Investing, Stock Market and Retirement Planning Thread

[columbia]

My Roth is 1/3 of each. I ran some numbers the other day and since 1993, that allocation (which is 67% stock) has beaten 90% Total Stock Market/10% Total Bond.

Past performance indicates....nothing for the future, of course.

[NTP66]

We’re at 84/16 right now and climbing in the equity area. I won’t rebalance until I’m more than 5% out of the band for my own personal glide, though.

I ran through a lot of backteating when switching things up a few years ago, even though it’s of little use, and am happy with where I landed. If the market tanks, I’ll simply stay the course (and enjoy buying cheap equity purchases).

[mikey]

Ok, made my biggest cash out on Bitcoin yet...I have almost none left at this point, just a fraction of a piece...looking it over, I got about a 900 or 1000% return in the year-ish that I had it...I converted some into Ethereum, so I half of one of those now just in case that goes off the rails in the near future...

But my current valuation in cryptocurrency is measured in the hundreds of USD now...

[columbia]

Decent rundown on the current state of Bitcoins by The Economist:
https://www.economist.com/news/finance- ... rsc=dg%7Ce

[NTP66]

I decided to keep my 403b contribution percentage the same the past two years, so now my final two paychecks of each calendar year are bigger thanks to maxing out on the retirement stuff earlier. And this got me thinking, is there actually an advantage to front load your retirement savings? One might even consider that market timing.

[MrKennethTKangaroo]

Decent rundown on the current state of Bitcoins by The Economist:
https://www.economist.com/news/finance- ... rsc=dg%7Ce

do you subscribe to the economist and if so, how is it

[Beveridge]

I decided to keep my 403b contribution percentage the same the past two years, so now my final two paychecks of each calendar year are bigger thanks to maxing out on the retirement stuff earlier. And this got me thinking, is there actually an advantage to front load your retirement savings? One might even consider that market timing.

I don't have the numbers to back this up, but in the long run, I don't think the timing in this case is going to make a significant impact.

If person A maxes out their contribution in January and person B maxes out over the course of the year, I doubt the difference in 20 years is significant.

Maybe if you look at a one year period, it would appear that way, but in the long run: doubtful.

Also assuming investing is done the same way in either way.

[NTP66]

I've always heard that you should aim to have your money in the market as long as possible (aka, anti-DCA), but yeah, I can't seem to find much that definitively says one is better than the other. If your employer requires contributions at a specific interval for a true-up, the decision is easy. I just checked, and mine matches at the end of each pay period, so I'd lose out on free money.

[Beveridge]

It's true you should aim to have your money in the market as long as possible, but if you're putting say 10,000 (I'm picking a number), a year it's not going to be a material difference if that 10,000 goes in on January 1 or if it's spread out January 1 through December 31. If you look at a short time period, 1, 3, 5 years, maybe their is a noticeable difference. However, I'm going to bet that if you do the 10,000 for 30 years on January 1 and I do the same 10,000 for 30 years over the 12 months, and we also invest in the exact same funds, our value isn't going to be vastly different.

[NTP66]

Source of the post If you look at a short time period

Don't think I'd do that with any investment, really. It's all about the long game. That said, I do max out my Roth each January with a lump-sum investment.

[Beveridge]

Yeah.

If you want to test the theory, max out your Roth on January with lump sum and also do a Roth for your wife that you do evenly spread over the year. Invest in the same funds and report back in 30 years.

[NTP66]

Yeah.

If you want to test the theory, max out your Roth on January with lump sum and also do a Roth for your wife that you do evenly spread over the year. Invest in the same funds and report back in 30 years.

Out of curiosity, you almost had me until that timeframe.

[columbia]

Do Not Dollar-Cost-Average for More than Twelve Months
http://www.efficientfrontier.com/ef/997/dca.htm

[NTP66]

Do Not Dollar-Cost-Average for More than Twelve Months
http://www.efficientfrontier.com/ef/997/dca.htm

That's interesting, but I'm not sure how much it matters for smaller lump sums; it sounds like he's more referring to larger investments, like an inheritance or the like.

[columbia]

Correct

[count2infinity]

Possibly stupid question: Does the 401K maximum include employer match amounts or no?

[NTP66]

No.

[columbia]

Possibly stupid question: Does the 401K maximum include employer match amounts or no?

No. But it does include "income" for tuition remission.

joking

[NTP66]

Should have expanded on that, but there is a total contribution limit (employee and employer) of the lesser of 100% of your salary or $54k (for 2017).

[count2infinity]

Danke

Also, my tuition waivers are long in the past. Someone else’s problem now... suckkkkkas!!!!

[columbia]

Bitcoin now over 16k.

[Tomas]

I decided to keep my 403b contribution percentage the same the past two years, so now my final two paychecks of each calendar year are bigger thanks to maxing out on the retirement stuff earlier. And this got me thinking, is there actually an advantage to front load your retirement savings? One might even consider that market timing.

Actually, it can make quite a difference. To compare two extremes, think about the sequence of contributions made at the end of every year (say, $10K) vs the same sequence made at the beginning of every year. Then, *each* of the payment in the "beginning" sequence will earn you rate of return for *extra* year. So, the amount of money you will have at the end of investment horizon from the "beginning" sequence will be the the amount you's have from the "ending" sequence TIMES (1+ annual rate of return). So, if you are investing in stocks, where the expected annual rate of return is about 10%, you'll retire with extra 10% in your account.

To see some numbers: Assume annual contribution of $10K, T=30 years, r=10%

Ending sequence future value (in Excel):
+FV(0.1,30,-10000)=$1,644,940.23

Beginning sequence future value:
+FV(0.1,30,-10000,,1)=1.1*FV(0.1,30,-10000)=$1,809,434.25

"In between" sequence (monthly payments spread out over 12 months:
+FV(1.1^(1/12)-1,12*30,-10000/12)=$1,719,036.10
(i.e. 5% below the Beginning Sequence Future Value)

[dodint]

Bitcoin now over 16k.

19k

don't blink

[columbia]

[count2infinity]

What is driving the price?