The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Wordstew on February 08, 2016, 06:38:37 PM
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Would you throw a large lump some of $$ the stock market today given the recent market downward trend or would you dollar cost average
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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.
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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.