Deploying Cash

[FireAspire]

Procrastination has paid off for the first time ever. I've been putting off moving money from an old 401k to my current company's plan. I finally pulled the trigger a few weeks ago to move about 50% of it. The transaction was executed about the time the craziness started and I ended up with a chunk of cash while the market tumbled. It took awhile for the check to finally be deposited, but it is in the new account as of yesterday. I intended to just plunge in at my target AA (60/40), but now I'm second guessing with the market swinging 10% daily.

I'm looking for opinions on how to move the cash back into the market. Thanks.

 

[Closet_Gamer]

I tend to deploy chunks of money over 4-6 months.

I had bonus cash on hand and have started to push a bit extra into the down market.

Don't make the mistake I did...the other night I placed market orders which triggered into the morning rally a few days ago. I normally don't worry about using market orders as it avoids the silliness of a trade not triggering because you were $0.01 off of the limit. In the face of the volatility, it cost me about 4% on the buy.

Today I put some more to work, but I set the limit orders for 10% below the friday close. I think volatility will allow them to trigger at some point.

If not, I will sweep along and make the buys right at the market (using a limit order!) during my normal monthly buys in April.

 

[OldShooter]

Well, all the simulations say that its just fine to put it in all at once. In theory your upside and downside probabilities are similar.

Dollar cost averaging, however, has the psychological advantage that if the market tanks after you make each buy the angst is reduced. IOW your downside from the event is less. But you pay for that by giving up the possible upside. Humans' tendency to risk aversion makes the possible down more painful than a missed "up."

So it's more IMO a psychological decision than a scientific one.

I am on the investment committee of a nonprofit that has a similar situation. As we have been sorting out kind of a cash management train wreck (little organization in the process of growing up) we presently have a couple of million that is to be moved from bonds to equities. I think we will probably end up dollar cost averaging to some degree and that is just fine with me. Few on the organization board are financially sophisticated, so if we dumped all the money in and then saw anther 15%+ decline many would probably be upset. In my experience upset board members (or, for that matter, upset top management) are to be avoided.

 

[Montecfo]

I think you will get more selloffs and opportunities to invest. But now is pretty good time. So maybe do it in chunks.

I raised cash over last few months and have redeployed about 2/3 of it. I am hoping to get some even lower prices but we will see.

As Old Shooter suggested, statistically all at once is fine.