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Lump sum to invest
Old 05-03-2019, 03:56 PM   #1
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Lump sum to invest

Hey all,

I know this question is asked a lot. But I'll ask again

I sold my home and bought a new one and ended up making a decent chunk of change. Combined with my year-end bonus, etc., I've got about $40k in extra cash on hand. Emergency fund is fully funded, and I will be maxing out my 401k and Roth IRA this year thru my normal salary.

Given the all time market highs, does it make sense to invest this lump sum according to my asset allocation? I was thinking of dollar cost averaging it over the next 8 months? I don't have any immediate need for this money in the next 5 years.

Here are my stats:


Age: 30
Annual Income: $110,000
Cash/Emergency Fund: $35,000
Roth 401k: $100,000
Roth IRA: $120,000
Taxable Investments: $170,000
HSA Savings: $10,000
Extra Cash on hand to invest: $40,000
Mortgage: $375,000 @ 3.5%
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Old 05-03-2019, 03:59 PM   #2
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There is nothing wrong w/ DCA but if I were you, I would just dump it into your taxable account. Would you be buying on the "high"? Maybe, but you are very young and have lots of years to recoup if/when there is a downturn and you won't realize a loss unless you sell.
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Old 05-03-2019, 04:08 PM   #3
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So when you say nothing significant in the next five years or so, there's no (say) home improvements or new cars in that horizon? No major home repairs that you see coming? Because if there is, I'd probably leave that $40K out of the market and keep it more liquid and relatively secure.

That said, if you are confident your time horizon for this money is over 5 years and you have an adequate emergency fund, yeah, I'd invest it. In truth you are probably "buying high" here, but for someone your age who will probably be letting this ride for 30+ years, I wouldn't let pursuit of the perfect be the enemy of the good enough and I'd probably just invest a lump sum, or perhaps four $10K chunks (say) three months apart. I don't see too much gain for dragging out DCA longer than that, or in more frequent, smaller chunks. There's something to be said in your situation for just keeping it simple and going all in at once.
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Old 05-03-2019, 04:20 PM   #4
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I guess you're looking for a different answer than what's been given those other times. It's your money, do what you want. I'm not going to repeat my view that I've given here many times before.
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Old 05-03-2019, 04:37 PM   #5
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I just bought $83,000 worth of bonds today to get my AA back to 60/40. This was money from the sale of a house. I never hesitate to lump sum in accordance with my AA. Saves me the anxiety of thinking about it.
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Old 05-03-2019, 04:43 PM   #6
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Lump sum or DCA? Yes!
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Old 05-03-2019, 04:45 PM   #7
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Lump sum or DCA? Yes!
That's a good way to put it. Either one is better than sitting around not getting invested because of a "paralysis of analysis".
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 05-03-2019, 04:48 PM   #8
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Quote:
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I never hesitate to lump sum in accordance with my AA.
I always wait until there's a least a slight economic advantage to making the trade. For example, last week, when I thought the market was peaking, I upped my bond holdings. Received near market-high value for the equities, and bought bond fund at a slight discount. I don't understand blindly making a trade just because it's convenient, to get it over with. Might as well make an attempt at timing the market
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Old 05-03-2019, 04:54 PM   #9
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One can do both. Invest a partial lump sum, and DCA the rest. I know, crazy idea...
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