Invest all at once?

[Its All About Value !!!]

I'm embarrassed to say that I haven't invested at all... and I have a large sum of money in the bank just inching along at 0.7% or something like that.  I know I should invest it (I'm thinking some vanguard funds), but I'm hesitant to put it all into funds at once fearing that if something bad happens, I'll instantly lose a certain percentage of that amount.  I know I could dollar cost average it over time... but is that dumb?  Talk me off the ledge here... or convince me to jump!

On a related note, I know that more risk = more reward, but what fund would you suggest that has the best resistance to decline in value when bad things happen?  Probably a bond fund, right?  Which one?

[Tradies wife]

Truth is, there isn't a lot of risk involved with investing. Well depending on where you invest.
While a large sum of money may be $500 to some and 10K to others, I'm not sure where you are going with this. But there are plenty of options.

My ausi perspective may be a little different to yours but here goes.

1. As safe as anywhere else, high interest accounts. ING happen to have accounts that are earning your 5.6% p/a. Nice little return. Ubank 5.71. You can get your money out at any time. Not bad really.

2. Term deposits. Yet again, just whack a large sum into a term deposit. Out of harms way from any notions of spending it for a short time. Around 5.21% pa from Ubank. But most large banks have these.

3. LEARN about the share market. Read some books, do some homework. Set up a share trading account and start off with one parcel ($500). Most fees involved here are around $20 per trade and are tax deductible. Hey if you have enough, do either 1 & or 2, and dabble with 1K investing in shares, learning along the way.

4. Property. Do your figures, if they stack up dive in. Maybe risker than other ways to earn some money. But I like to think of eventually getting rent as passive income once the investment has been paid off. One can dream....

1, 2 and 3 is where I would start though.

[gooki]

I'm going to assume large = $100k plus. In which case I'd be investing 10% per month into index funds. This is assuming you do not require this money for several years, and just want to see it grow.

[arebelspy]

I like lump sum, myself.

But dollar cost average and value cost averaging are both fine choices.

In most instances, it won't matter, so pick one and do it!  The hesitation will cost you more in opportunity cost than you'll likely lose to a dip.  It WILL dip at some point after you invest.  Be okay with that, and don't look at what the market is doing.

[frugal rph]

I am also embarrassed to say I have only invested money I don't plan on needing for at least 10 years or more.  I know we have way too much just sitting in a bank account, but I am not sure I can stomach much of a loss on this money either.  We finally decided to start with $5000 in VBINX and just see how that goes for awhile.  If we had been doing this all along, we may be at FI by now!

[Its All About Value !!!]

Thanks for the responses everyone!

@Tradies Wife - Maybe its the ausi thing... but your post kinda sounds like greek to me.  ING in the USA only gets 0.9%

@frugal rph - why don't you step up to 10k and go for the lower expense ratio VBIAX?

[Use it up, wear it out...]

What you're talking about doing by investing a lump sum over time is called Dollar Cost Averaging.

Simply put, it doesn't improve your returns - studies show that you will generally get worse returns than by simply investing the lump sum all at one.

http://faculty.chicagobooth.edu/george.constantinides/documents/JFQA_1979.pdf

The only real advantage of DCA is getting you into the market at all, and avoiding market timing, which is even worse.

FYI, don't confuse DCA with systematic investing - investing regularly into the market. The difference is whether or not you have the lump sum up front. If you have the lump sum, it's more likely to provide a better return to invest it up front. If you DON'T HAVE a lump some, they recommend investing regular amounts over time to avoid market timing, which produces the worst results of the 3 strategies.