How to buy during the market correction??

[Amyolin]

Hey all you savvy WCI followers,

I may still be learning but what I know is that I should not panic during the market correction.  I should not sell.  In fact, I understand that I should buy!  Looking for guidance.  I’m assuming the easiest option is to purchase more shares of my existing taxable account with Vanguard (it’s in Life Strategy moderate growth fund).  I know we can’t time the market but is this something I should do ASAP or do I have a few days?  I figure those of you who pay more attention to the market may have strong opinions on when and what to buy.  EDUCATE me!  I’m all ears.  Thanks.

[wawot1]

You're describing timing the market - I don't think anybody can honestly say they know what the stock market is going to do in the next day or week or month or year.....

[wideopenspaces]

I am no expert by any stretch of the imagination. I decide how much we will invest at the beginning of the year and invest into employer sponsored plans twice a month via automatic contributions. So that is what I will continue to do for the next 20 years or so, regardless of what the market is doing at any specific time. I only check balances once a year which I'm hoping will keep me from getting too anxious about what is happening at any given moment.

[Ryan]

The traditional "bogleheads" style advice is just choosing an asset allocation, like is done for you in that life strategy fund and sticking to it, which would be done by just investing in more of it. That fund automatically "buys more" when it rebalances itself to buying more stocks, where you nominally would now own more shares if stock prices recently decreased compared to other holdings. Although I'm not exactly sure how the Vanguard growth funds work, so double-check that. The overall strategy bogleheads recommend is deciding what to hold in an emergency fund of 6months cash, and put the rest in tax-free investments and then taxable ones. If a stock price downturn gets you to save more, then by all means do.

Doing a non-bucket allocation (like would happen if you preferentially buy stocks in a down market) exposes you to the risk of making very costly bad decisions. Similar to what wawot1 said, nobody really thinks you can predict stock prices at a given point in time. But, there's some nuance there, which means you don't have to feel constrained to the bucket asset allocation strategy if you're willing to do actual, meaningful research. But, making mistakes as a more active investor can be very costly.

Also, your 1-fund strategy loses money you could save by tax planning. If you want to get into that, you can actually make more net after taxes by allocating investment classes more appropriately between tax-free and taxable accounts.

[The White Coat Investor]

I buy during corrections the same way I buy during everything else. When I have money designated for retirement, I invest it as soon as I can.

[adventure]

Part of every monthly paycheck buys some... mostly retirement accounts...

[VagabondMD]

I am an outlier here. I always have some extra cash on the sidelines (10% or so) and make some token buys on big down days. Yesterday, I purchased some VOO and VT, symbolic purchases, $2000 in aggregate. It does not move the needle much, but it makes me feel like I am doing something and keeps me from greater mischief.

[Zaphod]

wawot1 wrote:

You’re describing timing the market – I don’t think anybody can honestly say they know what the stock market is going to do in the next day or week or month or year…..

Click to expand...

I can. It will fluctuate.

 

fingerinthewind.gif

[Amyolin]

This is what I am curious about.  I probably wasn’t very clear in my first post.  I mainly want to know if savvy investors are taking advantage of the down market and investing more than they NORMALLY do.  I already max my retirement accounts, HSA, back door Roth, and I have an automatic monthly deposit into my taxable account.  But like Vagabond MD, I always have extra cash on hand (prob more than I should) and certainly could part with some of it on any given day.  BUT...I don’t follow the market, I don’t get stock tips, and I honestly wouldn’t have even known that the market had taken a dive if I hadn’t have seen an email from our financial guy in our partnership (I cringe admitting that).  I’ll probably just stay the course and continue investing as I always do, but I have a hard time believing that expert investors aren’t taking full advantage of the down turn and buying more stocks while they’re low.  But Vagabond MD, I’m guessing you did your research and bought appropriately.  Not sure it’d make much of a difference if I threw a few extra $$s into the stock portion of my taxable.  Probably not.  But I’ll sleep better tonight having read all the replies.

 

Thanks.

 

[Donnie]

You would be better off investing the cash as soon as you can rather than trying to buy the dips. Many studies have shown this. No one posting in this thread is a “savvy” investor in the way you describe. Savvy investors make use of information not easily available to you and generally aren’t buying index funds.

Keeping cash on the sidelines is helpful only from a psychological perspective. You should try to train yourself to hold less cash and to invest the same way in both up and down markets.

[Hatton]

Vagabond MD wrote:

I am an outlier here. I always have some extra cash on the sidelines (10% or so) and make some token buys on big down days. Yesterday, I purchased some VOO and VT, symbolic purchases, $2000 in aggregate. It does not move the needle much, but it makes me feel like I am doing something and keeps me from greater mischief.

Click to expand...

In previous downturns I also did this buying SPY and QQQ.  This was with new money.  I am holding onto cash this time because I am planning to retire in a few months.  Buying the dips is a good psychological nostrum.  I never held cash waiting a dip.  There are roads to Dublin and buying the dips is another path.

[cgossage]

I second the advice to buy only if you are rebalancing to your target asset allocation. Times of dislocation often give these opportunities. It’s been a decent week for rebalancing to stocks and you may have tax loss harvesting harvesting opportunities. Outside of that, don’t try and time your buys.

[VagabondMD]

hatton1 wrote:

Vagabond MD wrote:

I am an outlier here. I always have some extra cash on the sidelines (10% or so) and make some token buys on big down days. Yesterday, I purchased some VOO and VT, symbolic purchases, $2000 in aggregate. It does not move the needle much, but it makes me feel like I am doing something and keeps me from greater mischief.

Click to expand…

In previous downturns I also did this buying SPY and QQQ.  This was with new money.  I am holding onto cash this time because I am planning to retire in a few months.  Buying the dips is a good psychological nostrum.  I never held cash waiting a dip.  There are roads to Dublin and buying the dips is another path.

Click to expand...

I always have a lot of cash around; it’s just my nature and is included in my asset allocation. My “savvy” buy on Monday moved 0.03% of my net worth from cash to stocks, hardly earth-shattering from a mathematical standpoint. From an emotional standpoint, it made me feel like I was doing something and allowed me to move on to more important things (like taking my dogs for a walk and preparing for a presentation that I am giving today).

[StarTrekDoc]

This is a Continuation of an earlier thread. As Donnie said, having cash set aside for this specific event is opportunity cost lost.

If one had time in their retirement plans that specifically calls for a shift in allocation during a correction, that's pretty aggressive stance and one would think not a very well thought out ling term vision on the large scale.

Now there's the 'fun money' account where one can flex dollars into the market in smallish amounts for kicks and giggles. As noted people will do that like vagabound did and hatton would have if she's not retirement horizon in 4 months. I would have too but starting at a relatively lathe tax bill from last year that my cash account will be funding in 60 days.

Large new cash into the market quickly is hard on demand. We have a heloc readily available and have done that in the past but it's not really recommended and we do that usually for real estate investments not stock market timing.

[Amyolin]

All great advice.  I guess this brings up an even better question, and I realize the answer will be personal and dependent on a lot of factors.  What percent of one’s portfolio should be cash?  How much cash should be in a money market within your investments?  I wasn’t sure as I was crunching numbers yesterday.

51% stock

28% bond

5% REIT

1.4% gold

14.6% cash

Perhaps I’m labeling the cash wrong.  8.6% of it is in a high yield savings account I use to pay quarterly taxes and big expenses like home remodeling (arguably I could tolerate having less).  The remaining 6% is in money markets within my investments.  When I looked closely I’ve got over 37K in a money market in my 401k, which is nearly 7% of the 401k!!  I’m guessing that’s stupid.  My Schwab Roth IRA is still small, but it’s in one of their “intelligent portfolios” where they mandate 10% kept as cash (as they explained it to me, that’s how they make some money).  I tried to change the percentages there and they said I’d have to open a new self directed Roth.  I probably should do that.

 

Tips from others??  I’m guessing lowering the cash % in my 401k and changing out the Schwab Roth might be a good idea.  That schwab roth has about 20 different holdings.  Seems excessive.  My Vanguard Roth (a rollover from USAA with about 40K in it) that I set up last year is 90% stock, 10% REIT.  Maybe I should roll the Schwab into that?  If I start making the Vanguard Roth my back door, should I rebalance to have some bonds in there too?

 

Questions beget more questions!