Author Topic: 401K Rollover: DCA into the market, or maintain cash?  (Read 2143 times)

Kansas Beachbum

  • Stubble
  • **
  • Posts: 182
  • Location: Kansas City Metro
401K Rollover: DCA into the market, or maintain cash?
« on: March 10, 2015, 10:31:47 AM »
Morning all.  The Mrs. KBB and I are both in process of rolling our old 401k's to IRA's...about 650K, roughly half our stache.  I'm very comfortable developing an asset allocation plan and selecting funds (already done, actually).  With the markets near all time highs, and the bull market looking a little long in the tooth would you be inclined to just sit on the cash for a while?  Normally I'm not a "market timer" sort of person, that's a fool's errand, but given current market conditions it does make me stop to consider...

ZiziPB

  • Magnum Stache
  • ******
  • Posts: 3317
  • Location: The Other Side
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #1 on: March 10, 2015, 10:37:55 AM »
Was the money invested when it was in the 401ks or was it sitting in cash?  If it was invested and you were not rolling it over, would you have sold the investments to wait out the "high" market?  Why would the rollover change your view of the state of the markets and your strategy?

NotJen

  • Pencil Stache
  • ****
  • Posts: 612
  • Location: USA
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #2 on: March 10, 2015, 10:39:53 AM »
Don't try to time the market!

You are selling your existing funds at "market highs", so just buy your new funds all at once, and you should be in nearly the same position as before.

Kansas Beachbum

  • Stubble
  • **
  • Posts: 182
  • Location: Kansas City Metro
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #3 on: March 10, 2015, 10:52:32 AM »
Fully invested prior to the rollover, not a market timer.  The rollover represents a pretty unique situation that gives me pause...

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #4 on: March 10, 2015, 10:55:08 AM »
So to sum up, you're not a market timer, because it's a fool's errand.  Therefore, you should probably try to time market.  Is that about right?

And no, a rollover is not a unique situation.  At any point, you can sell off all your IRA holdings and sit in cash.  If you haven't done that before, why would you do it now? 

NotJen

  • Pencil Stache
  • ****
  • Posts: 612
  • Location: USA
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #5 on: March 10, 2015, 11:02:06 AM »
Fully invested prior to the rollover, not a market timer.  The rollover represents a pretty unique situation that gives me pause...
Like Eric said, and to reiterate, this is NOT a unique situation, since you can go to cash at any time in your retirement accounts.

ZiziPB

  • Magnum Stache
  • ******
  • Posts: 3317
  • Location: The Other Side
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #6 on: March 10, 2015, 11:11:31 AM »
BTW, I just realized that the title of your thread had only 2 options, DCA and cash.  I think that neither is a good strategy. What I think you should do is invest it all in accordance with your selected AA and be done with it.

RexualChocolate

  • Stubble
  • **
  • Posts: 222
Re: 401K Rollover: DCA into the market, or maintain cash?
« Reply #7 on: March 10, 2015, 11:51:50 AM »
Given no knowledge of the future (which is precisely what we have), DCA is empirically inferior to Lump Sum investing.

http://gersteinfisher.com/wp-content/uploads/2011/11/GF_Research_Does_Dollar_Cost_Averaging_Make_Sense_For_Investors.pdf

"Risk-averse investors, who may be unwilling to invest into risky assets all at once, find the piecemeal approach of DCA strategies emotionally comforting."

You can pick the type of investor you want to be.