Author Topic: Invest lump sum or wait??  (Read 1418 times)

Mcsavesalot

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Invest lump sum or wait??
« on: August 10, 2020, 09:59:48 AM »
I always get great feedback from this group so here I am with yet another question. I know we shouldn't try to time the market....  We recently sold our house to downsize into a smaller house which put an extra 100k into our pocket. We want to invest this into VTI or VTSAX. With that being said, there seems like a lot going on and with the market close to all time highs it just seems hard to buy in right now.
Question, Would you buy in now? Who knows where the market goes from here. Or would you wait until there another dip? . My Gut is telling me to wait, but everything I read just says throw it in the market and forget it. I'm I overthinking the timing of this?

MustacheAndaHalf

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Re: Invest lump sum or wait??
« Reply #1 on: August 10, 2020, 11:20:47 AM »
If you place that money in a savings account and don't touch it... do you realize that savings account will hit all time highs every single month?  Which is to say, don't avoid the stock market for that reason.  Historically, the stock market tends to go up, so it makes new all time highs rather often.

v8rx7guy

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Re: Invest lump sum or wait??
« Reply #2 on: August 10, 2020, 11:33:43 AM »
It's understandably hard to jump all in to a market with such a large sum of money during these crazy time.  The correct answer is indeed, "don't try to time the market", and "time in the market beats timing the market" and all of the other cliches people love to say when it comes to other peoples money decisions.  However, there is a psychological aspect, and if it helps you sleep at night, you could dollar cost average (DCA) yourself into the market.  Maybe make 10 lump sums of $10K over the next 10 months while holding the remaining funds in a Capital One Money Market account?  The reason I mention Capital One is that they have a $450 bonus for keeping $50K in for 6 months which could be a convenient bonus for you.

Counter anecdote to DCA-ing: My dad retired in the beginning of the year and was in the process of transferring over his 401K to an IRA around when the big COVID drop took place.  He considered himself really lucky that his funds were in a holding account for the big 30+% drop.  He determined he wanted to DCA in with 25% over the 4 quarters.  Well he got one nice big purchase at a low market but by the time his 2nd contribution came along the markets had almost completely recovered.  That's not to say another big drop is coming which could make him look super smart...  But who knows!


Goanywhere

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Re: Invest lump sum or wait??
« Reply #3 on: August 10, 2020, 01:07:41 PM »
Hi all, funnily enough I came on to the forum to ask the exact same question. It seems there is no right or wrong answer.

We are in a similar situation to the OP with a lump sum to invest due to realizing some business profits. It is roughly 10% of our net worth, which is broken down as follows:

Cash 11%
Home 48%
Fixed interest 21%
Equities 20%

Where we've got to is that we are in our mid-30's and investing for the long term so the "time in the market" approach seems logical,  and therefore we plan to move substantially all of the cash into our equity index fund over the next month.   It might not seem like a bit deal, but in terms of risk it is roughly a 50% increase in our exposure to equities which does cause us some nervousness.



waltworks

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Re: Invest lump sum or wait??
« Reply #4 on: August 10, 2020, 01:11:51 PM »
Hi all, funnily enough I came on to the forum to ask the exact same question. It seems there is no right or wrong answer.

We are in a similar situation to the OP with a lump sum to invest due to realizing some business profits. It is roughly 10% of our net worth, which is broken down as follows:

Cash 11%
Home 48%
Fixed interest 21%
Equities 20%

Where we've got to is that we are in our mid-30's and investing for the long term so the "time in the market" approach seems logical,  and therefore we plan to move substantially all of the cash into our equity index fund over the next month.   It might not seem like a bit deal, but in terms of risk it is roughly a 50% increase in our exposure to equities which does cause us some nervousness.

You have an incredibly conservative portfolio for someone in your mid-30s. Unless you're on the cusp of FIRE right now, by all means dump it all into equities. By my reckoning, you're about 40/60 equities to bonds/cash right now. Even 60/40 would be super conservative at your age... but you've gotta do what lets you sleep at night, too. What does your IPS say?

-W

Goanywhere

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Re: Invest lump sum or wait??
« Reply #5 on: August 10, 2020, 04:48:49 PM »
Hi all, funnily enough I came on to the forum to ask the exact same question. It seems there is no right or wrong answer.

We are in a similar situation to the OP with a lump sum to invest due to realizing some business profits. It is roughly 10% of our net worth, which is broken down as follows:

Cash 11%
Home 48%
Fixed interest 21%
Equities 20%

Where we've got to is that we are in our mid-30's and investing for the long term so the "time in the market" approach seems logical,  and therefore we plan to move substantially all of the cash into our equity index fund over the next month.   It might not seem like a bit deal, but in terms of risk it is roughly a 50% increase in our exposure to equities which does cause us some nervousness.

You have an incredibly conservative portfolio for someone in your mid-30s. Unless you're on the cusp of FIRE right now, by all means dump it all into equities. By my reckoning, you're about 40/60 equities to bonds/cash right now. Even 60/40 would be super conservative at your age... but you've gotta do what lets you sleep at night, too. What does your IPS say?

-W

Agreed the mix looks conservative but I should have also said that the fixed interest is linked to a business I'm involved with and pays a pre-tax return of 10%.   So whilst it is fixed interest I view it through a slightly different lens. 

Sorry what does IPS stand for?

LennStar

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Re: Invest lump sum or wait??
« Reply #6 on: August 11, 2020, 03:38:40 AM »
If you worry about stock prices dropping (which is a well founded thought with Corona) but still don't want the lackluster results of bonds (not to mention that corporate bonds from companies that go bankrupt due to Corona are not a good investment either), what do you think about the "safer" alternative to buying the stock index?

I am heavily thinking aobut it right now.

https://forum.mrmoneymustache.com/investor-alley/dicount-certificates/

RWD

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Re: Invest lump sum or wait??
« Reply #7 on: August 11, 2020, 10:51:00 AM »
With that being said, there seems like a lot going on and with the market close to all time highs it just seems hard to buy in right now.

Question, Would you buy in now?

Yes, I would buy in now.

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LennStar

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Re: Invest lump sum or wait??
« Reply #8 on: August 11, 2020, 10:57:46 AM »
And here I resisted so hard to post 2 or 3 of them...


RWD

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Re: Invest lump sum or wait??
« Reply #9 on: August 11, 2020, 11:24:32 AM »

FLBiker

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Re: Invest lump sum or wait??
« Reply #10 on: August 11, 2020, 11:36:09 AM »
Thanks for this!  We're in the same boat.  We're likely going to keep a bit more out of the market than usual (due to job insecurity) but once the dust settles on our new house, I think we'll just dump the rest into index funds.  We just moved from the US to Canada, though, which means I have to wait until Jan 1 to have any tax advantaged options available to me, which makes me a bit more hesitant...

Buffaloski Boris

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Re: Invest lump sum or wait??
« Reply #11 on: August 12, 2020, 09:09:20 AM »
I always get great feedback from this group so here I am with yet another question. I know we shouldn't try to time the market....  We recently sold our house to downsize into a smaller house which put an extra 100k into our pocket. We want to invest this into VTI or VTSAX. With that being said, there seems like a lot going on and with the market close to all time highs it just seems hard to buy in right now.
Question, Would you buy in now? Who knows where the market goes from here. Or would you wait until there another dip? . My Gut is telling me to wait, but everything I read just says throw it in the market and forget it. I'm I overthinking the timing of this?

There is a white paper on this over at the Vanguard website.  My read: they concluded that you're better off just tossing it all in as it's time in the market that matters.  Fair enough.  Knowing that, I still DCA.  Because a lot of investing is psychology.  For example, we had a poster back in February who invested a whole lot just before the market took a dive.  In the end, they probably did OK, but still...I would not wanted to have that happen to me.

More fundamentally, it's what you invest in that matters.  I know there are a lot of folks who look at the US large cap/ cap weighted indexes and think they've found the promised land.  I disagree and have almost nothing in those sorts of funds. I'm not interested in mechanically allocating large amounts of wealth into a few mega-cap companies, which is exactly what you're doing when you invest in these cap weighted funds. I've tossed a lot at international equities of late, but even those have gotten pricey.  In the end I'm a fan of diversification across asset classes and countries.  And so I'm sniffing around at those assets that look more beaten down such as commodities that I'm light on.   And later I'll shift it around.  We are soooo fortunate to have free tools like portfolio charts that show us what sort of diversified portfolio has done well over time.  It seems a shame not to use that information at least in the back of our minds to do better. YMMV.   

thedigitalone

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Re: Invest lump sum or wait??
« Reply #12 on: August 12, 2020, 11:56:58 AM »
I have this exact issue going on now as well.

We moved double six digits out of out a single tech stock that accumulated due to RSUs, the idea was to diversify and take advantage of a price bump that happened last week.  Now the funds have settled and I need to reinvest them but the feeling that we're in a bubble has me hesitating to buy back in.  I know intellectually that the market is at an all-time high most of the time, I know that its best to keep them invested but the temptation to just go ahead and pay off the mortgage for the perceived security is real (I've been a member of the don't-payoff-your-mortgage-club for a while).

These funds are about 18% of our LNW and 13% of TNW, we're about 5-7 years out from FIRE so probably enough time to recover from a COVID bubble if/when it happens. Maybe I'll just DCA it back in over the next month or two, somehow the decisions are more difficult with more zeros involved.

As an aside, did you know that Schwab and Fidelity have a max $100k daily transfer limit?  It might be an online limitation, I didn't call in, but online that's the max in a 24 hour window.

BicycleB

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Re: Invest lump sum or wait??
« Reply #13 on: August 12, 2020, 12:38:51 PM »
^ Did not know! Thanks, @thedigitalone.

Cache_Stash

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Re: Invest lump sum or wait??
« Reply #14 on: August 12, 2020, 02:28:55 PM »
Read up on Dollar cost averaging (DCA) yourself into the market.  It may be something you might want to consider

trollwithamustache

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Re: Invest lump sum or wait??
« Reply #15 on: August 12, 2020, 02:32:51 PM »
personally I am waiting. 

Post election I'll start a quarterly buy in.

PJC74

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Re: Invest lump sum or wait??
« Reply #16 on: August 12, 2020, 03:43:53 PM »
so we switched HSA providers in Jan. $$ was moved into a holding account early Feb. I called Mid Feb and still was in holding pattern. I was upset the $$ was not working for me. Then the drop came and I was happy in was in cash.

So then the $$ finally moved to new company mid March. I sent the threshold to buy over the 1,000 min. I looked one day and the $$ moved to investments because it was over the threshold. It was bought March 17th. I was upset the trade went through because I was convinced the market was going lower. I decided to leave it and the rest is history, up over 50% now.

Moral of the story is you simply can't time the markets , and if you do it's all luck. Just put the $$ in and forget it.