Author Topic: Where to put a large windfall with stock market near all-time highs?  (Read 2470 times)

dudermcgee

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Hi All,
I'm new to this early retirement movement, but it has me very excited. I'm 34, and my wife is 33. We recently sold a business and now have cash well into the 6-figures. We have some concern with putting the money into the market via Vanguard index funds that are near all-time highs. I know it doesn't make sense "time the market," but at the same time, I've used the F.I.R.E calc simulator and investing in the "wrong" year can really hurt early retirement plans.

I'm curious what people might recommend. Thanks in advance for any insights or recommendations.

DuderMcgee



Exflyboy

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #1 on: December 09, 2015, 12:21:48 PM »
Well what is your time horizon.. do you think the market will be higher in say 10 or 20 years?

What makes you think it won't go higher next year?

OK that's the logic out of the way.

How about this, wait for the interest rate hike (next week?) then invest at 75% stocks and 25% bonds.

If the market tanks, your bonds will go up (probably) and you can roll that bond money when the market has fallen to where you think you might be closer to the bottom.. If the market continues to rise.. well you lost some gains but you won't lose money.

matchewed

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #2 on: December 09, 2015, 12:22:14 PM »
If you're worried about a sudden crash then you DCA (dollar cost average) the money. But just an FYI lump sum beats DCA usually.

And for the record craft an Investment Policy Statement http://www.bogleheads.org/wiki/Investment_policy_statement which will guide you in the how to invest any sort of money that comes your way, windfall or not.

dudermcgee

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #3 on: December 09, 2015, 12:31:04 PM »
Thanks, guys. If things continue as planned, our time horizon for early retirement is 3-5 more years to achieve a 3% SWR (I'd like to play this a bit more conservatively).

We've been dollar cost averaging since 2004, which I'm much more comfortable with than lump sum investing. Investing a lump sum this large is new to us.

Thanks again for the advice.

Eric

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #4 on: December 09, 2015, 12:32:03 PM »
We have some concern with putting the money into the market via Vanguard index funds that are near all-time highs. I know it doesn't make sense "time the market," but at the same time, I've used the F.I.R.E calc simulator and investing in the "wrong" year can really hurt early retirement plans. I want to try to time the market.

Hi Duder.  Welcome!  I've fixed up your quote above to reflect what you're really asking.  You say you know to not time the market, so don't try to time the market.  Simple!

The thing is, the market is almost always near all time highs.  If you waited until it wasn't, then you'd practically never invest.

Eric

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #5 on: December 09, 2015, 12:34:29 PM »
We've been dollar cost averaging since 2004, which I'm much more comfortable with than lump sum investing. Investing a lump sum this large is new to us.

I have good news for you.  You've been lump sum investing this entire time!  You invested as much as you had available as soon as it was available, right?  That's lump sum.  So you should already be perfectly comfortable with it.  :)

It's only DCA if you purposefully space out your investment over time when you had the option to invest all at once.

Exflyboy

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #6 on: December 09, 2015, 12:37:35 PM »
We have some concern with putting the money into the market via Vanguard index funds that are near all-time highs. I know it doesn't make sense "time the market," but at the same time, I've used the F.I.R.E calc simulator and investing in the "wrong" year can really hurt early retirement plans. I want to try to time the market.

Hi Duder.  Welcome!  I've fixed up your quote above to reflect what you're really asking.  You say you know to not time the market, so don't try to time the market.  Simple!

The thing is, the market is almost always near all time highs.  If you waited until it wasn't, then you'd practically never invest.

That's a very good point Eric.. I hadn't thought of that!

Eric

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #7 on: December 09, 2015, 12:53:08 PM »
I found the old thread (18 months ago) where shuffler actually did the math on this.  Worth a quick read:

http://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/

use2betrix

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Re: Where to put a large windfall with stock market near all-time highs?
« Reply #8 on: December 09, 2015, 12:56:38 PM »
I've mentioned this in other threads, but while the overall stock market (like VTSAX) is at an all time high, not all industries are. I'm newer to investing, but see with what you're saying. For that reason lately I've been investing into some individual major oil companies as well as VGENX. I had a pretty good sized emergency fund I needed to start investing. Oil prices are at a 7 year low, and stocks are way down as well. I feel far better dumping money into VGENX right now than my VTSAX. My VGENX isn't planned to be as long term as my VTSAX, but for the next few years I feel more confident with it.

Don't take my word on it, and I'm far from a professional. Just some advice to look into, for at least some diversity in your investments. About 20% of my investments right now are in energy/oil&gas.