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Learning, Sharing, and Teaching => Investor Alley => Topic started by: RumbleKittie on November 02, 2015, 09:55:06 AM

Title: Investing a large lump of cash
Post by: RumbleKittie on November 02, 2015, 09:55:06 AM
I handle our family's finances and I've been rolling along with a fairly lazy passive investment portfolio for a while, rebalancing every month with excess cash and it had worked out pretty well.

Then I got pregnant and had a baby, and our finances have been neglected for a while. Now I have a large lump of cash that has built up (~$40k) that I need to move into investments, but I'm not sure if it's better to do it all at once or if I should invest a set amount each month over the course of several months until I completely draw-down the excess cash.

Intuitively, I feel that doing it over the course of several months spreads out risk, but I know that a lot of things about investing doesn't match our intuition.
Title: Re: Investing a large lump of cash
Post by: Tjat on November 02, 2015, 10:03:10 AM
Math-wise, you're better off lump-sum investing, but you do stand a greater risk of seeing a sudden large downturn.

http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/
http://www.madfientist.com/front-loading/
http://www.businessinsider.com/lump-sum-vs-dollar-cost-averaging-2014-12
Title: Re: Investing a large lump of cash
Post by: RumbleKittie on November 02, 2015, 10:05:42 AM
Thanks for the links! I like reading the detailed rationale.
Title: Re: Investing a large lump of cash
Post by: younggunner on November 07, 2015, 11:50:23 AM
Math-wise, you're better off lump-sum investing, but you do stand a greater risk of seeing a sudden large downturn.

http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/
http://www.madfientist.com/front-loading/
http://www.businessinsider.com/lump-sum-vs-dollar-cost-averaging-2014-12

I'm not sure that I follow how "math-wise" its better to lump sum invest for individual stocks vs funds.. I can understand with a diverse fund, but specific companies I would think the opposite..

By dollar cost averaging, wouldnt you lessen the risk, making it the better alternative?  I  suppose if it jumps in price, you could miss out on some gains, but why not DCA if its safer?  is that not what many large firms / hedge funds do?