I have been investing in individual stocks for years but want to start putting my extra cash into the market by either buying index funds or using robo advisiors. I know the long term strategy is buying smaller amounts on a regular basis during both up and downs, but what about my initial relatively larger lump sum, should I put them all into the market now, or split into a few rounds? In long term it probably doesn’t matter, but want to hear what you guys think.
Time in market beats timing the market.
This. Simple. Done. Close the thread!
the oracle has spoken
If you have 10+ years before retirement, don't bother.. just put all your money in low cost index funds such as VOO...
What about Wealthfront and Betterment? Their loss harvest seems to be worth the fee?
TLH gains are usually overstated. I would skip it. Save, invest, rebalance once a year.
Curious on this subject. I’ve been looking a bit at Wealthfront and vanguard funds.
For long-term goals / funds, use lump sum. For shorter term goals / funds, use dollar cost averaging to mitigate risk. The long duration of long-term goals / funds will mitigate the risk by itself. This is what a Vanguard personal advisor suggested me to do, and it makes sense.
Can you go into more detail and provide any specific examples? Thanks.
Op:. Most definitely take a look at Wealthfront and Betterment. Their reasonable 0.25% is well worth it. First, the fees might pay by themselves with features like tax loss harvesting and direct indexing. Secondly, they automate everything that you need to do. Some of those tasks are not that simple doing manually. It's true that it's totally possible to do manually but the convenience and peace of mind that it's done right and automatically is worth a lot IMO. Things like rebalancing, smart dividends reinvestment, tax optimized portfolios, withdrawals that are tax optimized, and more.
I would not put "reasonable" and "0.25%" in the same sentence. Index fund is the meat of your investment and it charges you 0.05%. thus 5x that for marginal benefit is not worth spending. Go with wisebanyan, they charge 0% over and above index fund fees, unlike other robo investing companies. I personally have half of my assets in wisebanyan and other half I manually maintain in fidelity.
Look, what you're doing is really good. Not questioning it. But don't be too quick to dismiss that 0.25% is not worth it. Maybe it's not worth it for you because you're on top of your investments, knowledgeable and willing to spend the time to maintain all of it. However, I firmly believe the fees could be well worth it for many people. First, although TLH might not cover all of the 0.25%, it certainly pays back some. See a study here that shows it pays way more: https://blog.wealthfront.com/real-value-tax-loss-harvesting/ Also, like I said, convenience has a price too. Me, for one, feel I have tons of value in exchange of those fees. And btw, in a fully diversified portfolio like Wealthfront or Betterment, you have funds that are more expensive than 0.05%. municipal bonds are around 0.23% and emerging markets bonds are 0.33% for example. Emerging markets stock fund (VWO) is 0.14%. Oh another good blog that compares a DIY approach with Vanguard vs. Wealthfront: https://blog.wealthfront.com/vanguard-versus-wealthfront/
I would stick with Vanguard for the low fees and excellent tracking. You only need three: VTI, VXUS, and BND. You may want to add VWO, VB, VSS, etc, if you want to overweight some of the higher risk sectors but three is enough. The share into BND should likely be 10% or less until you are 35 and then grow linearly to 50% when you retire but you can increase or decrease that percentage based on your risk tolerance. Between VTI and VXUS it depends on whether you plan to retire in the US or outside. Inside the US you should have an 80/20 ratio between these two. Planning to live outside the US you might go as far as 50/50. It's useful to know that the US is roughly 50% of the world market cap, but has historically outperformed the rest of the world. The reason to put more in VXUS if you live outside the US is to hedge against currency swings. If you want to overweight certain sectors suggest you use them as substitutes within the overall allocation. If you want some VWO, replace some VXUS with it. If you want some VB, substitute it for some of your VTI. For rebalancing try and never sell, see if you can restore balance just by directing new money to the underweight fund and sell only if things get seriously out of whack and not more than once a year. It's not necessary that the ratios be perfect, general ballpark is good enough.
^this is an awesome advice. Can't go wrong with that approach. Max out 401k, look at backdoor Roth, repeat every year, stay the course. Retire rich.
Good advice here. Note that, for bonds in taxable accounts, use VTEB instead of BND for tax exemption. You can use BND in tax-deferred accounts like 401K, and tax-exempt accounts like IRA Roth.
Thanks a lot! I’m in my mid 20s so I generally don’t buy any bonds other than the ones in my 401k. I’ll try for VTI and VXUS. Out of curiosity I also want to try out Wealthfront, so I’m gonna use that for part of my money as well. Looks like they are a lot more aggressive for my risk tolerance (10/10), and are recommending 35% US, 20+% developed markets and 30+% emerging market. Should I change the ratio of VTI and VXUS to be lower than 80/20?
I would bump the US portion to at least 50% since it's 50% of the world market and really unless you want to live outside the US it should be higher. If you want to take more risk you can put some of the US portion into small cap or value stocks. If you mix wealthfront with your own direct interesting be sure to exclude the shares you buy from wealthfront so they don't try and play tax loss harvesting games with something you actually buy yourself in another account.
That’s a great point I didn’t think about. Thanks a lot for pointing that out!
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Look at what market has done in the past couple of weeks. It just went parabolic, straight up in a crazy manner. And you still want to get long with a lump sum? Probabilities are not in your favor.
Why not. This was due to pull out of crypto. Nows a great time to get into the market.
I mean, sure, in the long run he will be fine, but I wouldn’t do it personally.