Is This The Crash We’ve Been Waiting For?

The stock market is tanking! Yes!

The hubby is more and more inclined to throw even bigger sums of money at the stock market.

I’d love to get that emergency fund down to 100% and the rest invested!

Love,

Mrs EconoWiser

P.s. Right now our VWRL stocks have dropped under €50! For the first time in months! I’m going to transfer some cash to my investment account, ha!

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14 thoughts on “Is This The Crash We’ve Been Waiting For?

  1. Astrid

    Cash is king when the markets go down. It’s great to have savings earmarked for investments, and wait until it’s low.
    Are you guys looking at stocks, funds or index for this extra invenstment?

    Reply
  2. a Mustachian

    When you say you’re going to step up your investing now that the market is low, I think you’re doing the right thing – but for the wrong reason. Let me explain.

    By investing more now that you believe the market is low, you’re trying to time the market. That’s an unbelievably hard thing to do. Most who try fail. They end up buying high and selling low. http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy#Never_try_to_time_the_market In the case of you and your hubby, you risk paying more for your shares than the average share price over time (which is what you would pay with euro cost averaging) because you might buy your shares too early or too late.

    On the other hand there is a very good reason to put all your available money into the market right this instant, and that is that lumpsum investment has historically beaten euro cost averaging. This is because the market’s overall movement has historically been upward, so having more money in the market sooner has historically resulted in higher returns.
    https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf

    Note that reason 2 applies regardless of how expensive shares are.

    Personally, I hope the market will continue to go down and stay down. I won’t be changing my plans because of what the market’s doing, however. I was already planning to invest as much as possible as soon as possible.

    Reply
    1. econowiser Post author

      You are sooooooooooooo right and thank you very very much for your comment.

      However…the hubby (love love looooooove him, now it sounds like I’m blaming him….) is too afraid of lump sum investing. It’s twice our annual expenses we have sitting around doing nothing in a savings account…and it’s just too big of a number for him to be throwing at the stock market in one go….it’s tens of thousands of euros…

      I’ll forward your comment to him!

      P.s. my intention is not to time the market, it’s just to gain more confidence myself and trying to persuade the hubby to throw more money at the stock market…maybe our confidence will grow during a market that’s tanking?!

      Reply
      1. Mark

        Maybe your asset allocation is not where it should be then. If the hubby is reluctant to investing now (while we are still feeling positive about the value of our stocks and are still in a bull market), will he not be even more reluctant throwing cash at stocks when your stocks have plummeted in value? It could be that a higher allocation to bonds will make the ride easier for him and possibly also for you since I get the idea that you have not experienced a real bearmarket while being invested in stocks.
        If not true, please disregard my reply, it as meant as positive feedback! Just try to make sure that you both have confidence in your allocation and that it agrees with your risk profiles.
        Kind regards!

      2. econowiser Post author

        Thanks for your imput, but we decided bonds aren’t for us right now. We’re in the wealth-building stage. Once we hit FI or the respectable age of 55 or whatever we’ll add bonds to the mix…

      3. a Mustachian

        Another way of thinking about the euro cost averaging vs. lumpsum investing conundrum is this: Suppose you receive a windfall of twice your annual expenses in VWRL shares. Would you immediately sell the shares so you could then euro cost average back into them? I assume you wouldn’t, right?

        There is no material difference between this VWRL windfall scenario and your current situation. In both cases you get to choose how much of the money you want in your bank account and how much in VWRL. In both cases, the amount in VWRL will fluctuate with the market. So, if you’re being completely rational, how much you want in VWRL is the same in both cases.

        If lumpsum investing just isn’t for you (and hey, who would blame you?), you could of course step up the fixed investments that come out of the sum you would otherwise have invested as a lump sum. Just do it because you recognise that investing sooner is usually better than investing later, not because you think shares are underpriced right now (which may not be correct).

        By the way, I think Mark makes a good point about reviewing your asset allocation in light of how much risk both of you wish to assume. There is no shame in adding a few bonds to the mix even if you’re still in the accrual stage. Keeping 100% of your investments in shares requires balls/ovaries of steel. If your risk appetite might change due to market conditions, as you suggested, that could be a sign you are just as human as the rest of us and would benefit from seeing some green numbers in your portfolio when the market tanks (i.e. investment-grade bonds).

  3. dx

    2 things:
    1. don’t try to time the market. You know better than that!
    2. It sounds you (or your husband) are afraid to lose money in the stockmarket. On the other hand, you really don’t want to diversify and lower your risk by buying bonds next to stocks. It seems that that really need to think about the asset allocation between cash/bonds and stocks that you are comfortable with.

    Reply
    1. econowiser Post author

      1. You’re right!
      2. As we’re in the wealth building stage we don’t want to invest in bonds….now we should find the courage to dump more money into stocks!

      Reply
      1. dx

        I think “wealth building stage” is a term that is invented by a blogger you follow right?
        There are many others out there that even in your circumstances advice to put some bonds in the mix. They call diversification (also between bonds and stocks) the investor’s free lunch.
        So, I think it is not given that in your case 0% bonds is the best option. (Still it might be, but just the word “wealth building stage” does not convince this blog-reader 🙂 )

        Do you care to explain why you follow this blogger’s advice over others.

  4. Phony

    Since you`re investing for a long period of time (20 – 30 years?), this is just a minor drop in price. It might seem a good time to invest now instead of a month ago, or a month later, but with this timespan it just doesn`t make much of a difference. Actually waiting is worse than investing now. The best time is NOW 🙂 Ofcourse you could buy a whole lot more when the price drops significantly, but that requires waiting for a big crash, while in the meantime the stockprices are most likely to be going up.

    To be honest, I also invested some extra in VWRL this week, but I already planned to do so for my dollar (euro?) cost averaging strategy. It feels good to buy now at a lower price than a few days before. (small victory!), but I know I`m just fooling myself 🙂

    A little bit offtopic: because of the transactioncosts at Binck, I`m trying to do investments two to four times a year. This gives some room for picking the exact date. I might start an account at Meesman for monthly investments, for better averaging.

    Reply
    1. econowiser Post author

      I keep telling the hubby that we will regret our waiting game (well…we are investing a couple of thousand on a monthly basis…but I’m talking about the money sitting in a useless savings account) later in life as well….seems like most commenters here are on my side! 😉 I just love being “right”! 😉

      Reply

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