not go to small (style) stock funds.
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Post by Chahta on Aug 12, 2021 20:09:32 GMT
I’m not sure how you invest. But if you want to lump sum invest I would use SCHD. But I would average it in. Growth seems to be a little tired.
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Post by rhythmmethod on Aug 12, 2021 20:30:52 GMT
I like Chahta idea, SCHD. I have a big chunk of IRA in PRWAX. You may consider SCHY, if you are interested in Int Value.
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Post by yogibearbull on Aug 12, 2021 21:03:14 GMT
Normally, 401k to T-IRA rollovers/direct-transfers are lateral moves and can be done right away.
But when a significant change in allocation is involved, it can be done in 2-4 steps over several months. Luckily, it is a weak seasonality period (May 1 - October 30) and there may be chances for quicker deployment.
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Post by anitya on Aug 12, 2021 21:06:36 GMT
I like Chahta idea, SCHD. I have a big chunk of IRA in PRWAX. You may consider SCHY, if you are interested in Int Value. I have a starter position of SCHY but historically I did not find ETFs appealing for international investing. Obviously, if we go by our experience with SCHD, SCHY is not just another international ETF. I should find best international value funds and see how they compared to SPY (my benchmark) and other international funds over time, which might give me an idea of how SCHY might perform. I will have to do some work here. Thanks.
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Post by Chahta on Aug 12, 2021 21:21:59 GMT
Another one I like is QQQJ for long term. I plan to add more down the road.
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Post by chang on Aug 13, 2021 4:30:21 GMT
"Where to invest in equities now?" is a common question on this or any other discussion board. (And a question I ask myself all the time.) My stock answer is: "the same way your current portfolio is invested". The only reason not to invest new money the same way that existing money is invested would be if one's target AA is dependent on total PV, and the new money takes your PV to the next "level". In fact, I think AA is dependent on PV. In other words, a given individual's "correct" AA depends, to some extent, upon whether they have $10,000 or $1 million or $100 million to invest. Many years ago retiredat48 started a thread on M* titled something like "Should you invest your second million differently than your first?" (And the discussion moved on to whether you should invest your third million differently than your second, etc.) I believe there is a PV-dependence, but it's approximately logarithmic. In other words, AA changes come into play every time your PV increases by a fixed multiple, e.g., $10K, $100K, $1M, $10M, etc. So, unless your PV was around $10,000 prior to receiving this $100K lump sum, I would guess that no major AA change is warranted. I assume, on the other hand, that this extra $100K just bumps your PV up incrementally, in which case I would default to my stock "the same way your current portfolio is invested".
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Post by anitya on Aug 13, 2021 7:00:18 GMT
chang, Thanks for your thoughts. It may sound strange to you but I never had a targeted AA and though I check often to see how my portfolio is doing relative to moderate allocation funds and SPY, I do not look at the total portfolio value very often. More specifically, the new money was previously earning equity like returns, and I would like to continue to invest it in equities. I do not want to spread it over my existing equity positions, rather take this opportunity to see if I can not improve. Also, I want visibility of results of my diligence by putting the entire amount in one fund. Spreading across loses visibility.
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Post by richardsok on Aug 13, 2021 11:19:06 GMT
At current market levels, I am suspicious of anything long term. I would choose one from VTI, VOOG or DIAX and apply a 50-day moving average to it.
OR -- pick one and put in two GTC trailing stop losses; 50% sold at, say, 7% loss and the rest, say, at 11% loss. Since you are investing a once-in-a-lifetime windfall, protecting wealth is important.
You can always get back in if you wish, but I wouldn't want to be fully invested if things turn ugly. Better to pre-think it out than to make your "sell" decision in panic. Yes, there is indeed a "flash crash" risk, but (a) I believe it is minimal with VTI, and (b) that is why the two-step sell order. Your trailing stop will help you lock in future gains as they occur.... IF they occur.
I wouldn't trust ANY mutual fund with a once-in-a-lifetime windfall at current levels. If the Big Ugly ever arrives, I want to be OUT -- not to be forced to wait for market close to get my price.
Am also partial to L/S funds like QAI, FSD, CPZ and also FFTY or even AIEQ to be more aggressive, but certainly wouldn't put everything into them.
My two cents.
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Post by Chahta on Aug 13, 2021 13:25:09 GMT
"Where to invest in equities now?" is a common question on this or any other discussion board. (And a question I ask myself all the time.) My stock answer is: "the same way your current portfolio is invested". The only reason not to invest new money the same way that existing money is invested would be if one's target AA is dependent on total PV, and the new money takes your PV to the next "level". In fact, I think AA is dependent on PV. In other words, a given individual's "correct" AA depends, to some extent, upon whether they have $10,000 or $1 million or $100 million to invest. Many years ago retiredat48 started a thread on M* titled something like "Should you invest your second million differently than your first?" (And the discussion moved on to whether you should invest your third million differently than your second, etc.) I believe there is a PV-dependence, but it's approximately logarithmic. In other words, AA changes come into play every time your PV increases by a fixed multiple, e.g., $10K, $100K, $1M, $10M, etc. So, unless your PV was around $10,000 prior to receiving this $100K lump sum, I would guess that no major AA change is warranted. I assume, on the other hand, that this extra $100K just bumps your PV up incrementally, in which case I would default to my stock "the same way your current portfolio is invested".I would have answered in the same manner, but he asked a specific question. The $100k represents "new" money for equities because it was in a guaranteed interest account. I would not lump sum invest "new" money unless we were in a "buying opportunity" now. EDIT: This for a B&H investor.
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Post by Chahta on Aug 13, 2021 13:29:13 GMT
At current market levels, I am suspicious of anything long term. I would choose one from VTI, VOOG or DIAX and apply a 50-day moving average to it. OR -- pick one and put in two GTC trailing stop losses; 50% sold at, say, 7% loss and the rest, say, at 11% loss. Since you are investing a once-in-a-lifetime windfall, protecting wealth is important. You can always get back in if you wish, but I wouldn't want to be fully invested if things turn ugly. Better to pre-think it out than to make your "sell" decision in panic. Yes, there is indeed a "flash crash" risk, but (a) I believe it is minimal with VTI, and (b) that is why the two-step sell order. Your trailing stop will help you lock in future gains as they occur.... IF they occur. I wouldn't trust ANY mutual fund with a once-in-a-lifetime windfall at current levels. If the Big Ugly ever arrives, I want to be OUT -- not to be forced to wait for market close to get my price. Am also partial to L/S funds like QAI, FSD, CPZ and also FFTY or even AIEQ to be more aggressive, but certainly wouldn't put everything into them. My two cents. Not sure what QAI is, but looked it up. It has a 2.77% 10 year return, 0.69% YTD. Why?
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Post by FD1000 on Aug 13, 2021 13:51:54 GMT
This is how I look at it and what I do every couple of weeks. Suppose I look at all my accounts and none is invested (all in cash), what funds do I want to own? The answer is what I do next. This is what I have done for over 25 years.
VIX<16 = risk on. I'm in at 99+%. If all my money this morning was in cash, I would invest exactly in what I own now.
As chang already said, I may change my AA if the new money gets me to the next level. Each one of us has different levels.
So, where would I invest in stocks? SP500=KISS. This has been the easiest way to invest in the last 1-3-5-10 years. Why fight it?
Is it going to be an investment for 1,3,5 years?
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Post by richardsok on Aug 13, 2021 14:02:47 GMT
chahta -- Another fat thumb. Disregard. Sorry.
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Post by acksurf on Aug 13, 2021 14:08:39 GMT
I had a bit of windfall recently and "chickened out". I bought $100K of Vanguard Tax Managed Balanced. I did shift some funds in my retirement accounts by selling some balanced funds and adding to VTI and QQQ. I also bought a bit more SCHD in taxable.
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Post by rhythmmethod on Aug 13, 2021 15:35:37 GMT
anitya, adding to what acksurf mentioned. Your 6% ish yearly gains seems more like a balanced fund than equity only. (my interpretation only) You might want to look at a balanced, middle of the road fund slightly skewed toward equity.. Depending other funds you own, VGWAX MIGHT be a possibility. Good luck.
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Post by Karen on Aug 13, 2021 15:55:44 GMT
This is how I look at it and what I do every couple of weeks. Suppose I look at all my accounts and none is invested (all in cash), what funds do I want to own? The answer is what I do next. This is what I have done for over 25 years. VIX<16 = risk on. I'm in at 99+%. If all my money this morning was in cash, I would invest exactly in what I own now. As chang already said, I may change my AA if the new money gets me to the next level. Each one of us has different levels. So, where would I invest in stocks? SP500=KISS. This has been the easiest way to invest in the last 1-3-5-10 years. Why fight it? Is it going to be an investment for 1,3,5 years? NONE of that makes ANY sense or rings ANYWHERE NEAR true to your long history of posts on multiple investment boards. You regularly claim that you are ALWAYS 100% invested. You routinely claim that you ONLY own 2-3 BOND OEFS, and no stocks. I'm sure you have an explanation. I'm sure my husband and I won't believe it.
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Post by Chahta on Aug 13, 2021 16:21:50 GMT
anitya, adding to what acksurf mentioned. Your 6% ish yearly gains seems more like a balanced fund than equity only. (my interpretation only) You might want to look at a balanced, middle of the road fund slightly skewed toward equity.. Depending other funds you own, VGWAX MIGHT be a possibility. Good luck. Or maybe a stable value fund since it is coming from a retirement plan (401k?). He did say 6% interest. That is what I took away. OTOH if I had 6% SV I would sure as heck keep $100k there. But I never had the opportunity. At some point plans make you empty them. I have a small amount in my old 401k. They want to force me to roll it.
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Post by richardsok on Aug 13, 2021 16:27:27 GMT
Karen:
I believe FD wrote SUPPOSE he was all in cash.
I understand his post to be a theoretical statement as part of a discussion, not a report on where he's actually invested.
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Post by win1177 on Aug 13, 2021 16:50:30 GMT
"Where to invest in equities now?" is a common question on this or any other discussion board. (And a question I ask myself all the time.) My stock answer is: "the same way your current portfolio is invested". The only reason not to invest new money the same way that existing money is invested would be if one's target AA is dependent on total PV, and the new money takes your PV to the next "level". In fact, I think AA is dependent on PV. In other words, a given individual's "correct" AA depends, to some extent, upon whether they have $10,000 or $1 million or $100 million to invest. Many years ago retiredat48 started a thread on M* titled something like "Should you invest your second million differently than your first?" (And the discussion moved on to whether you should invest your third million differently than your second, etc.) I believe there is a PV-dependence, but it's approximately logarithmic. In other words, AA changes come into play every time your PV increases by a fixed multiple, e.g., $10K, $100K, $1M, $10M, etc. So, unless your PV was around $10,000 prior to receiving this $100K lump sum, I would guess that no major AA change is warranted. I assume, on the other hand, that this extra $100K just bumps your PV up incrementally, in which case I would default to my stock "the same way your current portfolio is invested".I like how Chang is approaching this. Depending on the size of one’s portfolio, and one’s time horizon (young/ able to take risks vs. older/ retired), would affect my approach to investing a new found “pot” of money. If I was early in my career, long time horizon, etc. then it would be 100% in equity (total stock market fund). But, since I’m close to retirement, age 62, and have a large pot of money already, most of it would go into (safer) fixed income and cash. Granted, my returns will be lower, probably MUCH lower, but safety is more important now. Also, I already have enough dividend/ interest income from my portfolio, so we should be OK. I would invest much more in equities IF the market was lower in it’s measures of valuation. The market looks “Pricey” right now, so I would be cautious in putting a lump sum into the market (right now) all at once. If I was investing it in equity, I would slowly “dribble” it in over 6-12 months. We have more than “enough” for us, so I’m being more cautious with new equity investments. Not selling, just not adding here at these valuation levels. Win
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Post by shipwreckedandalone on Aug 13, 2021 17:49:00 GMT
All new money must be timed into the market. I am 100% positive there will be another recession. The last two were down 57% and 49%. My thoughts are to study the worst case scenarios first before studying the best case possibilities. Be careful.
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Post by FD1000 on Aug 13, 2021 20:52:47 GMT
This is how I look at it and what I do every couple of weeks. Suppose I look at all my accounts and none is invested (all in cash), what funds do I want to own? The answer is what I do next. This is what I have done for over 25 years. VIX<16 = risk on. I'm in at 99+%. If all my money this morning was in cash, I would invest exactly in what I own now. As chang already said, I may change my AA if the new money gets me to the next level. Each one of us has different levels. So, where would I invest in stocks? SP500=KISS. This has been the easiest way to invest in the last 1-3-5-10 years. Why fight it? Is it going to be an investment for 1,3,5 years? NONE of that makes ANY sense or rings ANYWHERE NEAR true to your long history of posts on multiple investment boards.
You regularly claim that you are ALWAYS 100% invested. You routinely claim that you ONLY own 2-3 BOND OEFS, and no stocks. I'm sure you have an explanation. I'm sure my husband and I won't believe it. That was another one of your inflame posts with no proof.As a younger investor, I started in 1995 at 99+% in stocks for about 5 years using 2 funds (over 90% in US total stock index). In 2002 I started using my system of 5 best risk/reward funds with about 85% for over 10 years. Then, I planned for retirement and decrease my stock portion gradually over the years. Close to retirement to today, I invested mostly in 2-3 bond OEFs funds while trading risky stuff(stocks, ETF, CEFs) for hours to several days. I also practiced in the last several year selling to cash when market risk is high. None of the above is new, it was posted many times in the last several years. So, regardless of what I do, I make generic comments about many subjects. Investing in the SP500 is a response to the OP.
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Post by FD1000 on Aug 13, 2021 20:57:07 GMT
Karen: I believe FD wrote SUPPOSE he was all in cash. I understand his post to be a theoretical statement as part of a discussion, not a report on where he's actually invested. Of course, I'm not in cash, I'm invested at 99+%. If I'm anitya and I get new money and want to invest in stocks, I would invest it immediately in the SP500.
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Post by Deleted on Aug 13, 2021 21:08:15 GMT
FD1000, can you please post this system again - "In 2002 I started using my system of 5 best risk/reward funds with about 85% for over 10 years." I would like to test drive this system for a portion of my account.
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Post by FD1000 on Aug 13, 2021 21:15:03 GMT
FD1000 , can you please post this system again - "In 2002 I started using my system of 5 best risk/reward funds with about 85% for over 10 years." I would like to test drive this system for a portion of my account. Send me a private msg with your email.
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Post by anitya on Aug 13, 2021 21:48:22 GMT
Equity market sentiment expressed by some of you resonates with the economic indicators and positioning by some of the fixed income managers I am seeing. However, I am not yet good at timing: either too early or too late. Compounding the difficulty of market timing is the Fed and fiscal intervention. E.g., post 2008, any relationship between economic cycles and equity market cycles has broken down considerably. Interestingly, I have lost 10 times more money (opportunity cost) anticipating an equity market correction than in corrections. The proof is in the performance of my taxable account vs that of my retirement accounts. With that caveat out of the way, I am leaning towards Yogi's suggestion of dripping the purchases in 2-4 steps over several months which will also automatically incorporate the market sentiment expressed by others. This plan in execution is new for me as it requires discipline. I can further protect downside by buying in a taxable account where the Govt can subsidize my wrong choices but this is not an overriding factor. I am still inclined to put all the money into one fund.
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Post by jongaltiii on Aug 13, 2021 22:00:33 GMT
As someone that is down 15% YTD in FSEAX… yes I always recommend dripping in or DCA in as yogi said. I’ve learned my lesson too many times. I guess a case could be made to throw it all in at once only if you are leaving it for a very long time. That might exceed DCA returns?
There’s a lot better advice above but I would likely SPY it. I mean…. It’s “only” up 18% YTD. Then again, if you want more conservative like AA (talked about above and I don’t disagree that it’s better to manage equities and bonds separately)… FBALX or FMSDX might suffice. OR if you want more aggressive than SPY then a PRWAX or a LC growth. Lots of good suggestions
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Post by FD1000 on Aug 13, 2021 22:05:29 GMT
I like simplicity. You can invest it all in a more conservative way and transfer to stock over time.
Example: suppose you are at Fidelity. You put it all in FBALX(allocation) and gradually sell and buy SP500. This way you are in the market all the time.
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Post by anitya on Aug 14, 2021 0:19:46 GMT
A quick digression to FBALX and FMSDX - Yogi can give you a scientific answer but my eyeball observation has been that in the past year + their correlation with the equity market volatility is much higher than their stated equity %age suggests. The returns have not been corresponding to the volatility - of course, it does not say anything about the future!
P.S.: I currently have a 5% position in FBALX (a few years old) and an experimental position in FMSDX. I am unlikely to use the money from this thread to elevate FMSDX. BTW, when I say starter position elsewhere, I mean experimental position.
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Post by yogibearbull on Aug 14, 2021 0:44:45 GMT
A quick digression to FBALX and FMSDX - Yogi can give you a scientific answer but my eyeball observation has been that in the past year + their correlation with the equity market volatility is much higher than their stated equity %age suggests. The returns have not been corresponding to the volatility - of course, it does not say anything about the future! P.S.: I currently have a 5% position in FBALX (a few years old) and an experimental position in FMSDX. I am unlikely to use the money from this thread to elevate FMSDX. BTW, when I say starter position elsewhere, I mean experimental position. Fido & PV data (M* data is too stale) FBALX nominal equity 68.31% (misclassified as moderate allocation, M* 50-70%), but effective equity 76.26% (aggressive allocation) FMSDX nominal equity 61.70% (misclassified as conservative allocation allocation, M* 30-50%), but effective equity 57% (moderate allocation) So, both are operating a notch above their labels.
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Post by flipperxxx on Aug 14, 2021 16:58:15 GMT
i have 20% of PV split about equally b/ PRWCX and VTMFX, with the rest in HY munis and multi sector bonds ... and i still worry about the (paper?)losses i know i am going to take at some point in those two balanced funds. i often think about selling them but then i look at my returns in PRWCX -- it's up 334%, and I"ve held it for a long time -- and i can't bring myself to sell. no tax consequences, since it's in an IRA. but every time VIX looks like it's going to rocket up and i consider selling, i shrug and shut my eyes and next thing you know, i'm even again and from there on up again. right now, my bonds are up 6% or so on the year, while PRWCX is up 13%. it's hard for me not to like the way that looks, though i know that eventually i'm going to get whacked but good. what's my point? i dunno. just writing things out helps clarify things for me, if for no one else.
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