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ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 03:50 PM   #1
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ER is 2 Years Away, Where Should I Invest $300K?

I am within 2 years or ER. I am selling my house and will have $300K available to invest in my SWR portfolio after paying cash for my retirement home. The problem is with the recent run up in the stock market, I am afraid to invest it in the market
right now, no matter how diversified the portfolio. My fear is that we are comming up on a downturn in the market which would negatively affect my ability to ER in 2 years. I know that we are not supposed to time the market but $300K seems like a lot to dump into the market right now at current values.

Any ideas what I should do?

Thanks
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Re: Wher
Old 05-05-2006, 03:56 PM   #2
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Re: Wher

1. Diversify-keep your (nest) egg in several different baskets

2. DCA=Dollar Cost Average your money into the market over time.

Or

3. Stick your $$$ into a MM fund and sit tight until you feel better about the market.

4. Do nothing

5. Do a combination of 1,2 and 3
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Re: Wher
Old 05-05-2006, 04:00 PM   #3
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Re: Wher

Nothing wrong with money markets yielding 4.5+ per cent. Sit on it until you have a better feel for what you want to do.
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 04:13 PM   #4
 
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Re: ER is 2 Years Away, Where Should I Invest $300K?

The experts usually say put 1/2 in now and then the other half in 6 months. And hope the market drops in between.

But, I think you might elaborate a bit on your stock/bond allocation currently and what is your desired allocation. For example if your current allocation is 50-50 stock-bond and that is your desired allocation. you only need to invest $150K in stocks. That would be $75K now and $75K later. The other $150 could be put into a CD for a year or so.

So what is your current and desired allocation?
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 04:22 PM   #5
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Re: ER is 2 Years Away, Where Should I Invest $300K?

I had a lump sum to invest in early 2000 (gulp!). *

I decided to DCA in quarterly over a 2 year period. *1 year seemed too quick.
Once a quarter turned out to be easier to manage than once a month.

I invested in an asset allocated portfolio. * I kept the money yet to be invested in an ultra short-term bond fund. *Then each quarter I invested in a way that rebalanced my portfolio - so money went into the supposedly "undervalued" asset classes, not the "overvalued" ones.

As the market bottomed in late 2001/2002, I actually stretched it out to 3 years by skipping a couple of quarters here and there.

It was scary. *By Oct 2002 I did the last DCA. *Gulp! *That was it. *I was all "in".

But by the time the market recovered in 2003, I was well ahead!!! *That was sweet.

Keep in mind that 2000-2002 was a particularly nasty bear market, and most bears do not last that long. *Thus most people advise DCAing over a year. *But a 2 year period might still be prudent. *Pick what you think will let you sleep at night.

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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 04:23 PM   #6
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Re: ER is 2 Years Away, Where Should I Invest $300K?

MODERATOR action: Merged duplicate threads into one thread.

The OP in this thread was originally "Wher", but the 2nd topic sounded more appropriate.
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 04:56 PM   #7
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Re: ER is 2 Years Away, Where Should I Invest $300K?

Quote:
Originally Posted by Cut-Throat


But, I think you might elaborate a bit on your stock/bond allocation currently and what is your desired allocation. So what is your current and desired allocation?
The current allocation of my invested funds is 60% equities and 40% short/intermediate term bonds and cash. My equities are asset allocated 50/50 between domestic and international index funds.
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 05:22 PM   #8
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Re: ER is 2 Years Away, Where Should I Invest $300K?

Quote:
Originally Posted by Hydroman
The current allocation of my invested funds is 60% equities and 40% short/intermediate term bonds and cash. My equities are asset allocated 50/50 between domestic and international index funds.
Thats a pretty good AA, especially as you are comfortable with it. Why not just DCA into exactly that AA monthly or quarterly over a couple years and in the meantime keep the funds in a MM?
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 09:22 PM   #9
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Re: ER is 2 Years Away, Where Should I Invest $300K?

If you feel stock market going down, BEARX and RYVNX are good choices.
If you believe bond yields are going up, RYJUX.
Look at some energy related mutual funds and/or Canadian Oil/Gas Trusts.
Gold and silver are in up trend -- CEF, GLD, SLV
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 09:35 PM   #10
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Re: ER is 2 Years Away, Where Should I Invest $300K?

Quote:
will have $300K available to invest in my SWR portfolio
This amount of money will only generate about $12k per year (4%SWR). Are you sure that you (spouse?) can live on that?
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 09:47 PM   #11
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Re: ER is 2 Years Away, Where Should I Invest $300K?

Quote:
Originally Posted by mickeyd
This amount of money will only generate about $12k per year (4%SWR). Are you sure that you (spouse?) can live on that?
The $300K is not my total SWR portfolio. It is additive to an existing portfolio.
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-05-2006, 09:52 PM   #12
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Re: ER is 2 Years Away, Where Should I Invest $300K?

Any thoughts on value averaging the lump sum versus using DCA. I am thinking about value averaging the equity investments on a quarterly basis over a 2 year period. I am even thinking of extending the value averaging to each equity asset class, but that maybe splitting hairs.

Any thoughts?
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Re: ER is 2 Years Away, Where Should I Invest $300K?
Old 05-06-2006, 06:10 PM   #13
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Re: ER is 2 Years Away, Where Should I Invest $300K?

I wouldn't try to predict which way the market is going. You only win that bet if you get both the direction and timing right... even if the market is overvalued it may still go up for the next two years and you would be better off being in for those two years.

The experts seem to agree that DCA is a good approach for reducing volatility but not for getting better returns.

I would decide your DCA timeline based on how much a percentage of your total wealth this is.* *If 300k is half your net worth, then maybe 2 years.* But if it's only 10% of your net worth then I'd get it in quicker, like 3 months because you don't need as much volatility protection.

And I'd use limit orders set a bit below the market, so you can take advantage of the volatility that occurs during your DCA period.

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