Author Topic: Investing a lump o cash  (Read 1114 times)

Halfsees

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Investing a lump o cash
« on: March 03, 2020, 03:01:55 PM »
Backstory: When my father died last spring and I inherited the house, this forum gave me the push I needed to sell the townhouse since it didn't make sense as a rental. The results were great and I closed last October. However, I have yet to invest most of the money from the sale. I was just too exhausted, was still trying to get my in-laws to move out of our house, and then Thanksgiving and Christmas hit and every time I looked at the markets they kept going up and I figured that they'd go down sometime.

Well, the time the markets are going down seems to be now and I'd like to move a quarter of a million into the markets. How should I do it? I'm already maxing out our tax advantaged accounts (401ks, Roth IRAs, HSA). Should I just put a few thousand (5k? 10k?) into a regular brokerage account with Vanguard every couple of days until the money runs out? All equities? Some bonds? We're 40 and not planning to retire until 55 and I feel like this is money we appreciate more than need.  I'll probably do VTSAX and VGTSX, but should I consider something else as well?

Mighty-Dollar

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Re: Investing a lump o cash
« Reply #1 on: March 04, 2020, 08:42:32 PM »
If you're worried about stocks being at all-time highs then you are ignoring bonds. You mitigate stock market risk with bonds. When stocks fall, money runs to the safety of bonds. For a 40 year old, you would be at least 20% bonds (and 80% stocks). If you've already reached "critical mass" (you have enough for retirement right now) then maybe you should be more like 40% bonds and 60% stocks. You should view the whole portfolio as one. Don't fret about just the stock portion of your portfolio.

Open an account with E Trade, AmeriTrade, Schwab or Vanguard and invest in a total stock market index fund and a total bond market index fund.

Here's the historical performance of a 50/50 mix.

K-ice

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Re: Investing a lump o cash
« Reply #2 on: March 04, 2020, 08:57:06 PM »
Do you already have anything in the market? If yes I would follow the same ratios.

Looking at this may be helpful.  Some people say your bond ratio should be equal to your age, so 40% bonds for you. The rest in equities. (Some, especially this FIRE crowd say that's a bit too conservative.) I've also heard age - 20% = bond ratio.

https://www.bogleheads.org/wiki/Lazy_portfolios

I find it pretty scary to to invest large lump sums. But statistically you are better to invest as soon as possible instead of 10K every month.

 But you've got to do what lets you sleep at night. I'd probably break it into sixths and invest 1/6 every month for the next 6 months. In 15 years it shouldn't really matter but that would make me feel better over the next few months.

Halfsees

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Re: Investing a lump o cash
« Reply #3 on: March 05, 2020, 05:41:12 AM »
Thanks Mighty Dollar and K Ice. I do have 20% bonds in our 401k. I will keep that ratio with this. I will also probably do it over time (6 months as suggested). It helps a lot just to have some feedback, so I really appreciate it.

MustacheAndaHalf

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Re: Investing a lump o cash
« Reply #4 on: March 07, 2020, 10:10:17 PM »
In general, you won't luck into a market drop while waiting.  The market can go on a bull run for 10 years, and never fall all the way back to it's prior level.  You can be left waiting forever.

Since stocks are fortunately on sale, in your situation I might invest more of the money now.
What about 1/4th now, and then 1/10th per month until all the money is invested?

But if you've come up with a plan, just go with that.  The key thing is starting.  Even if you pick a really bad mutual fund, it's likely to beat cash over time.

Halfsees

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Re: Investing a lump o cash
« Reply #5 on: March 13, 2020, 06:20:06 AM »
I've started buying some indexes: a REIT in our ROTH IRAs (about 4k) and 5k in VTSAX. I think I did 3 trades with that money and managed to hit the upswing of volatility in the market each time waiting for them to trade at the end of the next business day. Based on learning from those experiences and doing some research, I'm now purchasing the VTI ETF and placing limit orders. Most of our investing in the past has been pretty passive (and still is) so this is a learning experience for me. The way the market is going I'm hoping to get it all invested by May, but who knows.

Thanks again for advice, and if anyone who happens to read this is one of the people who pushed me to empty and sell my Dad's house last fall I am really, really grateful right now. If not for you, there is a high chance I could be trying to sell right now. You have saved me a lot of stress and provided me with what is feeling like a great opportunity, although I would of course prefer no pandemic.

MustacheAndaHalf

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Re: Investing a lump o cash
« Reply #6 on: March 13, 2020, 06:53:32 AM »
Current market volatility is off the charts right now, so just know it will rarely be this crazy.  When you buy VTI at Vanguard, the buy screen has an up to the second display of the current price.  You can even tell it to refresh prices.  So you should get a very accurate picture of the current cost.  Your account balance screen has delayed information, but not the buy/sell screen.

Halfsees

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Re: Investing a lump o cash
« Reply #7 on: March 13, 2020, 07:34:20 AM »
Current market volatility is off the charts right now, so just know it will rarely be this crazy.  When you buy VTI at Vanguard, the buy screen has an up to the second display of the current price.  You can even tell it to refresh prices.  So you should get a very accurate picture of the current cost.  Your account balance screen has delayed information, but not the buy/sell screen.

With a limit order this shouldn't matter, right? They'll buy when/if the price drops to what I've requested? I've put in two 60 day orders.