Author Topic: Lump sum into index fund  (Read 4890 times)

DrSweden

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Lump sum into index fund
« on: November 08, 2014, 01:15:22 AM »
I have recently a large stash in cash. I sold a summer home and have now 210 000 $ in the bank. I have been buying stocks for the last couple of years but to be hones against myself I have performed as index or less. I will now switch to a index fund without a cost. I live in sweden so I will divide it over a Sweden, Denmark, Norway fund (without cost) and emerging markets (0,4% cost).

It is hard to say if the stocks will go up or down in the short term. My plan is to buy gradually over the next couple of years. The questions is how many years should I divide my purchase over? What would you do? I i divide it over 12 months I might by in the peak of a bubble. But if I divide it over i.e. 4 years the risk is less.

Best wishes DrSweden

larmando

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Re: Lump sum into index fund
« Reply #1 on: November 08, 2014, 01:25:40 AM »
Mathematically it's provably better to just buy in one go, but dollar cost averaging is not too bad of course. Also I understand dinner focus on where you live: but why excluding all the rest of the world except emerging markets? Do you know that the us, or Germany, or Canada, or some other place will go well or badly? Shouldn't you have a total world fund too?

MrMonkeyMustache

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Re: Lump sum into index fund
« Reply #2 on: November 08, 2014, 01:32:46 AM »
The zero cost is of course tempting, but that allocation looks really creative. Where is the rest of the developed world (europe and US)?

Norwegian72

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Re: Lump sum into index fund
« Reply #3 on: November 08, 2014, 04:16:34 AM »
I'm in roughly the same situation as you, I'll just chime in with my plan going forward.

I am transferring a fixed amount 2 times a month over a period of one year. I have a different allocation than you, 50% developed markets (US/Europe - 2 different funds), 25% emerging markets, 17% Nordic markets and 8% Norwegian market. In total 5 different index funds.

However, I am not putting a fixed amount into each fund in each period (the total investment sum each period is fixed), I am calculating how much I need to put in to rebalance to the wanted spread as the funds are quite volatile. Oslo Stock Exchange for instance has had a very volatile year.

Sometimes the fixed amount I want to put in is unable to rebalance the funds completely, this is due to being unable to sell overperformers due to associated costs. In that case they get 0 and I recalculate the values for the rest. Enter this into a spreadsheet and you'll know what I mean.

After the initial transfer is done I intend to continue this process but probably with a lower sum:) and may have to switch to yearly proper rebalancing.

Regards

ScroogeMcDutch

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Re: Lump sum into index fund
« Reply #4 on: November 08, 2014, 07:57:13 AM »
In a similar situation, I have done a deposit of about 60% in one go, and going to average in the rest over the course of a year. Although yes you may buy in right before a bubble (say 2007 scenario) and then see it tumbling down, I couldn't sit on the money for a long time, as it would be pure market timing. I don't believe I have the right information to see when a market is going to tumble down, or if it is going to continue it's steady climb for 5 more years before we crash down 40%.

So it's a bit of a combination of both, to ease my mind.

DrSweden

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Re: Lump sum into index fund
« Reply #5 on: November 08, 2014, 08:57:59 AM »
Thank you for your replies. I have thought more on the subject and I will continue with my buy and hold approach. I like the feeling of owning stocks and knowing the companies. I also like to get the dividends in cash and choosing to invest them or not. I will buy companies when I feel they are at an ok value.

DrSweden

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Re: Lump sum into index fund
« Reply #6 on: December 19, 2014, 07:14:55 AM »
Most Investors Think they can beat the returnindex. However most people can't. After Reading up on the research I have decided to switch to a low cost indexfund. My plan is to invest in

30% Swedish index fund.  0 % fee
20% Europé (500 largest companies) 0,2% fee
30% US 500 Largets companies or so 0,2% fee
20% Emerging markets, Asia, Africa, South america 0,8 % fee

Average fee of 0,25%.

I will invest my lumpsum over 3 years time. I will do the same with my monthly savings.

Since I wont need the Money for at least 20 years I Think this is a good strategy. I will not have to analyze stocks anymore and will have more time for my family, Reading both novels and other books. It feels Amazing to have sold all my stocks and taking this step.

I have no idea what will happen to the stockmarket in the next month or year. I know it will go up and down and up again.


Fallenour

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Re: Lump sum into index fund
« Reply #7 on: December 19, 2014, 07:50:33 AM »
Denmark is currently ranked as the worlds best place for entrepreneurs at the moment. I would look into investing into small caps there.

Small businesses have a much higher rate of success due to the programs in place to help them displace startup costs, and additional programs to assist with services small businesses need to thrive.

Look into it a bit.

Also, the danish Krone has dropped over the past year against the USD, but has shown signs of rising, and has been doing well against the USD today, currency trade as well mayhaps? from what I can tell on xrate, over the past year, it declined steadily to .165 down from about .185.

It shows signs of going back up to around .167 to .168 in the near future, so good potential there. 

DrF

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Re: Lump sum into index fund
« Reply #8 on: December 23, 2014, 12:02:20 PM »
I think Eric posted this link a few days ago.  Seems perfect for your situation.

Don't worry when you invest.

http://awealthofcommonsense.com/worlds-worst-market-timer/

Statistically it is better to invest all your money all at once.

DrF

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Re: Lump sum into index fund
« Reply #9 on: December 23, 2014, 12:07:33 PM »
Then read this.

http://awealthofcommonsense.com/bought-near-market-bottoms/

It doesn't matter if you are the worst or the best market timer, just get your money into a low cost diversified investment.