Would you invest in an S&P500 ETF now?

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Submitted by kev374 on January 4, 2018 - 10:21am

If you had a large lumpsum of money (currently in a high yield savings acct) that you got, say $300,000, would you take that money and invest in an S&P500 ETF right now, something like VOO? Or would you just keep it in cash? Or do something else with it?

On one hand fearful that we are in the tail end of the bull market and a big crash is imminent. On the other hand I feel there isn't a big enough trigger, sentiment is still sky high and UBS just made a claim that S&P is going to surge 18% this year. WTF? However, I also recall the Buffet remark - be fearful when others are greedy.

GS Bank is now offering 1.4% APY, lousy but it's something. After income taxes (mine are at almost 40% marginal rate) I would make less than 1%. Heck, the S&P went up that much in last 3 days.

I know from a long term standpoint it will come back but I would rather wait if we are at the cusp of something big given the ridiculously long bull market cycle we've had and the staggering gains we've had so far.

The thing that scares me is that the tax cuts have already been priced in and there are a few headwinds - rising interest rates, Democrat win in the mid terms, Trump scandal etc.

Submitted by carlsbadworker on January 4, 2018 - 12:15pm.

I don't think there is any reason for the S&P 500 to crash because it is supported by the healthy profit margin (which is itself supported by the business friendly political atmosphere).
But on the other hand, I will be nervous to step into this market as well.

Submitted by spdrun on January 4, 2018 - 2:07pm.

$300k cash will buy you a rental even in this market.

Submitted by zk on January 4, 2018 - 3:46pm.

What is this "high-yield savings account" that you speak of? I thought those were extinct. Dormant, anyway. What kind of rate are we talking about?

Submitted by The-Shoveler on January 4, 2018 - 5:29pm.

Now If I could just get a FDIC CD's with 10% interest like we could in the 80's LOL.

Heck you could get 5% CD's in 2005-6.

That was sweet until the bank folded LOL
(thank god for FDIC).

Submitted by harvey on January 4, 2018 - 7:42pm.

carlsbadworker wrote:
I don't think there is any reason for the S&P 500 to crash because it is supported by the healthy profit margin (which is itself supported by the business friendly political atmosphere).
But on the other hand, I will be nervous to step into this market as well.

I'm not sure what you mean by "healthy profit margin" but S&P500 is expensive by historical standards:

http://www.multpl.com/shiller-pe/

What that chart means that if you buy now you don't get a lot of income, relative to historical returns, for what you pay. I would label that the opposite of a "healthy profit margin."

The only tangible aspect of the "business friendly political atmosphere" is some reduction of tax expenses for a limited timeframe. Returns on equities cannot be sustained long-term by a tax break.

As for the OP question, you only asked half a question. Investment decisions need to be made in the context of a holding period.

Submitted by plm on January 5, 2018 - 5:30pm.

I would reserve whatever you need to weather a crash and put the rest into the SP500. The key is not to have to sell if or when the market crashes then wait for it to recover.

Learning from experience. Over the summer I put too much into tech stocks and market rotated out of tech and I lost most of my gains and had to sell some at a bad time. But if I had reserved more in cash, I wouldn't have sold and I wouldn't have lost anything as it came back up and went even higher.

Same thing happened in December with tech rotating out losing 10 percent but this time I had 20K in cash so didn't sell. And now within the last 3 days it all came back up.

Going forward as the SP500 keeps increasing, there is a higher chance of a crash, so I will need to increase my cash by profit taking. But it's very hard not to be greedy with the big stock returns lately.

I don't think it's wise to wait for a correction or crash to get in. I missed two years of gains because I was waiting for a correction that never happened.

Submitted by flu on January 5, 2018 - 10:51pm.

Buy bitcoin instead.

If you're trying to get rich quick by timing the market, speculate on bitcoin. It's so volatile that the price wildly swings by +-1 $1000 almost each day...So it's perfect for people who try to time the market.

On the other hand, if you plan on doing a long term buy and accumulate and actually invest, drip a few hundred/thousand into an S&P500 index every month for the next 5-10 years and forget about it.

Submitted by svelte on January 6, 2018 - 9:44am.

It's so unclear right now it's driving me crazy.

I was ready to drop quite a bit into the market last week, but took awhile for me to move money around and it has went up so much I'm spooked now. Usually a normal acting market will drop right after it crosses a threshold - like 25K - but this one didn't...it kept rising like crazy. To me that borders on mania.

Too afraid to drop my cash in right now and look the fool when things tank. Will probably keep it position to drop in should a tank occur, but day after day of rising without pause sure looks like the end of a long run.

I'm losing sleep over this. Luckily I have a patient wife.

Submitted by kev374 on January 6, 2018 - 9:54am.

I put in my buy order today, VOO @ 251.25 for 1094 shares, total value ~$275,000. I am going to take a bet that the market will be higher end 2018. Even though it's crazy I think the market has solid momentum.

Submitted by svelte on January 6, 2018 - 10:00am.

kev374 wrote:
I put in my buy order today, VOO @ 251.25 for 1094 shares, total value ~$275,000. I am going to take a bet that the market will be higher end 2018. Even though it's crazy I think the market has solid momentum.

I'm with you man. Rooting for you. You must have your pants tailor made cuz your balls must be HUGE. :-)

Submitted by carlsbadworker on January 6, 2018 - 10:09am.

harvey wrote:

I'm not sure what you mean by "healthy profit margin" but S&P500 is expensive by historical standards:

http://www.multpl.com/shiller-pe/

What that chart means that if you buy now you don't get a lot of income, relative to historical returns, for what you pay. I would label that the opposite of a "healthy profit margin."

The only tangible aspect of the "business friendly political atmosphere" is some reduction of tax expenses for a limited timeframe. Returns on equities cannot be sustained long-term by a tax break.

As for the OP question, you only asked half a question. Investment decisions need to be made in the context of a holding period.

No, I meant real profit margin (https://www.yardeni.com/pub/sp500margin.pdf). It has nothing to do with the tax cut but everything to do with the fact that governments now allow monopoly to exist in almost everywhere.

When a company has monopoly, it is much easier to maintain profit margin (Cox just raised price on almost all tiers in the new year, despite the tax cut). Well, what are you going to do about it?

Submitted by flu on January 6, 2018 - 10:31am.

.

Submitted by kev374 on January 6, 2018 - 12:24pm.

svelte wrote:
kev374 wrote:
I put in my buy order today, VOO @ 251.25 for 1094 shares, total value ~$275,000. I am going to take a bet that the market will be higher end 2018. Even though it's crazy I think the market has solid momentum.

I'm with you man. Rooting for you. You must have your pants tailor made cuz your balls must be HUGE. :-)

no need for huge balls, it's this constant fear that keeps people out. Every single year since 2010 heard the same thing.. your balls must be huge to get into THIS market.

Submitted by harvey on January 7, 2018 - 12:20pm.

carlsbadworker wrote:

No, I meant real profit margin (https://www.yardeni.com/pub/sp500margin.pdf). It has nothing to do with the tax cut but everything to do with the fact that governments now allow monopoly to exist in almost everywhere

I'm not sure how one would use those charts to predict equity returns. They basically show rising margins since 1992, which I would say can be mostly explained by a general shift in the economy toward services.

Quote:
When a company has monopoly, it is much easier to maintain profit margin (Cox just raised price on almost all tiers in the new year, despite the tax cut). Well, what are you going to do about it?

Spend less on other things, which will hurt someone else's profits.

There's a gazillion metrics that can be used to predict the market - all of them are correct sometimes and incorrect other times. But ultimately price to earnings must be reconciled. By that measure, the market is expensive.

Submitted by phaster on January 8, 2018 - 8:46am.

harvey wrote:

There's a gazillion metrics that can be used to predict the market - all of them are correct sometimes and incorrect other times. But ultimately price to earnings must be reconciled. By that measure, the market is expensive.

Yeah, the market is expensive,... but what is the alternative (since we are all in the same "metaphorical" boat)?

Quote:

Pension Funds’ Dilemma: What To Buy When Nothing Is Cheap?

...The goal of most pension funds is to pay for future benefits by earning 7% to 8% a year. After the 2008 financial crisis, many funds tried to hit those marks by lowering their holdings of bonds as interest rates dropped, and by turning to real estate, commodities, hedge funds and private-equity holdings.

These so-called alternative investments rose to 26% of holdings at about 150 of the biggest U.S. funds in 2016, according to the Public Plans database, compared with 7% more than a decade earlier.

...The biggest public pension in the U.S., known by its abbreviation Calpers, has been backing away from alternative investments as a way of reducing complexity and fees. In December, directors considered a 34% allocation to equities,...

...No matter which move Calpers made, it faced challenges. Scaling back Calpers’ equity investment would have reduced the fund’s projected 7% return at a time when the fund has just 68% of the assets needed to pay for future benefits. That would have meant higher contribution costs for local governments across California.

https://www.wsj.com/articles/pension-fun...

FWIW IMHO the market averages are high because the average number of shares outstanding is now lower that it was 20 years ago (because of M&A and share buy backs),... then there is the simple fact that various central banks have printed lots of money in the hopes it some how will boost economic activity BUT the unintended consequence is lots of money is out there, chasing fewer shares

just sayin' it kinda makes sense why the market "averages" are expensive (by recent historical standards)

next,... looking at the history of bucket shops,... the interest in alternative investments like bitcoin, the interest in shorting the VIX, etc. tells me as crazy as it sounds, things mostly likely will continue to surprise people (on the up side),... BUT at the end of the cycle I'd say, only the the paranoid survive (w/ a little bit of "luck" AND "skill")

www.TinyURL.com/DifferentDay

Submitted by scaredyclassic on January 8, 2018 - 12:43pm.

used possibly iranian rugs might be low.

flea market vendors were saying sales are sluggish in jan., people holding on to money.

Submitted by flu on January 8, 2018 - 9:03pm.

...some say be very very scared when the perma-bears capitulate and go long in the markets....

Submitted by ocrenter on January 9, 2018 - 7:17am.

flu wrote:
Buy bitcoin instead.

If you're trying to get rich quick by timing the market, speculate on bitcoin. It's so volatile that the price wildly swings by +-1 $1000 almost each day...So it's perfect for people who try to time the market.

On the other hand, if you plan on doing a long term buy and accumulate and actually invest, drip a few hundred/thousand into an S&P500 index every month for the next 5-10 years and forget about it.

20 something medical assistant at work was really gun-ho about bit coin, quieted down some over the last couple of weeks...

Submitted by flu on January 9, 2018 - 8:25am.

ocrenter wrote:
flu wrote:
Buy bitcoin instead.

If you're trying to get rich quick by timing the market, speculate on bitcoin. It's so volatile that the price wildly swings by +-1 $1000 almost each day...So it's perfect for people who try to time the market.

On the other hand, if you plan on doing a long term buy and accumulate and actually invest, drip a few hundred/thousand into an S&P500 index every month for the next 5-10 years and forget about it.

20 something medical assistant at work was really gun-ho about bit coin, quieted down some over the last couple of weeks...

I am not one to comment about it. I just don't get bitcoin or crypto currency for that matter. I know the few younger engineers that work for me are crazy about it. the rest of the older engineers are like WTF..The ones talking about it are the ones that were still in college a few years ago when they bought a few coins around $100, not now when it's $15k... I think for most of them, they are trying to figure out how to sell and pay taxes on it. some are trying to convert into hard money like gold bullion. i think that might be why if you go to eBay these days and look at some of the coin purchases from leading reputable dealers, you'll suddenly see a lot of block purchases in which some purchases 35 1 ounce coins at once, at $1300ish a piece when prices where such that those coins were $40 above spot prices when gold was still in the $1280ies...some people were in hurry to buy a lot of gold quickly. it didn't use to happen so frequently I think, and especially not when the spread from spot was that large. I could be wrong, but I swear there is uptick in these larger transactions and I am guessing it's all the crypto currency holders converting into hard currency.... One of my friends did mention Bitcoin to me back years ago when it appeared in wired magazine. He was very anti-stock market and traditional speculation in the markets. Hopefully, he took advantage of the opportunity.

instant gratification and get rich quick!!!!!

Submitted by harvey on January 9, 2018 - 9:12am.

flu wrote:

I am not one to comment about it. [long paragraph of comments...]

Submitted by flu on January 9, 2018 - 11:37am.

harvey wrote:
flu wrote:

I am not one to comment about it. [long paragraph of comments...]

whatever.

Submitted by carlsbadworker on January 9, 2018 - 2:52pm.

flu wrote:
harvey wrote:
flu wrote:

I am not one to comment about it. [long paragraph of comments...]

whatever.

Media makes no distinguishment between block-chain technology and bitcoin. My view is that buying bitcoin or any other crypto-currency is like buying dotcom names in the 1990s. Investing in block-chain technology is also like investing in e-commerce companies in 1990s. One of these will be Amazon, others will be like pets.com or webvan.com. But the technology will spread due to this bubble.

Submitted by livinincali on January 10, 2018 - 9:39am.

carlsbadworker wrote:

Media makes no distinguishment between block-chain technology and bitcoin. My view is that buying bitcoin or any other crypto-currency is like buying dotcom names in the 1990s. Investing in block-chain technology is also like investing in e-commerce companies in 1990s. One of these will be Amazon, others will be like pets.com or webvan.com. But the technology will spread due to this bubble.

Best case is blockchain tech does get picked up and somebody or a couple somebodies have something of value. Worse case it vanishes into thin air. Bit coin by definition sort of has an end to it. This is exactly like the internet bubble of 2000. It will be easy come easy go for the vast majority of people and a couple lucky/smart ones will get out unscathed. Most will loss their ass and be around in 20 years telling the next generation's bubble seekers they are stupid for getting involved in X just like the 40 something engineers are telling the 20 something crypto fools they are going to get hammered.

Submitted by The-Shoveler on January 10, 2018 - 10:38am.

Bitcoin mining could use more electricity in 2018 than Argentina.

Don't know seems like a big waste and stress on the environment IMO.

LOL Things we humans do.

Submitted by harvey on January 10, 2018 - 11:58am.

Yeah, except this time it's different.

Maybe Piggington should re-brand. Real estate is boring these days. It doesn't get the clicks.

Submitted by carlsbadworker on January 10, 2018 - 3:33pm.

harvey wrote:
Yeah, except this time it's different.

Maybe Piggington should re-brand. Real estate is boring these days. It doesn't get the clicks.

This time is different, as we are witnessing the biggest bubble of all in history (although only in scale, not in size of financial assets).

bitcoin

Enormous amount of money can be made with a bubble of this size.

Submitted by The-Shoveler on January 10, 2018 - 5:54pm.

Warren Buffett said on Wednesday the recent craze over bitcoin and other cryptocurrencies won't end well.
"If I could buy a five-year put on every one of the cryptocurrencies, I'd be glad to do it but I would never short a dime's worth."

"Me" IMO the environmental cost of mining/creating these things is too great, the gov should put an end to it as fast as possible.

Submitted by ltsdd on January 12, 2018 - 10:03am.

I broke down today and put some money into bitcoin (sort of) - a whole 2 shares of gbtc.

As for the market as a whole, it's getting scary. I am seriously considering taking some $$ off of the table at the end of this month. Other than a little hiccup (-0.04%) in March 2017, the S&P500 has been up every month since Nov 2016.

After 8 days of trading this year my portfolio has out-gained every month of last year's. A correction in the stock market would be healthy.

Submitted by svelte on January 12, 2018 - 11:42am.

ltsdd wrote:

As for the market as a whole, it's getting scary. I am seriously considering taking some $$ off of the table at the end of this month. Other than a little hiccup (-0.04%) in March 2017, the S&P500 has been up every month since Nov 2016.

You said it man.

These two graphs should give anybody pause

Jan 2018 DJIA

Submitted by svelte on January 12, 2018 - 11:44am.

Jan 2018 SP500

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