Preparing for a Market Crash. Tips?

[Millennial ER Doc]

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Hey all, I’m a new attending looking for tips on starting my portfolio.

For the sake of numbers, let’s say I’m grossing 300K annually, w/ plans to save ~100K: 60K ear marked for Vanguard (or other low risk index funds) and 40K for high-risk investments (real estate, bitcoin, staying liquid for an unanticipated business opportunity, whatever).

Since graduation this summer I have about 40K cash on hand, I’m planning on opening my Vanguard account soon, but am concerned that the stock market looks poised for a BIG correction.

So my question (especially for the attendings w/ experience circa 2008): should I stay mostly liquid until the market corrects? This may still be years away; or just go ahead w/ the plan and start loading up in Vanguard?

* I’m early 30s now and can ride out a bad 5-10 year market downturn, but it just seems to make sense to wait until the market plummets, with the thought that my cash would be worth more shares then.

** I’m going to run this all by my accountant within the next week or 2. I’ll report back on what advice they give me.

*** I’ll try to post screen shots of the S&P 500 and Nasdaq to show that it’s enjoyed 10 years of growth without significant correction. Hypothetically, if I was 55 or 60 years old, w/ 3,4 or 5 mil in Vanguard accounts, would there be a way to shelter that $ if I anticipated an impending market downturn?

 

[Vandalia]

The one thing that I have learned over the decades is that trying to "time the market" is a recipe for disaster. Fortunately I have learned that lesson from others, not from myself. Select good investments and/or people who know good investments, then let it be. How much money would you have lost if you thought the correction was coming in 2011?

I will defer to the expert, but one of the advantages of a profession like EM is that you shouldn't need to be seeking that 20% annual return if you are saving properly. Now if instead of buying a $100K car you want to use that money to play around in the market, fine. But that should be with money you can afford to lose, sort of like going in to a casino.

Now, to be transparent, I have moved money to more conservative investments, but that is due to my status, not trying to guess what will happen next month.

 

[NITRAS]

My opinion. Don't try and time the market. No one knows when the next market stumble, crash, recession, depression will be. You may be waiting for the next 5 years for a major drop. Those would be 5 years of crummy returns waiting on the big fish.
I paid my loans off, then invest a substantial percentage in my 403b, 457b, and backdoor ROTHs. The rest I put in my house. When that is paid off, I'll put it in taxable accounts. (I have some 529s going, HSA). I put my money in a variety of equity mutual funds. I buy every paycheck.

For my strategy to work, you have to buy and hold through the downturns. If you are going to hold on, the rollercoaster is fun If you are going to want to pull your money, jumping off the rollercoaster is dangerous.

I also don't put money into high risk investments. Mutual funds with good track records. I'm a millennial, too, but I try to be like Warren Buffet. It is always a good time to buy.

 

[LChristmas]

@WhiteCoatInvestor had a blog post about this very topic a few days ago. You should check it out if you haven't already.

 

[Birdstrike]

Hey all, I’m a new attending looking for tips on starting my portfolio.

For the sake of numbers, let’s say I’m grossing 300K annually, w/ plans to save ~100K: 60K ear marked for Vanguard (or other low risk index funds) and 40K for high-risk investments (real estate, bitcoin, staying liquid for an unanticipated business opportunity, whatever).

Since graduation this summer I have about 40K cash on hand, I’m planning on opening my Vanguard account soon, but am concerned that the stock market looks poised for a BIG correction.

So my question (especially for the attendings w/ experience circa 2008): should I stay mostly liquid until the market corrects? This may still be years away; or just go ahead w/ the plan and start loading up in Vanguard?

* I’m early 30s now and can ride out a bad 5-10 year market downturn, but it just seems to make sense to wait until the market plummets, with the thought that my cash would be worth more shares then.

** I’m going to run this all by my accountant within the next week or 2. I’ll report back on what advice they give me.

*** I’ll try to post screen shots of the S&P 500 and Nasdaq to show that it’s enjoyed 10 years of growth without significant correction. Hypothetically, if I was 55 or 60 years old, w/ 3,4 or 5 mil in Vanguard accounts, would there be a way to shelter that $ if I anticipated an impending market downturn?

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If you're that young (30's):

Think long term. Buy monthly. Dollar cost average.

If the market goes down, great! The best thing that could happen for you is the market to crash down in your 30's then you ride the rise during your career by dollar cost averaging. Don't worry for a nanosecond about a "crash." You should be praying for one.

If you're close to retirement, on the other hand, a market crash is the worst thing that could happen, if you're still heavily into stocks (not so if already transitioned more conservatively). But if you're just starting out, it's the best case scenario. That just means cheap stocks and mutual funds will abound.

The market always comes back, if you have enough time. If you're in your thirties, you're much, much younger than the average investor. You, more than anyone, have the time.

I'm in the middle (mid 40's) and even so, I would not even consider changing my investing strategy based on a perceived fear of a crash, nor will I change it when it crashes. If it crashes tomorrow, I say, "Good. More shares for me, when I buy next month."

In fact, I was about your age 10 years ago during the '08 crash. I just kept buying, same strategy. And the money has grown.

Pick a strategy for the long term, knowing there will be crashes (there always are) and stick with it. It will pay off.

 

[Tenk]

I’ve almost finished paying off my loans ($400,000 when I include my wife’s) and I am a PGY-7. I will tell you the amount of happiness I am experiencing is incredible and I’m not even done yet. In just a few months I won’t HAVE to work hard anymore. I could work part time if I wanted and still live an amazing life. That freedom is worth more to me than any investment. If you still have loans I would focus on them instead of gambling with the market.

 

[miacomet]

Curious as to why you are picking such a non evidence-based investment strategy- why not put everything, or nearly everything, in Vanguard and rebalance annually? What's with the high-risk investments?

This seems like gambling, not investing....

 

[Birdstrike]

Hypothetically, if I was 55 or 60 years old, w/ 3,4 or 5 mil in Vanguard accounts, would there be a way to shelter that $ if I anticipated an impending market downturn?

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Yes. At that age, you would have already been gradually moving to a more conservative investment profile as you approach retirement. But honestly, it's too much and too individualized to hash out on an internet forum. Either educate yourself on how to do this to do it yourself by ready as much as you can on the subject, hire a good financial planner who doesn't rip you off or put your money in a low cost target-retirement index fund that does it all for you. Vanguard has multiple.

 

[Groove]

Hey all, I’m a new attending looking for tips on starting my portfolio.

For the sake of numbers, let’s say I’m grossing 300K annually, w/ plans to save ~100K: 60K ear marked for Vanguard (or other low risk index funds) and 40K for high-risk investments (real estate, bitcoin, staying liquid for an unanticipated business opportunity, whatever).

Since graduation this summer I have about 40K cash on hand, I’m planning on opening my Vanguard account soon, but am concerned that the stock market looks poised for a BIG correction.

So my question (especially for the attendings w/ experience circa 2008): should I stay mostly liquid until the market corrects? This may still be years away; or just go ahead w/ the plan and start loading up in Vanguard?

* I’m early 30s now and can ride out a bad 5-10 year market downturn, but it just seems to make sense to wait until the market plummets, with the thought that my cash would be worth more shares then.

** I’m going to run this all by my accountant within the next week or 2. I’ll report back on what advice they give me.

*** I’ll try to post screen shots of the S&P 500 and Nasdaq to show that it’s enjoyed 10 years of growth without significant correction. Hypothetically, if I was 55 or 60 years old, w/ 3,4 or 5 mil in Vanguard accounts, would there be a way to shelter that $ if I anticipated an impending market downturn?

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You have a good strategy. Don't cause yourself undue stress and try to optimize entry/exit points with your long term holds, otherwise what you will find happen is that you will stick the money in a money market account waiting to invest and 10 months later you are still sitting on it. If you're going to stress on technical analysis trading while spending an hour each night analyzing charts and candlesticks, save that for your "play" money.

My SEP is 100% Vanguard mutual funds and I max it out within ~5-6 months each year. I rarely touch it. Those are long term investments and I don't worry about transient dips in the market. I subscribe to Dan Wiener's "Independent Advisor for Vanguard Investors" and find it helpful for researching various Vanguard funds. The rest, I actively invest on TDA's platform mainly due to the wealth of investment tools/resources and my familiarity with the thinkorswim platform. I also really dig their mobile app. I have entertained the thought of re-opening another brokerage account with Vanguard to invest any extra money over my SEP into some of the same mutual funds just to make it easier on myself since I really don't find myself having as much time to actively invest as I used to and my non tax deferred mutual fund investments are also designed to be long term holds but so far I continue with TDA.

 

[deleted547339]

WCI did a podcast on this recently. Go listen to it. The takehome is that the best day to invest is yesterday. Since that isn’t an option, pick today.

Don’t invest in bitcoin, that’s speculation.

You didn’t say whether or not you have loans.

 

[gamerEMdoc]

WCI did a podcast on this recently. Go listen to it. The takehome is that the best day to invest is yesterday. Since that isn’t an option, pick today.

Don’t invest in bitcoin, that’s speculation.

You didn’t say whether or not you have loans.

Yep, the market goes up, and it goes down. But over the long run, it always goes up. So if you are investing for the long run, don't try and time the market. Invest, ride out the valleys, and you'll be fine. The only time a crash kills investors is when they are near retirement, but hopefully your investment portfolio in the years before retirement are very conservative to prevent taking a huge hit.

 

[Siggy]

1. Lump sum investing beats dollar cost averaging (assuming you have a lump sum to invest. I would argue that investing X amount of your excess money every month isn't dollar cost averaging since you didn't have access to that money before that paycheck).
How to invest a lump sum of money | Vanguard


2. Let's learn about Bob, the world's worst market timer. Moral of the story is don't try to time the market and don't sell until you have to.

https://www.google.com/search?q=the...timer&ie=utf-8&oe=utf-8&client=firefox-b-1-ab

 

[goodoldalky]

Hey all, I’m a new attending looking for tips on starting my portfolio.

For the sake of numbers, let’s say I’m grossing 300K annually, w/ plans to save ~100K: 60K ear marked for Vanguard (or other low risk index funds)

Sounds good

and 40K for high-risk investments (real estate, bitcoin, staying liquid for an unanticipated business opportunity, whatever).

Just light it on fire instead

Since graduation this summer I have about 40K cash on hand, I’m planning on opening my Vanguard account soon, but am concerned that the stock market looks poised for a BIG correction.

You don’t know anything (no offense, no one really does)

So my question (especially for the attendings w/ experience circa 2008): should I stay mostly liquid until the market corrects? This may still be years away; or just go ahead w/ the plan and start loading up in Vanguard?

The previous posters have given you good advice. Take whatever is not needed for an emergency fund and load up in a vanguard three or four fund portfolio strategy. Look this up if you’re not sure what it is. If you feel strongly as a 30 year old, you can skip the bond portion until later.

* I’m early 30s now and can ride out a bad 5-10 year market downturn, but it just seems to make sense to wait until the market plummets, with the thought that my cash would be worth more shares then.

No

*** I’ll try to post screen shots of the S&P 500 and Nasdaq to show that it’s enjoyed 10 years of growth without significant correction. Hypothetically, if I was 55 or 60 years old, w/ 3,4 or 5 mil in Vanguard accounts, would there be a way to shelter that $ if I anticipated an impending market downturn?

The answer to this is asset allocation

Cheers for looking into this right off the bat... you’ll do well for yourself

 

[Millennial ER Doc]

I'm in the INCREDIBLY fortunate position of having ZERO debt. Undergrad: inexpensive state school + scholarships. Med school: scholarships + family help #grateful

I've followed WCI's blog/book for years (but have slacked lately) and try to practice the balance of frugality w/ life enjoyment that he preaches. To that effect, in residency I prioritized enjoying a high COL city over saving as a resident.

WCI not withstanding, financial terms and IRS codes are pretty esoteric when you don't have any real skin in the game.

The financial steps I've taken to this point include:

• disability insurance (I've locked in a plan and am going to increase my premium to the max by next year; ~$4-500/month for an ~$16K/monthly payout if disabled),
• catastrophic PPO health care coverage (I would pay $0 after the deductible for any hospital admission/surgery) - it's not ACA compliant (2K/year tax hit I think) and there's no maternity, psych or preventative coverage; but that's not my prerogative given my current personal circumstance
• and my COL now is MUCH lower than when I was a resident given I'm choosing to be in the sticks while I set myself up and take the boards

As mentioned, I've met w/ an accountant who seems competent. I'm planning to file an extension for next year, but plan to overpay my anticipated tax burden before April 15th, then hash out a plan (401K vs SEP IRA, etc) w/ them after the busy tax season, when I can spend more time w/ them getting the most/best personalized advice.

What prompted my post, was that I've never had so much cash (good problems lol) and there's too much of a temptation to spend it. I'd like to lock it into a long term investment vehicle. I didn't realize what I was describing was an attempt to "time the market", but hey, I'm happy I asked now. I'll definitely take the advice given and move the cash to a Vanguard account.

I appreciate you all taking the time to respond, I've been lurking on SDN for a looong time (since like 2009) and have only made it this far because of all the nuggets of wisdom scattered throughout these pages, so THANK YOU, truly.

Once I have some insight to offer, I'll definitely try to pay it forward.

 

[Millennial ER Doc]

But just so I'm reading this right; the consensus seems to be: allocating the ENTIRE 100K to long term, low cost index funds would be the best move?

EDIT: I'll read about that "vanguard three or four fund portfolio strategy" - sounds promising

 

[EctopicFetus]

Good buddy of mine came into about $2m. Just before the election in 2016 he decided to go cash. How did that work out? I am pretty strong on the financial game as my dad was a stock broker and I have “invested” or gambled in the market since I was about 15.

That being said I hired a financial advisor. Why? Cause I know myself and now that I have a few dollars in the bank I would do just as my buddy did and miss out on 30+% market returns.

I pay little.

If you think you can time the market you are a fool. If you actually are successful quit medicine immediately. Join Goldman Sachs and live a good life.

 

[miacomet]

But just so I'm reading this right; the consensus seems to be: allocating the ENTIRE 100K to long term, low cost index funds would be the best move?

EDIT: I'll read about that "vanguard three or four fund portfolio strategy" - sounds promising

Yes. Reread WCI.

 

[Vandalia]

But just so I'm reading this right; the consensus seems to be: allocating the ENTIRE 100K to long term, low cost index funds would be the best move?

EDIT: I'll read about that "vanguard three or four fund portfolio strategy" - sounds promising

Correct. As long as you are not working on Wall Street, investing takes discipline, not intelligence.

 

[swamprat]

Time in the market better than timing the market

 

[d2305]

Individual stocks take more skill (luck) to pick, but a SP 500 index fund will do well over the long term.

 

[Birdstrike]

Good buddy of mine came into about $2m.

Inheritance?

 

[coachB]

Inheritance?

thinking more along the lines of a payout from Envision...

 

[EctopicFetus]

Mix.