Author Topic: Thinking about delaying my annual, start of the year, lump sum investments  (Read 2306 times)

catccc

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So, we are coming to the end of the year! 

Every January, I take cash saved up from the prior year and do the following:  Max out IRAs for the new year, and spend the remainder on something like a fun vacation.  The latter item will be easy to do, my family has decided a quick week, half in London and half in Paris in the Spring.  But the first item?  Well, I know how lame this is, but I'm tempted to wait because I don't understand what the hell is happening with he market.  I know lump sum beats DCA, but I'm worried to be overpaying for my investments with market conditions right now.  If it makes any difference, I think we are 5 years out from FIRE.

I know the answer is stay the course, i.e. lump sum in January, but if anyone would like to coddle me by concurring, I'll take it.  Or if anyone would like to convince me to do otherwise, I'm open to suggestions.

2Birds1Stone

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #1 on: December 12, 2016, 11:39:39 AM »
I just made a very similar thread about investing ~$35k in cash I had sitting from an IRA rollover that finalized last week. All the advice was to get the money into the market asap.

dandarc

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #2 on: December 12, 2016, 12:07:29 PM »
When you say "max out IRAs for the year" do you mean 2 IRAs?  That's 11 grand.  If you're 5 years from FIRE, that can't be that big a deal to your overall situation - just get the money in as planned and forget about it.

VoteCthulu

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #3 on: December 12, 2016, 01:38:06 PM »
I put all my contribution in Jan 1 this year, and then it tanked later that month. I kicked myself at the time, but I had no way of knowing when the future would be. I think the best move is to play the long game and just invest it as soon as possible, so I'm going to do the same next year.

gliderpilot567

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #4 on: December 12, 2016, 01:44:41 PM »
Just put it in. I have a low five figure amount coming my way early next year from a home sale, and will pretty much invest all of it regardless of what the market is doing, even though the lizard part of my brain is having the same feelings about the market as you are.

Waiting to invest a lump sum, is mathematically the same as cashing out an equivalent amount that you already have invested, and waiting to re-invest it later. Smells like market timing. If you wouldn't cash out of positions that you're already in, then you shouldn't delay buying into positions with cash you have on hand now.

Your asset allocation should account for your desired risk exposure. If you are too worried to put money in right now, then you might be using the wrong asset allocation - but don't go willy nilly changing your AA in response to market swings, because that too smells like market timing.

Even if the market tanks the day after you put it in, you will still own all the shares and still get dividends from that day going forward. Somewhere there is a story about a hypothetical guy who only invested the day before the biggest stock market crashes, and 30 or 40 years later he ended up better than ok.

Radagast

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #5 on: December 12, 2016, 01:53:33 PM »
What gliderpilot said. If you are happy with what you have invested now, wouldn't you be even happier with more of it? If you would not be happier with more of it, your head might be saying that now is time to increase your bond ownership. Now is a good time with stocks up, bonds down, and you coming up on your goal. Even if stocks are best for the long run there is nothing that says they will be best for meeting an early retirement date.

catccc

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #6 on: December 12, 2016, 02:28:24 PM »
Yeah, this is 2 IRAs, mine and DH's.

So last year due to a delay in opening new traditional IRA accounts (previously held Roth IRAs only), I held off a bit on funding it, and we ended up funding in late January, which I was really glad for, but I know it was just luck.

Waiting to invest a lump sum, is mathematically the same as cashing out an equivalent amount that you already have invested, and waiting to re-invest it later. Smells like market timing. If you wouldn't cash out of positions that you're already in, then you shouldn't delay buying into positions with cash you have on hand now.

Really good perspective, this helps a lot!

catccc

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #7 on: December 12, 2016, 02:33:33 PM »
Also, I'm remembering the time I took $80K out of savings and dumped it into Vanguard in early 2014.  IDK why, but I don't think I even thought twice about DCA v. lump sum or attempting any kind of timing.  Something about the recent run up has me unnecessarily spooked, I guess. 
« Last Edit: December 12, 2016, 02:39:06 PM by catccc »

JAYSLOL

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #8 on: December 13, 2016, 07:38:31 AM »
Also, I'm remembering the time I took $80K out of savings and dumped it into Vanguard in early 2014.  IDK why, but I don't think I even thought twice about DCA v. lump sum or attempting any kind of timing.  Something about the recent run up has me unnecessarily spooked, I guess. 

It has been quite the climb lately.  I expect things will level out a bit soon, but as far as dropping significantly, its hard to predict.  I don't think i would invest a large chunk all at once right now, but spread it evenly over a few months or something and see what the market does. 

Malum Prohibitum

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #9 on: December 13, 2016, 07:51:52 AM »
If you invest it all in January, the market will go down in February and throughout the spring, and you will kick yourself for not averaging it out over the year.

If you average it in over the year, then the market will just continue to go up and up, and each share you buy will be more expensive.  You will kick yourself for not having just invested it in a lump sum in January like you always do.


Metric Mouse

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #10 on: December 13, 2016, 08:03:21 AM »
Lump it in as early as you can. Then you can at least stop worrying about it!

catccc

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Re: Thinking about delaying my annual, start of the year, lump sum investments
« Reply #11 on: December 14, 2016, 12:55:24 PM »
Lump it in as early as you can. Then you can at least stop worrying about it!

True, once it's in, that's it.  No use crying over spilled milk if the market doesn't keep up with it's current path.

If you invest it all in January, the market will go down in February and throughout the spring, and you will kick yourself for not averaging it out over the year.

If you average it in over the year, then the market will just continue to go up and up, and each share you buy will be more expensive.  You will kick yourself for not having just invested it in a lump sum in January like you always do.
ha!  Wouldn't that be the way it ended up?!  But I've always been a lucky gal... when I look at my life, I think, 'I've been on a winning streak for 38 of my 38 years, it seems!'