Anyway, now I have a lump sum and I want to invest based upon Modern Portfolio Theory. I am thinking of the Coffeehouse Model. Set it and forget it. About 40% fixed income, the rest stocks, in ETF's and MF's
The question is, when do I start buying in, using dollar cost averaging?
I am thinking about starting to get some Inflation-Protected Securities now, because of inflationary pressure, and wait a little while to buy stock ETF's. I don't think we've hit bottom, although I know I'm market timing a little, here.
Amy, like you I'm dealing with a lump sum. In my case, I received about 2/3 of it on February 13th and the rest should arrive this spring.
I have put a large amount in Wellesley VWIAX right off the bat; it is over 61% bonds and doesn't vary much, so I have no problems with doing that.
And for what it's worth, as another part of my investment plan I am moving an equally large amount into a small number of Vanguard equity index funds more gradually, over 4-5 months (on the 14th of each month, Feb-June).
I do think that higher risk is likely to give you higher reward, as several here have pointed out. Still, we each have to determine what sort of risk will allow us to sleep at night, and I think that individuals differ on that.
I have no crystal ball telling me what the market will do. I would never know until later, if I was buying equity funds on the best or worst day possible from an investment standpoint. If I bought all of my equity funds on the worst day possible, I would stress out about it and chastise myself endlessly for years. If instead, I buy on five different dates, I have five times as great a chance of hitting the worst day possible - - but I would only be buying 20% my equity funds on that day. I can live with that a lot easier.
I see no need for me to rush into this, though I do want to be fully invested to the extent of my plan by mid-June. Meanwhile, the remainder of the lump sum will be earning interest in Vanguard's Prime Money Market fund VMMXX.
I am definitely NOT saying that everyone should DCA instead of investing the entire lump sum immediately, just because I did so with one portion of my lump sum. I am just saying that for me, as an individual and knowing my own tolerance for stress and risk, I know I have made the right decision. Individuals are different and we need to keep that in mind. This is not necessarily a "one size fits all" decision for the individual investor.