View Poll Results: How Would You Invest $100K in Today's Market ...
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DCA - Dollar Cost Average (Invest Certain Amount Per Week/Month)
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14 |
38.89% |
Lump Sum Investment (All In!)
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19 |
52.78% |
Hold for Market Correction in Savings Acct paying 1%
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3 |
8.33% |
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DCA vs Lump Sum Investment ~ Your Thoughts?
07-10-2015, 09:35 AM
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#1
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Recycles dryer sheets
Join Date: Jan 2015
Location: Midwest (Not Quite The Boondocks)
Posts: 76
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DCA vs Lump Sum Investment ~ Your Thoughts?
Hey Y'all ...
Wanted to hear your thoughts on something. With the market where its at today, how would you go about investing lets say ... $100,000 in cash?
Over the past several months, I have been DCA'ing ... Its a slow process, but I allows me to sleep better at night.
Would you:
A) Dollar Cost Average (DCA) ~ And enter the market at lets say $5k - $10k/monthly
or
B) Invest the entire $100k in one lump sum.
or
C) Hold On for a decent market drop while earning 1% in a Savings Acct.
Thoughts & Idea's welcome
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07-10-2015, 09:49 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Posts: 3,083
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All in baby. If we are in a bull every day you wait is like loosing some gain.
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07-10-2015, 09:53 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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I heard someone has an aunt that sells VUL. You could put it all in that.
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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07-10-2015, 09:53 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,303
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If you do a search here you'll see it's been discussed at length many times.
Or Let me google that for you
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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07-10-2015, 09:54 AM
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#5
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Recycles dryer sheets
Join Date: Jan 2015
Location: Midwest (Not Quite The Boondocks)
Posts: 76
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Quote:
Originally Posted by Big_Hitter
I heard someone has an aunt that sells VUL. You could put it all in that.
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LOL ... Was just in that thread. No thanks
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07-10-2015, 09:55 AM
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#6
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Recycles dryer sheets
Join Date: Jan 2015
Location: Midwest (Not Quite The Boondocks)
Posts: 76
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Quote:
Originally Posted by Midpack
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I'm sure it has ... I've seen several old threads on the subject.
But at TODAY's market value & trading is what I'm after
Just whatever your thoughts might be. Your thoughts today could very well be different then 5 years ago, or even 8 years ago.
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07-10-2015, 09:58 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,303
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Quote:
Originally Posted by DROPOUT
I'm sure it has ... I've seen several old threads on the subject.
But at TODAY's market value & trading is what I'm after
Just whatever your thoughts might be. Your thoughts today could very well be different then 5 years ago, or even 8 years ago.
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On the subject of DCA vs lump sum, my thoughts haven't changed with valuations over time. But there is no definitive right answer, both have their merits, neither is wrong - and there are plenty of academic studies to read that might be more valuable than two sentence replies...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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DCA vs Lump Sum Investment ~ Your Thoughts?
07-10-2015, 12:01 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jun 2014
Posts: 1,069
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DCA vs Lump Sum Investment ~ Your Thoughts?
DCA is pixie dust. If it was ever the right move, then shouldn't everyone sell everthying right now, and DCA back in over time? Rinse, repeat.
It's intellectually bankrupt hogwash.
Sent from my iPhone using Early Retirement Forum
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07-10-2015, 12:42 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,370
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I would value average in rather than DCA. Invest $10k today, in a month add whatever you need to to increase the value to $20k, a month later, add whatever you need to to increase the value to $30k... repeat until the $100k is fully invested.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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07-10-2015, 06:08 PM
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#10
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Full time employment: Posting here.
Join Date: Apr 2015
Posts: 903
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Quote:
Originally Posted by pb4uski
I would value average in rather than DCA. Invest $10k today, in a month add whatever you need to to increase the value to $20k, a month later, add whatever you need to to increase the value to $30k... repeat until the $100k is fully invested.
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Yup, this is what I'd do. I realize lump sum's likely the better option more often than not but I think I'm going to appease my monkey brain and just do value cost averaging. There's more pain with losing money than there is happiness at gaining it.
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07-10-2015, 06:16 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Location: Northern Ohio
Posts: 3,182
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Quote:
Originally Posted by hnzw_rui
Yup, this is what I'd do. I realize lump sum's likely the better option more often than not but I think I'm going to appease my monkey brain and just do value cost averaging. There's more pain with losing money than there is happiness at gaining it.
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Me too.
For anything above a fairly low threshold, I divide up unto 2-4 piles and buy in over time.
If the market's up: "glad I put in pile #1 when I did!"
If the market's down: "glad I put in pile #n when I did!"
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07-10-2015, 07:26 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,873
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I lumped sum into the market in early 2008, before the market crashed. I would definitely have been better off DCA'ing. In retrospect, I would definitely DCA, but making the same choice today I'd still probably invest it all to my AA and be done with it.
The data shows that lump sum investing on average is better than DCA. Valuations today are higher than normal, so there would be little harm in value averaging into the market. If you're in it for the long-haul, it probably won't matter much. The important part is to stick with your AA.
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Eat, Drink and Be Merry.
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07-10-2015, 08:00 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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Quote:
Originally Posted by dallas27
DCA is pixie dust. If it was ever the right move, then shouldn't everyone sell everthying right now, and DCA back in over time?
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As a non-timer of the markets, that's how I always look at it. Your $100K is no different than mine. If there's a reason you would only have 10% of it invested, wouldn't that mean I should also have 10% of it invested, meaning I should sell $90K? The only difference would be any transaction costs and tax hits. But I don't think that's the reason people treat it differently. It's harder to accept a negative consequence if it's because of an action you took, but if you miss out because of not taking action, many people brush it off.
An asset allocation plan is what keeps your portfolio relatively safe while trying to optimize gains.
Now, if your a market timer, by all means, do something different.
And if you'll sleep better putting it in a bit at a time, by all means do that too. It probably won't make much difference. And you might come out better. Or you could miss out on more gains. Sleeping peacefully is important.
Personally, I'd feel just as bad to miss out on gains as I would to jump in and lose money, but some people don't mind the former so much and hate the latter. Especially as I said, if it's due to their action. I try not to let emotions rule my investment decisions. Sometimes I don't follow my own advice on that, but on this one I'm pretty consistent.
Here's the problem I have with waiting for a market drop. Say you are looking for 10%. If it drops 8% and recovers, you might not get in. At all. So then you watch it recover and go back up another 10%. So then you say, that's it, if it drops 5%, I'm in. Finally it drops that 5% and you got back in. 5% higher than when you first had the money.
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07-10-2015, 08:19 PM
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#14
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Full time employment: Posting here.
Join Date: Sep 2011
Location: Bushnell
Posts: 607
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If you are truly torn about this decision, another way to approach it is to split the difference: lump sum 50% of the total now and then dollar cost average the remaining 50%.
Sent from my iPhone using Early Retirement Forum
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07-10-2015, 08:21 PM
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#15
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Full time employment: Posting here.
Join Date: Apr 2015
Posts: 903
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Quote:
Originally Posted by RunningBum
Here's the problem I have with waiting for a market drop. Say you are looking for 10%. If it drops 8% and recovers, you might not get in. At all. So then you watch it recover and go back up another 10%. So then you say, that's it, if it drops 5%, I'm in. Finally it drops that 5% and you got back in. 5% higher than when you first had the money.
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Therein lies the benefit of DCA/VCA for folks who have a hard time separating their emotions from their investments (myself included, unfortunately). It's that in-between of immediate lump-sum investing and trying to time the market.
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07-10-2015, 09:02 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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I can't psychologically buy in lump sum. The only way I can buy in is to DCA a or rebalance.
Lucky for me my biggest lump sum investment was from 2000-2002, so I happened to fall on a period where it paid off.
I can't begin to tell you where the market is now - no one knows.
__________________
Retired since summer 1999.
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07-11-2015, 06:36 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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I shouldn't stir things up, but I'm going to anyway.
You call it a benefit, but I think it's taking the worst of both worlds. You don't have all your money fully invested and working for you, and you don't have a reason for it like a market timer does. You really have no reason for keeping money out other than a fear of making an active decision that could go wrong, even though over time the odds favor being in the market.
To be fair, the OP did frame the question in the current market. Like Audrey in the post before me, I don't really know where the market is though my impression is that it might be a bit overvalued.
I would at least be looking at value cost averaging (over dollar cost averaging), which has an element of market timing in a predetermined sort of way, as I understand it, though I haven't looked too closely at it since averaging in doesn't interest me, and I'm unlikely to have any new money coming in anymore.
Like I said, what the rest of you do with your money is your business, and having a plan you can sleep at night with is important.
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07-15-2015, 07:12 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Sep 2007
Posts: 1,214
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If you invest $10K each month, in 10 months you are 100% invested. So just what has DCA'ing done for you? Either tomorrow or next May all $100K will be invested. What is so special about the ensuing 10 months?
I agree with the poster who said that if DCA was so great, then when you get fully invested you should pull it all out and then DCA it in again.
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07-16-2015, 02:07 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
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If you > $1 million in liquid assets than stick all in at once. If you have less than $200K than DCA over 3-12 months. Between those amounts, it is really up to you.
I personally am in favor of putting all in once, not so much because of the math, although it is clear that putting it all in at once is superior. But rather because in my experience people who talk about DCA over say a year, often procrastinate and a year passes and only 10-20K has been invested.
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07-16-2015, 02:36 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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Quote:
Originally Posted by DROPOUT
Over the past several months, I have been DCA'ing ... Its a slow process, but I allows me to sleep better at night.
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I think the reason to DCA may be what you said and I bolded above.
But I would agree with those who recommend value averaging...
When we talk about the market being high... I think most refer to the US market, but you may be looking internationally and some of those may be undervalued.
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