Author Topic: Monthly or all at once?  (Read 2407 times)

Lanthiriel

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Monthly or all at once?
« on: March 09, 2017, 10:27:21 PM »
I know, I know. You can't time the market. That said, I just sold a house with no plans to buy in the near future, so I'm using the cash to max out my and my husband's 2016 IRAs. That obviously needs to go in now to sneak in under the tax filing deadline.

My question is for 2017. Should I just dump the money in now, or should I invest $500/person/month throughout the year? I'm a little nervous with the market so high, and think that maybe I would be spreading it the risk doing it that way? Plus I think setting it up this way would allow me to set my IRAs on autopilot so that they sort of just become another bill.

Obviously I'm new to this and a little nervous. Any suggestions?

Radagast

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Re: Monthly or all at once?
« Reply #1 on: March 09, 2017, 10:51:12 PM »
Speaking for myself, I have regretted 100% of all delays I made. I managed to speed things up once, and it was totally worth it.

Dago

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Re: Monthly or all at once?
« Reply #2 on: March 10, 2017, 03:52:14 AM »
Speaking for myself, I regretted investing all at once right before the 2008 crisis :S . Statistically you should go all at once then one should take into account his/her level of comfort with doing that.

I have the feeling that you are hesitating. Just because of that I would advise to invest over a certain period of time (1 year ?) to make you feel more comfortable.

SeattleCPA

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Re: Monthly or all at once?
« Reply #3 on: March 10, 2017, 05:58:50 AM »
Here's one rational thing you can do to dial down your risk: Be sure you're using a common sense asset allocation plan.

This should help at least a little because while some markets are (it would seem) richly valued, others probably aren't.

BTW, I think it would be rational to take time to buff up on your investment knowledge. (This means waiting/delaying a few days or the next couple of weekends... not five months.)


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Re: Monthly or all at once?
« Reply #4 on: March 10, 2017, 06:32:32 AM »
Statistically, if you have a lump sum, you should invest it when you have it.

Then, continue putting in small amounts in increments when you get them.


Holding and waiting isn't a good idea mathematically.

NorthernBlitz

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Re: Monthly or all at once?
« Reply #5 on: March 10, 2017, 07:20:38 AM »
Statistically, if you have a lump sum, you should invest it when you have it.

Then, continue putting in small amounts in increments when you get them.


Holding and waiting isn't a good idea mathematically.

Ultimately, both decisions are reasonable decisions and without a time machine you can't know which one will be better for you.

But, the market goes up something like 70% of the time. So you'd expect that lump sum will be a better choice than DCA more often than not (if you have funds available).

Lanthiriel

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Re: Monthly or all at once?
« Reply #6 on: March 10, 2017, 07:32:31 AM »
BTW, I think it would be rational to take time to buff up on your investment knowledge. (This means waiting/delaying a few days or the next couple of weekends... not five months.)

Any suggestions? I've done a lot of reading on the three fund portfolio, read JL Collins' book The Simple Path to Wealth, got through as much of Jack Bogle's book on Mutual Funds as I could without dying of boredom, and The Investor's Manifesto by William Bernstein. My husband and I have about $120k largely in 2050 Target Retirement Funds with Fidelity (my work) and Vanguard (rollovers). My plan was to put all of our Roth IRA money into VTSAX because I think the 2050s are a little conservative and I don't need more bonds. Does that all seem reasonable?

Car Jack

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Re: Monthly or all at once?
« Reply #7 on: March 10, 2017, 09:47:44 AM »
If you're willing to do a little work using Excel, you can build yourself an investment tracking spread sheet.  Mine has no fancy pants links or any of that crap, just places for me to update balances, a total of everything, ER column and expense column (seeing the actual number is a good thing to have) with a total expenses box.

At the bottom, I set up a total of US stock funds, US bond funds, International stock funds.  (asset allocation).

Ok, so why do you need that?  Well, instead of a target date fund, you can buy the lower cost index funds separately and fine tune your AA as you want it.  Rebalance once a year on your birthday.  The other nice thing with this is that you can have as many accounts as you want and optimize what's in each from a cost perspective.  You could have VTi at TDAmeritrade, VTSAX at Vanguard and SCHB at Schwab which are all like total US stock.  Never try to put every type of fund in every account.  You don't need to do that.  In my case, my rollover IRA is half my portfolio and where I do my rebalance work.  So I can go all US equity in taxable and Roth and keep all the bonds in the IRA.

Know the ER and choose by lowest ER.  Sure, you could choose VTI at 0.05% at TDA instead of SCHB at 0.03% because you like the way Vanguard does their management and because the ER changes at the end of the year to cover the previous year....which is usually lower.  But don't go picking some 1.13% fund!

Lanthiriel

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Re: Monthly or all at once?
« Reply #8 on: March 10, 2017, 10:09:28 AM »
If you're willing to do a little work using Excel, you can build yourself an investment tracking spread sheet.  Mine has no fancy pants links or any of that crap, just places for me to update balances, a total of everything, ER column and expense column (seeing the actual number is a good thing to have) with a total expenses box.

At the bottom, I set up a total of US stock funds, US bond funds, International stock funds.  (asset allocation).

Ok, so why do you need that?  Well, instead of a target date fund, you can buy the lower cost index funds separately and fine tune your AA as you want it.  Rebalance once a year on your birthday.  The other nice thing with this is that you can have as many accounts as you want and optimize what's in each from a cost perspective.  You could have VTi at TDAmeritrade, VTSAX at Vanguard and SCHB at Schwab which are all like total US stock.  Never try to put every type of fund in every account.  You don't need to do that.  In my case, my rollover IRA is half my portfolio and where I do my rebalance work.  So I can go all US equity in taxable and Roth and keep all the bonds in the IRA.

Know the ER and choose by lowest ER.  Sure, you could choose VTI at 0.05% at TDA instead of SCHB at 0.03% because you like the way Vanguard does their management and because the ER changes at the end of the year to cover the previous year....which is usually lower.  But don't go picking some 1.13% fund!

You're right. My Fidelity account has an ER of .67% and is underperforming the S&P 500 by a fairly significant margin. I've been laser focused on debt repayment for the last 4 years, and now that that's done, it seems like it's time to learn a new skill. Being "good at money" is a lot more complicated than it seems on the surface.

PaulMaxime

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Re: Monthly or all at once?
« Reply #9 on: March 10, 2017, 01:11:24 PM »
I sold a house in Sept 2007 and put all the money I got into the market right away at literally the worst moment. 10 years later it's all good. I could have made more by waiting or easing in in that one situation, but the reality is that you never know. If you wait, and things crash, when will you feel is the right time when everyone around you is freaking out?

If you must wait commit to a certain amount each week/month whatever and stick to it no matter what. But on average the best thing to do is just invest.


RangerOne

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Re: Monthly or all at once?
« Reply #10 on: March 10, 2017, 05:14:04 PM »
If you're willing to do a little work using Excel, you can build yourself an investment tracking spread sheet.  Mine has no fancy pants links or any of that crap, just places for me to update balances, a total of everything, ER column and expense column (seeing the actual number is a good thing to have) with a total expenses box.

At the bottom, I set up a total of US stock funds, US bond funds, International stock funds.  (asset allocation).

Ok, so why do you need that?  Well, instead of a target date fund, you can buy the lower cost index funds separately and fine tune your AA as you want it.  Rebalance once a year on your birthday.  The other nice thing with this is that you can have as many accounts as you want and optimize what's in each from a cost perspective.  You could have VTi at TDAmeritrade, VTSAX at Vanguard and SCHB at Schwab which are all like total US stock.  Never try to put every type of fund in every account.  You don't need to do that.  In my case, my rollover IRA is half my portfolio and where I do my rebalance work.  So I can go all US equity in taxable and Roth and keep all the bonds in the IRA.

Know the ER and choose by lowest ER.  Sure, you could choose VTI at 0.05% at TDA instead of SCHB at 0.03% because you like the way Vanguard does their management and because the ER changes at the end of the year to cover the previous year....which is usually lower.  But don't go picking some 1.13% fund!

You're right. My Fidelity account has an ER of .67% and is underperforming the S&P 500 by a fairly significant margin. I've been laser focused on debt repayment for the last 4 years, and now that that's done, it seems like it's time to learn a new skill. Being "good at money" is a lot more complicated than it seems on the surface.

I mean pretty much every diversified portfolio is going to under perform the S&P 500 since you are likely to have at least 10% bonds and a foreign stock component. Not necessarily a bad thing.

RangerOne

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Re: Monthly or all at once?
« Reply #11 on: March 10, 2017, 05:25:44 PM »
I would also recommend if you have a 401k with limited investment choices, read all their documentation especially on their fund options. They should specify their holdings updated regularly, as well as more importantly the index they are based off of. Like whether a fund is using the S&P 500 index, or the MSCI ex-U.S. IMI index as it baseline.

Understanding the popular underlying indexes that the major financial brokers use for their offerings can help you make sure you are always comparing apples to oranges and understand when you may want to add or a remove a fund to achieve proper diversification.

This research helped me get a simpler balance of small cap, mid cap and large to mirror the US total stock based on the discount funds my company made available.

moof

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Re: Monthly or all at once?
« Reply #12 on: March 10, 2017, 05:55:40 PM »
Nothing wrong with shoveling it into bonds if you fear a crash.  Letting it sit in cash is likely the worst thing you can do.

However, if I were in your situation I would shove it all in now according to whatever your current asset allocation is planned to be.

You should also ask yourself as to why if you won't buy the market it today, why would you not sell everything in existing accounts today?  You are buying to build up today for what you will withdraw in 10, 20, 30 or more years.  Ideally your investments soak in stocks for a long time and ride out the wildest gyrations.

At the beginning of last year the market slid about 5% and all the talking head declared the bubble was finally popping.  Then things rebounded and went up 20%.  If you listened to the talking heads you would be about 20% worse off today by selling and sitting in cash.


Retire-Canada

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Re: Monthly or all at once?
« Reply #13 on: March 10, 2017, 06:57:18 PM »
I have made several lump sum additions to my investments as big as $200K and never regretted one of them. Frankly it's nice to just put the money to work and stop thinking about it. In every case it's been worth more 6 months later, but even if the market crashes who cares? I don't know when that will happen. As long as it eventually goes back up that's good enough for me.

MustacheAndaHalf

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Re: Monthly or all at once?
« Reply #14 on: March 10, 2017, 08:42:41 PM »
Most bad market days are isolated enough you can simply put half your money to work on two separate days.  I forget the study which evaluated how to divide a lump sum if you're worried about market corrections, but the general idea is that any distance (days, weeks, months) is about the same.  The market can't be too correlated day by day, or it would get rather predictable.

For your lump sum, how small a chunk do you feel comfortable investing?  1/5th?  1/2th?  Take that amount and invest one chunk per week or month.  With a house sale, I assume you have more than enough for IRAs and 401(k), so you might wind up doing lump sum investing in taxable.

Lanthiriel

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Re: Monthly or all at once?
« Reply #15 on: March 10, 2017, 10:54:52 PM »
Well, guys, I decided to go lump sum. I put $16,500 in the market today between 2 2016 and 1 2017 IRAs. I did a 60/40 split between domestic and international total market. When I get my escrow check in a few weeks, I'll do the second 2017 and I'm trying to decide if I want to put $3000 in bonds to meet the minimum or just wait until next year when I'll have $30k between the two IRAs to have it be 10% of my portfolio, which is my goal.

I sort of knew enough to be dangerous and did some more research today based on the info I got here. I don't think I'll ever be the kind of investor who has their money in 30 different pots. I'm going to stick with a 60/30/10 asset mix across domestic, international, and bonds until I find a compelling reason not to.

Re: the Fidelity 401k. I'm going to leave it in the target fund. I took a look at the other options available through my plan and was underwhelmed. I don't think I could achieve an average of less than my current fees mixing it up between funds and there seems to be a very high potential to get it wrong. I do, however, think I'm going to get the Vanguard funds out of a Target Date Fund and into that portfolio asset mix I mentioned above.

Thanks for giving me so much to think about! More learning to do for sure...

MoonLiteNite

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Re: Monthly or all at once?
« Reply #16 on: March 11, 2017, 04:26:13 AM »
I personally dumped all 5.5k on jan 1st
For my HSA i am cost averaging it across the year
401k i am doing my best to front load it, but trying to time it properly with overtime and employer matching. Do not want to lose any free money :)

Metric Mouse

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Re: Monthly or all at once?
« Reply #17 on: March 11, 2017, 04:57:37 AM »
Speaking for myself, I have regretted 100% of all delays I made. I managed to speed things up once, and it was totally worth it.
This. Get the money working as early and often as possible.