Investing $500K In Today's Market

[mjones1234]

I'm coming here to obtain wisdom from those more experienced than me. I am looking to invest some money I've been blessed with to the tune of $500k. Although the market is at 23,000 I do believe there are many stocks that still have moderate multiples and room to run. One thought I have is to leave $100k as emergency (opportunity) cash, then take $400k and split it into around 6 monthly installments of $60-70k. This would be a mix of dividend paying stocks and index funds. Hopefully this strategy would insulate things in case of a near term correction. I have not considered real estate because I don't have the experience other than owning a primary residence and a weekend lake cabin (75% built by my wife and I). I will say, that I'm recently FIRE and being handy, a house to flip would not be out of the realm of possibility - but once more, this would be new to me and want to be careful with how I invest this money.

If it helps, I am 50 years old, 3 months into early retirement and no debt/mortgage free, so nothing to pay down. I just don't like sitting on this much cash, earning so little but don't want to be foolish and move it into the market all at once.

I welcome any thoughts and do appreciate it.

[mxt0133]

How are you funding your retirement, pensions? 

Lump sum vs DCA is a topic that will never die and for some it's not about statistics but the fact that for most people the psychological effect of loosing $1 is greater than the effect of gaining $2 even though it should be the opposite.  Knowing this helps some people overcome it.

The popular reply around here is, if you already have money in the market and are afraid to put in a lump sum of $500K because a correction might happen, then logically you should pull the money you invested because you might loose money that you have invested if a correction does happen.  Is that something that you would consider doing?  If not then you probably should just invest it lump sum.

My question is since you are already FIRE you don't really need to grow it, so why invest it in something as volatile as individual stocks.  No sense on playing (investing) if you've already won.  Why don't you just use it for traveling or some kind of slush fund for the next 10-20 years.  10y Treasure notes are yielding 2.3% which is just keeping up with inflation so put in there or some kind of ladder that will mature when you intent to spend it.

[JLee]

I would put all of it in the market immediately, but that's me.

[stashing_it]

The other thing to think about is asset allocation.  If you're worried about money in the market, it can be a sign that you have too much allocated to equities.   You don't have to just pick cash or stocks.  You can put some in bonds for more return than cash, less risk than stocks. 

You need to decide asset allocation between
cash
bonds
stocks

and then for stocks  (i'm assuming you live in the U.S.)
domestic
international


If it were me, I would just go with the index funds, not play with the dividend stocks.   Just take the diversification.

For my stock allocation, I like 60% U.S. using VTSAX (or VTI)  and 40% international using VEA (20%) and VTIAX (20%)    (I also use  90/10 split for veu and vss for international when tax loss harvesting)

For my bond allocation, I like a mix of total bond fun  (VBTLX) and intermediate and long term corporate  (VCIT) and (VCLT)  I weight a bit more towards the corporate because I think that the total bond has too much government debt with low yields.   That's just my opinion

You can get 1-2% on cash right now.   4-5% on bonds, and long term stocks is anybody's guess


Personally I've been DCA-ing my cash into the market over the past year.  That's even though I know that just putting it all in is better long term

[Heroes821]

Since you said you are already early retired. What does your IPS https://www.bogleheads.org/wiki/Investment_policy_statement  say?

Mine isn't fancy, it's an email to myself that says what percentages I want to keep my investments in and what funds to focus on inside my different investment vehicles (taxable, IRAs, HSA, 401k etc).

Some people count their emergency fund cash, or their house.  Mine is simply my investment accounts.  I use 10% bond, 30% International VTIAX, and 60% VTSAX (HSA only has S&P 500, but close enough)

$5, $50, $500, $5,000, $50,000 or $500,000 if you are already invested enough to be ER, I'm confident you have an IPS even if just in your head. Follow it and throw your money into your plan.

Maybe take $1000 and do something fun like learning to build benches you can sell on craigslist.

[Cycling Stache]

I just don't like sitting on this much cash, earning so little but don't want to be foolish and move it into the market all at once.

I welcome any thoughts and do appreciate it.

I've made this point before, but worth repeating here.  If you have money already invested in the market, every day you have a choice to pull it out.  Thus, every day is a "choice" to put (leave) the money in the market.  There is no logical difference.

So I had $1 million that I had to decide whether to invest this morning.  I decided to leave it in the market.  Just like all the days before. 

Whatever your asset allocation is, put it there now.  Unless you're thinking about pulling the money you already invested out and messing around with that too.

[talltexan]

taking $1,000 out for a splurge is too little.

Take $5,000-$10,000 out. But otherwise, I agree with the other votes here that you should match your current asset allocation immediately.

[RWD]

Since you said you are already early retired. What does your IPS https://www.bogleheads.org/wiki/Investment_policy_statement  say?

This. Follow your investment policy statement.

[Mr. Boh]

I've made this point before, but worth repeating here.  If you have money already invested in the market, every day you have a choice to pull it out.  Thus, every day is a "choice" to put (leave) the money in the market.  There is no logical difference.

So I had $1 million that I had to decide whether to invest this morning.  I decided to leave it in the market.  Just like all the days before. 

Whatever your asset allocation is, put it there now.  Unless you're thinking about pulling the money you already invested out and messing around with that too.

Capital gains taxes are one important difference you might not be considering. I have a position that I've had since the eighties that has appreciated 2500%. I have to think long and hard about selling this stock and in fact have only sold a small portion when I was harvesting capital gains. Let me assure you that there is a logical difference between cash and some of my investments.

[Cycling Stache]

I've made this point before, but worth repeating here.  If you have money already invested in the market, every day you have a choice to pull it out.  Thus, every day is a "choice" to put (leave) the money in the market.  There is no logical difference.

So I had $1 million that I had to decide whether to invest this morning.  I decided to leave it in the market.  Just like all the days before. 

Whatever your asset allocation is, put it there now.  Unless you're thinking about pulling the money you already invested out and messing around with that too.

Capital gains taxes are one important difference you might not be considering. I have a position that I've had since the eighties that has appreciated 2500%. I have to think long and hard about selling this stock and in fact have only sold a small portion when I was harvesting capital gains. Let me assure you that there is a logical difference between cash and some of my investments.

Capital gains isn't really the point.  When you have money in the market, the advice (correctly so) is don't try to time the market.  That exact logic applies to money you're about to put in the market as well.

Capital gains is the tax on gains.  If you believe the market (or your particular stock) is about to drop 30% and you believe you can predict it, then you absolutely sell, take your gains, wait for the market/stock to drop 30%, and then buy back.  The reason you don't is because you can't time the market, not because of capital gains. 

[AdrianC]

Relevant article:

How to Invest At All-Time Highs
http://awealthofcommonsense.com/2017/10/how-to-invest-at-all-time-highs/

[Mr. Boh]

Cycling Stache I agree with you about timing the market. However you stated that there is no logical difference between deciding to buy stocks and leaving stocks in the market. I'm just pointing out that there most certainly is a logical difference when you account for capital gains taxes. I don't want to hijack this thread but I can get more detailed if you like.

[Mighty-Dollar]

Keep it simple. Nothing wrong with just a total stock market index fund and a total bond market index fund.
https://personal.vanguard.com/us/funds/tools/recommendation?reset=true
https://www.blackrock.com/wte/core-builder/us?refType=fi

[human]

You want to invest the money over three years and have 100k sitting in a crappy savings account? What happens if markets tank in the meantime will you pull everything out? Do you have other investments?

Maybe you should go with100% bonds sounds like you don't like risk and yet you want to pick a mix of didividend stocks . . .

DCA over three years sounds terrible but if you're going to cry if markets go down just get whatever the american equivalent of a government of canada savings bond is. return is probably better than inflation but better than nothing.

[Retire-Canada]

but don't want to be foolish and move it into the market all at once.

I welcome any thoughts and do appreciate it.

Putting your money in the market as quickly as possible is the smart move. Waiting and sitting on cash is the foolish move. My parents are in their 90's if I get an inheritance tomorrow I'd put every dollar into the market the next day and then I would stop thinking about it.

[JLee]

The Dow was 23,164 when you posted this thread. It's 23,347 today, or .79% up.

If I did the math right, waiting cost you $3,950 (so far).