Author Topic: 400k cash need the push to invest it :)  (Read 11274 times)

felizcortez

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400k cash need the push to invest it :)
« on: March 18, 2015, 09:58:25 AM »
So my cash pile has been growing significantly as my net worth has spiked.  Most of the excess cash is from sales of company stocks, but I have about 400k of cash that isn't doing anything for me right now.

I know there are a ton of threads on this already about how lump sum investing is better than dollar cost averaging over time.  I'm planning on putting almost all of it into VTSAX, but I guess I'm just over thinking it which has caused me to sit on the sidelines.  (analysis paralysis)

I think I just need to suck it up and do it.  I need to call my bank account to make sure there isn't a limit on electronic transfers to vanguard.

Any thoughts would be appreciated.

terran

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Re: 400k cash need the push to invest it :)
« Reply #1 on: March 18, 2015, 10:18:08 AM »
On the other hand, dollar cost averaging is better than doing nothing, so if it it makes you feel better, just do that.

Eric

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Re: 400k cash need the push to invest it :)
« Reply #2 on: March 18, 2015, 10:49:07 AM »
Yes, just suck it up and do it.

GGNoob

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Re: 400k cash need the push to invest it :)
« Reply #3 on: March 18, 2015, 11:14:51 AM »
Do you have an investment policy statement and a preferred portfolio allocation? I would assume you'd want some sort of split between US and international stocks. Set up your IPS and then just invest and don't look at it for a while!

gt7152b

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Re: 400k cash need the push to invest it :)
« Reply #4 on: March 18, 2015, 11:20:06 AM »
I generally like to do things in halves so I would probably do a lump sum investment of 50% and DCA the rest over a few months.

catccc

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Re: 400k cash need the push to invest it :)
« Reply #5 on: March 19, 2015, 12:36:45 PM »
I generally like to do things in halves so I would probably do a lump sum investment of 50% and DCA the rest over a few months.

I think this is a good idea.

Not nearly as much, but I had about $120K in cash that wasn't doing anything, and I lump sum invested 80K of it early last year.  I'm holding back 40K because we are house shopping.  It was originally a house down payment account that went a little crazy because we never bought a house.  Anyway, my only regret is that I didn't invest it sooner.  That was cash built up over many years, but it was still many years I could have been earning higher rates of return.

Scandium

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Re: 400k cash need the push to invest it :)
« Reply #6 on: March 19, 2015, 12:47:22 PM »
I generally like to do things in halves so I would probably do a lump sum investment of 50% and DCA the rest over a few months.

Why? There's no point to this. Just invest it all right away and be done with it.

And are you doing only US stocks with this? What is your AA (current and desired)? I would include some international stocks, and maybe even bonds. Munis if in taxable.

theoverlook

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Re: 400k cash need the push to invest it :)
« Reply #7 on: March 19, 2015, 01:45:55 PM »

Not nearly as much, but I had about $120K in cash that wasn't doing anything, and I lump sum invested 80K of it early last year.  I'm holding back 40K because we are house shopping.  It was originally a house down payment account that went a little crazy because we never bought a house.  Anyway, my only regret is that I didn't invest it sooner.  That was cash built up over many years, but it was still many years I could have been earning higher rates of return.

We had the exact same thing happen!  We were saving for an upgrade in house and ended up taking a lot longer than we intended (2 years shopping!) so our "down payment" savings went nuts.  I am sad we missed out on most of 2013's awesome returns.  But at least it felt like we were in great shape once we did buy the house.  And now the remainder - along with the equity from the old sold house - is working away in vtsax.  Next time make a mental note to watch how much is sitting in cash.

frugledoc

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Re: 400k cash need the push to invest it :)
« Reply #8 on: March 19, 2015, 02:39:07 PM »
Lump sum investing does beat drip feeding but not by a huge amount. 

I'd much rather invest a lump sum during a market crash than now.

If you are wanting to invest it all in VSTAX then maybe 100k every 3 months?




Financial.Velociraptor

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Re: 400k cash need the push to invest it :)
« Reply #9 on: March 19, 2015, 03:59:20 PM »
Motivation?

Invest it ... OR ... *FACEPUNCH*

waltworks

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Re: 400k cash need the push to invest it :)
« Reply #10 on: March 19, 2015, 04:42:11 PM »
I like to think about it this way: in 20 years, I'll look back at foolish young me and say "man, good thing foolish young me invested that money instead of sitting on it". It's pretty unlikely I'll say "darn it foolish young me, why didn't you wait for that 5% dip in April 2016?"

Now, current foolish young me is going to be gouging his eyes and bemoaning his fate every time the market drops just after he buys some VTSAX. But that's ok, because it's 20 years from now wise old me that matters. He needs the money. I don't, because I still have a job.

-W

Murdoch

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Re: 400k cash need the push to invest it :)
« Reply #11 on: March 19, 2015, 08:09:50 PM »
As per Nikes advice - Just Do It

catccc

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Re: 400k cash need the push to invest it :)
« Reply #12 on: March 20, 2015, 10:42:15 AM »
I generally like to do things in halves so I would probably do a lump sum investment of 50% and DCA the rest over a few months.

Why? There's no point to this. Just invest it all right away and be done with it.

And are you doing only US stocks with this? What is your AA (current and desired)? I would include some international stocks, and maybe even bonds. Munis if in taxable.

Because if OP is slightly skittish about it, this approach just might be enough to feel like he's hedging his bets, I guess?

greatrussian

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Re: 400k cash need the push to invest it :)
« Reply #13 on: March 20, 2015, 10:44:22 AM »
What's your fear? Are you afraid of losing money by investing mostly in stocks? If so, you may need to consider changing your asset allocation to something were you aren't as worried.

Right now, you are choosing an allocation of 100% cash. Is that really what you want? Probably not, or you wouldn't have asked. Balanced funds, or asset allocation funds, which put a portion of their assets in bonds might be appropriate for you.

catccc

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Re: 400k cash need the push to invest it :)
« Reply #14 on: March 20, 2015, 12:12:04 PM »
OP, is the hesitation because you aren't sure what to put it in?  Or is the hesitation whether you should lump sum of DCA in?  Or both?

Is there any reason you would need this $ in the near future?

You can always exchange or rebalance if it's because you aren't sure where to put it.

And if you don't need it anytime soon, just dump it all in now.  Any slightly changes in price in the coming months aren't going to matter much in the long run, probably.

ArbitraryGuy

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Re: 400k cash need the push to invest it :)
« Reply #15 on: March 20, 2015, 02:07:35 PM »
With 2% inflation, you're losing about $8000/yr by just letting it sit.

frugalnacho

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Re: 400k cash need the push to invest it :)
« Reply #16 on: March 20, 2015, 02:14:36 PM »
So my cash pile has been growing significantly as my net worth has spiked.  Most of the excess cash is from sales of company stocks, but I have about 400k of cash that isn't doing anything for me right now.

I know there are a ton of threads on this already about how lump sum investing is better than dollar cost averaging over time.  I'm planning on putting almost all of it into VTSAX, but I guess I'm just over thinking it which has caused me to sit on the sidelines.  (analysis paralysis)

I think I just need to suck it up and do it.  I need to call my bank account to make sure there isn't a limit on electronic transfers to vanguard.

Any thoughts would be appreciated.

https://www.youtube.com/watch?v=NflTOYuVJ0E

Doulos

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Re: 400k cash need the push to invest it :)
« Reply #17 on: March 20, 2015, 06:07:23 PM »
If you consider the average inflation 3.22% and the 7% return on investment MMM quotes in this article http://www.mrmoneymustache.com/2014/11/04/why-i-put-my-last-100000-into-betterment/.
Then you are looking at roughly 10% you are losing annually.  This is roughly 40k, or $110 per day.
If you have not invested yet, you cost yourself $220 since Wednesday. (on average).

If you want to use more pessimistic numbers, 2% inflation and 5% after inflation returns, you are still looking at...
$28,000 lost per year or $76.70 lost per day.

I hope that helps with the convincing.

Malaysia41

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Re: 400k cash need the push to invest it :)
« Reply #18 on: March 20, 2015, 06:42:40 PM »
I'm in a very similar situation.  Like you, I'm a puss ;), so I DCA into my preferred asset allocation about $25k per month.  I just couldn't stomach putting in $200k and seeing it turn to $150k.  But I'm not 100% cash.  We're working down from 7% cash to 3% cash - so it's not so dire. 

Memories of 2008 pop in my head when I consider pushing it all in at once.  2008 was maddening to me because we had no cash.  All of those stocks were on bargain basement sale and I didn't have the money to sop them up.  The few shares I did manage to purchase  have more than quintupled.  That was a time when I would have gleefully pushed in $100k all at once - even if I didn't strictly pick the bottom.

Yes, I know - I could buy on margin, and I know, this 2008 talk smacks of market timing. Plus, there's no telling when the next bargain basement sale will happen.  But still, I figure consistent DCA'ing into our AA is better than just leaving the cash there. 

Waltworks has it right - older wiser me would have stupid current me put it all in the market at once.  Yes I'm administering facepunches.

felizcortez

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Re: 400k cash need the push to invest it :)
« Reply #19 on: March 22, 2015, 10:05:30 PM »
A few of the issues I'm having is due to asset allocation and the other piece is being a wuss.

I'm simultaneously trying to clean up my asset allocation and put the cash into the market.

Portfolio Summary:
Bonds   $31,868.02   3.07%
Cash   $457,051.88   43.96%
Company Stock   $36,211.36   3.48%
International Stocks   $110,011.57   10.58%
Stocks   $404,521.33   38.91%
Total Result   $1,039,664.16   100.00%


Breakdown of Investments outside of liquid cash
Bonds   31,868.02   5.37%
Cash   10,406.80   1.75%
Company Stock   36,211.36   6.11%
International Stocks   110,011.57   18.55%
Stocks   404,521.33   68.21%
Total Result   593,019.08   100.00%

I've attached a screenshot showing investments in taxable and tax advataged accounts:
In my 401k I've primarily been investing in a lifestyle fund, which I'm planning on shifting to the individual funds for lower expense ratios.

In the Taxable Brokerage and the Traditional IRA accounts I'm also planning on shifting away from the Target Retirement Funds and recreating them on my own then rebalancing once per year.

Putting together the attached took me about 2 hours and I have been putting off doing this exercise because the allocation is kind of a mess (procrastination).  I used personal capital, but since a good chunk of these are in target funds I had to manually calculate the actual values and percentages for those accounts.  (painful).

With regards to asset allocation I'm weighing the following options:

90% stocks (30% International, 60% Domestic) and  10% bonds
80% stocks (30% International, 50% Domestic) and 20% bonds
100% stocks (30% international, 70% Domestic)

I didn't touch anything during the 2008 downturn and continued to invest so once I have the money in the market I'm fine.  The cash build up was primarily from selling ESPP company stock over time and Company stock options that didn't get reinvested yet.

A few questions:
1.  Should I hold the bonds in my tax advantaged accounts or in my taxable account?
2.  I should look at total allocation and not try to recreate the same allocation in each account?  (how would you approach this from a tax advantaged accounts vs a taxable for the above situation?  I'm planning on using all vanguard index funds in the taxable accounts. 
3.  I'm planning on selling the latest chunk of ESPP and putting it into the taxable account.

Any Help/Guidance would be appreciated.




Malaysia41

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Re: 400k cash need the push to invest it :)
« Reply #20 on: March 23, 2015, 04:03:36 AM »
I'll answer your questions with how I do it - others can scream whether it's right or wrong.

1. Put all bonds & bond funds in tax advantaged accounts.  Their 'dividends' are actually interest and treated as ord income.  If you are in a 25% or higher tax bracket, you definitely don't want those dividends on your AGI every year - even in 15% bracket it's better to keep them in tax advantaged accounts because in the 15% bracket all LTCGs are taxed at 0%.  Why mess with that?

2. Allocate across ALL accounts.  Add em all up and dial it in til your AA is where you want it across all accounts.  Who cares if one account is 100% bond funds if it's contributing to the overall allocation of 10% bonds. 

3. Cool.  I wish I'd done that religiously when I was working.  Doh.

aj_yooper

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Re: 400k cash need the push to invest it :)
« Reply #21 on: March 23, 2015, 05:45:28 AM »
Do you have an investment policy statement and a preferred portfolio allocation? I would assume you'd want some sort of split between US and international stocks. Set up your IPS and then just invest and don't look at it for a while!
+1

An alternative to DCA is to do value averaging, assuming you have more than one fund choice.  You could break the cash into 3 or 4  or more chunks and then invest it according to your predetermined plan, e.g. 40% total market index, 20% international index, and 40% total bond market index.  When you do your second round of investing, you would add enough to each fund so that the current value in that fund matches your asset allocation goal percentage.   At the next interval, you repeat the process.  This will cause you to harvest winners and buy more of the funds that have decreased in price.   http://www.investopedia.com/articles/stocks/07/dcavsva.asp

greatrussian

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Re: 400k cash need the push to invest it :)
« Reply #22 on: March 23, 2015, 01:53:10 PM »
A few questions:
1.  Should I hold the bonds in my tax advantaged accounts or in my taxable account?
2.  I should look at total allocation and not try to recreate the same allocation in each account?  (how would you approach this from a tax advantaged accounts vs a taxable for the above situation?  I'm planning on using all vanguard index funds in the taxable accounts. 
3.  I'm planning on selling the latest chunk of ESPP and putting it into the taxable account.

1. Tax-advantaged is the best place for bonds. The best place for your international allocation is the taxable. That way you get credit for the foreign taxes paid.
2. You can improve your after tax return by focusing on your total allocation. Any pre-tax assets you have should be adjusted for taxes you expect to pay on the withdrawals. For example, if you have $400k in the 401k, but expect to pay 25% in taxes, then treat it as $300k.
3. Nothing wrong with that.

Note that, given your reservations so far, I would probably recommend focusing on simplicity. You can probably improve your returns by investing more of your US stocks portfolio in small caps, but if you are constantly second-guessing whether you have the right allocation, then just pick a target date fund and be done with it. Or else hire an adviser who will help you pick a allocation, and stick to it.

powskier

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Re: 400k cash need the push to invest it :)
« Reply #23 on: March 24, 2015, 12:31:59 PM »
My unsophisticated opinion may be out of place in this thread, but just trying to help the "push" from other angle...

If you invest it all market will tank.
If you keep it all cash market will continue to rise.
For our sake, please keep it cash! ;)

Seriously though, you could just keep x% to suit your "need( psychological)" to have cash on hand for next sale and dump rest in.

felizcortez

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Re: 400k cash need the push to invest it :)
« Reply #24 on: April 07, 2015, 12:53:42 PM »
I put 200k into the market last night and am working on cleaning up my asset allocation.  I'm going to do the 2nd 200k in a different transaction because it is coming from a different bank.

pdxvandal

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Re: 400k cash need the push to invest it :)
« Reply #25 on: April 08, 2015, 10:03:54 AM »
Dude, the S&P is up 6 points today ... thanks for investing!  :)

ysette9

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Re: 400k cash need the push to invest it :)
« Reply #26 on: April 08, 2015, 10:06:11 AM »
I did pretty much exactly this earlier this year: moved almost $400k from cash into VTSAX. I went with the dollar-cost-averaging approach for reasons I can't ever recall clearly right now. In the beginning it was dipping my toes into the water. By the end, I was ready to dump the whole lot of it in so my little green dudes could all be working for me. I was surprised how excited I got about having money in the market. It feels great.

Jump in the pool with the rest of us!

Malaysia41

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Re: 400k cash need the push to invest it :)
« Reply #27 on: April 08, 2015, 05:11:01 PM »
I put 200k into the market last night and am working on cleaning up my asset allocation.  I'm going to do the 2nd 200k in a different transaction because it is coming from a different bank.

You are a man of action felizcortez.  Bold moves become you.

felizcortez

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Re: 400k cash need the push to invest it :)
« Reply #28 on: April 08, 2015, 07:44:58 PM »
You are a man of action felizcortez.  Bold moves become you.

Sounds like a fortune cookie :)

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Re: 400k cash need the push to invest it :)
« Reply #29 on: April 09, 2015, 07:42:53 AM »
This has always been tough for me as well. I have a lot of cash right now and despite face punches etc... I just add a set amount every Friday. If the market is down which it really hasn't been in a long time I might increase that amount but right now I just do the same amount.  At some point right our wrong I chose to do what lets me sleep at night despite respecting everyone's opinions. While a lot of the opinions make sense I think for some depending on where you came from and where you are today its harder to not have the emotion and just put all the cash in. Again i am not saying its right but as long as your doing something and getting it in at some rate its still better than just sitting in a cash account for ever.