Author Topic: Wanted: Crystal Ball Readers... When would you invest a windfall?  (Read 5187 times)

MaudMan

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I'm looking for all MMM forum members who have a crystal ball and can tell me if the market is going to continue to decline this year. :)

We recently came into a windfall of money (like $100K+) and I'm totally freaking out about dumping it all in the market right now. I seem to have a knack for causing the market to drop [further] right after I buy something. LOL 

I already fully funded my and my wife's IRA on Wednesday last week (1/6). I also increased my 401K contribution at work to 25% so I can get some discounts while the market is down. 

And... My 401K was in need of a little re-balancing (not too much, but it was slightly heavy toward bonds), so I changed my future contributions to 90% stock / 10% bonds. I'm normally 80/20, so I figured I'd change the allocation while the market is in correction.  Good move, or bad move?   I know we should just stick to our plan no matter what, but I couldn't resist. I use an S&P500 index fund and a total bond market index fund in my 401K because those were the lowest cost index options.

So... What would you do if you had a large chunk of money to invest right now? Our retirement money is with Schwab in a simple 3-fund ETF portfolio (Bogleheads style) I manage myself. And the majority of our taxable money is invested at Betterment in a 90/10 portfolio.

thepokercab

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #1 on: January 13, 2016, 09:42:50 PM »
I know we should just stick to our plan no matter what

Sounds like you already know what to do.  I'd invest my windfall according to whatever plan I have and ignore the day to day.   

FIRE_Buckeye

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #2 on: January 13, 2016, 10:11:35 PM »
Either DCA in or wait for some sort of stabilization
Dumping a huge amount into the market as it is in free-fall wouldn't be doing yourself any favors.

CanuckExpat

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #3 on: January 13, 2016, 10:49:32 PM »
Decent general article on managing a windfall from bogleheads
Rick Ferri has a nice article on things to consider about investing all at once or DCA'ing.

His guideline is that if the windfall is less than 20% of your networth go ahead and invest it all at once. If it's a higher percentage, maybe DCA, but over some well defined period of time.

dragoncar

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #4 on: January 13, 2016, 11:03:45 PM »
If you are worried about lump sum investing in your chosen asset allocation, consider that your risk tolerance may in fact be lower and you should use a more conservative AA

If you keep it all in cash, what would your overall asset allocation be?  Say you already have 100k invested in 100% equities and you have a $100k windfall.  If you hold off, you are choosing a 50/50 asset allocation.  It's ok to keep this cash, but you should know your target and rebalance into equities when they fall. 

From what you said about betterment, you seem to think 90/10 is right for you, in which case I say dump it in as long as you can stomach a drop

Drifterrider

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #5 on: January 14, 2016, 05:10:32 AM »
So... What would you do if you had a large chunk of money to invest right now? Our retirement money is with Schwab in a simple 3-fund ETF portfolio (Bogleheads style) I manage myself. And the majority of our taxable money is invested at Betterment in a 90/10 portfolio.

I would buy another rental house.  OR    I'd put it in a 90 Day CD (issued by an insured bank or credit union) to give myself time to think.  Not much interest to be gained from a CD but zero loss risk. 

Fishindude

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #6 on: January 14, 2016, 05:47:52 AM »
I don't trust the market right now and already have enough riding there at risk.
I'm going with real estate, not necessarily to make a bunch of money but more to preserve and protect it.

MaudMan

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #7 on: January 14, 2016, 05:53:56 AM »
Excellent advice so far. You've all given me several things to think about.  More real estate is definitely under consideration, at least with a portion of the money.

Retire-Canada

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #8 on: January 14, 2016, 06:58:30 AM »
Don't change your AA based on emotion. Stick with what you had decided one. If that no longer makes you happy you can change your plan, but if you'll be changing every time the market does something dramatic you don't have much of a plan.

I'm a fan of putting my money to work as soon as I can. $100K is more than I typically have to invest in a lump. I'd spread it over a few days, but be done within a week or so.

RE is fine if that is something you've been planning to invest in. If it's just a new idea because the market is freaking you out than instead of investing that money anywhere I'd start looking at your own risk tolerance and emotional reaction to the markets.

If you can't confidently invest money according to your investment plan it's time to dig deeper and see what's going on. Recent events haven't been that bad. If you can't hold a course you may do something damaging later when a real crash happens.

In any case congrats on the windfall. I'd be super duper stoked if $100K suddenly came my way unexpectedly! :)

GrowingTheGreen

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #9 on: January 14, 2016, 11:54:18 AM »
I'm a fan of dollar-cost-averaging over a span of 2-4 months depending on your comfort level. As an example, you could do $10k every Friday for 10 weeks.


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zephyr911

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #10 on: January 14, 2016, 12:11:12 PM »
Sheeeeeeeeeeeeeeeeeeeeeeyit!
1) I'm jealous
2) I'd buy real estate
3) Do exactly what you'd do with $1,000 or $10,000

MaudMan

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #11 on: January 20, 2016, 08:18:39 AM »
This market is freakin' killing me! I'm getting quite nervous and not wanting to invest any new money in the market...YET!  But when?? I think we're in for a long downtrend.

YoungInvestor

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #12 on: January 20, 2016, 08:36:04 AM »
I'd do what I'd do with 5000 dollars, times 19, and then pay for a vacation to clear my mind.

soccerluvof4

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #13 on: January 20, 2016, 08:38:30 AM »
I had the same situation for different reasons more than once. Divide by 12 and add once a month preferably on dips. Even if the market goes back up there will be dip days. Thats just an option but sooner you get it in the better. Maybe do 6 months.. Buy the dip today if it holds.

Jesstache

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #14 on: January 20, 2016, 09:19:42 AM »
Ha... I had a 2016 goal of rolling over my old 401k's to an IRA and got all of the phone calls and such done for it on Thursday afternoon.  Both 401k companies said the checks would be cut Friday afternoon.  I thought, my luck, the market is probably going to tank right before the cash out goes through.    Well, you saw what the markets did on Friday, though it wasn't TOO bad.  We're talking about like $160k in investments.  I can only hope the market doesn't have a huge rebound before the checks arrive in my rollover account.  I'm just glad I didn't get to my husband's 401k rollovers (Another ~$400k) on the same day.  While I know you can't and shouldn't market time, I'm going to spread the rollovers of his accounts (3 total) out and do one at a time to spread out the risk of big market jumps while transferring funds.

So I guess my suggestion is like others, to pick a set amount to put in at a set time interval to DCA.

MaudMan

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #15 on: January 20, 2016, 09:32:37 AM »
Ha... I had a 2016 goal of rolling over my old 401k's to an IRA and got all of the phone calls and such done for it on Thursday afternoon.  Both 401k companies said the checks would be cut Friday afternoon.  I thought, my luck, the market is probably going to tank right before the cash out goes through.    Well, you saw what the markets did on Friday, though it wasn't TOO bad.  We're talking about like $160k in investments.  I can only hope the market doesn't have a huge rebound before the checks arrive in my rollover account.  I'm just glad I didn't get to my husband's 401k rollovers (Another ~$400k) on the same day.  While I know you can't and shouldn't market time, I'm going to spread the rollovers of his accounts (3 total) out and do one at a time to spread out the risk of big market jumps while transferring funds.

So I guess my suggestion is like others, to pick a set amount to put in at a set time interval to DCA.

OUCH! That is definitely painful. I feel like we're in for a long term downtrend if the S&P closes below ~1830.  I've been kinda watching the moving averages, but I don't know if that's a good indicator in this case or not. All I know is, they are in free-fall!  :(

« Last Edit: January 20, 2016, 09:37:00 AM by MaudMan »

spud1987

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #16 on: January 20, 2016, 09:58:15 AM »
This market is freakin' killing me! I'm getting quite nervous and not wanting to invest any new money in the market...YET!  But when?? I think we're in for a long downtrend.

I'd start DCA-ing the money into the market now. It looks ugly out there but keep in mind that we are already 15% off the market highs in the S&P (over 20% for the Russell 2000). We obviously may still have a ways to fall, but no one knows for sure. In 2008-09 the market fell 40%. But the fundamentals look much better now than 08-09. The only thing driving this downturn is China and oil. The US's exposure to China is relatively small. All this is to say that I would be shocked if the market fell more than 25%.

But as I said above, no one knows for sure. That is why DCA is perfect in these scenarios. You will never be able to pick the bottom, but at least you won't miss out completely by DCA-ing.

I'm a red panda

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #17 on: January 20, 2016, 10:12:54 AM »
This market is freakin' killing me! I'm getting quite nervous and not wanting to invest any new money in the market...YET!  But when?? I think we're in for a long downtrend.

Don't try to time the market. 
You might want to buy in over a few weeks, but I wouldn't spread it out a huge amount- just buy in. 

Unless you are psychic and can tell when that downtrend is about to go up before it goes up again. In which case, then you want to wait.  But most people aren't.

Jesstache

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #18 on: January 20, 2016, 10:39:45 AM »
Ha... I had a 2016 goal of rolling over my old 401k's to an IRA and got all of the phone calls and such done for it on Thursday afternoon.  Both 401k companies said the checks would be cut Friday afternoon.  I thought, my luck, the market is probably going to tank right before the cash out goes through.    Well, you saw what the markets did on Friday, though it wasn't TOO bad.  We're talking about like $160k in investments.  I can only hope the market doesn't have a huge rebound before the checks arrive in my rollover account.  I'm just glad I didn't get to my husband's 401k rollovers (Another ~$400k) on the same day.  While I know you can't and shouldn't market time, I'm going to spread the rollovers of his accounts (3 total) out and do one at a time to spread out the risk of big market jumps while transferring funds.

So I guess my suggestion is like others, to pick a set amount to put in at a set time interval to DCA.

OUCH! That is definitely painful. I feel like we're in for a long term downtrend if the S&P closes below ~1830.  I've been kinda watching the moving averages, but I don't know if that's a good indicator in this case or not. All I know is, they are in free-fall!  :(

Whelp, if the markets keep falling between now and when the roll over is complete, that's only good for my current situation and I'll wish I HAD rolled over the other accounts at the same time.  It's hard to get too excited as I don't plan on retiring any time too soon, there's plenty of time to recover.  What's done is done. 

codemonkey

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #19 on: January 20, 2016, 10:40:30 AM »
Just for kicks, I would schedule daily transfers from my bank account to VTSMX for $1,000.  That'd at least stretch out your money over the next 20 weeks.

Dumping it all in, or at least faster is probably an even better idea.  With things down 3% today, I'd be tempted to put a bunch in. 

Personally, I've been moving money from fixed funds into VTSMX as things have been going down.  I just wish I had more to move.

On the plus side, our company match and profit sharing should be arriving tonight or tomorrow night in our 401k.  That's a nice 10k+ chunk of money going into the market at a good time. 

Bobberth

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Re: Wanted: Crystal Ball Readers... When would you invest a windfall?
« Reply #20 on: January 20, 2016, 11:32:02 AM »
How long is your holding period? The S&P is down about 15% from it's all time high right now. Let's say we have another 2008 and stocks go down 40% peak to trough. That would mean there is another 25% to go down. What if you buy at the absolute bottom? Over 25 years, your returns are 1% higher than somebody that buys today. Over 50 years, your returns end up being 0.5% higher because of all the strain and stress you put on yourself in 2016 (and luck). Of course if you had to choose, you would choose the higher return but is it really worth it? If markets move up, you will lag behind from the same strain and stress.