When to Invest Bonus Forum

[jamestaylorrecordsas]

Why does Berkshire Hathaway have $149bil cash on hand, Jan 2023? Maybe investing lump sum is not most rational approach?

[Anonymous User]

OP here - bumping this thread again to see if opinions have changed. I invested nearly all of my bonus last year and am having trouble shaking off regrets (I'm down >10% across all my investments from this time last year). I'm in a similar situation this year and am wondering whether people's advice has changed (especially with recession predictions still looming). Invest it all again? Spread it out? Wait for the Fed to settle? What does everyone think?

If this is money for retirement (as you previously said), and presuming you’re not retiring for a while, why are you stressing over year to year changes? You invest the money and forget about it, until you get closer to retirement and move it to less volatile investments.

It’s definitely a bummer to see the value go down, so I get being unhappy about it, but that’s not what should be guiding your current strategy. You can’t time the market.

[nealric]

To answer your question, the point I'm making is that just because it's down doesn't mean it's on discount.

The pods I mentioned are pretty uniform in saying that we are in for some pain in 2023.

One I especially like is "We Study Billionaires". Jan 12, the permanent supply chain disruptions that will sink the economy with Jim Rickards.

I guess we can meet again Jan 2024 and see who was right.

I'm done. It was nice talking to you.

We can all reconvene in January 2024 but you're still not going to be "right." Given the information we have today, which indicates that lump sum investing is the best rational economic decision, we are going to be right whether the 2023 datapoint shifts that view marginally more strongly or weakly.

But when to invest that lump sum?
How about if there's a strong chance of recession?
Invest the lump sum anyway as soon as you get it?
Should Ray Dalio at Bridgewater fire the hundreds of people who work for him and simply funnel all incoming new money into the S&P 500? As it comes in the door?

It's pretty simple: put money in the market when you have money to invest. Take money out of the market when you need money to spend.

Nobody actually knows what the chances of the stock market going up or down will be. Nobody really knows if there will be a recession. The fear of one has already dropped the markets quite a bit. Whether the recession will be worse than expected or not happen at all is anybody's guess.

Ray Dalio is primarily in the business of collecting fees from people who choose to invest in his funds, not investing per-se. The actual investments are just necessary to getting people to park his money in his funds. His investors could just skip his funds and buy VTI or VOO, but for various reasons they choose not to. The problem with hedge funds is that market-beating performance caused by luck is typically indistinguishable from market beating performance caused by skill.

Even legendary investors tend to mean revert after a sufficient time horizon. Warren Buffet beat the market for decades, but BRK now basically matches it for the most part. Or worse, you have someone like Bernie Madoff who beat the market for a decade before we all found out how.

The point for a biglaw attorney is that you don't have to beat the market. You make enough money that market returns are enough to amass a pretty healthy nest egg if you make a reasonable effort to control spending- even retire early if you want. If you are trying to beat the market, you have to ask yourself why. What is it that you want to buy that market returns won't allow you to have? Are you comfortable with below market returns in your efforts to achieve above market returns?

[Wanderingdrock]

To answer your question, the point I'm making is that just because it's down doesn't mean it's on discount.

The pods I mentioned are pretty uniform in saying that we are in for some pain in 2023.

One I especially like is "We Study Billionaires". Jan 12, the permanent supply chain disruptions that will sink the economy with Jim Rickards.

I guess we can meet again Jan 2024 and see who was right.

I'm done. It was nice talking to you.

We can all reconvene in January 2024 but you're still not going to be "right." Given the information we have today, which indicates that lump sum investing is the best rational economic decision, we are going to be right whether the 2023 datapoint shifts that view marginally more strongly or weakly.

But when to invest that lump sum?
How about if there's a strong chance of recession?
Invest the lump sum anyway as soon as you get it?
Should Ray Dalio at Bridgewater fire the hundreds of people who work for him and simply funnel all incoming new money into the S&P 500? As it comes in the door?

When to invest - as soon as you get it (that's generally what we mean by the term "lump sum investing").
Strong chance of recession - risk is presumably priced in, do it unless you have a reason to act conservatively and DCA it, understanding that you are likely to lose out on some gains using this strategy.
Ray Dalio - if you're Ray Dalio, you can disregard my advice. (My bad for condescending to explain basic finance to you, Ray. And these are basic financial concepts - "Don't try to predict recessions, on average you will lose money as an average investor doing this" is not some crazy idea but an established concept backed by lots of evidence.) But obviously Ray Dalio is doing something different - his hedge fund picks companies to invest in, so there's a lot more than just trying to time the market (which is also something that hedge funds are generally not very good at doing).

[sparty99]

Time to invest was 2 weeks ago when southwest stock went down. Could have had a 20 percent return by now.

[Wanderingdrock]

Why does Berkshire Hathaway have $149bil cash on hand, Jan 2023? Maybe investing lump sum is not most rational approach?

Buffett had $147b on hand at the beginning of 2022 and then spent more than a third of that by April. Who knows what he's saving his powder for? Presumably he's doing research, looking for the right opportunities. He picks stocks, he doesn't time the market.

[nealric]

Why does Berkshire Hathaway have $149bil cash on hand, Jan 2023? Maybe investing lump sum is not most rational approach?

Buffett had $147b on hand at the beginning of 2022 and then spent more than a third of that by April. Who knows what he's saving his powder for? Presumably he's doing research, looking for the right opportunities. He picks stocks, he doesn't time the market.

I think Buffet/BRK bases their investment on a set of criteria. Since everything was fairly expensive in 2021/early 22, there may simply have not been enough deals out there that met their criteria, so the cash just piled up. They can't just shove money into the index like an individual can- they need to find specific individual investment opportunities that make sense. Buffett tells individuals to just buy the index.

[jamestaylorrecordsas]

Buffet doesn't time the market? Of course he does.
Google:
"Warren Buffett Invested $5B in Goldman During the 2008 Crisis. What’s It Worth Now?"

[thisismytlsuername]

Dang James Taylor, I didn't realize we had an investment professional at the level of Warren Buffet on this board! I agree that you, a Warren Buffet-level investor, don't need the advice in this thread!

[jamestaylorrecordsas]

Dang James Taylor, I didn't realize we had an investment professional at the level of Warren Buffet on this board! I agree that you, a Warren Buffet-level investor, don't need the advice in this thread!

That's very nice of you to say but I still need advice on this thread after watching my Cisco call options go from $4.8m to zero in early 2000.

Takeaway: You only need to get rich once.

[Wanderingdrock]

Buffet doesn't time the market? Of course he does.
Google:
"Warren Buffett Invested $5B in Goldman During the 2008 Crisis. What’s It Worth Now?"

Look man, you don't want to accept the wisdom folks are dumping all over you ITT, don't, but stop being so silly. Warren Buffett, in his own words, doesn't time the market:

"We haven't the faintest idea what the stock market is gonna do when it opens on Monday — we never have. We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money. ... I don't think we've ever made a decision where either one of us has either said or been thinking: 'We should buy or sell based on what the market is going to do.' Or, for that matter, what the economy is going to do."

"The only value of stock forecasters is to make fortune-tellers look good."

"If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes."

"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

"Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."

He's even widely attributed with having said, "It's not about timing the market, but about time in the market," though this one might be apocryphal.

Point is, he's a value investor. He's literally the most famous value investor ever, in addition to being famous for telling people NOT to try to time the market. He picks companies he thinks are undervalued and invests in them - he doesn't time the market, and the fact that you're getting these concepts confused should really stop you from arguing with all of us, take a step back, and assess why a couple of podcasts have you convinced that you've defeated the Dunning-Kruger effect.

[Anonymous User]

Off-topic. North of 120k? Wow. At my V20 overseas satellite office, I billed above my firm's bonus target last year, but was told due to my mixed reviews, there's some risk that I might not get the full market bonus. US scale comp, same class year as OP. Partner's vouching for me, but I don't know how it will pan out and nothing's certain. I worked my ass off last year despite the crazy, patchy deal flow where I probably billed 3/4 of my hours in the first half of that year. Nothing to contribute to the discussion. Just sad.

[Anonymous User]

Off-topic. North of 120k? Wow. At my V20 overseas satellite office, I billed above my firm's bonus target last year, but was told due to my mixed reviews, there's some risk that I might not get the full market bonus. US scale comp, same class year as OP. Partner's vouching for me, but I don't know how it will pan out and nothing's certain. I worked my ass off last year despite the crazy, patchy deal flow where I probably billed 3/4 of my hours in the first half of that year. Nothing to contribute to the discussion. Just sad.

OP here - that's really unfortunate. I count myself as both lucky and unlucky to be at a firm that gives extra hours bonuses almost automatically. Lucky because, well, it's extra cash. Unlucky because, at least in my group, there's a real race to the bottom mindset on hours. The partners feel good about overloading us because we're "learning" and get "rewarded" with small sums for high hours. I calculated out my hourly rate for the extra hours I worked a few years ago and I would have done better driving Uber for that extra time. But I'd rather that than nothing.

[jamestaylorrecordsas]

Buffet doesn't time the market? Of course he does.
Google:
"Warren Buffett Invested $5B in Goldman During the 2008 Crisis. What’s It Worth Now?"

Look man, you don't want to accept the wisdom folks are dumping all over you ITT, don't, but stop being so silly. Warren Buffett, in his own words, doesn't time the market:

"We haven't the faintest idea what the stock market is gonna do when it opens on Monday — we never have. We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money. ... I don't think we've ever made a decision where either one of us has either said or been thinking: 'We should buy or sell based on what the market is going to do.' Or, for that matter, what the economy is going to do."

"The only value of stock forecasters is to make fortune-tellers look good."

"If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes."

"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

"Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."

He's even widely attributed with having said, "It's not about timing the market, but about time in the market," though this one might be apocryphal.

Point is, he's a value investor. He's literally the most famous value investor ever, in addition to being famous for telling people NOT to try to time the market. He picks companies he thinks are undervalued and invests in them - he doesn't time the market, and the fact that you're getting these concepts confused should really stop you from arguing with all of us, take a step back, and assess why a couple of podcasts have you convinced that you've defeated the Dunning-Kruger effect.

I know it's all over Google how Buffett says he doesn't do market timing. A review of history tells us something very different.

1) Buffett and market timing with airline stocks. He bailed out of airline stocks in Apr 2020. "The world has changed for airlines," Buffett said when announcing the liquidation. What does he mean by that? Covid. Like the travel downturn, no one anticipated the swift rebound of domestic flying in the United States in 2021. That rebound, along with government support and ample liquidity, has seen the stock prices of all four airlines increase since Buffett sold out. If you measured gains from the worst troughs in May 2020, the rebound across all four airlines was even better. United Airlines was up over 200% over the period, while American Airlines was up 190%. Buffett did not sell when airline stock prices were at their worst. But he broke a cardinal investment rule and sold in a slump.

Buffett can say that he didn't do market timing when he sold the airlines when Covid started, but it's the old saying "Who are you going to believe, me or your lying eyes?"
Above from: How Have Warren Buffett's Airline Shares Done Since Being Sold? (simpleflying.com)

2) Vid of Berkshire shareholder meeting. Title of vid "I totally missed the market timing in March 2020, says Warren Buffett". Very start of vid, the question was posed to Buffett, why did you get out in 1969, back in in 1972, then a repeat of that in 1987, 1999, 2000. Buffet does not respond regarding the above dates given by the questioner. Hear it for yourself by watching the vid.
At 3:20 of the vid Buffett claimed we're not good at market timing but we are good at deciding when we're getting enough for our money.

Isn't that market timing by another name?

[nealric]

Buffet doesn't time the market? Of course he does.
Google:
"Warren Buffett Invested $5B in Goldman During the 2008 Crisis. What’s It Worth Now?"

Look man, you don't want to accept the wisdom folks are dumping all over you ITT, don't, but stop being so silly. Warren Buffett, in his own words, doesn't time the market:

"We haven't the faintest idea what the stock market is gonna do when it opens on Monday — we never have. We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money. ... I don't think we've ever made a decision where either one of us has either said or been thinking: 'We should buy or sell based on what the market is going to do.' Or, for that matter, what the economy is going to do."

"The only value of stock forecasters is to make fortune-tellers look good."

"If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes."

"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

"Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."

He's even widely attributed with having said, "It's not about timing the market, but about time in the market," though this one might be apocryphal.

Point is, he's a value investor. He's literally the most famous value investor ever, in addition to being famous for telling people NOT to try to time the market. He picks companies he thinks are undervalued and invests in them - he doesn't time the market, and the fact that you're getting these concepts confused should really stop you from arguing with all of us, take a step back, and assess why a couple of podcasts have you convinced that you've defeated the Dunning-Kruger effect.

I know it's all over Google how Buffett says he doesn't do market timing. A review of history tells us something very different.

1) Buffett and market timing with airline stocks. He bailed out of airline stocks in Apr 2020. "The world has changed for airlines," Buffett said when announcing the liquidation. What does he mean by that? Covid. Like the travel downturn, no one anticipated the swift rebound of domestic flying in the United States in 2021. That rebound, along with government support and ample liquidity, has seen the stock prices of all four airlines increase since Buffett sold out. If you measured gains from the worst troughs in May 2020, the rebound across all four airlines was even better. United Airlines was up over 200% over the period, while American Airlines was up 190%. Buffett did not sell when airline stock prices were at their worst. But he broke a cardinal investment rule and sold in a slump.

Buffett can say that he didn't do market timing when he sold the airlines when Covid started, but it's the old saying "Who are you going to believe, me or your lying eyes?"
Above from: How Have Warren Buffett's Airline Shares Done Since Being Sold? (simpleflying.com)

2) Vid of Berkshire shareholder meeting. Title of vid "I totally missed the market timing in March 2020, says Warren Buffett". Very start of vid, the question was posed to Buffett, why did you get out in 1969, back in in 1972, then a repeat of that in 1987, 1999, 2000. Buffet does not respond regarding the above dates given by the questioner. Hear it for yourself by watching the vid.
At 3:20 of the vid Buffett claimed we're not good at market timing but we are good at deciding when we're getting enough for our money.

Isn't that market timing by another name?

What BRK does is pretty irrelevant to what you, an individual, does. BRK is not buying the total stock market. It is investing in individual companies, and of course there will always be a timing component with respect to when it gets in/out. It is doing so with tens of billions of dollars, which means the very act of its investment moves share prices of the companies it buys. Moreover, it can participate in/influence management of companies, or just buy them outright. Until you are playing with enough money to buy board seats, what BRK does is not relevant to you.

[nealric]

Dang James Taylor, I didn't realize we had an investment professional at the level of Warren Buffet on this board! I agree that you, a Warren Buffet-level investor, don't need the advice in this thread!

That's very nice of you to say but I still need advice on this thread after watching my Cisco call options go from $4.8m to zero in early 2000.

Takeaway: You only need to get rich once.

If you get rich quick, you may very well need to get rich more than once, because the type who gets rich quick with a speculative investment is also the type who may take risky bets to get even more rich.

[Wanderingdrock]

Buffet doesn't time the market? Of course he does.
Google:
"Warren Buffett Invested $5B in Goldman During the 2008 Crisis. What’s It Worth Now?"

Look man, you don't want to accept the wisdom folks are dumping all over you ITT, don't, but stop being so silly. Warren Buffett, in his own words, doesn't time the market:

"We haven't the faintest idea what the stock market is gonna do when it opens on Monday — we never have. We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money. ... I don't think we've ever made a decision where either one of us has either said or been thinking: 'We should buy or sell based on what the market is going to do.' Or, for that matter, what the economy is going to do."

"The only value of stock forecasters is to make fortune-tellers look good."

"If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes."

"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

"Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."

He's even widely attributed with having said, "It's not about timing the market, but about time in the market," though this one might be apocryphal.

Point is, he's a value investor. He's literally the most famous value investor ever, in addition to being famous for telling people NOT to try to time the market. He picks companies he thinks are undervalued and invests in them - he doesn't time the market, and the fact that you're getting these concepts confused should really stop you from arguing with all of us, take a step back, and assess why a couple of podcasts have you convinced that you've defeated the Dunning-Kruger effect.

I know it's all over Google how Buffett says he doesn't do market timing. A review of history tells us something very different.

1) Buffett and market timing with airline stocks. He bailed out of airline stocks in Apr 2020. "The world has changed for airlines," Buffett said when announcing the liquidation. What does he mean by that? Covid. Like the travel downturn, no one anticipated the swift rebound of domestic flying in the United States in 2021. That rebound, along with government support and ample liquidity, has seen the stock prices of all four airlines increase since Buffett sold out. If you measured gains from the worst troughs in May 2020, the rebound across all four airlines was even better. United Airlines was up over 200% over the period, while American Airlines was up 190%. Buffett did not sell when airline stock prices were at their worst. But he broke a cardinal investment rule and sold in a slump.

Buffett can say that he didn't do market timing when he sold the airlines when Covid started, but it's the old saying "Who are you going to believe, me or your lying eyes?"
Above from: How Have Warren Buffett's Airline Shares Done Since Being Sold? (simpleflying.com)

2) Vid of Berkshire shareholder meeting. Title of vid "I totally missed the market timing in March 2020, says Warren Buffett". Very start of vid, the question was posed to Buffett, why did you get out in 1969, back in in 1972, then a repeat of that in 1987, 1999, 2000. Buffet does not respond regarding the above dates given by the questioner. Hear it for yourself by watching the vid.
At 3:20 of the vid Buffett claimed we're not good at market timing but we are good at deciding when we're getting enough for our money.

Isn't that market timing by another name?

No, it's not. It's analyzing the fundamentals of specific companies. He was wrong and he admits that, but it's still not market timing.

[jamestaylorrecordsas]

2) Vid of Berkshire shareholder meeting. Title of vid "I totally missed the market timing in March 2020, says Warren Buffett". Very start of vid, the question was posed to Buffett, why did you get out in 1969, back in in 1972, then a repeat of that in 1987, 1999, 2000. Buffett does not respond regarding the above dates given by the questioner

It's real easy to access the above vid.
The questioner at the Berkshire shareholder meeting is giving Buffett examples of Buffett's market timing, and Buffett evades the question.

Any comment?

Let me also mention the sweetheart deal Buffett made with Goldman during the 2008-09 meltdown. It's all over Google. The $5bil infusion into Goldman made Berkshire a $3bil profit.

If that's not Buffett doing market timing then what is it?

Having a lot of dry powder and waiting for a calamity

It's all in the timing

[Wanderingdrock]

2) Vid of Berkshire shareholder meeting. Title of vid "I totally missed the market timing in March 2020, says Warren Buffett". Very start of vid, the question was posed to Buffett, why did you get out in 1969, back in in 1972, then a repeat of that in 1987, 1999, 2000. Buffett does not respond regarding the above dates given by the questioner

It's real easy to access the above vid.
The questioner at the Berkshire shareholder meeting is giving Buffett examples of Buffett's market timing, and Buffett evades the question.

Any comment?

Let me also mention the sweetheart deal Buffett made with Goldman during the 2008-09 meltdown. It's all over Google. The $5bil infusion into Goldman made Berkshire a $3bil profit.

If that's not Buffett doing market timing then what is it?

Having a lot of dry powder and waiting for a calamity

It's all in the timing

This is dumb. I already told you. It's value investing. He bought something when it was down, expecting it to go up, based on an analysis of its fundamentals. He's not waiting for a calamity, he's waiting for something good to buy, which may or may not coincide with a broader market drop.

To the extent you're saying it's "market timing" to make a decision on when to buy or sell a particular stock simply because you decided to buy or sell at this moment rather than last week when the price was different, you're being pedantic, particularly in a conversation about whether to lump sum invest or not.

I'm done explaining. If you can't even agree on what some basic terms mean, you're not going to accept advice in a conversation structured around those terms. Go ahead and have the last word if you like, I am past caring, just don't want others to come into this thread and leave with some effed up ideas regarding their personal finances.

[jamestaylorrecordsas]

Take me out of it.
Focus on the guy at the Berkshire shareholder meeting (video link above) giving Buffett 5 examples of his market timing, and then Buffett evades the question, calling it "getting value for the money".

Buffett could not coherently explain, date by date, why there was no market timing. So the question of the shareholder was never answered. It's in the video for all to see.

So don't believe these words on a screen, see the video for yourself of Buffett evading the question.

Buffett selling all his airline stocks when Covid began, Mar-May 2020, and then seeking to buy them all back when there's a vaccine and recovery. That's not market timing?

[jamestaylorrecordsas]

I forgot. This is more applicable to the thread.

If Buffett can sit on $149bil in cash and wait for an opportunity, calamity or no calamity, then why should a 25 yr old with his bonus feel foolish for sitting on his $100k and waiting for a similar opportunity?

[nixy]

I forgot. This is more applicable to the thread.

If Buffett can sit on $149bil in cash and wait for an opportunity, calamity or no calamity, then why should a 25 yr old with his bonus feel foolish for sitting on his $100k and waiting for a similar opportunity?

I kinda doubt Buffett was sitting on $149 billion in his checking account.

[jamestaylorrecordsas]

Google, Buffett’s Cash Pile Tops Record With $149.2 Billion

And if it was all in cash, banks don't want it since the bank has to pay FDIC insurance on it, so, contrary to popular opinion, banks were telling people like Buffett to get the cash out of here or actually have Buffett pay to keep the cash at the bank.

I know it's counterintuitive.

So if you think banks were bending over backwards to accept Buffett's cash, that's a misconception. If I'm wrong about this I'd like someone in banking to correct me.

[Anonymous User]

I forgot. This is more applicable to the thread.

If Buffett can sit on $149bil in cash and wait for an opportunity, calamity or no calamity, then why should a 25 yr old with his bonus feel foolish for sitting on his $100k and waiting for a similar opportunity?

I kinda doubt Buffett was sitting on $149 billion in his checking account.

OP here - I also can't really take advantage of the same opportunities as Buffet. I don't have time to dig into particular investments and even if I did, my firm's securities trading policy would slow me down, if not stop me. Plus, I don't have a billion dollar BSD to waive around looking for a discount.

I'm really just trying to choose the best time to invest my bonus in an index fund given on the one hand conventional wisdom and on the other increased uncertainty regarding a recession.

[nixy]

I forgot. This is more applicable to the thread.

If Buffett can sit on $149bil in cash and wait for an opportunity, calamity or no calamity, then why should a 25 yr old with his bonus feel foolish for sitting on his $100k and waiting for a similar opportunity?

I kinda doubt Buffett was sitting on $149 billion in his checking account.

OP here - I also can't really take advantage of the same opportunities as Buffet. I don't have time to dig into particular investments and even if I did, my firm's securities trading policy would slow me down, if not stop me. Plus, I don't have a billion dollar BSD to waive around looking for a discount.

I'm really just trying to choose the best time to invest my bonus in an index fund given on the one hand conventional wisdom and on the other increased uncertainty regarding a recession.

Exactly, the Buffett discussion is irrelevant. I’m going to again advocate for investing in an index fund and forgetting it regardless of a potential recession, in part because it’s not clear to me what your alternative would be - money in the market will grow over the long term regardless of potential recession losses, whereas sitting on that money means it won’t grow at all.