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Old 12-23-2011, 03:21 PM   #21
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I would probably put it in at once, but if a more gradual approach suits you you can value cost average over 6-12 months.

VCA is a bit different than DCA. You set a target balance and then invest the difference between you equity balance and the target each period. For example, let's say your current equity balance is 22 and you want to increase it to 42 in 12 months so your new investments would be 20. Adding a bit for growth, the target in 12 months might be 46. So the target would start at 22 and increase 2 each month; 22, 24, 26..... At the end of the first month you invest whatever is needed to bring your equity balance to 22, ditto the next month to 24, etc. When you get to the end you need to fudge it a bit depending on how equities performed over the period.

As a result if the market does well in a month you invest less and if it has a bad month you invest more and the end result is buying more while it is low and less when it is high.

I did this with my kids college fund and was pleased with the results. IIRC some backcasting analysis showed that the technique increased returns by about 50 bps. While some would think it isn't worth the effort and they may be right, I saw it as an interesting and entertaining game as well.

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Old 12-23-2011, 08:22 PM   #22
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Originally Posted by ARB57 View Post
Realistically, it will probably be more like 15+ years before I'd consider tapping the equity portion of the portfolio.
That's certainly more than "several years".

If I was in your situation I would first ensure I was maxing out my tax advantaged contributions (401k, IRA etc), and have 9-12 months expenses in an emergency fund, then DCA the rest into paying off the house. Reason I'd be so cautious on the emergency fund is the poor job market.

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Old 12-24-2011, 10:54 AM   #23
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Thanks again for all the feedback. Re: the last post...I think that we have gotten our wires crossed. You reference 401k's, emergency fund, paying off house etc. That's not me. I'm retired. No mortgage. My question was about when and how to increase my equity position. Re: the post about Value Cost Averaging. That was very helpful...I had never thought about it that way. It seems to make a little more sense than simply dollar cost averaging. Thanks again to all.
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Old 12-24-2011, 11:04 AM   #24
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Before we put this subject to's an article that shows how times of market volatility are the best times to invest, if you have the cojones.

The silver lining to volatile stock markets - The Globe and Mail
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Old 12-26-2011, 07:05 PM   #25
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Originally Posted by ARB57 View Post
market timing is evil, BUT, I'm at 20% equities and would like to get to 35-40%. Would you take the plunge TODAY and get the equity position up to your allocation target (with the S&P at the top of it's recent trading range,) or wait for a pullback. If it were YOU...what what you do?

Retired...mid-fifties. No pension. Shouldn't need the equity money for several years.


I'll be a bit of contrarian and say do it now or at least 1/2 of it now.
To me a mid 50s retiree with no pension and 20% equity AA is as almost as a dangerous AA, as 75+ year old with near 100% equity position. There is certainly a possibility that January effect will be in force this year and if you DCA over the next 6 months you'll have missed a 10+% move.

On a practical level lets say you put 1/2 the money into several ETFs between now and the end of the year. If next Dec the market is down you can sell your losers and take the tax loss in 2012, if on the other hand you have one big winner that you think is over valued you have flexibility of still getting a long term capital gain in 2012 or 2013. Dec trades really help with minimizing taxes.

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