Author Topic: Invest all at once in etf or over time?  (Read 1213 times)

Postmann007

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Invest all at once in etf or over time?
« on: August 01, 2018, 04:33:11 AM »
My first post and happy to be part of this forum. I will directly get to the point:

Situation is that I inherited 200k. I want to invest this in etf but not all at the same time. This, because i want to decrease the risk of investing short before a bear market.

Over what time should i invest the money in etf? Happy to hear whether there is maybe statistics, models etc. in place which helps to determine over how many months/years i should spread the investment.

Additional information: My goal is to retire in 10y. I have a job and will continously invest the savings over the next years.

ziopfan

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Re: Invest all at once in etf or over time?
« Reply #1 on: August 01, 2018, 06:07:30 AM »
Classic, first thing to read re: this question:

Read About Bob, The Worst Market Timer
What happens if you only invested at market highs?
http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Hargrove

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Re: Invest all at once in etf or over time?
« Reply #2 on: August 01, 2018, 08:06:28 AM »
In other words, it's scary, and it feels a little too much like a bet to buy-in 100% right now.

But your odds are always best to invest whatever you have to invest now.

The stock market tends to go up. That being the case, you are betting that it won't go up every day you don't invest, which is betting against a very long-running trend.

Lots of people who are paid gobs of money to guess these things sat out all the growth of 2015... 2016... 2017...

You see a risk if you invest today and boom - bear market tomorrow. But what if you invest a little today, and miss gains... a little tomorrow... miss more gains... and so on through the next 6 months, and THEN bear market? You'll have skipped most of the gains to buy extra-expensive stock and you'll still have to weather the downturn.

Financial.Velociraptor

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Re: Invest all at once in etf or over time?
« Reply #3 on: August 01, 2018, 08:22:38 AM »
Invest it all now.  Time in the market always beats market timing. 

Also note, the people who cheer 'dollar cost averaging', never tell you to DCA when SELLING...  It's voodoo.

capitalninja

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Re: Invest all at once in etf or over time?
« Reply #4 on: August 02, 2018, 07:32:24 AM »
Put it all in now. Less headache and 5 - 10 years from now, it won't matter.

By putting it all in now, you benefit from the additional dividend income which helps grow your wealth faster.
« Last Edit: August 05, 2018, 09:08:02 AM by capitalninja »

SuperSecretName

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Re: Invest all at once in etf or over time?
« Reply #5 on: August 02, 2018, 08:15:36 AM »
like others mention, DCA is not optimal.

However, for many people it's an emotional, not a logical reaction.

One thing you can do is split the difference.  Lump sump half now and DCA the rest over the next 12 months.

Mother Fussbudget

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Re: Invest all at once in etf or over time?
« Reply #6 on: August 02, 2018, 10:29:07 AM »
This question has been asked, and answered a NUMBER of times over the years here.  I suggest using your favorite search engine...
(hint:  the 'search bar' above is NOT the best - the real issue is the 'big data' problem - there's TOO MUCH good advice here to find anything!)

Search for:  "forum.mrmoneymustache.com dollar cost average or all at once"

Read as many of those posts as you can, until you're sick of reading, and then decide for yourself.

All the best!  MFB

chasesfish

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Re: Invest all at once in etf or over time?
« Reply #7 on: August 03, 2018, 05:55:15 AM »
Both are okay.

Statistically based on the highest returns, you are better off investing the entire lump sum now.

You reduce the risk of volatility at the expense of likely lower returns by dollar cost averaging.

Its your money, your choice.   Most people have commented like I would, I'd make the higher risk/higher return decision and invest it all

Hargrove

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Re: Invest all at once in etf or over time?
« Reply #8 on: August 04, 2018, 12:07:12 PM »
"Higher risk" is not quite framing the whole situation...

It feels super risky to invest all at once because it's proactive, and people new to investing think they "won" or "lost" as soon as the balance goes up or down. There is no balance. You only take your money when you get off the ride. The "balance" is just what you could get IF you got off the ride RIGHT NOW.

Doing nothing is also risk, and that risk is very high. You risk growth (likely, and you're missing all of it) and inflation (likely, and you're losing all of it).

One

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Re: Invest all at once in etf or over time?
« Reply #9 on: August 04, 2018, 12:17:51 PM »
Invest in short term treasuries and slowly transfer into the s&p500 index fund over time.

Warren Buffett rules for investing,
Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1

https://www.investopedia.com/financial-edge/0210/rules-that-warren-buffett-lives-by.aspx

MustacheAndaHalf

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Re: Invest all at once in etf or over time?
« Reply #10 on: August 05, 2018, 02:58:35 AM »
Invest in short term treasuries and slowly transfer into the s&p500 index fund over time.

Warren Buffett rules for investing,
...
When has Warren Buffet recommended someone start 100% in US Treasuries?

"Consistently buy an S&P 500 low-cost index fund" is his advice in general, and in particular repeated in this article:
https://www.cnbc.com/2018/01/03/why-warren-buffett-says-index-funds-are-the-best-investment.html

terran

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Re: Invest all at once in etf or over time?
« Reply #11 on: August 05, 2018, 08:27:21 AM »
Others have said it, but here's another source: https://personal.vanguard.com/pdf/ISGDCA.pdf

Lump sum investing beats dollar cost average 67% of the time, so on average it's best to invest it all at once. If you can't get yourself to do that then dollar cost averaging is a good behavioral finance trick to get yourself to invest as quickly as possible while minimizing regret if the markets do happen to drop after you invest, so dollar cost average over the shortest time period you're comfortable.

In other words, the best time to invest is now and the next best time to invest is as close to now as you can convince yourself to invest.

K-ice

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Re: Invest all at once in etf or over time?
« Reply #12 on: August 05, 2018, 09:47:54 AM »
I have seen the math but still would have a hard time pulling the trigger.

In the systematic methods does anyone know if the cash just sits there or makes interest?

For example a quick search shows a bank giving 2.25 (annual) for a 180 day secure deposit. (Tangerine in Canada) You can find savings accounts giving 1%.

I would probably:

Pay all debts except mortgage.
Set aside any large lumps for a new car or major Reno roof etc needed in next year.
(Shop around for Best bank savings promo)

With remaining:
20% invest now.
20% invest in 3 months
40% lock in Best 6 month secure deposit
(When that matures invest 1/2, put other 1/2 in savings & invest at the 9 month mark.)
20% put final 20% in Best 1 year secure deposit & invest once it matures.

The important thing is I wouldn’t want my money doing nothing. So always have your cash in a savings account or a secure deposit.

This seams a bit complicated but not as complicated as monthly.

Congratulations & good luck.


One

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Re: Invest all at once in etf or over time?
« Reply #13 on: August 05, 2018, 10:24:31 AM »
Many say it's statistically better to invest the lump sum. What if you only look at the historical data for investing the lump sum in the ninth or tenth year of bull markets. I don't know the answer because I'm too lazy to check but I bet the lump sum won't look so good. Probably not a great time to take the risk.

terran

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Re: Invest all at once in etf or over time?
« Reply #14 on: August 05, 2018, 10:45:11 AM »
Many say it's statistically better to invest the lump sum. What if you only look at the historical data for investing the lump sum in the ninth or tenth year of bull markets. I don't know the answer because I'm too lazy to check but I bet the lump sum won't look so good. Probably not a great time to take the risk.

See the link in the first post in this thread: https://forum.mrmoneymustache.com/investor-alley/invest-all-at-once-in-etf-or-over-time/msg2089998/#msg2089998 -- not only is that post describing investing well into a bull market, it describes investing ONLY at the very peak and it still works out.

One

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Re: Invest all at once in etf or over time?
« Reply #15 on: August 05, 2018, 10:55:31 AM »
Invest in short term treasuries and slowly transfer into the s&p500 index fund over time.

Warren Buffett rules for investing,
...
When has Warren Buffet recommended someone start 100% in US Treasuries?

"Consistently buy an S&P 500 low-cost index fund" is his advice in general, and in particular repeated in this article:
https://www.cnbc.com/2018/01/03/why-warren-buffett-says-index-funds-are-the-best-investment.html

Warren Buffett recommends DCA,
Look at number 3 in this article
https://www.fool.com/investing/2016/09/04/3-pieces-of-warren-buffett-wisdom-for-an-expensive.aspx

chiefsuave

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Re: Invest all at once in etf or over time?
« Reply #16 on: August 05, 2018, 11:01:24 PM »
You want to retire in 10yrs? Get your 10 yrs worth of time in the market. Jump in the waters nice but even if it gets a little rough, you are investing for the long term not fast cash.

Black or White/ 1's or 0's / Yes or No.
I say yes all at once.

PaulMaxime

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Re: Invest all at once in etf or over time?
« Reply #17 on: August 05, 2018, 11:35:35 PM »
I put 140K in the market right at the very peak of the marked in 2007 right before the great meltdown. I look back and I am way ahead of where I was back then.

I don't regret the worst possible timing one little bit. Would I have been better off waiting? It's not as clear as you might think. Once things started dropping maybe I would have second-guessed myself and perhaps I would have sat out all the way through the drop and back up again.

At least this way I put the money to work and thankfully didn't panic and sell out at the bottom so now it's all good.

Of course I've been working and saving for these 11 years and so I'm guessing are you. So even if you put it all in now and the market drops, these are not the last dollars you'll ever invest and so it will average out.

Another question for you: What if you decide to DCA and the market just keeps going up? Since you are scared of a downturn will you then decide to hold off and not put it in just in case it drops thereby missing out on all kinds of gains? You never know, the market may never be this low again.
« Last Edit: August 05, 2018, 11:37:57 PM by PaulMaxime »

Dabnasty

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Re: Invest all at once in etf or over time?
« Reply #18 on: August 06, 2018, 02:04:33 PM »
Many say it's statistically better to invest the lump sum. What if you only look at the historical data for investing the lump sum in the ninth or tenth year of bull markets. I don't know the answer because I'm too lazy to check but I bet the lump sum won't look so good. Probably not a great time to take the risk.

See the link in the first post in this thread: https://forum.mrmoneymustache.com/investor-alley/invest-all-at-once-in-etf-or-over-time/msg2089998/#msg2089998 -- not only is that post describing investing well into a bull market, it describes investing ONLY at the very peak and it still works out.

It still works out but I think what they were asking was, how does lump sum compare to DCA if you only account for instances 9+ years into a bull market. I think we need more specifics in order to answer that question, such as, how long will you stretch out the DCA method and what constitutes a pure bull market. Not to mention, there aren't enough instances of this happening to have any real meaning.