When would you get in the market with a lump sum?

Well, I put $100k into the market into funds a couple months ago and am already down almost 10%. Someone tell me why I wouldn't have been better off DCA'ing into the market?
 
Let's see:

On the one hand, a proverbial "guy on the internet" says he had a bad result by investing a lump sum a couple of months ago .

On the other hand, countless analyses, expert opinions, and modeling studies say lump sum works out best most of the time over the long run with ample data to support that.

It's about probabilities and decision making. You can bet and lose even though you are holding a royal flush, but I'd make that bet every time.

Do whatcha gotta do.
 
LOL! "A guy on the internet"...you make it sound like I'm making it up. The market hasn't been correcting as of late?
What you are stating is the generally accepted viewpoint of some "experts". BTW, I find it really interesting here how "experts" in print on the internet get so much more credibility than the investment advisor who calls you on the phone soliciting your business. Does "expert" here equate to distance?
Anyway, so an "expert opinion" states it's not a good idea, and I have first hand knowledge (which is easily verified just by looking at a three month chart of the S&P), and I tell you the portfolio has dropped.
So we have theory vs. reality. Which do you accept?

BTW, you can't lose with a royal flush.
 
Last edited:
Art G said:
LOL! "A guy on the internet"...you make it sound like I'm making it up. The market hasn't been correcting as of late?
What you are stating is the generally accepted viewpoint of some "experts". BTW, I find it really interesting here how "experts" in print on the internet get so much more credibility than the investment advisor who calls you on the phone soliciting your business. Does "expert" here equate to distance?
Anyway, so an "expert opinion" states it's not a good idea, and I have first hand knowledge (which is easily verified just by looking at a three month chart of the S&P), and I tell you the portfolio has dropped.
So we have theory vs. reality. Which do you accept?
Click to expand...

:D:D:D

Well, the standards must be pretty low, Kiyosaki is on Yahoo! expousing investment advice.........;)
 
There are so many purported "experts" on the internet. I guess I need to start my own website, make the same statement, and then people will believe me when I say it.
I can't stop laughing about being "the guy on the internet". ...someone quoted Moshe Milevsky. Well Moshe also is a huge proponent of living benefits within a variable annuity. NOW how many on here will listen to whatever Moshe says?
 
I cant hide my lyin' eyes
And my smile is a thin disguise
I thought by now you'd realize
There aint now way to hide my lyin' eyes
 
I don't believe the experts, or the guy on the Internet. I believe the numbers. Go analyze the numbers yourself. I program stock investing alg's as a hobby. Haven't done one in about two years now, just to many other things going on.. but... One of the ones I did check was, DCA vs. Lump Sum.

Its pretty easy to look at, I have 50K, do I put it in immediatly, or over a year (or two), or 6 months.. or... and guess what... historically, more often than not, its better to put the money in immediatly.

Yes there are windows of time where it is better to have put it in over a year. Is there some sort of formula you can come up with to spot those periods before they have happend?(hindsight is 20/20) If you can, you are now a billionaire.

Its easy today to say "I knew the market was overvalued 6 months ago, and was going to fall". The problem is your just as likely to be right as wrong. If you can really predict where the market is going in the next year, you aren't on this board posting.. you're on your own private island spending your billions.

Going all in (Lump Sum), is like gambling at vegas, only you are the house. The house always eventually wins. Sometimes the house loses for a while, but in the end it wins. (If it didn't, it wouldn't be there anymore) :)

Some people don't want to gamble at all, even if they know their odds are pretty good. They want the "safe" thing. Thats fine... for them, DCA is fine.

I have a specific asset allocation. When I got 60K from selling my house, I put it into that allocation (after futzing over this exact question and checking the numbers)... I put it all into the asset allocation, and went to bed. (> 80% is in stocks). Slept great.

If you won't sleep great, DCA the money.

Laters,
-d.
 
dgalbraith100 said:
I don't believe the experts, or the guy on the Internet. I believe the numbers. Go analyze the numbers yourself. I program stock investing alg's as a hobby. Haven't done one in about two years now, just to many other things going on.. but... One of the ones I did check was, DCA vs. Lump Sum.

Its pretty easy to look at, I have 50K, do I put it in immediatly, or over a year (or two), or 6 months.. or... and guess what... historically, more often than not, its better to put the money in immediatly.
-d.
Click to expand...

I think most of us would concede that. My quibble is with the assumption that the long term is all that matters. And the assumption that all market climates are created equal.

Once you have committed to retiring, you are in reality a lame duck when it comes to "the long term". Much shorter terms now matter to you, and early damage can quite possibly sink your retirement.

Safety first would be my motto. Of course if the allocation makes much use of cash like instruments timing is less critical.

Ha
 
dgalbraith100 said:
Its pretty easy to look at, I have 50K, do I put it in immediatly, or over a year (or two), or 6 months.. or... and guess what... historically, more often than not, its better to put the money in immediatly.

Yes there are windows of time where it is better to have put it in over a year. Is there some sort of formula you can come up with to spot those periods before they have happend?(hindsight is 20/20) If you can, you are now a billionaire...Going all in (Lump Sum), is like gambling at vegas, only you are the house.
Click to expand...

Well stated, dg -- especially the Las Vegas analogy, where you're the house ;). I agree -- citing individual examples where the evidence-based strategy didn't do as well for a spell is of no consequence -- of course they occur, and unless you can predict them, they are a nonentity in the long term decision.

By the way, I don't mean to say that making a choice which runs contrary to the best evidence is "wrong." It just reflects a different set of values and priorities from what the evidence is intended for. In this case, if you look at total return, the evidence tells me that lump sum is generally the best choice based on the evidence and probabilities. But once you inject other value priorities (e.g. the "sleep well" factor, low tolerance for short term remorse or volatility, time horizon in question, etc.) it becomes a totally different, individual and subjective beast. That's fine, and it's also personal. My best decisions incorporate both pieces; when I screw up it's often because I ignored one or the other.
 
Well since most here don't believe in technical analysis, trying to argue that timing the market has merit, is pointless.
 
Some of the most successful long term investors are P&C insurance comapanies like Cincinnati Financial and Markel Corp which by the nature of their cash flows are DCF investors.

As to the research, I think it was the bunny who showed that you can show pretty much anything with research. I know that if I were a mutual fund marketer or a brokerage, I would find me some research that showed that lump sum investing was best. For the simple reason that I at least will know that I will have those lump assets, and the associated fees and commissions, rather than some other, undeserving, company.

Another thing to look at carefully is the period chosen for the research. Clearly lump sum will outperform on a total return basis in a bull market. But will it in a 25 year bear?

Ha
 
Art G said:
I can't stop laughing about being "the guy on the internet". ...someone quoted Moshe Milevsky. Well Moshe also is a huge proponent of living benefits within a variable annuity. NOW how many on here will listen to whatever Moshe says?
Click to expand...

I'll give your sentiments to Moshe when I see him TWO WEEKS from today........:)

Keep in mind in 2000 he was villified by the insurance industry, got death threats, etc, because he did NOT believe living benefits were worth the cost, or VAs for that matter.

Apparently he had a renaissance of thinking after 9/11, crunched a bunch of numbers, and now thinks insurers are not charging ENOUGH to arbitrage the risk of living benefits away.............:eek:

Hey, even the "experts" can change their mind..........;)
 
If you get the chance, tell him you are thinking about investing in Uruguay and ask his opinion. He'll think you're a genius!
 
Art G said:
If you get the chance, tell him you are thinking about investing in Uruguay and ask his opinion. He'll think you're a genius!
Click to expand...

Why would I ask him that?
 
Art G said:
There are so many purported "experts" on the internet. I guess I need to start my own website, make the same statement, and then people will believe me when I say it.
I can't stop laughing about being "the guy on the internet". ...someone quoted Moshe Milevsky. Well Moshe also is a huge proponent of living benefits within a variable annuity. NOW how many on here will listen to whatever Moshe says?
Click to expand...

Art....

The problem is you are using one data point... which happens to be YOU... and for your one data point you are down...

The studies uses many data points... and the probability is that if you do a lump sum purchase it will be better than DCA. Now, what is that probability? I don't know...

But, using the poker analysis... would you fold on a full house? The probability is that you would win... but there are hands that can beat you... or, make it a straight flush... still a higher probability of you winning... but you can still lose... you are right.. a royal flush wins unless you have wild cards... then you got that 5 of a kind...

so... who will I believe.... well, both of you.... you have lost, but the 'better' bet is to do what you did... and years from now it will not be that much of a difference... like say... 10%...

Edit to remove something already there in another post...
 
Texas Proud said:
Art....

The problem is you are using one data point... which happens to be YOU... and for your one data point you are down...

The studies uses many data points... and the probability is that if you do a lump sum purchase it will be better than DCA. Now, what is that probability? I don't know...

But, using the poker analysis... would you fold on a full house? The probability is that you would win... but there are hands that can beat you... or, make it a straight flush... still a higher probability of you winning... but you can still lose... you are right.. a royal flush wins unless you have wild cards... then you got that 5 of a kind...

so... who will I believe.... well, both of you.... you have lost, but the 'better' bet is to do what you did... and years from now it will not be that much of a difference... like say... 10%...

Edit to remove something already there in another post...
Click to expand...

Texas, while you may be correct about odds, the point I was trying to make was that it's more important (in my opinion) to lean toward investing based on whether or not you are more driven by fear or greed. The fact, that the odds were potentially on my side are of little value when down over 9% after a couple of months. I'm getting no satisfaction out of knowing the odds were slightly in my favor. I happen to be the type of investor who will give up a max return to lean towards safety. Now, if I felt the market were at a low, then I would consider more that the odds may more be in my favor and adjust my thinking accordingly.
I like your poker comparisons, so lets' stay with those. Consider I have a full house, but can see that the nine, ten, jack, and queen of diamonds are already showing on the table; now how much less must I consider towards the value of my full house? I may have the eight of diamonds in my hand, giving me a straight flush, but I still have to bet with the rationale that the king may be in the opponents hand.
My point being that using technical analysis is much like reading the odds of having the best hand on the poker table, however, unless I have the nuts, I've got to consider whether or not it's worth the risk to go all in.
 
Art G said:
Texas, while you may be correct about odds, the point I was trying to make was that it's more important (in my opinion) to lean toward investing based on whether or not you are more driven by fear or greed. The fact, that the odds were potentially on my side are of little value when down over 9% after a couple of months. I'm getting no satisfaction out of knowing the odds were slightly in my favor. I happen to be the type of investor who will give up a max return to lean towards safety. Now, if I felt the market were at a low, then I would consider more that the odds may more be in my favor and adjust my thinking accordingly.
I like your poker comparisons, so lets' stay with those. Consider I have a full house, but can see that the nine, ten, jack, and queen of diamonds are already showing on the table; now how much less must I consider towards the value of my full house? I may have the eight of diamonds in my hand, giving me a straight flush, but I still have to bet with the rationale that the king may be in the opponents hand.
My point being that using technical analysis is much like reading the odds of having the best hand on the poker table, however, unless I have the nuts, I've got to consider whether or not it's worth the risk to go all in.
Click to expand...

I gotta jump in here, because you crack me up. Why did you invest a couple months ago, when you state you use technical analysis to make calculated investment decisions? Certainly some of the indicators were showing some weaknesses, right?? :D:D

On a serious note, the last quarter of any investment years can get choppy, with quarterly and yearly rebalancing, tax loss selling, capital gains being distributed by most mutual funds, etc. I for one wasn't geared up for anything but an "ok" 2008, certainly NOT like the market rebound years we have had.

If the general indexes move up 4-5% this year or so, I am good with that............
 
FinanceDude said:
I gotta jump in here, because you crack me up. Why did you invest a couple months ago, when you state you use technical analysis to make calculated investment decisions? Certainly some of the indicators were showing some weaknesses, right?? :D:D

On a serious note, the last quarter of any investment years can get choppy, with quarterly and yearly rebalancing, tax loss selling, capital gains being distributed by most mutual funds, etc. I for one wasn't geared up for anything but an "ok" 2008, certainly NOT like the market rebound years we have had.

If the general indexes move up 4-5% this year or so, I am good with that............
Click to expand...

Fair questions. And here's the reason, I was moving money out of (what I considered) more risky investments into a variable annuity because I felt we were due for a major correction. However, this particular company did not allow for dollar cost averaging or else I most definitely would have. So, while I have locked in my future income for life, I am now starting off over $9k in the hole.
So sure, the market may bounce back, but I am now that much further from getting a raise in income.
 
Art G said:
Fair questions. And here's the reason, I was moving money out of (what I considered) more risky investments into a variable annuity because I felt we were due for a major correction. However, this particular company did not allow for dollar cost averaging or else I most definitely would have. So, while I have locked in my future income for life, I am now starting off over $9k in the hole.
So sure, the market may bounce back, but I am now that much further from getting a raise in income.
Click to expand...

Well there's time to make that up.........like today..........
 
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