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

[FinanceDude]

Quote:

Originally Posted by haha I remember a flurry of interest in REITs 18 months or so ago, when a lot of posters suddenly discovered that this was a class they really should have. Not much being said about REITs now, after 30-45% losses. I have no idea whether REITs would now be a good or bad investment, but someone bit by the REIT bug 18 months ago might wish that he had DCA'd into them rather than taking a nice big slice then. Ha

People would rather argue with EMOTION than LOGIC, remember Spock's famous phrase: "Logically, Captain, I should be Captain"...........

The reason most investors do poorly is their nature to get in when things are at alltime highs. Also, listening to CNBC and other financial gurus leads folks to BAD decisions..........once the news is ALL about REIT, it means the "smart money" has been in there for awhile, and is trimming their positions.

I love the MF managers they have on there, when they use the words: "We like XYZ stock,you better sell it quick, or have a put strategy in place", because after a 1-hour uptick that puppy's heading south most likely.............

[Art G]

One thing this Quincy Krosby said that stuck with me was that; when the market is going up, people believe this time will be different than all the others and continue up, and when things look the worst, people are convinced this time things will be different and never come back.
One other thing, she said she was asked on CNBC what should the individual investor be doing in these times and her response was, "turn off the TV".

[FinanceDude]

Quote:

Originally Posted by Art G One thing this Quincy Krosby said that stuck with me was that; when the market is going up, people believe this time will be different than all the others and continue up, and when things look the worst, people are convinced this time things will be different and never come back. One other thing, she said she was asked on CNBC what should the individual investor be doing in these times and her response was, "turn off the TV".

I like her already..........

I remember when the Dow hit 7286 on October 9th, 2002. You couldn't GIVE a stock away..........seems to have been a good time to put a lump sum in, no??

[Art G]

She gave some pretty good indicators to watch for, but not sure where a good place to post on here would be.
Although, her bottom line seemed to be about the same as mine. We need to be watching still for further indicators.

[hellodeli1]

Actually, since you are considering cost averaging, the assumption is that you'll be in the market for a while. In this case, it's actually better to go ahead and invest the lump sum. In the long run, you'll get a better return because of the time the money was in the market.

musings on personal finance

[chinaco]

I have stopped chasing momentum (which is usually the popular advice). Because of a aversion to risk, I have tended to average my money into and out of (any significant) position. But on analysis of past events, I have found that I would have been better off with a lump sum investment.

IMHO - use a contrarian strategy and lump-sum invest in assets that are out of favor. But ensure that you have at least a 7-10 year time horizon for long-term securities.

However, in spite of my advice above I still DCA in and out of positions. THe older I get, the more risk averse I am.

[Anne]

What is the consensus around here on dollar value averaging? This is likely going to be my strategy when I start making large monthly investments in taxable, but I'd like to hear your thoughts.

[haha]

Quote:

Originally Posted by Anne What is the consensus around here on dollar value averaging? This is likely going to be my strategy when I start making large monthly investments in taxable, but I'd like to hear your thoughts.

I read Edleson's book on this method aroung the millennium. I thought it was very interesting, and he is well informed and highly educated.

It seems that since you will be selling funds from time to time, it might be better in a tax deferred account.

Ha

[Anne]

Thanks Ha. My thought is that if I'm investing enough monthly, I won't have to sell very frequently because I can just put the money into other asset classes to keep both the overall portfolio value and the asset allocation where I want them. I think I need to model this with a hypothetical portfolio to see if it will work.

[ziggy29]

Quote:

Originally Posted by Anne Thanks Ha. My thought is that if I'm investing enough monthly, I won't have to sell very frequently because I can just put the money into other asset classes to keep both the overall portfolio value and the asset allocation where I want them. I think I need to model this with a hypothetical portfolio to see if it will work.

If you are regularly adding substantial amounts to your portfolio, "rebalancing" by buying the underrepresented asset classes works very well. And as you said, it can prevent the need to sell -- particularly important for taxable accounts.

In reality, in my 401K plan (Fidelity) I'm too lazy to change what I buy week after week. I have it set up so I always buy the 2030 lifecycle fund with each new contribution, and at the end of the year I rebalance between five different funds.