after a few good years of DINKing and a lot of overtime, my wife and I just keep putting the extra money into our savings account.
we have just over 400k sitting there now. and while I've had the feeling of it could be put to better use in the stock market, Everytime I think about putting some or all of it in, trump will make some crazy proclamation and it scares me off.
it doesn't help that my wife is handsoff and very hesitant about doing anything other than a savings account.
are any of y'all in a similar situation?
Posted by TTangy
49 Comments
There is no reason for you not at least put a small amount like $10k in the market, then both of you watch what happens.
lol 400k in cash losing value every year.
You could go with bond funds which are pretty safe. Or a combo of bonds and value investing which tends to be safer than growth stocks which can swing a lot. Lots of robo-advisor platforms make that pretty easy but I like Wallace Finance since it lets you tweak things, especially from an ETF allocation standpoint.
People will say S&P ETFs are the way to go but these days they are so top heavy that they can swing quite a bit. Check out the Boglehead approach for safer diversificaiton.
No one knows %$#& about how this plays out. Evaluate your risk, diversify but do invest. Trying to time it is impossible obviously but cash is depreciating due to inflation… so your savings accounts is risky due to reduction in buying power and lost opportunity cost deployed elsewhere.
In the past year, VT, a total stock market index fund with international exposure is up 16 percent. In the past 5 years it’s up 40 percent. The most you probably ever got out of a savings account was 4.5 or 5 percent annually. That’s a lot of money left on the table.
Is now the right time to invest if you have a ten plus year horizon? Yes. Could this be the start of a decline because of war and high oil? Maybe. How long will it last? Who knows. Could you wait a year and time it better? Who knows. But your continued fear will keep making you miss out.
Now if you still have too much fear, you could invest large chunks every month (let’s say 40k a month) so that it is still all invested by the end of the year. You could also do a small percentage of bonds depending on your age or even gold to diversify. Keep 6 months of emergency savings. I say keep it simple for someone who was too worried to invest for years and just put it in VT.
Dump all of it into VOO and forget about it.
You already have missed out on massive gains by not investing sooner, why do you think sticking to that same strategy is a good idea?
I can understand your hesitation in leaping into stocks.
There are other options.
Bonds have been volatile last few years as well.
I have over 200k in money markets , making about 4% tax free yoy.
That’s as well as 600k in ETFs, 100k in bonds and 200k in stocks.
I’m waiting for a dip to buy more ETFs and maybe some blue chip stocks.
Doesn’t need to be put in equities. JPIE or JAAA for cash equivalents (roughly 6% yield)
That was extremely stupid. You missed out on probably $100k of gains in the past few years.
Equity markets are never certain, especially over the short term. Doesn’t matter who the president is.
Broad index funds in the stock market can and do drop 10-20% and more, and takes years to recover. That’s reality. Invest according to your needs and limits.
As long as you put it in a high yield savings account, you’ll be able to beat or match inflation for now. Who knows where rates will go though
I’d hold off with this administration. The market is a casino right now, just use a 3-4% per year acct until this chills out a bit.
Risk may be a 4 letter word, but inflation is a risk. Diversify it if you fear the US market, but Trump swings short-term volatility, not long-term. Long-term, your 400K will buy less and less.
The best long term move is to put 100% into a low fee diversified etf.
Why is it not in a HYSA? FDIC only insures up to $250k per depositor per bank so you should also consider splitting it into separate accounts soon.
Honestly, if you’re hands-off and you’re not interested in learning about the market and investing in general, a low cost **index lifecycle fund** is probably your best bet. The three main brokerages are Fidelity, Schwab and Vanguard and you basically just pick the fund closest to your retirement date (and make sure it’s an **index** retirement fund); and the fund will auto balance as you approach retirement and on.
Op hear me out – the administrations action and Iran war is basically going to continue devaluing the dollar. Putting it in savings account is essentially guaranteeing loss through inflation.
I would recommend finding a conservative portfolio that includes a mix of inflation hedged bonds.
How long have you been sitting on the 400k?
S&P500 is up 60% last 5 years. You missed out on ~150-300k by not being invested the last 5 years.
Sure it could go down 20-30% and you’d lose 80-90k but you already lost more than that by sitting on sideline
Strc, pays 11.5% interest
Sigh, just dollar cost average it in over a period of time.
You are objectively an idiot if you’re sitting on $400K with no intention of spending it anytime soon (like on a house) and not investing any of it.
You are losing money when you could’ve grown that capital hand over fist smh.
With Trump? Just buy the tantrum dip, sell the TACO rip.
First answer the following questions to yourself at least:
1. Do I need any of this 400k for a near term large purchase such as a house, car, major renovations, college expenses, etc.
2. How much $ do I need in cash like funds in case of emergency? Usually no more than 6 months of your monthly expenses.
3. Retirement plans, age/years to go.
4. What is set aside for retirement already?
5. Is my job stable?
There are quite a few more you could ask but at least these will help determine how you might invest that 400k. If you basically don’t need any of the 400k and retirement is down the road say 10 or more years, invest it into index/growth etf’s with some possibly in dividend based etf’s such as SCHD, VIG, VYMI to help balance the risk you are willing to take. If you need the money, then obviously take a much more conservative approach such as SGOV, VUSXX or other bond funds and possibly CD’s.
The morning of Trumps tweet when the market rebounded, I sold off and put around 70% of my portfolio into SGOV. I don’t trust the market and most of all I don’t trust this orange president. I think max potential upside for S&P500 this year is +10% and max potential downside over the new few years is -30% to -50%. The latter is way more important to me than the former, even if the risk of a recession is only 30 to 40%. I personally believe however, that the probability is much higher.
If I were you, I would put cash into money market or SGOV and buy small positions in US and Foreign markets over time. I am a strong believer in the idea that international and emerging markets will outperform overall the next 5 to 10 years, but those markets are particularly exposed to downside during this conflict. That means they will be incredible buys once the conflict is resolved and as they continue to be sold off. My personal plan is to enter heavy back into emerging and international markets once I have more faith that the straight can be reopened. As far as US markets go, they are valued at levels only seen 2 other times in history, prior to the great depression and prior to the global financial crisis. My expectation is that US markets will lose significant value over the next 1 to 2 years and I plan to reenter slowly over time if it is a slow bleed or quickly if there is a sudden sell off due to massive escalation in the war.
My suggestion is that you need a plan. What are you going to do with that money (possibly multiple things)? Then, decide on an *asset allocation* for each goal. Write this all down. Revise it often.
EDIT: Lots of confidence in the advice that you are being given. But always consider how any plan will do in a bear market, such as 2000 to 2013. If your investment horizon is 20+ years that is less of a concern. If you have plans for money in 10 years of less “all in the stock market” is probably not a good idea.
My personal stress test is to always ask myself how the plan will work if a 40% market correction starts tomorrow and it takes 8 years to recover. I plan so that “OK” is the answer.
if you plan on using it in the next few years, dont invest it. 5+ years? probably chuck it into a broad market etf and keep buying with excess funds
Lump sum beats DCA. put it in and forget about it and stop watching the doomer news
Divide it in 12 (or 18 to be more conservative) and put one 1/12th into 75% VT and 25% BNDW. That mix of only two stocks will diversify you in US and international large/mid/small cap stocks and US and international bonds. In addition, those are Vanguard ETF’s that will charge you the smallest fees available. Fees are return killers. The 12 (or 18) month period will dollar cost average and protect you from buying right before a crash. With this strategy, you have near zero percent chance of underperforming a savings account or losing money as long as you hold for at least a few years.
I have a very similar situation. Spouse doesn’t trust the stock market. I risk 10-20% of my portfolio. That might be something to consider.
Also consider a MYGA. It’s a guaranteed annuity that will pay 5-6 percent over a 7-10 year period.
The sneaky risk here is letting all 400k just sit while worrying about headlnes, plus kinda putting all your moves on hold just cause of political noise, what if inflatin quietly eats at it while you wait?
That money is eroding, fast. Had you invested it little by little along the way it would likely be a million plus already. Volatility is the price of entry of reaping the benefits of the stock market. As someone who once had a huge cash pile and got over the psychological hurdle, my advice is to start small. Trickle it in through DCA until your brain gets used to it. Then ramp it up. Try to have it all in within a year, aside from any cash position or emergency fund you will need short term. You’ll be glad you did later.
Im not in this situation because I know that the stock market only goes up long term. Just look at a chart of the sp500 and nasdaq. That 400k would have been over a million by now.
Convert half the cash to gold. Keep twelve months expenses. Invest the rest in sp500. Now is a good time for both. Do it today and don’t look back. You’ll be safer than you FEEL.
Nope. I remain fully invested at all times. I suggest you do the same.
Markets are down 5-10% now… start dropping $40K a month throughout the next 8 months.
Play with high interest savings promo rates with the cash…
OP, hopefully this is a high yield savings account. If not, this is the very first thing you should do. Banks pay close to zero in standard checking. HYSA is somewhere around 3.5% at the moment depending on who you go with.
By itself that’s about 1800 a month, risk free, and insured. It will at least help you keep up with inflation.
If it’s in a checking account, GTFO out of it now. If not, the question of investing it is much more nuanced and you’re getting plenty of boglehead answers in the comments already.
Crazy. You literally would have had HUNDREDS OF THOUSANDS more wealth if you had been investing the money this whole time. I really don’t get how people can know that and still be holding out and trying to time the market just right. Just crazy behavior.
Did you intentionally go in your phone settings and disable auto-capitalization?
Inflation will rip you to shreds, buy slowly over 24-48 months in increments if you’re worried.
We didn’t reach the bottom yet wait until the oil routes restart and some sort of official treaty is made. Until then market is gonna be choppy.
You can put this money into fixed income so you’re at least earning some money on it. At least into a high interest savings account
You don’t have to put it all in at once. Start by keeping your savings balance as it is and invest new money. You will gain comfort over time.
I was there with you. You will be paralyzed on the sidelines forever. First off let’s get you ready to go and at least a better rate. You don’t need to buy in all at once (especially now) but you need to be ready to get into the market in an instant once it gets better. Open an account at vanguard or E*Trade. You can put it all into vanguards default sweep account and get better interest returns or buy into something safe like the SGOV etf (short term treasury bonds). It’s a no brainer over your current situation. Then lookup some good target day funds S&P ETFs and international ETFs and save the tickers so you know what you will buy when you are ready.
Start with leveraged micro oil/gold futures
I never cease to be amazed by these posts. How do so many people amass all this extra money and investing never crosses their mind?
In 2021 people told be it was a bad time to buy the total stock market glad I didn’t listen
FDIC only insures up to 250K per bank account – if it’s gonna sit at least spread it out.
I’m in a similar boat and have mine in a jumbo CD earning 5%. I’m sure there are smarter things to do with it but I love the zero risk.