Author Topic: $150k cash. How to get back into the market? Lump sum? Dollar cost avg?  (Read 1067 times)

FIREin2018

  • Stubble
  • **
  • Posts: 146
  • I did decide to Fire in 2018 @Age47! :)
Age 49, single, no kids, house paid off, Expenses = $20k/yr.
FiRED at age 47.

$150k is all after tax $. I don't need it to FiRE. It's my cushion.
I got out when VTSAX (Vanguard Total Market fund) was at $60.50.

my plan was to wait till the market re-tests the recent bottom, which is DOW @18.5k.
well, the Dow is now at 24k.
I missed the April rise, where the Dow had the best month in about 25years.

VTSAX is currently at $69, a 15% gain from when I left. :(
I'm tired of waiting and want to get back in.
What's the best plan of doing it with $150k?
Buy in with 1 lump sum?
Dollar cost avg (DCA)?
Or..?

If DCA, over what time period?
$15k/week for 10 weeks?
$15k/month for 10 months?
$15k every other month over 20 months? (1yr 8 months)

With 150k cash, at what interval would you buy into the Total Market fund?
« Last Edit: May 02, 2020, 05:04:01 PM by FIREin2018 »

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 7839
I'd just lump it in and stop thinking about it.

Villanelle

  • Magnum Stache
  • ******
  • Posts: 3591
Lump Sum.

If you truly can't stomach that, DCA it in the shortest time frame you can bring yourself to do. 

Rob_bob

  • Bristles
  • ***
  • Posts: 267
  • Location: Oregon
With current market volatility and covid-19/economy uncertainty I would DCA over the next six months.

johndoe

  • Stubble
  • **
  • Posts: 118
I am in no way qualified to give you financial advice; I'm just some guy on the internet.  Here's the last decade of VTSAX

For what it's worth I've taken ~20% of investment funds and moved it to cash.  Was it the right thing to do?  So far no; I'll let you know in a decade.  But I've probably done other non-idealized things (paying off mortgage, keeping emergency fund of >1 years worth of spending, going on vacation :), etc) and going a bit more cash makes me feel more secure in case the market goes below values of last fall.

When will I get in?  I don't know.  I was getting ready to admit defeat if Spy hit 305.  Is that logical?  No.  Sorry I'm not of much good to you, just thought I'd let you know you're not the only one!

Andy R

  • Bristles
  • ***
  • Posts: 324
More important than lump sum vs DCA is to face the reality that like most people you don't have the risk tolerance for 100% equities and that you should consider lowering your stock to equities allocation in future to avoid turn your 150k into 50k.

FIREin2018

  • Stubble
  • **
  • Posts: 146
  • I did decide to Fire in 2018 @Age47! :)
More important than lump sum vs DCA is to face the reality that like most people you don't have the risk tolerance for 100% equities and that you should consider lowering your stock to equities allocation in future to avoid turn your 150k into 50k.
the $150k is after tax.
overall with my retirement funds (401k/ira/roth), my Bonds is at the recommended 25% for people that FiRE.
once i invest that 150k back into the market, my stocks will be at the recommended 75%. (55% US stocks, 20% intl, 25% bonds)
« Last Edit: May 03, 2020, 09:19:54 AM by FIREin2018 »

FIREin2018

  • Stubble
  • **
  • Posts: 146
  • I did decide to Fire in 2018 @Age47! :)
Lump Sum.

If you truly can't stomach that, DCA it in the shortest time frame you can bring yourself to do.
Why put it all in the market as soon as possible?
Currently, the market is very volatile/huge swings during these pandemic times.

waltworks

  • Magnum Stache
  • ******
  • Posts: 4190
Lump Sum.

If you truly can't stomach that, DCA it in the shortest time frame you can bring yourself to do.
Why put it all in the market as soon as possible?
Currently, the market is very volatile/huge swings during these pandemic times.

Statistically, lump sum beats DCA pretty handily. There is of course more downside risk, but there is also a LOT more upside. Even at very high P/E ratios as we have now, lump sum wins by a little bit (and does better as the time horizon expands).

https://awealthofcommonsense.com/2018/05/the-lump-sum-vs-dollar-cost-averaging-decision/

If you're very loss averse, adjust your AA (75% stocks is probably too much) and DCA back in.

-W
« Last Edit: May 03, 2020, 10:54:22 AM by waltworks »

FIREin2018

  • Stubble
  • **
  • Posts: 146
  • I did decide to Fire in 2018 @Age47! :)
Why put it all in the market as soon as possible?
Currently, the market is very volatile/huge swings during these pandemic times.
Statistically, lump sum beats DCA pretty handily. There is of course more downside risk, but there is also a LOT more upside. Even at very high P/E ratios as we have now, lump sum wins by a little bit (and does better as the time horizon expands).

https://awealthofcommonsense.com/2018/05/the-lump-sum-vs-dollar-cost-averaging-decision/

If you're very loss averse, adjust your AA (75% stocks is probably too much) and DCA back in.

-W
ahh.. didnt know lump sum beats DCA most of the time.
THX!

as for 75% stock Asset Allocation (combined US and Intl) while FiRE as standard:
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-can-last-45years-on-the-4-rule/msg2301674/#msg2301674

Summary:
1) follow normal AA where you increase bonds the closer you are to retirement.
2) after FiRE, indirectly increase equity to 75% by selling bonds to pay for expenses to mitigate Sequence of Return Risk
3a) 50/25/25 mix and a safemax withdraw rate of 4.3%: if I never withdraw more than 4.3% of my portfolio in any year then i have a 95% chance of the $ lasting 40years but it might be $1 left.

3b) The perpetual withdrawal rate is 3.8% meaning if i never withdraw more than 3.8% of my portfolio in any year, i have a 95% chance of still having my initial principal after 40years!

4) Thus the general rule of thumb of 4% withdraw rate but that requires 50/25/25 AA for those of us that FiRE because we spend more years in retirement than those that retire at the regular age of 65.
We need more in equity for our $ to last the extra decade or 2.
« Last Edit: May 03, 2020, 12:04:18 PM by FIREin2018 »

KateFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 53
I am also timing the market with $200k. I DCA in on this rally, but I just sold this money 2 weeks ago. The market has been pretty flat since I sold. Now Iím trying to decide how to get back in. I donít feel comfortable with this market. Buying in now seems more like gambling than waiting in cash. What I see in my community doesnít match. I think we will soon see what direction this is going now that states have reopened. Will their business return? Will cases tick up? Soon we will know and then Iíll buy in. I figure there is much more downward potential than upward so I wonít miss much if I wait until this news is revealed.

Thatís what Iím doing. Against the grain here.

Villanelle

  • Magnum Stache
  • ******
  • Posts: 3591
Lump Sum.

If you truly can't stomach that, DCA it in the shortest time frame you can bring yourself to do.
Why put it all in the market as soon as possible?
Currently, the market is very volatile/huge swings during these pandemic times.
Yes, it's volatile, but know one knows what flavor of volatile it will be tomorrow or in a week or in a month.  Or in a year,  Or a decade. Waiting or DCAing could make you more money.  It could also lose you more money.  The thing about volatility is just that it means "lots of movement" with no indication what the overall direction trend of that movement will be or over what length of time the trend will take to form and how long it will continue.

There's the old platitude about time in the market being more important than timing the market. 

That's why I'd go with what history tells us which is that on average, lump sum is better than DCA.

NWOutlier

  • Stubble
  • **
  • Posts: 115
  • Age: 52
  • Location: Seattle Area
just an opinion from a random person

2500/wk for 60 weeks is my guess..... high volatility seems to benefit more with DCA... by doing 2500/wk you always have dry powder to do a random 10k+ investment. 

My side
I have 100k for the same situation
I put 40k into my taxable settlement account to pull 500/wk for 80 weeks (more than 1 year while the market does its thing)
I have the other 60k into savings that I am adding 2500 a month to extend the DCA or take advantage of a significant drop - so my 60k grows by 2500 a month to take advantage of the market.
I've been buying vtsax since 43/share... wish I would have started sooner.

this is just what I've done and what I think - add it to your consideration along with everyone else's input.. cause this group of people are AWESOME!!!!!!

Steve (NWOutlier)

Villanelle

  • Magnum Stache
  • ******
  • Posts: 3591
just an opinion from a random person

2500/wk for 60 weeks is my guess..... high volatility seems to benefit more with DCA... by doing 2500/wk you always have dry powder to do a random 10k+ investment. 

My side
I have 100k for the same situation
I put 40k into my taxable settlement account to pull 500/wk for 80 weeks (more than 1 year while the market does its thing)
I have the other 60k into savings that I am adding 2500 a month to extend the DCA or take advantage of a significant drop - so my 60k grows by 2500 a month to take advantage of the market.
I've been buying vtsax since 43/share... wish I would have started sooner.

this is just what I've done and what I think - add it to your consideration along with everyone else's input.. cause this group of people are AWESOME!!!!!!

Steve (NWOutlier)

But when would you do that?  What would trigger it?  Do you set a specific rate for the S&P, and then pull forward what would have been your last few weeks (of 60) and invest it?  One of the many problems with market timing is that many people just say they will do X when the market is up and Y when the market is down, never defining up or down.  So if it goes down 4%, is that down?  Then what if it goes down more?  Or does "down" mean 10%?  And likewise with up?  And is "up" from the low, or from the starting point? 


Heckler

  • Handlebar Stache
  • *****
  • Posts: 1361
I'm loving all these threads about how you can't time the market.  Thank you all for validating having an Asset Allocation plan and sticking to it. 

So far, I've only failed at timing a buy-in for an extra $2k cheque that wasn't part of the plan.  I missed out on last week of gains when I had the cash and should have invested it.

John Galt incarnate!

  • Handlebar Stache
  • *****
  • Posts: 1425
  • Location: On Cloud Nine

What's the best plan of doing it with $150k?
Buy in with 1 lump sum?
Dollar cost avg (DCA)?
Or..?

If DCA, over what time period?
$15k/week for 10 weeks?
$15k/month for 10 months?
$15k every other month over 20 months? (1yr 8 months)

With 150k cash, at what interval would you buy into the Total Market fund?


1. If it were ME I'd  LS  the entire $150K as it is always my practice to LS any extra $.  The reason I LS  entire amounts is that  research shows that  LS generates slightly better returns than DCA.

2. If you are a bit hesitant you can  LS  $75K now and DCA the other $75K over the next 6 months.

I've heard a few professional advisors recommend option 2:  LS 50% right away and DCA the other 50% over the next 6 months.

« Last Edit: May 03, 2020, 03:57:43 PM by John Galt incarnate! »

FIREin2018

  • Stubble
  • **
  • Posts: 146
  • I did decide to Fire in 2018 @Age47! :)
1. If it were ME I'd  LS  the entire $150K as it is always my practice to LS any extra $.

2.If you are a bit hesitant you can  LS  $75K now and DCA the other $75K over the next 6 months.

I've heard a few professional advisors recommend option 2:  LS 50% right away and DCA the other 50% over the next 6 months.
ooh... i like the 2nd choice.
good compromise!