Is it right to enter IVV and NDQ for long run?

Discussion in 'Shares & Funds' started by mkbonline, 11th Jul, 2020.

Join Australia's most dynamic and respected property investment community
  1. mkbonline

    mkbonline Well-Known Member

    Joined:
    10th Nov, 2012
    Posts:
    52
    Location:
    Kellyville, NSW
    I am looking at start long term regular investment (monthly/quarterly) for next 10-15 years to build up my retirement kitty in a US equities based index fund like IVV and NDQ. I am waiting for dip in US market to make a lumpsum investment of $20k-$50k and follow it up with regular $2k-$4k monthly investment.

    But both IVV and NDQ have been relentlessly moving upward for last 3 months !

    My options

    1. Be more patient and wait for the next dip , may close to US election

    2. Start investing with $2k per month now without any upfront big lumpsum investment. Invest lumpsum amount whenever next big dip comes

    3. Invest in VAS now or individual quality but beaten down stocks like Qantas, CBA, Westpac, ANZ and NAB now - may $20k in total and begin invest in US index funds whenever next dip happens

    Both myself and spouse at highest income bracket but have nit accumulated any wealth in form of stock or property yet.
     
    Zenith Chaos likes this.
  2. ChrisP73

    ChrisP73 Well-Known Member

    Joined:
    5th Oct, 2018
    Posts:
    492
    Location:
    Brisbane
    Nobody knows.

    Here's what I would do.

    Decide your target asset allocation. Determine specific holdings that you will use to achieve that allocation. Decide what your buy periodicity will be.

    DCA across your target allocation with regular rebalances using your periodic buys.
     
  3. UncleDrew

    UncleDrew Well-Known Member

    Joined:
    9th Feb, 2020
    Posts:
    45
    Location:
    Brisbane
    What if the 15% dip comes after a further 40% gain? No one knows the future.
     
  4. Ross36

    Ross36 Well-Known Member

    Joined:
    14th Aug, 2015
    Posts:
    217
    Location:
    Cane Toad Country
    JL Collins would argue that IVV has been relentlessly going upwards forever.

    Stocks -- Part II: The Market Always Goes Up | jlcollinsnh

    My thoughts (not advice) is that from what you've said the lump sum investment isn't massive relative to the regular contributions, hence for me it wouldn't make sense to DCA the lump sum in. Given your regular contributions are equal to your lump sum within around a year I would personally put the lump sum in and then DCA as much as possible on set dates.

    As @ChrisP73 said though - before doing anything write up your investment plan which needs to have no wiggle room. Don't copy this, it's an example, but it can be as simple as "Invest the total lump sum in at market price on Monday 11th of July 2020, split evenly between VAS and IVV. Then buy VAS or IVV at market price on the 1st day of each month, starting with VAS on the 1st of August 2020 and alternating each month. The investment sum is all savings in our accounts minus 3 months expenditure as a safety net, which is $24,000."

    Whether you choose NDQ or IVV is a personal decision. For me IVV (and IJH) are heavy enough on tech that I don't feel the need to concentrate.
     
  5. Fargo

    Fargo Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,080
    Location:
    Vic
    Start with 2 k every month on NDQ with a low cost broker, as the price goes up may be add less, if the price falls may be add more. View your cash and holdings as one portfolio and understand price anchoring, it is the biggest mistake 90% of investors make(elliot wave included) as evidenced here. Be in control, just put your buy orders in, if it isnt triggered before next tranche due, buy at market and put another buy order in for the next contribution. If it is triggered put in a low ball order for next tranche (maybe 5% lower) 30-70% of VAS has ordinary companies ran by ordinary people, Banks and Qantas and other capital intensive stocks with short runways enough to be wary of, it may be ok for short term(5 yrs). Only 30% of the companies in it I would want to own. NDQ has the best companies ran by the best people in the world, much more growth potential and all the diversification you need in one. You could also look ATEC.
     
    Last edited: 11th Jul, 2020
    mkbonline likes this.
  6. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    4,604
    Location:
    WA
    Tech's going strong

    upload_2020-7-12_10-46-8.png
     
    SydneyBasedCouple likes this.
  7. Zenith Chaos

    Zenith Chaos Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    1,356
    Location:
    Sydney
    The response from @ChrisP73 is probably your best bet:

    1. You should keep investing with regular frequency aka DCA. Should you invest your $20k up front? I can't answer that question, but I can say based on a statistical average of historical events - you should. However, we are in very volatile times.
    2. Determine your target asset allocation and stick with it. The decision around asset allocation can be tough but start with the fully diversified "Total Market" as your base. The question of going overweight into NDQ is not trivial - technology (NDQ) has been the primary reason for the market turnaround and FAANG (Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google)) stocks have good reason to be looking at a brighter future. That being said, the efficient market principle says this future cashflow has been priced in already. Secondly, given NDQ is considered overvalued with mean reversion it could end up being a bad decision. Conversely, technology has the potential to keep growing compared to all other sectors. I myself have thought about this decision but I will stick with market capitalisation asset allocation for technology and take more of it as it increases.
    3. Tweaking your portfolio alpha with undervalued companies means you believe the value factor still exists. A completely valid point of view, as long as you stick with points 1 and 2.
    Good luck.
     
    blob2004 likes this.