Author Topic: Dollar Cost Averaging- Timeframe for lump sum investing.  (Read 2149 times)

Blackbeard

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Dollar Cost Averaging- Timeframe for lump sum investing.
« on: August 22, 2015, 07:34:41 AM »
Sorry for shitty title...  I'm a firm believer in dollar cost averaging.  Typically I invest every month $X/month.  Recently because of some work benefits and finishing up an expat assignment I got a lump sum of 25 times my monthly $X investing.

I know there probably isn't a set timeframe, but I'm looking for advice on timelines for investing.  Should I aim for all at once?  Over the course of six months, twelves, etc?

thoughts?

forummm

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Re: Dollar Cost Averaging- Timeframe for lump sum investing.
« Reply #1 on: August 22, 2015, 07:38:46 AM »
The best time to invest is always as soon as you have the money. The market could go up or down afterwards, but over the long run it will go up. I would lump sum it. But if you would feel better putting it in overtime, it's your money and your psychology at play.

ender

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Re: Dollar Cost Averaging- Timeframe for lump sum investing.
« Reply #2 on: August 22, 2015, 09:12:55 AM »
Do you expect the market to return higher than your current savings?

If yes, then lump sum is better.

Unless you have a lower risk tolerance, in which case you can benefit from DCA a bit more. But DCA is mainly an avoidance of risk, and sacrifices potential gains in favor of reduced risk.

MDM

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Re: Dollar Cost Averaging- Timeframe for lump sum investing.
« Reply #3 on: August 22, 2015, 03:42:22 PM »
See http://awealthofcommonsense.com/worlds-worst-market-timer/ for a "for example" that supports what the previous posters are saying.

brainfart

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Re: Dollar Cost Averaging- Timeframe for lump sum investing.
« Reply #4 on: August 22, 2015, 04:28:05 PM »
See http://awealthofcommonsense.com/worlds-worst-market-timer/ for a "for example" that supports what the previous posters are saying.

"And if he would have simply dollar cost averaged into the market on an annual basis with his savings he would have ended up with much more money in the end (over $2.3 million)."

MDM

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Re: Dollar Cost Averaging- Timeframe for lump sum investing.
« Reply #5 on: August 22, 2015, 06:13:28 PM »
See http://awealthofcommonsense.com/worlds-worst-market-timer/ for a "for example" that supports what the previous posters are saying.

"And if he would have simply dollar cost averaged into the market on an annual basis with his savings he would have ended up with much more money in the end (over $2.3 million)."

Just checking to ensure you (and anyone else reading) understands that, statistically, investing a lump sum as soon as you have it beats spreading the investment of that lump sum over time.  Dollar cost averaging is indeed better than procrastinating and then investing at the absolute worst times, but investing as soon as you have money to invest is better yet.

Blackbeard

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Re: Dollar Cost Averaging- Timeframe for lump sum investing.
« Reply #6 on: August 22, 2015, 07:44:35 PM »
Thanks for the thoughts.  The article was great.  I guess it comes down to psychology!  I think if I would have invested it on Thursday and then Friday crash happened I would be upset.  Even though I am pretty risk tolerant when reading MMM and with other people's money!

However, with my "normal" monthly investment I would didn't have thought anything about it.  This is just such a large sum.

Thanks again.  I've got 95% going in Monday.  5% is to buy a car and some other odds and ends after being out of the U.S. for so long.