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 Coronita on January 12, 2018 - 12:10pm.

Spend, drill, deregulate....

Gold, energy, banking.

Submitted by ltsddd on January 12, 2018 - 2:03pm.

flu wrote:
Spend, drill, deregulate....

Gold, energy, banking.

I am batting .333. Somehow I never found gold or energy/oil appealing. But I am not complaining my BAC - been riding it up from 13 and change.

Submitted by ltsddd on January 12, 2018 - 2:23pm.

svelte wrote:
You said it man.
These two graphs should give anybody pause

Today's stocks market reminds me of the dot com and housing bubbles where the mantra is "buy high, sell higher".

Submitted by carlsbadworker on January 12, 2018 - 5:33pm.

ltsdd wrote:

Today's stocks market reminds me of the dot com and housing bubbles where the mantra is "buy high, sell higher".

Unfortunately, correctly spotting bubble does not make anyone a single cent richer than he otherwise would be.

Hence this is a discussion of the trading strategy under the current valuation (which we all know is high, albeit supported by low interest rates). The problem that we faced is that there is no reason for the stock market to tank NOW just because the valuation is high. The history taught us again and again on that (although the higher it becomes, the more likely it will tank due to gravity)

Here are a few possible strategies:

1. All-in now. This is what kev374 decides to do. It feels risky but it was risky for the last couple years and it has kept climbing. Who said it won't climb more? The drawback is that if it indeed tanks, you are out of bullets to buy more at lower price when the dotcom busts kicks in.

2. Take money off the table. But you will be punished if your timing call is wrong. This is the strategy a lot piggs have employed in the last few years with dismal outcomes so far.

3. Underweight stocks but use a small percentage of the cash to buy high growth potential. This is basically what ltsdd is doing. 2 shares of gbtc but some money off the table.

I find the last trading strategy interesting. So if the stocks keep climbing, because you are invested in "hot" stocks, they will climb more therefore even though you underweight stocks, your outcome may not be bad at all. But if it tanks, you only lose a tiny amount of money set aside for speculation and you reserved the cash to buy at the bottom. The drawback, if the dotcom bubbles is any guide, the tech stock tanks earlier during the bust when S&P formed the head & shoulder pattern.

The best trading strategy of course is to all-in but to find early warning signal to get out, but I don't know if anyone knows a good early warning signal, but the performance of high growth tech stock did decline full 6 months earlier than the S&P 500 in the last bubble.

That's why I felt bitcoin bubble very interesting. That may be exactly the form of earlier warning signs that we need to form the best trading strategy under the current market condition.

Submitted by svelte on January 15, 2018 - 7:31pm.

Carlsbadworker,

I've read your post just above several times, and appreciate the thought that went into it and the insight it gives.

This is exactly the type of post that makes me visit this site.

Thank you.

Submitted by Coronita on February 5, 2018 - 12:30pm.

Bitcoin < $7000. Ouch... Markets also ouch...

Another 500+ plunge or so, and I'm guessing all folks that moved money at high will sell and eat a loss....

Submitted by Coronita on February 5, 2018 - 1:59pm.

Time to make my monthly index fund purchases...dow down 1000+pts. ouch.

Submitted by kev374 on February 5, 2018 - 7:47pm.

flu wrote:
Bitcoin < $7000. Ouch... Markets also ouch...

Another 500+ plunge or so, and I'm guessing all folks that moved money at high will sell and eat a loss....

I invested all early Jan, down about $25k or so. Will ride it out.

Submitted by Coronita on February 5, 2018 - 8:13pm.

Futures are looking ugly . Dow futures off another 600 points. that takes us back to October 2017 in just 2 weeks.

Submitted by FlyerInHi on February 5, 2018 - 9:20pm.

carlsbadworker wrote:

Unfortunately, correctly spotting bubble does not make anyone a single cent richer than he otherwise would be.

Of course it works. Your trading strategy is based on your assumptions. If you are correct, you will make money.

Submitted by henrysd on February 5, 2018 - 10:06pm.

Today the market welcomed new Feb Chairman Jerome Powell with a big bang. During the first few months of Greenspan's rookie year as Fed boss, the market welcomed him with an even bigger one - drop of 20+% in one day.

I am not too much worried about last Friday and today's drop. I don't see it is big bear market coming in, more of a overdue correction. We have now 8.5% correction in place, once it gets to 15% correction, our dovish Fed has to delay or pause rate hike or even reduce rate if market lost support. Also additional large drop will force bond yield to go down also, partially cure the problem which started the selling. We had even higher 10 and 30 year bond yields in early 2014 and the market didn't took it as a big issue.

Submitted by kev374 on February 6, 2018 - 1:19am.

if inflation kicks in the Fed will be forced to raise rates.

Submitted by carlsbadworker on April 13, 2018 - 9:22am.

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.

It looks like bitcoin is preparing a comeback. Any previous bubble burst pattern would say it should be below $5K by now, but instead it went above $8K again today.

Submitted by moneymaker on April 13, 2018 - 9:57am.

I would only invest in the S&P 500 with a short term time horizon. In other words I would try to time the market.
The rich might make 3% on a safe investment while the average homeowner will feel good about having a 3% mortgage but if you take the difference, 6%, and over 10 years, the rich person will be 80% richer on the same investment as the homeowner (is homeowner one word?) that folks is why the rich get richer and the poor get poorer in a nutshell. I'm sure the rich will probably make more than 3% when invested professionally and credit card debt is way higher than any mortgage rate which is a real drag on the poor person's balance sheet.
I bought in at 23900 and plan on selling at 25000 (DOW).
Probably should have used 3.6% in above example for mortgage and investments for a doubling of disparity.

Submitted by Coronita on April 13, 2018 - 10:14am.

carlsbadworker 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.

It looks like bitcoin is preparing a comeback. Any previous bubble burst pattern would say it should be below $5K by now, but instead it went above $8K again today.

until I see more regulation in the cyptocurrency markets ,I ain't touching it.
I do notice a lot more people buying gold bullion on eBay though....

Submitted by carlsbadworker on April 13, 2018 - 12:04pm.

moneymaker wrote:

Probably should have used 3.6% in above example for mortgage and investments for a doubling of disparity.

I am highly skeptic that mortgage was the reason for the disparity. After all, it is backed by an asset that is appreciating faster than inflation. I would think the mass "invest" more into depreciating assets such as car loan, credit card purchase (include home remodeling) and most likely student loans fit into this category as well. Yes, investing in yourself could be a depreciating asset especially if you go after "do what you love" type of liberal arts education.

Submitted by moneymaker on April 13, 2018 - 12:10pm.

I'm not saying buying a house is a bad idea, just that there are probably better investment choices out there.
https://mortgagebite.com/mortgage-blog/p...

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