Large lump sum-how to invest

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Akrachidi
Posts: 1
Joined: Thu Oct 12, 2017 8:36 pm

Large lump sum-how to invest

Post by Akrachidi » Thu Oct 12, 2017 8:47 pm

We just received a large payout on a property sale. We have approximately $220k on hand with a $380k new mortgage. Should we focus on paying down the new mortgage as fast as possible or invest the $220k? And if stocks are a good idea, lump sum or DCA?

More info:
-We have 6 mos expenses in savings account
- No other debt besides current home mortgage. We bought current home before selling prior home, which is why we didn't use profit for down payment.
- Married filing jointly, 4 kids, annual income about $110k
-Live in Wi, plan to stay in home at least 15 yrs, age early 40s
- Already max out 401k equivalent
- Current rate on mortgage is 3.875 30 yr fixed.




Emergency funds: Three to six months of expenses (indicate if you have this, but it is generally not part of your asset allocation)
Debt: Indicate if you have any debt (credit card, school loans, car loans, mortgage) and the interest rate you are paying on each loan.
Tax Filing Status: (Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Widow/Widower with Dependent Children)
Tax Rate: xx% Federal, xx% State
State of Residence:
Age:
Desired Asset allocation: xx% stocks / xx% bonds
Desired International allocation: xx% of stocks
Last edited by Akrachidi on Sat Oct 14, 2017 12:36 pm, edited 1 time in total.

runner3081
Posts: 827
Joined: Mon Aug 22, 2016 3:22 pm

Re: Large lump sum-how to invest

Post by runner3081 » Thu Oct 12, 2017 10:21 pm

More info needed.

Mortgage rate, marginal tax rate, current savings, debt, etc.

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ruralavalon
Posts: 11865
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Large lump sum-how to invest

Post by ruralavalon » Fri Oct 13, 2017 10:22 am

Welcome to the forum :)
Akrachidi wrote:
Thu Oct 12, 2017 8:47 pm
We just received a large payout on a property sale. We have approximately $220k on hand with a $380k new mortgage. Should we focus on paying down the new mortgage as fast as possible or invest the $220k? And if stocks are a good idea, lump sum or DCA?
More information is needed.

What is your tax bracket, both federal and state?

What is the interest rate on the mortgage note?

How long do you expect you will stay in this home?

Is there a reason that you didn't originally put this $220k down on your new home?

Please post more information, see the post "asking portfolio questions" for format. You can simply add this to your original post, so that all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Slothmeister
Posts: 56
Joined: Sun Sep 10, 2017 11:48 am

Re: Large lump sum-how to invest

Post by Slothmeister » Fri Oct 13, 2017 12:17 pm

Akrachidi wrote:
Thu Oct 12, 2017 8:47 pm
We just received a large payout on a property sale. We have approximately $220k on hand with a $380k new mortgage. Should we focus on paying down the new mortgage as fast as possible or invest the $220k? And if stocks are a good idea, lump sum or DCA?
It also depends on how long you're willing to hold the investment, your income, and your age. If you can wait 15+ years and make a pretty decent salary and your mortgage rate is around 3.5%, I would invest 80/20 of stocks/bonds, via index funds and let it sit while you pay off the mortgage.

I'm presuming you already have 401k and IRA set up and maxed out? If not, get those set up first.

alex_686
Posts: 2589
Joined: Mon Feb 09, 2015 2:39 pm

Re: Large lump sum-how to invest

Post by alex_686 » Fri Oct 13, 2017 12:21 pm

Lump sum is the rational answer. There is no logical reason why one should not implement your optimal asset allocation imminently.

DCA addresses behavioral and cognitive issues. Lack of discipline, fear of regret, etc.

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Sandtrap
Posts: 2743
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: Large lump sum-how to invest

Post by Sandtrap » Fri Oct 13, 2017 12:36 pm

Some helpful links:
Bogle Philosophy
https://www.bogleheads.org/wiki/Boglehe ... philosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... _statement
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
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