Author Topic: Lump Sum Benefit - what to do with the funds?  (Read 430 times)

boyerbt

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Lump Sum Benefit - what to do with the funds?
« on: September 17, 2019, 06:58:32 PM »
My wife asked me to pose the question to the forum even though I believe I know the majority’s answer being lump sum investment. With the recent sale of our company, I have received a large lump sum, how would you proceed: lump sum investment or dollar cost average? My train of thought was to invest the total amount in VTSAX equally over the next eight months while we’re traveling in lieu of a single lump sum investment.

This amount is cushion on our retirement plans and will only push us to FatFIRE with our plan for early retirement in roughly 20-22 years. What is everyone’s take?

Goldy

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Re: Lump Sum Benefit - what to do with the funds?
« Reply #1 on: September 18, 2019, 05:41:14 AM »
The math shows lump sum investing beating DCA but there is a physiological side to it as well.  After the sale of my house I had some money I tried to DCA but found that as the market went up I kept kicking myself for not investing the lump so within a couple weeks I changed my investment to lump sum and for me it was the right decision. 


terran

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Re: Lump Sum Benefit - what to do with the funds?
« Reply #2 on: September 18, 2019, 06:02:20 AM »
As @Goldy and Vanguard say, lump sum investing results in higher balances 67% of the time, however dollar cost averaging is a powerful regret minimization framework. Basically, the highest statistical return will result from the strategy that gets the money invested the fastest, so invest it as fast as you and your wife feel comfortable investing.

RWTL

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Re: Lump Sum Benefit - what to do with the funds?
« Reply #3 on: September 18, 2019, 06:11:50 AM »
With your example of this moving you to Fat Fire, I would just lump it in. With an outlook of 20 years, even a short term market correction can be tolerated.

Saving in Austin

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Re: Lump Sum Benefit - what to do with the funds?
« Reply #4 on: September 18, 2019, 10:16:50 PM »
This is a good piece about why lump sum beats DCA:

https://ofdollarsanddata.com/the-cost-of-waiting/