Chunk of Money: how to invest for newbie investor?

[GigiH]

Due to a good December, I have a chunk of about $8000 to invest right now. Wondering if I should just dump all of it into index funds now, or only put a couple thousand in each month for the next several months in hopes that the market keeps dropping? I hold in VTI, VTV, SDY and my "fun stock" of Plug Power. I will also have about $3000/month over the next year for investing, so what to do with the big chunk I have now?

[solon]

Have you reviewed the Investment Order? https://forum.mrmoneymustache.com/investor-alley/investment-order/ Follow these steps, in order, and you'll be fine.

[ATtiny85]

With $8,000 now and $3,000 per month going forward, I would not hesitate and simply dump the $8,000 in today.

Review that list posted and make sure you have filled them from top to(wards) bottom.

[GigiH]

I am currently self-employed, working as a massage therapist (catering to the non-Mustachian crowd and the already-too-wealthy-to-care folk). Most of the money I make is in cash with a portion of income from independent-contractor work through a massage app (similar to Uber but for massage therapists). I don't have a 401k, and I luckily have no debt either. I already have a safety net fund, so this money I'm asking about it purely for investment purposes. So, I should put most/all of this money in my IRA? Does anyone have specific index funds I haven't listed already they like that I should consider? Thanks...

[Rob_bob]

I would tend to dollar cost average into a bear market and lump sum into a Bull market.

I'm a fan of the Roth unless you need the tax deduction of the tIRA.

Invest according to your risk tolerance asset allocation.

Edit bear to Bull due to not proof reading my comment.

[MustacheAndaHalf]

Due to a good December, I have a chunk of about $8000 to invest right now. Wondering if I should just dump all of it into index funds now, or only put a couple thousand in each month ...

Tax software can help you estimate if you are caught up on estimated tax payments.  The next due date is 2 weeks away, so I would pay estimated taxes first.

Investing in SDY and VTV suggests you are investing defensively into value and dividend stocks.  From that I think you are very concerned with market drops, and should probably average your investments over time.

[Financial.Velociraptor]

DO you have an investor's policy statement? If not, now is a good time to develop one. 

In your shoes (I'm assuming you are young), I'd hold the 8,000 as cash or near cash (MM, CD, I-bond) and call it "emergency fund" money.  You want at least 3 months expenses in EF.  6 months is better.  I hold 12 months.   Long term, if you are putting 3k/mo in market, 8k now (or later) scarcely moves the needle.  Better to make your financial situation more robust!

[GigiH]

Sadly, I'm not young! I'm a 43 year old single mom trying to plan as best I can while expecting my brother to cheat me out of my inheritance!!! I have about $30,000 invested in an IRA and an individual account (about 1/2 and 1/2). Trying to make the best of what I can with the next 20 years of working. I won't be an early retiree, just hoping to be a retiree that doesn't have to eat dog food to get by. ;)

[BicycleB]

^In that case, good answers already. Invest it and move forward!

VTI's a good long term choice because it gives you very broad exposure to the US stock market.

[jeroly]

Due to a good December, I have a chunk of about $8000 to invest right now. Wondering if I should just dump all of it into index funds now, or only put a couple thousand in each month for the next several months in hopes that the market keeps dropping? I hold in VTI, VTV, SDY and my "fun stock" of Plug Power. I will also have about $3000/month over the next year for investing, so what to do with the big chunk I have now?

Historically speaking, the best move has usually been to lump-sum it - IIRC it wins about 2/3 of the time versus breaking it up into monthly chunks invested over a year.  However, either approach wins big versus not investing it at all, so I'd say whichever approach lets you sleep better at night is the better one!

In the context of the 36k you will be investing over the coming year, 8k isn't really a big chunk, and it would be simpler to just lump-sum it... so that's what I would do.

I would tend to dollar cost average into a bear market and lump sum into a bear bull.

FTFY.

[theolympians]

I will assume you have an emergency fund.

The important thing is to get it in the market, Roth or traditional IRA, or taxable account if those are fully funded. Index fund(s) with low expense ratio. Stay away from crypto. I wouldn't put anything into the "fun stock" at 43 years old. The money coming each month allocate to auto pay into your investment account. SET IT AND FORGET IT!

Think compounding returns, how often does you $$ double. You will get a jump on that right away.

***If you don't have an emergency fund, I would keep the 8K as an emergency fund in a separate account then blast the 3k as described each month.

[MustachioedPistachio]

You could also consider opening a SIMPLE IRA, SEP-IRA, or Solo 401(k) for even more tax-advantaged space since you are self-employed.

I opened a SIMPLE through Vanguard...it was truly simple.

[footwear]

I'm going to piggy back on this thread because it is somewhat similar to a question I have and don't want to start a new thread. I have a decent amount of cash on hand and would like a few second opinions on how to handle it.

The biggest question I have in regards to FIRE is what do I do in the 10 or so years between retiring and 59.5. Based on my calculations I should be able to comfortably retire in 10 years or so, I'll be 47 then. We are currently maxing out both of our Roth 401ks, and both my Roth IRA and my wifes Roth IRA in years our AGI allows. In years it doesn't we contribute to a tIRA and roll it into the Roth, we are also funding 529s for our children.

I have also been steadily contributing to a mutual fund/S&P 500 index fund through a broker/financial advisor. I had been planning on this account being my buffer from early retirement to when we reach 59.5.

However after reading more around these parts it appears it could be a better option to do the "mega backdoor" Roth 401k. Do the after tax contributions and then roll/convert those into the Roth 401k at the end of the year, pay those fees and taxes on the gains.

Then when we are about 5 years from FI open a new Roth IRA and do the pipeline as described in other threads. This appears to maybe be a better option that the mutual fund/sp 500 index fund i have been funding.

My other thought it use the cash for a down payment on an investment property. I work in the mortgage business and I just don't think I have the stomach to be a landlord or take on a 6% rate on a property right now. I do live in a college town of a major state university so there are always going to be tenants and I think the rental market here would be solid although I don't have any hard data on it.

TL;DR - should I just stay the course and keep pumping into a sp 500 index fund or pivot and slow those contributions and really attack the 401k with the after tax mega back door?

Thanks for reading my novel...

[Must_ache]

You could argue that dollar cost average is market timing, which people warn about.  "You can't time the market".  Or can you?
By putting all your money in now, you recognize that the long-term trend is up, and you are ready to withstand a drop in the short term.
If you fail to invest all your money right away, it is because you are concerned the money will go down at least in the short-term.
Dollar cost averaging to me is just a cop-out.  You're not willing to invest it all, because you are concerned it will do gown.  If that if the case, why are you investing any of it at all?  And don't give me the "if the value goes down I am buying more and more shares each time" argument - If the value goes down you lost money and would have been better staying on the sidelines.

Bottom line, as much as we would like to buy at the bottom and sell at the top, we aren't really able to do so.  We can try, and we each have to invest according to our personal risk tolerances which differ.  But in the end you have to decide something and implement it.  And it doesn't have to be all or nothing, just wanted to give some food for thought.     

One more thing: people that have regular contributions out of their paychecks to their 401k's aren't dollar cost averaging.  They are putting their money into the market as soon as it is given to them.

[Stimpy]

One more thing: people that have regular contributions out of their paychecks to their 401k's aren't dollar cost averaging.  They are putting their money into the market as soon as it is given to them.

ummm....
Definition: Dollar-cost averaging is the practice of systematically investing equal amounts of money at regular intervals, regardless of the price of a security.

Regular contributions to a 401k are DCA.  Whether it's from a paycheck or on the fly.  If it's a "regular" contribution you do regardless of price it's DCA.