Dollar Cost Average or Go All In

[El Sargento]

I know the arguments against trying to time the market. However, I've often heard when the market drops thats the time to buy.

Every month I invest a set amount into an after tax account (VTSAX) and into my ROTH (VWIAX). I'm considering dipping into my emergency / opportunity fund to make one years worth of purchases. Then replenish the emergency fund during the year.

Any reason why I shouldn't do this?

 

[FireFool]

Other than you having enough reservations to be asking internet strangers for financial advice. From one internet stranger to another I say go for it, especially since my advice has zero risk to myself.

BTW: can I get a percentage of the portfolio like a paid Financial Adviser would get,regardless of the ultimate gain or loss.

 

[REWahoo]

Any reason why I shouldn't do this?

Because you really have no idea what the market will do over the next year. It may continue to drop and you could end up paying more for those funds buying them now rather than via continued monthly DCA purchases.

 

[CRLLS]

It all depends on whether you are a DCA person or a Market Timer. Either one can be tempted by temporary market swings.

Myself, I was tempted a few months ago to pay off my mortgage with Market-High money. And am currently tempted to do a 2019 Roth Conversion now with the market low. That would allow me to convert a higher % of my pretax IRA to a Roth IRA at the same actual dollars and the taxes on that transaction.

I haven't acted on those temptations (yet) Experience has taught many times over not to change my plan as it more often is a bad decision. It sounds like you are a conservative DCA investor, Why would you change your plan now?

To paraphrase Dirty Harry:

Well, to tell you the truth, in all this excitement, I've kinda lost track myself. But being this is a temporary condition of the most powerful markets in the world, and deviating from your plan could blow your retirement plans clean to bits, you've got to ask yourself one question: 'Do I feel lucky?' Well, do ya?

Good luck whatever way you chose.

 

[yakers]

for me DCA is a good idea, just feels right. My BIL could handle more risk/stress, borrowed $ to speculate in commodities (broke even) but I like to manage my cash flow. There is a logical argument to various forms of leverage but not compelling for me.

 

[flintnational]

Stocks are on sale for about 13% off of their peak prices. I guess the real question is, "In the short term will they go lower or higher?" No one knows. Its a coin toss. If you are okay with the sale price, jump in. If not, I would DCA. In the long term, they should be higher.

 

[CardsFan]

According to your profile, you are currently retired (2017). Correct? So are you investing excess money from SS or pension? Or are you taking tIra distributions, and investing the excess?

In any event, I would continue to DCA any on going income/distributions, and not exhaust an emergency fund to go all in. It's called an emergency fund for a reason.

 

[easysurfer]

IMO, If you have a large amount, DCA is the way to go. The past couple of days are a good example. Dow yesterday down about 650 pts. Today, up about 750 pts. Knowing when to jump in or out by hoping things got timed right isn't really a system.

DCA and you have a system that is easy to follow and continues in both good and bad times which eliminates emotions deciding if you stick to the system.

 

[Red Badger]

Well, I sold some total market bond funds in order to build 2020 CD ladder. The amount was fixed and in the plan long ago. It also further re-balanced my AA (the down market did most of that) at year end. Since bonds have had a modest uptick, it seemed like a good time.

Now, I'll just have to see if the Market Timing MSS here haul this guy and hold slug to the Xingyi Prison.

 

[Chuckanut]

If you want an alternative to dollar cost averaging but don't feel good about dumping it all in at once you might try Value Averaging.

Value Averaging

One strategy that has started to gain favor is value averaging, which aims to invest more when the share price falls and less when the share price rises. Value averaging is conducted by calculating predetermined amounts for the total value of the investment in future periods, then by making an investment to match these amounts at each future period.

For example, suppose you determine that the value of your investment will rise by $500 each quarter as you make additional investments. In the first investment period, you would invest $500, say at $10 per share. In the next period, you determine that the value of your investment will rise to $1,000. If the current price is $12.50 per share, your original position is worth $625 (50 shares times $12.50), which only requires you to invest $375 to put the value of your investment at $1,000. This is done until the end value of the portfolio is reached. As you can see in this example below, you have invested less as the price has risen, and the opposite would be true if the price had fallen.

Therefore, instead of investing a set amount each period, a VA strategy makes investments based on the total size of the portfolio at each point.

https://www.investopedia.com/articles/stocks/07/dcavsva.asp

Note, that both methods have certain risks. Read the article.

 

[El Sargento]

According to your profile, you are currently retired (2017). Correct? So are you investing excess money from SS or pension? Or are you taking tIra distributions, and investing the excess?

In any event, I would continue to DCA any on going income/distributions, and not exhaust an emergency fund to go all in. It's called an emergency fund for a reason.

My profile was inaccurate. I can't retire until later this year. I'm still investing from my salary.

 

[El Sargento]

I never heard of value averaging. I'll definitely read up on it. Thanks

 

[rk911]

the emergency fund is for true emergencie which this is not. don't tempt risk. dollar cost average your purchases. slow and steady wins the race.

 

[cooch96]

I’d say go as aggressive as you can easily stomach. Pick the option which lets you sleep better at night.

If it were me right now, I’d go all in. If I were less than a year from FIRE, I might be less audacious; perhaps half in and DCA the rest.

 

[target2019]

I know the arguments against trying to time the market. However, I've often heard when the market drops thats the time to buy.

Every month I invest a set amount into an after tax account (VTSAX) and into my ROTH (VWIAX). I'm considering dipping into my emergency / opportunity fund to make one years worth of purchases. Then replenish the emergency fund during the year.

Any reason why I shouldn't do this?

How about a split decision? Go all in for Roth, and DCA the after tax account. At the end of year tell us how it worked...

 

[DrRoy]

You can split the difference. Do a 1/2 or 1/3 buy.

 

[VanWinkle]

I say no. If market timing is considered an emergency, why even have an emergency fund. If you have a separate cash stash for market timing, go for it. Just don't use your emergency fund.

P.S. I was thinking of doing the same thing, and talked myself out of doing it.

VW

 

[corn18]

Pulling money out of EF to buy stocks on sale? Nope. That's market timing and I'm not a fan. I have an Investment Policy Statement that keeps me from doing things like this. Although it doesn't keep me from thinking about doing things like this.

 

[mrfeh]

I know the arguments against trying to time the market. However, I've often heard when the market drops thats the time to buy.

Every month I invest a set amount into an after tax account (VTSAX) and into my ROTH (VWIAX). I'm considering dipping into my emergency / opportunity fund to make one years worth of purchases. Then replenish the emergency fund during the year.

Any reason why I shouldn't do this?

The question isn't why shouldn't you do this, but why should you do this?

 

[pjigar]

I wouldn't advise you one way or other but here is what I have done so far. Any regular contributions (DCA) remains unchanged in HSA, 401K, IRA, etc. "Pot money" on the side due to unavailability of low PE investments is being invested slowly: 25% so far. Definition of "Pot money": I keep 50K to 100K on the side for any spontaneous private equity and/or real estate investments opportunities.

 

[Amethyst]

Real estate, as in farming? LOL

Definition of "Pot money": I keep 50K to 100K on the side for any spontaneous private equity and/or real estate investments opportunities.

 

[mickeyd]

Any reason why I shouldn't do this?

In the long-run I don't see that it makes any difference. Maybe you are over-thinking this thing. The key here is that you are stashing away money on a regular basis.


You will end up with a nice stack of cash in the end no matter what you do. Keep up the good work!

 

[WestUniversity]

Any reason why I shouldn't do this?

Since you no doubt amassed your current portfolio using DCA, why would you want to change your methodology now?