# Is now a good timing to enter the marker (index funds)?



## Eltuna (Mar 18, 2018)

Hi all,

Thank you for reading my post and sharing your opinion. I am 27 and have 50k that I would like to invest for my retirement. Call it a ~30-35 year investment. The money is now 'sleeping' in my TFSA, not invested for now. After a bit of shopping and following Buffet's advice for people in my situation, I have decided to go with index funds as a core investment, maybe 80-85% (such as the low-MER TD e-series); the rest will be bonds. I a am not looking to dedicate serious time and energy to my investments, and have never invested before.

My question is: considering the current market uncertainty and volatility (NAFTA talks, other Trump-related policies...), and given that either a relatively major correction/bear market should reasonably occur within the next couple of years (we are now at 10 yrs of ~quite steady growth), should I delay the investment of my TFSA and my entrance on the market quite a bit? I know this is a million-dollar question and that nobody can commit to a definitive answer, but I am more than interested in hearing other people on this. Given the proposed investment period, I can tolerate some market ups and downs, but my reflex is 'If a bust is coming, should I keep my money safe for now?' 

To recap they key parameters are: 

1) Looking at a very long-term investment and I am in no hurry to invest;
2) Index funds chosen as a core investment;
3) Invest now or later?


Thank you very much!! Eltuna


----------



## none (Jan 15, 2013)

Those are not parameters. Those are variables. Not a big issue just a pet peave.

Invest now. You never know. I almost sold everything when orange hitler was elected. I'm glad I stuck to plan.

With a 30 year time horizon it doesn't matter. Read this: https://www.cnbc.com/2015/08/27/the-inspiring-story-of-the-worst-market-timer-ever.html


----------



## m3s (Apr 3, 2010)

Many will say invest now but many who give this advice also hold cash. There is a risk to investing $50k all at once at these level imo

Holding all out in case of a crash is the opposite of buying all in at once. You will likely suffer more cash drag waiting for the right time to invest

The other choice is to dollar cost average into the market rather than trying to time it all in or all out.


----------



## james4beach (Nov 15, 2012)

There is no way to know if "now is a good time". Nobody can predict a bust (bear market).

I think a reasonably good way to do this is to invest half now, wait 6 or 12 months, then invest the other half. Or you could do the same over a longer period such as 2 years to invest fully.


----------



## lonewolf :) (Sep 13, 2016)

none said:


> Those are not parameters. Those are variables. Not a big issue just a pet peave.
> 
> Invest now. You never know. I almost sold everything when orange hitler was elected. I'm glad I stuck to plan.
> 
> With a 30 year time horizon it doesn't matter. Read this: https://www.cnbc.com/2015/08/27/the-inspiring-story-of-the-worst-market-timer-ever.html


 I would have to check the chart to confirm. The DJT had a high & 70 years latter was lower from the high. ( might have been in the high 60s or low 70s for number of years though rounded off was about 70 yrs)


----------



## MrMatt (Dec 21, 2011)

Eltuna said:


> Hi all,
> 
> Thank you for reading my post and sharing your opinion. I am 27 and have 50k that I would like to invest for my retirement. Call it a ~30-35 year investment. The money is now 'sleeping' in my TFSA, not invested for now. After a bit of shopping and following Buffet's advice for people in my situation, I have decided to go with index funds as a core investment, maybe 80-85% (such as the low-MER TD e-series); the rest will be bonds. I a am not looking to dedicate serious time and energy to my investments, and have never invested before.
> 
> ...



You can't time the market effectively, so invest when you have the money.

I'd simply choose the couch potato matching your risk tolerance
http://canadiancouchpotato.com/model-portfolios-2/

TD eSeries are a great idea, they're low fee and easy to deal with, at a $50k portfolio it's likely not worth the trouble to do ETFs to save a bit of MER.
If you're curious you could look into it, but do that later.


----------



## lonewolf :) (Sep 13, 2016)

Could invest the money opposite of the DSI numbers i.e., just before the 09 low there was 2% bulls for the S&P so could have went 98% long. Recently @ the Jan peak it was something like 97% - 98% bulls so could put 2 to 3% on table numbers have dropped off since then. If you want to buy in hold forever I would put whatever the opposite of the DSI number of bulls on the table is & increase it as number of bulls decrease.


----------



## Oldroe (Sep 18, 2009)

So invest 50k now wake up 35 years later to 5m.

You are dreaming.


----------



## Eltuna (Mar 18, 2018)

Thank you all very much for the advice!

I am now considering options I had not thought about, especially going with lumped delayed investments, dollar-cost-average or looking at DSI numbers.

Greatly appreciated!!


----------



## new dog (Jun 21, 2016)

As far as governments are concerned I wouldn't worry about what they do as long as they don't go crazy. I would only worry about them effecting the market if they did something truly ridiculous that the market couldn't ignore the extreme costs of their policies.


----------



## can_84 (Jul 2, 2011)

I am not sure what your financial background or knowledge is so that is also a factor in what you decide to do. 

If I were in your shoes I would do the following:

Assumptions:
1) I would assume that there will be a correction, quite a few in your lifetime. 
2) You are disciplined to hold your cash and not spend on consumer goods
3) You have financial skills (e.g your profession is an accountant or you work in finance and can read financial statements) 

If your planning to buy ETFs at this point I would hold off due to the reasoning above (most companies are way too expensive) 

When I buy shares I assume I am buying the business (no matter how good the business is at the current point in time) Consider these aspects:


1) current cash flow
2) future cash flow (mid and long term)
3) the industry and its 20 year horizon (will it still be there, is it going or is it shrinking?)
4) current management and past performance.

From a valuation perspective a large majority of good business are way over valued. There is no sense in paying 20x or more for earnings.

Given your situation I would consider dumping my cash into a decent GIC or something that pays you a decent return while being liquid enough for you to take advantage of a correction. Like others have mentioned above that are older and wiser and have experience, a correction is coming but we dont know when. The only thing we know is that we had a bull market for 10 years so the odds of a correction are much higher than a bull market in the near to midterm. 

For example: you would do well if you waited and bought BCE (Bell) when its $25/share vs. $54/share within 2 years vs. buying now at $54/share and experiencing the devaluation. Since you have time in your favour and the probability that a correction is more certain in the next 2 years or so I would hold off buying into this very very very expensive market. 

Note that my opinions may be a bit biased because I did hold off pr2-2008/9 and started buying after the crash, I also bought Bombardier and canopy growth (Marijuna) when others were running. What I learned form Buffet is very true. Buy when there's blood on the street but you have to do your research and also have the technical skills. For example Bombardier was a horrible business 3 years ago but what allowed me to buy at $.80/share was that fact that Caisse de dépôt was buying in (they are the provinces pension fund) hence they see long term value, the Canadian government won't allow them to fail, and the C series product was the best inits class by a mile. But note Bombardier was a horrible business due to horrible management 3 years back but this was due to the bombardier family controlling the business which was addressed with the new management team and CEO. 

In summary:

What I am saying is look at your specific situation, you have time on your side and an almost certain probability that a correction is coming ... I would wait to buy on sale. Why pay retail when you can wait and buy on sale? Follow Buffets rule don't loose $ which is priority over everything.


----------



## m3s (Apr 3, 2010)

That's all fair advice but remember OP specified they aren't looking to dedicate serious time and energy researching the market, which would be required to time the bottom of the next big correction.

Fixed income should be allocated based on risk aversion. OP mentions 80-85% TD e-Series and the remainder in bonds, which is like an aggressive TD e-Series Canadian Couch Potato portfolio

Based on OPs concerns with the market, maybe something like a cautious or balanced allocation with more fixed income would be more suitable.

A $50k portfolio is also large enough to look at ETFs rather than TD e-Series. Brokerages like Questrade offer ETF transactions without commission now


----------



## Spudd (Oct 11, 2011)

VGRO is a new ETF that is 80% equity, 20% bonds, that might suit OP's needs. Won't comment on the timing the market part.


----------



## Jimmy (May 19, 2017)

The only markets that are really over valued are the US markets. The S&P 500 is trading at a P/E of 27 for ex. 

The S&P/TSX a month ago fell below its 200 day moving avg. It is now just a little above that but still undervalued trading at a P/E of 15.7 (historic is more around 17)

Europe and Far East same story . Undervalued a P/E of 18 still below its 200 day moving average. Emerging markets are also cheap. P/Es of ~ 15

So you could begin to put $ in, just underweight the US for now. Maybe put the extra into cash or ST bonds.

As others posted , maybe spread it our over 2 yrs too.


----------



## Eltuna (Mar 18, 2018)

Excellent points to consider, thanks a lot to all. This really helps me.

Just a quick question (maybe stupid): when you say 'the rest you keep in cash', I suppose that means buying all kinds of currencies like USD, Euro, Yen...Is there a standard procedure to buy these? Do you for example have to buy a fund which has a large fraction of foreign currencies? Or can you buy them directly in most banks (so, fees I guess?) and have them wired to your account?


Thank you,


----------



## Jimmy (May 19, 2017)

Sorry w 'cash ' just meant in short term accounts like a regular or high interest savings bank account or maybe a short term bond ETF. Something w a small return but wont lose any value over the 2 yrs as you transfer $ into the investments.

For simplicity, you could go w the couch potato ETFs or TD eseries. Just maybe only put 10% in the US ETF for now. Maybe when there is a little correction or the valuations get more normal then increase to 25 or 30% or whatever they recommend


----------



## AltaRed (Jun 8, 2009)

Eltuna said:


> Just a quick question (maybe stupid): when you say 'the rest you keep in cash', I suppose that means buying all kinds of currencies like USD, Euro, Yen...Is there a standard procedure to buy these? Do you for example have to buy a fund which has a large fraction of foreign currencies? Or can you buy them directly in most banks (so, fees I guess?) and have them wired to your account?


Why do you need to hold anything other than CAD, or if you really want too, USD and CAD? No reason to hold any other currencies since purchases on the TSX are mostly in CAD (some USD) and purchases on NYSE are in USD. USD is not even required given there are multiple Cdn domiciled products in CAD that invest in ex-Canada assets.


----------



## MrMatt (Dec 21, 2011)

new dog said:


> As far as governments are concerned I wouldn't worry about what they do as long as they don't go crazy. I would only worry about them effecting the market if they did something truly ridiculous that the market couldn't ignore the extreme costs of their policies.


That's exactly the problem!!

Political risk is a serious issue, it's why I stay away from certain investments (eg coal)


----------



## Rusty O'Toole (Feb 1, 2012)

First of all nobody knows what the markets are going to do tomorrow, next week or next year. Anyone who says they do is blowing smoke up your skirt.

To answer your question get a long term weekly chart of the S&P. Add a ten week moving average and a 50 week moving average. Figure out how you would have done if you were fully invested in a fund that tracks the S&P while the 10 week was above the 50 week, and out of the market when the 50 was above the 10.

You would have beaten 99% of fund managers.

Right now what are the moving averages showing? I don't know what the markets are going to do tomorrow - nobody does - but if you follow this method over time you will end up doing very well.


----------



## My Own Advisor (Sep 24, 2012)

The best time to plant a tree was yesterday.

FWIW, true index investors (who follow a 100% passive investment strategy and accept whatever the equity and/or bond (or some of both!) market returns) believe there is no perfect or ideal time to invest. That's because today's market price is the best price you can get.

Having said that, that's not me. I personally believe the market and stocks within it can be very irrational at times because investors are human beings after all and they are not always rational with money. While the stock market is largely efficient that does not people investing in it are always, perfectly, rational...

With a ~30-35 year investment timeline...I think if you're unsure what to invest in, I would concern developing a financial plan first with that time horizon in mind, set out some goals, risks, document all that on paper - then you can consider what products to put into your financial plan. I believe there is merit in planning and the process of planning, before jumping into a financial product or stock or bond or anything else for that matter.

Good luck!!


----------



## Jimmy (May 19, 2017)

Actually listened to Patricia Lovett Reid on BNN this morning. She said you are better off just putting in a lump sum at once vs $ cost averaging in over a year based on a Vanguard study of the US and other markets. The study showed the market is up 2/3 of the time so you are more likely to buy in a rising vs falling period. The co host did argue though to use avging if you are investing for the long 15+yr period vs taking a position.

So still is best to maybe split it up into a few installments over a 1 or 2 yr period. Can't really go too wrong either way.

She is at 41:00

https://www.bnn.ca/video/the-street-for-tuesday-march-20-2018~1347997


----------



## BoringInvestor (Sep 12, 2013)

Jimmy said:


> Actually listened to Patricia Lovett Reid on BNN this morning. She said you are better off just putting in a lump sum at once vs $ cost averaging in over a year based on a Vanguard study of the US and other markets. The study showed the market is up 2/3 of the time so you are more likely to buy in a rising vs falling period. The co host did argue though to use avging if you are investing for the long 15+yr period vs taking a position.


To provide some additional, first-hand anecdotal info:
- Over the past 5+ years, my couch potato's monthly results have been positive 70% of the time, and I've suffered losses 30% of the time.
- Over the past 3 years of my daughter's RESP account, monthly results have been positive 67% of the time, with the remaining 33% of the time suffering losses.


----------



## Eltuna (Mar 18, 2018)

That's really useful insight, thanks again! Will organize before making a move and consider making 2-3 lumped investments as suggested. Good points about basic technical analysis & potential usage (moving-average). ETFs: had neglected a detailed review of these products due to complexity, but will throw another look.


----------

