Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: How to invest a lump sum
Old 02-05-2007, 01:06 PM   #41
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Location: North Bay
Posts: 1,026
Re: How to invest a lump sum

I had the same decision to make last spring with a little over $1 million. It can drive you crazy worrying about what if's. What if the equity market tanks, what if the bond market tanks, what if inflation flares up, what if Japan sells all its US Treasury debt? In the end I just went on a buying spree one day at Vanguard after deciding on my AA. Then I watched the market closely and sweated for a few weeks while the whole process was fresh in my mind and the markets bobbed up and down. After that I pretty much forgot about the whole thing, and the world wasn't so full of scary what-ifs any more. Life was good. How did it work out? I don't know if DCA would have done better, but the account has grown $120k since late March, so I am satisfied.

I think the bottom line is that you've got to make a decision based on the information that you have today about the investment climate and investor characteristics, and then don't look back. A year from now the difference between a lump sum investment and a DCA investment will probably be less than a few percent. In ten years it will only be a fraction of a percent of difference in average returns. It will be more important to have chosen a low-fee brokerage than to have guessed right about where the market is going over the next few months.
__________________

__________________
scrinch is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: How to invest a lump sum
Old 02-05-2007, 01:11 PM   #42
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,517
Re: How to invest a lump sum

Quote:
Originally Posted by wab
So, after looking at the chart, do you still think that earnings don't mean revert?
The GDP grows over time, so no, I don't think earnings mean revert over the long term.

Audrey
__________________

__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Re: How to invest a lump sum
Old 02-05-2007, 01:17 PM   #43
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: How to invest a lump sum

Quote:
Originally Posted by wab
So, after looking at the chart, do you still think that earnings don't mean revert?
Wab, I'm sure that if you beat the snot out of the data you can get earnings to do anything you want!

I'm not sure how a ratio between earnings & GDP proves your reversion jihad point.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: How to invest a lump sum
Old 02-05-2007, 01:20 PM   #44
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: How to invest a lump sum

Quote:
Originally Posted by audreyh1
The GDP grows over time, so no, I don't think earnings mean revert over the long term.
OK, I guess it depends on which mean we mean.

In terms of % of GDP, it's pretty obvious that earnings revert to the mean. What isn't so obvious from the graph is that GDP growth tends to mean revert on the same cycle, so earnings tend to correct even more than the graph shows.

Semantics aside, market P/E obviously doesn't tell the whole story, especially when we're at the peak of the earnings cycle. I have no idea when earnings will retreat, but it seems certain that earnings growth is limited for the next few years.
__________________
wabmester is offline   Reply With Quote
Re: How to invest a lump sum
Old 02-05-2007, 02:44 PM   #45
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 678
Re: How to invest a lump sum

You should max out every retirement plan available to you. If you are over 50, and you can probably contribute over $20k a year to your qualified retirement plan, plus 5k to a Roth. If you have a spouse, you can double those figures. Then if necessary, use some of your windfall to make up the difference in income. This way, you will essentially convert some of the windfall into tax deferred money.
__________________
JustCurious is offline   Reply With Quote
Re: How to invest a lump sum
Old 02-05-2007, 05:22 PM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: How to invest a lump sum

Quote:
Originally Posted by audreyh1
The GDP grows over time, so no, I don't think earnings mean revert over the long term.
Ding! Ding! Ding!
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: How to invest a lump sum
Old 02-05-2007, 05:24 PM   #47
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: How to invest a lump sum

Quote:
Originally Posted by Cute Fuzzy Bunny
Ding! Ding! Ding!
Would you please stop playing with the door bell and stay on topic?
__________________
wabmester is offline   Reply With Quote
Re: How to invest a lump sum
Old 02-05-2007, 05:33 PM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: How to invest a lump sum

I thought I was the one staying on topic...you mean it was you?
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Lump sum to invest, DCA in or go lump? Olav23 FIRE and Money 4 03-03-2007 04:22 PM
Take a lump sum or pension payout Rollie FIRE and Money 45 06-11-2006 07:54 PM
How do you calculate a lump sum? debster FIRE and Money 4 10-28-2005 03:35 PM
Lump sum or annuity runnerr FIRE and Money 17 07-01-2005 03:39 PM
Lump Sum Question Ron P. Other topics 3 12-04-2004 02:43 AM

 

 
All times are GMT -6. The time now is 07:58 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.