Author Topic: The whole pile or one shovel full at a time?  (Read 1218 times)

Wordstew

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The whole pile or one shovel full at a time?
« on: February 08, 2016, 06:38:37 PM »
Would you throw a large lump some of $$ the stock market today given the recent market downward trend or would you dollar cost average
« Last Edit: February 08, 2016, 06:54:14 PM by Wordstew »

wwweb

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Re: The whole pile or one shovel full at a time?
« Reply #1 on: February 08, 2016, 07:11:55 PM »
How large  is a large lump of money?

My general rule of thumb is that extremely large sums (e.g. more than a year's salary or 30% your savings) should be dollar cost averaged into the market over about 3 years. This reduces your expected return, but also significantly reduces the risk that bad timing (luck) results in below average market returns for decades.

If it is only a moderately large sum of money (e.g. a bonus equivalent to a few months salary) then I just invest it as I would any other savings.

Notice that at no point did I mention the recent market behavior - trying to make decisions that way is a losing game.
« Last Edit: February 08, 2016, 07:21:15 PM by wwweb »

Giro

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Re: The whole pile or one shovel full at a time?
« Reply #2 on: February 09, 2016, 01:03:13 PM »
I tend to agree with the last poster.  My DH and I put $2500 in our personal account every two weeks.  Our 401k is also invested every two weeks.  If we have a windfall of more than $20k or so, I like to break it up into smaller amounts.  4x $5k would work in that scenario.  If we are talking about $100K or more, I would break it up over a year just to avoid any dips in the market.