Investing $140k in cash at 1k per week

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timetraveler
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Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 1:44 pm

Hello :happy

I have $140k in high yield saving accounts (FDIC insured) that pays me %2 - %2.20 in annual interest. My plan is to is transfer $1000 from my saving account to my brokerage account and buy $1000 worth of VTI every week. At this rate, it would take a bit more than 2.5 years to invest all this money into VTI. The reason I am choosing this low buy rate of $1000/week is because if the market crashes within the next 2.5 years I could buy low with most of the remaining cash. What do you think about this strategy?

As for which day of the week to invest the $1000 in VTI, should I just throw a dice and choose the weekday based on that? Or is there better strategy than random to pickup the weekday?

DesertDiva
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Re: Investing $140k in cash at 1k per week

Post by DesertDiva » Mon Nov 11, 2019 2:41 pm

Hard to say. No one has a crystal ball and we don’t know which direction the markets will move.

retiredjg
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Re: Investing $140k in cash at 1k per week

Post by retiredjg » Mon Nov 11, 2019 2:46 pm

This is market timing. It might work. It might not. No way to know. But what we do know is that most of your money will be sitting on the sidelines for months. This is usually not a good practice.

Investing $140k should take about 2.5 minutes, not 2.5 years. If you simply cannot do it at one time, invest 40K now and then $5k a week until done. If you find this is difficult, you may be investing too aggressively for your temperament.

Welcome to the forum. :happy

mike152
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Re: Investing $140k in cash at 1k per week

Post by mike152 » Mon Nov 11, 2019 2:48 pm

Question: If you had 140k already invested today, would you withdraw all of it in cash now, and slowly reinvest? Or, just leave it?

magicrat
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Re: Investing $140k in cash at 1k per week

Post by magicrat » Mon Nov 11, 2019 2:51 pm

The expected return on stocks is always positive. If you believe that, then you should invest it all now. If you don't, why would you invest in stocks at all?

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Re: Investing $140k in cash at 1k per week

Post by Jack FFR1846 » Mon Nov 11, 2019 3:05 pm

Sounds silly. Transfer $140k....buy VTI, move on.
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TaxingAccount
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Re: Investing $140k in cash at 1k per week

Post by TaxingAccount » Mon Nov 11, 2019 3:10 pm

.....
Last edited by TaxingAccount on Tue Nov 19, 2019 12:41 pm, edited 1 time in total.

magicrat
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Re: Investing $140k in cash at 1k per week

Post by magicrat » Mon Nov 11, 2019 3:13 pm

TaxingAccount wrote:
Mon Nov 11, 2019 3:10 pm
magicrat wrote:
Mon Nov 11, 2019 2:51 pm
The expected return on stocks is always positive. If you believe that, then you should invest it all now. If you don't, why would you invest in stocks at all?
Current Shiller PE Ratio: 30.48
Mean: 16.66
Median: 15.76
Min: 4.78 (Dec 1920)
Max: 44.19 (Dec 1999)
huh?

CurledMoss
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Re: Investing $140k in cash at 1k per week

Post by CurledMoss » Mon Nov 11, 2019 3:14 pm

If you don't feel comfortable with all at once try it over 12 months. Invest on the first of each month and if it crashes then go all in. That way you are not 100% wrong or 100% right in your decision. And not leaving money on the table for that extra year doing nothing.

Blake7
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Re: Investing $140k in cash at 1k per week

Post by Blake7 » Mon Nov 11, 2019 3:20 pm

timetraveler, read this Vanguard study on lump sum vs. Dollar cost averaging first:

https://personal.vanguard.com/pdf/ISGDCA.pdf

If you decide to DCA, pick a frequency/day of the week and stick with it, regardless of what the market is doing. Attempts to outsmart/time the market will more likely cost you than improve your returns. :happy

MathIsMyWayr
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Re: Investing $140k in cash at 1k per week

Post by MathIsMyWayr » Mon Nov 11, 2019 3:20 pm

mike152 wrote:
Mon Nov 11, 2019 2:48 pm
Question: If you had 140k already invested today, would you withdraw all of it in cash now, and slowly reinvest? Or, just leave it?
I often run into this analogy regarding lump sum vs. DCA investment.
"withdraw all of it in cash now, and slowly reinvest" is lump sum out and DCA in. If you truly believe in lump sum in a consistent way, then you should practice lump sum out and lump sum in, not lump sum out and DCA in. On the other hand, you should DCA out and DCA in if you are a true DCA believer.

I am not arguing whether lump sum investing is better than DCA or the other way around, but the logic has to be consistent. Logic should make an argument clearer rather than murkier.

mortfree
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Re: Investing $140k in cash at 1k per week

Post by mortfree » Mon Nov 11, 2019 3:22 pm

But you won’t actually put 1000 per week in VTI because you can’t buy partial shares (or can YOU)? I can’t.

HomeStretch
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Re: Investing $140k in cash at 1k per week

Post by HomeStretch » Mon Nov 11, 2019 3:43 pm

Welcome!

Markets hit new highs often. Don’t let concerns about market highs keep you from investing. Perhaps the 100% allocation to equity is too high for your risk tolerance and, if so, invest a portion in a bond fund. IMO 2.5 years is too long a time period over which to invest the money you have now into the market. If you won’t invest lump sum then dollar cost average (DCA) over a shorter period like 6 months. I am a proponent of lump sum.

The Vanguard paper linked by Blake7 concludes (paraphrasing a bit) that it’s prudent under certain assumptions to lump sum invest to gain access to markets as soon as possible, but acknowledges that for the investor concerned with managing risk and minimizing regret, DCA may be of use.

Here’s a Kitces article that (paraphrasing a bit) says DCA (as compared to lump sum) may help manage risks but on average just reduces returns:
https://www.kitces.com/blog/dollar-cost ... s-returns/

Gill
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Re: Investing $140k in cash at 1k per week

Post by Gill » Mon Nov 11, 2019 3:48 pm

Do you really want 140 different tax lots?
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Re: Investing $140k in cash at 1k per week

Post by RickBoglehead » Mon Nov 11, 2019 3:50 pm

Tuesday at 11:13AM, but only on odd number weeks.

Sounds crazy, right? It is. Because no one knows what the market is going to do, ever. Studies have proven that lump sum investing beats dollar cost averaging. You're taking dollar cost averaging to a crazy extent.

I recommend you either invest the lump sum, or leave your money there and do some reading, such as The Bogleheads Guide to Investing.

If you still want to DCA, do it once a month for a year and be done with it.

My portfolio is up over 16% this year. Think of what you'd be giving up if you took 2.5 years to invest.
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Re: Investing $140k in cash at 1k per week

Post by MotoTrojan » Mon Nov 11, 2019 3:57 pm

I think it is a terrible plan personally.

If you had $1.4M instead, accumulated in a 401k over 25 years of prudent saving/investing, would you move it all to money market (tax-free transaction) and then redeploy it over 2.5 years, or even over 3-6 months? Of course not; it has been invested for decades so you will let it ride. How is this money any different? Hint: Emotionally it may be, but emotions and logic are not one in the same.

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Re: Investing $140k in cash at 1k per week

Post by MotoTrojan » Mon Nov 11, 2019 3:59 pm

MathIsMyWayr wrote:
Mon Nov 11, 2019 3:20 pm
mike152 wrote:
Mon Nov 11, 2019 2:48 pm
Question: If you had 140k already invested today, would you withdraw all of it in cash now, and slowly reinvest? Or, just leave it?
I often run into this analogy regarding lump sum vs. DCA investment.
"withdraw all of it in cash now, and slowly reinvest" is lump sum out and DCA in. If you truly believe in lump sum in a consistent way, then you should practice lump sum out and lump sum in, not lump sum out and DCA in. On the other hand, you should DCA out and DCA in if you are a true DCA believer.

I am not arguing whether lump sum investing is better than DCA or the other way around, but the logic has to be consistent. Logic should make an argument clearer rather than murkier.
It actually makes the most logic sense to lump-sum in and DCA out, as that maximizes the time in the market. Get the money invested as soon as you possibly can, maximize how long it stays invested, and then in retirement you only withdraw what you need to spend (in essence DCA out) while leaving the rest invested as long as possible.

Helo80
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Re: Investing $140k in cash at 1k per week

Post by Helo80 » Mon Nov 11, 2019 4:00 pm

If I were you, I'd invest 2,000 per day over the next 70 trading days. That way you average out your buys over the next 3 months.

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Re: Investing $140k in cash at 1k per week

Post by Grt2bOutdoors » Mon Nov 11, 2019 4:05 pm

Okay, exactly 12 weeks from now, the market begins a decline, it falls 20% (classic bear market) - you have $128K left in the kitty. Are you going to go "all-in"? or will you wait for a bigger crash that may or may not appear? Now, let's say you go "all-in", the market then begins a small rise, it takes another year to rise 5%. Following that, the market declines 30%, what then?

Your crystal ball is as cloudy as mine, you should set up an Investment Policy Statement, but you should strike any language that says "I will market time or I will wait for a decline before I invest" - you could be waiting a very long time, just ask those who got out of the market in 2011 waiting for the big crash. I've got news for you: They are still waiting!!!
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123
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Re: Investing $140k in cash at 1k per week

Post by 123 » Mon Nov 11, 2019 4:06 pm

magicrat wrote:
Mon Nov 11, 2019 2:51 pm
The expected return on stocks is always positive...
If you can wait long enough.

The dividend yield on VTI is over 2% so that is some consolation when you're moving from fixed income.
The closest helping hand is at the end of your own arm.

stochastic
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Re: Investing $140k in cash at 1k per week

Post by stochastic » Mon Nov 11, 2019 4:18 pm

I'm going to dissent from the rest of the advice you are getting and say your approach is fine. It maybe not be the optimal strategy but you only need a good strategy. If it makes you more comfortable investing the money that way and are prepared to stick with it even if regardless of what the market does over the next 2.5 years then go for it.

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Brianmcg321
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Re: Investing $140k in cash at 1k per week

Post by Brianmcg321 » Mon Nov 11, 2019 4:21 pm

If the market doesn't crash, then you will be buying everything high and would have lost thousands due to not having your money be in the market.
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Cosmic Pony
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Re: Investing $140k in cash at 1k per week

Post by Cosmic Pony » Mon Nov 11, 2019 4:22 pm

I struggled with the same issue recently but came to the conclusion that dollar cost averaging would be a lot of work. I ended up just putting it all in at once. There are a number of links other Bogleheads can provide that demonstrate that even if you are dropping it in at the top, you will likely do fine over the long haul.

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1789
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Re: Investing $140k in cash at 1k per week

Post by 1789 » Mon Nov 11, 2019 4:46 pm

Why do you want to spend a lot of energy and time for something that will not work?
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Re: Investing $140k in cash at 1k per week

Post by anon_investor » Mon Nov 11, 2019 4:48 pm

Unsure what your investment time horizon is, if you have say 20 years, just invest it all today. If there is a market crash, tax loss harvest. Otherwise, set it and forget it until you get closer to needing the money.

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8foot7
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Re: Investing $140k in cash at 1k per week

Post by 8foot7 » Mon Nov 11, 2019 5:03 pm

I'd make that $5,000 a week and be done in six-ish months. No sense in stretching it out longer -- either you want to be in the market or you don't -- and if things turn to a point you can't stomach further buys, you can just stop.

dboeger1
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Re: Investing $140k in cash at 1k per week

Post by dboeger1 » Mon Nov 11, 2019 5:20 pm

anon_investor wrote:
Mon Nov 11, 2019 4:48 pm
Unsure what your investment time horizon is, if you have say 20 years, just invest it all today. If there is a market crash, tax loss harvest. Otherwise, set it and forget it until you get closer to needing the money.
I think this is an important distinction. If the reason OP doesn't want to lump sum in is that they're planning to buy a house in 3 years, well that's understandable. In that case, I think lump sum in is still the correct approach, but it's more a question of asset allocation, or in other words, how much to lump sum in.

OP, if you're new to investing, or perhaps unwilling to risk your life savings, then think about how much you want to keep safe, and how much you want to invest. Yes, investing is inherently risky. You might lose all of that money. But there's a reason you want to invest, because historically speaking, it has been a far more reliably way of generating and preserving wealthy as opposed to keeping your money in a basic savings account. You're either willing to invest, or you're not. If you're not, I'm sorry, but you don't get the gains; they go to the people who put their money on the line. Wanting to get all the rewards with none of the risk is a bit like walking into a casino and expecting them to give you unlimited free play so you can try your luck without bringing your own money. It just doesn't work like that. When you DCA in over a long period of time and the market has gone up, that's pretty much equivalent to having lost that same amount, in the sense that you will have left those gains on the table out of fear. Once you make peace with that fact, then you can decide how much to put in the market. Typically, most people recommend having some sort of short-term emergency fund outside of the market, but depending on your needs, you may need more or less.

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timetraveler
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Re: Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 5:24 pm

Wow! Thanks for all the replies! :happy
Brianmcg321 wrote:
Mon Nov 11, 2019 4:21 pm
If the market doesn't crash, then you will be buying everything high and would have lost thousands due to not having your money be in the market.
The same could be said if the market crashes in the next year or two. I think the DCA vs lump sum strategies come down to this. If it happens that the market crashes within the next couple of years, then DCA would return more than lump sum. However, if there is no market crash coming then lump sum definitely will yield more than DCA. Please correct me if I am wrong.

For example, if this was Nov. 2007 instead of 2019 and I invested the 140k all at once, it would have taken about 5 years from 2007 to recover that 140k back due to the 2008 recession. Then the return, after 10 years, in Nov 2017 would've been $292k. In contrast, if $4000/month were invested over the first three years since Nov. 2007, the return in Nov 2017 would've been $386k. That's 32% more!
For reference, I used this s&p 500 DCA calculator https://dqydj.com/scripts/spcalc/sp_500_reinvester.html.

Of course no body knows for certain whether the market is going to crash in the next couple of years. But if I had to make a guess, there has not been a market correction in a very long time, so I am not confident that the stock market will keep rising at the same pace. Also no body knows how the market will react to the 2020 elections. I just want to sleep at night if we were in similar situation as in 2007-2009.
Last edited by timetraveler on Mon Nov 11, 2019 6:35 pm, edited 1 time in total.

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fortfun
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Re: Investing $140k in cash at 1k per week

Post by fortfun » Mon Nov 11, 2019 5:25 pm

timetraveler wrote:
Mon Nov 11, 2019 1:44 pm
Hello :happy

I have $140k in high yield saving accounts (FDIC insured) that pays me %2 - %2.20 in annual interest. My plan is to is transfer $1000 from my saving account to my brokerage account and buy $1000 worth of VTI every week. At this rate, it would take a bit more than 2.5 years to invest all this money into VTI. The reason I am choosing this low buy rate of $1000/week is because if the market crashes within the next 2.5 years I could buy low with most of the remaining cash. What do you think about this strategy?

As for which day of the week to invest the $1000 in VTI, should I just throw a dice and choose the weekday based on that? Or is there better strategy than random to pickup the weekday?
William Berstein, an expert in this area, recommends to DCA for no longer than 1 year. You can hear him say this on a podcast by Invest like a Boss.

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Re: Investing $140k in cash at 1k per week

Post by arcticpineapplecorp. » Mon Nov 11, 2019 5:28 pm

timetraveler wrote:
Mon Nov 11, 2019 1:44 pm
The reason I am choosing this low buy rate of $1000/week is because if the market crashes within the next 2.5 years I could buy low with most of the remaining cash. What do you think about this strategy?
welcome to the group. Some things to think about:

I'm not sure your "strategy" is fully fleshed out, or has been fully described here. For instance,
1. what's your definition of a "crash"? Be specific. Is it 20%? 25%? 30%? 35%? 40 %? 45%? 50%?

2. now that you know what a "crash" is, have you thought about how often such a decline has occurred throughout history? If not, please look it up. The higher your number defining a "crash", the more infrequently that decline has actually occurred.

3. how will you know you've "bought low"? If you're waiting for a crash of 40% and then you invest what's left of this lump sum (that you haven't DCA'd prior) what if the market falls another 10% or 20% after that? Would you feel regret because you bought lower but not at the lowest point?

4. What if instead of the market "crashing" it continues to move upward and you didn't have the money invested because you were DCA'ing at a glacial pace?
timetraveler wrote:
Mon Nov 11, 2019 5:24 pm
For example, if this was Nov. 2007 instead of 2019 and I invested the 140k all at once, it would have taken about 5 years from 2007 to recover that 140k back due to the 2008 recession. Then the return, after 10 years, in Nov 2017 would've been $292k. In contrast, if $4000/month were invested over the first three years since Nov. 2007, the return in Nov 2017 would've been $386k. That's 32% more!
I don't know when you acquired this money but if it was since the beginning of this year, that money has lost an opportunity to have made 25% YTD. So instead of your $140K having made 2% this year and having grown to $142,800 it could have been worth $175,000 if invested in VTI. Your inaction would have cost you $32,200. Think about that.

In addition, if you had the money since the 4th quarter of last year, you could have invested when the market declined 20% in the 4th quarter of 2018. Missed out on that one too?

So depending on how long you've had this money to invest, you've lost both when the market went down and when it went up, because you've been sitting on the sidelines. That's why they say, "It's time in the market, not timing the market that matters."

Here's Larry Swedroe's take on this question (since it's the most often asked):
https://www.cbsnews.com/news/take-plung ... p-by-drip/
viewtopic.php?f=10&t=129706&newpost=1908642

this is another good post. substitute 100% bonds for what you're doing now (holding cash) and you see that you don't have to avoid market crashes to get good returns:
viewtopic.php?f=10&t=229429&start=50#p3567987
Last edited by arcticpineapplecorp. on Mon Nov 11, 2019 5:40 pm, edited 2 times in total.
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timetraveler
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Re: Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 5:35 pm

mortfree wrote:
Mon Nov 11, 2019 3:22 pm
But you won’t actually put 1000 per week in VTI because you can’t buy partial shares (or can YOU)? I can’t.
I believe Schwab allows you to buy fractional shares. It is relatively recent feature. :happy

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timetraveler
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Re: Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 5:47 pm

MotoTrojan wrote:
Mon Nov 11, 2019 3:57 pm
I think it is a terrible plan personally.

If you had $1.4M instead, accumulated in a 401k over 25 years of prudent saving/investing, would you move it all to money market (tax-free transaction) and then redeploy it over 2.5 years, or even over 3-6 months? Of course not; it has been invested for decades so you will let it ride. How is this money any different? Hint: Emotionally it may be, but emotions and logic are not one in the same.
It is kinda different IMO. Because over 25 years of investing I would have already made substantial return on my money. So if the market crashes even to minus 50-%, I'd probably still be positive on my return. But since I am just starting to invest this cash, I need to have something substantial set aside to invest it all if the stock market suddenly goes to new lows.

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Re: Investing $140k in cash at 1k per week

Post by Helo80 » Mon Nov 11, 2019 5:51 pm

timetraveler wrote:
Mon Nov 11, 2019 5:24 pm
Wow! Thanks for all the replies! :happy
Brianmcg321 wrote:
Mon Nov 11, 2019 4:21 pm
If the market doesn't crash, then you will be buying everything high and would have lost thousands due to not having your money be in the market.
The same could be said if the market crashes in the next year or two. I think the DCA vs lump sum strategies come down to this. If it happens that the market crashes within the next couple of years, then DCA would return more than lump sum. However, if there is no market crash coming then lump sum definitely will yield more than DCA. Please correct me if I am wrong.

For example, if this was Nov. 2007 instead of 2019 and I invested the 140k all at once, it would have taken about 5 years from 2007 to recover that 140k back due to the 2008 recession. Then the return, after 10 years, in Nov 2017 would've been $292k. In contrast, if $4000/month were invested over the first three years since Nov. 2007, the return in Nov 2017 would've been $386k. That's 32% more!
For reference, I used this s&p 500 DCA calculator https://dqydj.com/scripts/spcalc/sp_500_reinvester.html.

Of course no body knows for certain whether the market is going to crash in the next couple of years. But if I had to make a guess, there has not been a market correction in a very long time, so I am not confident that the stock market will keep rising at the same pace. Also no body knows how the market will react to the 2020 elections. I just want to sleep well if we were in similar situation as in 2007-2009.


At the end of the day, it's your call dude, and I don't think you're being completely unreasonable. If you're comfort level is at $1k per week for 140 weeks, that's fine. It's better to jump into the market slowly than to stay out for fear of an impending crash. It's also better to DIY than to seek the advice of an Edward Jones adviser or some other AUM wealth manager.

gmc4h232
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Re: Investing $140k in cash at 1k per week

Post by gmc4h232 » Mon Nov 11, 2019 5:57 pm

Why wouldn't you just let it sit in savings for another few months until you have enough to buy this:

https://www.porsche.com/usa/models/911/911-gt3-models/

Then you can spend $1k a week on fuel and upkeep....

Afty
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Re: Investing $140k in cash at 1k per week

Post by Afty » Mon Nov 11, 2019 6:10 pm

Adding to the Vanguard study posted upthread: your chance of success by DCAing is going to be even worse if you stretch this out to 2.5 years. If you are really set on this strategy, at least consider shortening the timeframe to a year at most.

tesuzuki2002
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Re: Investing $140k in cash at 1k per week

Post by tesuzuki2002 » Mon Nov 11, 2019 6:11 pm

timetraveler wrote:
Mon Nov 11, 2019 1:44 pm
Hello :happy

I have $140k in high yield saving accounts (FDIC insured) that pays me %2 - %2.20 in annual interest. My plan is to is transfer $1000 from my saving account to my brokerage account and buy $1000 worth of VTI every week. At this rate, it would take a bit more than 2.5 years to invest all this money into VTI. The reason I am choosing this low buy rate of $1000/week is because if the market crashes within the next 2.5 years I could buy low with most of the remaining cash. What do you think about this strategy?

As for which day of the week to invest the $1000 in VTI, should I just throw a dice and choose the weekday based on that? Or is there better strategy than random to pickup the weekday?
if/when VTI goes up 25% in the next 2.5 years... you would have been much better off investing it NOW.

I understand wanting to cost average in, but I would do it under 12 months. About 2,700 a week. You will likely be missing out on the effects of the market. Unless we head into a bear market... and then you get to buy more stuff on sale EVERY WEEK!!

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Re: Investing $140k in cash at 1k per week

Post by tesuzuki2002 » Mon Nov 11, 2019 6:12 pm

8foot7 wrote:
Mon Nov 11, 2019 5:03 pm
I'd make that $5,000 a week and be done in six-ish months. No sense in stretching it out longer -- either you want to be in the market or you don't -- and if things turn to a point you can't stomach further buys, you can just stop.

+1 :sharebeer :moneybag

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Re: Investing $140k in cash at 1k per week

Post by dacalo » Mon Nov 11, 2019 6:20 pm

timetraveler wrote:
Mon Nov 11, 2019 5:35 pm
mortfree wrote:
Mon Nov 11, 2019 3:22 pm
But you won’t actually put 1000 per week in VTI because you can’t buy partial shares (or can YOU)? I can’t.
I believe Schwab allows you to buy fractional shares. It is relatively recent feature. :happy
They will in future, can't do it yet.

dacalo
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Re: Investing $140k in cash at 1k per week

Post by dacalo » Mon Nov 11, 2019 6:20 pm

dacalo wrote:
Mon Nov 11, 2019 6:20 pm
dacalo wrote:
Mon Nov 11, 2019 6:20 pm
timetraveler wrote:
Mon Nov 11, 2019 5:35 pm
mortfree wrote:
Mon Nov 11, 2019 3:22 pm
But you won’t actually put 1000 per week in VTI because you can’t buy partial shares (or can YOU)? I can’t.
I believe Schwab allows you to buy fractional shares. It is relatively recent feature. :happy
They will in the future, can't do it yet.

mortfree
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Re: Investing $140k in cash at 1k per week

Post by mortfree » Mon Nov 11, 2019 6:21 pm

dacalo wrote:
Mon Nov 11, 2019 6:20 pm
timetraveler wrote:
Mon Nov 11, 2019 5:35 pm
mortfree wrote:
Mon Nov 11, 2019 3:22 pm
But you won’t actually put 1000 per week in VTI because you can’t buy partial shares (or can YOU)? I can’t.
I believe Schwab allows you to buy fractional shares. It is relatively recent feature. :happy
They will in future, can't do it yet.
When I started investing in early 2000’s I could buy partial shares through Sharebuilder. I was able to do that until E*Trade took over in 2018

Thegame14
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Re: Investing $140k in cash at 1k per week

Post by Thegame14 » Mon Nov 11, 2019 6:22 pm

timetraveler wrote:
Mon Nov 11, 2019 1:44 pm
Hello :happy

I have $140k in high yield saving accounts (FDIC insured) that pays me %2 - %2.20 in annual interest. My plan is to is transfer $1000 from my saving account to my brokerage account and buy $1000 worth of VTI every week. At this rate, it would take a bit more than 2.5 years to invest all this money into VTI. The reason I am choosing this low buy rate of $1000/week is because if the market crashes within the next 2.5 years I could buy low with most of the remaining cash. What do you think about this strategy?

As for which day of the week to invest the $1000 in VTI, should I just throw a dice and choose the weekday based on that? Or is there better strategy than random to pickup the weekday?
ID say you are better off doing nothing and then if the market crashes you can make a move in, if not you are earning a solid interest rate. Cash is king

Presintense
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Re: Investing $140k in cash at 1k per week

Post by Presintense » Mon Nov 11, 2019 6:26 pm

I did what you're talking about doing, but with a much larger sum. In the second year I saw the returns I was missing out on and poured it all in to VTSAX. That was back when the DJIA was about 19,000. Glad I didn't stick with my plan to DCA.
Performance = Potential - Distraction

Topic Author
timetraveler
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Joined: Mon Nov 11, 2019 1:13 pm

Re: Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 6:31 pm

arcticpineapplecorp. wrote:
Mon Nov 11, 2019 5:28 pm
timetraveler wrote:
Mon Nov 11, 2019 1:44 pm
The reason I am choosing this low buy rate of $1000/week is because if the market crashes within the next 2.5 years I could buy low with most of the remaining cash. What do you think about this strategy?
welcome to the group. Some things to think about:

I'm not sure your "strategy" is fully fleshed out, or has been fully described here. For instance,
1. what's your definition of a "crash"? Be specific. Is it 20%? 25%? 30%? 35%? 40 %? 45%? 50%?

2. now that you know what a "crash" is, have you thought about how often such a decline has occurred throughout history? If not, please look it up. The higher your number defining a "crash", the more infrequently that decline has actually occurred.

3. how will you know you've "bought low"? If you're waiting for a crash of 40% and then you invest what's left of this lump sum (that you haven't DCA'd prior) what if the market falls another 10% or 20% after that? Would you feel regret because you bought lower but not at the lowest point?

4. What if instead of the market "crashing" it continues to move upward and you didn't have the money invested because you were DCA'ing at a glacial pace?
These are good questions. I like to have at least 1000 shares of VTI with my $140k. So 140 average price of VTI is a good bargain for me. If I keep investing 1000/week or 4000/month, then if the market crashes, whatever VTI price let me complete the 1000 shares with the rest of the money I have is the one that I am going to lump sum at.
Here's Larry Swedroe's take on this question (since it's the most often asked):
https://www.cbsnews.com/news/take-plung ... p-by-drip/
viewtopic.php?f=10&t=129706&newpost=1908642

this is another good post. substitute 100% bonds for what you're doing now (holding cash) and you see that you don't have to avoid market crashes to get good returns:
viewtopic.php?f=10&t=229429&start=50#p3567987
Is there a big difference between buying the BND fund vs holding cash in high yield savings? AFAIK, BND dividend yield has been 2.x for years now. Am I missing something?

Thanks for the links and thoughtful post. You mentioned some good points.

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Stinky
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Re: Investing $140k in cash at 1k per week

Post by Stinky » Mon Nov 11, 2019 6:39 pm

Why not really dollar cost average into the market? How about investing $200 per day? Or better yet, invest $40 per hour for the first five hours that the market is open?

Of course, I’m not being serious. You can DCA if you choose. But I wouldn’t buy more often than once per month. The paperwork and record keeping could drive you nuts.

If you really must DCA, I’d do it on a monthly basis, over twelve months at the maximum.
It's a GREAT day to be alive - Travis Tritt

Topic Author
timetraveler
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Joined: Mon Nov 11, 2019 1:13 pm

Re: Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 6:41 pm

gmc4h232 wrote:
Mon Nov 11, 2019 5:57 pm
Why wouldn't you just let it sit in savings for another few months until you have enough to buy this:

https://www.porsche.com/usa/models/911/911-gt3-models/

Then you can spend $1k a week on fuel and upkeep....
Haha nah man, I would rather buy a Tesla with less than half the price :happy

MotoTrojan
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Re: Investing $140k in cash at 1k per week

Post by MotoTrojan » Mon Nov 11, 2019 6:42 pm

timetraveler wrote:
Mon Nov 11, 2019 5:47 pm
MotoTrojan wrote:
Mon Nov 11, 2019 3:57 pm
I think it is a terrible plan personally.

If you had $1.4M instead, accumulated in a 401k over 25 years of prudent saving/investing, would you move it all to money market (tax-free transaction) and then redeploy it over 2.5 years, or even over 3-6 months? Of course not; it has been invested for decades so you will let it ride. How is this money any different? Hint: Emotionally it may be, but emotions and logic are not one in the same.
It is kinda different IMO. Because over 25 years of investing I would have already made substantial return on my money. So if the market crashes even to minus 50-%, I'd probably still be positive on my return. But since I am just starting to invest this cash, I need to have something substantial set aside to invest it all if the stock market suddenly goes to new lows.
That is an entirely emotional response with no logic to it. $1.4M is $1.4M, it does not matter if I give it to you today in a suitcase, if you slowly saved/invested it, or if it started two years prior as $100 in Bitcoin.

DCA is designed to help people that are emotionally concerned with loss, but it is not founded in any logic. If it were, then it would make sense to DCA the 25 year old 401k in my example.

almostretired1965
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Re: Investing $140k in cash at 1k per week

Post by almostretired1965 » Mon Nov 11, 2019 6:42 pm

The advantage of dollar cost averaging into stocks is really more psychological than anything else. You are basically trying to minimize regret from going all in and losing 50% if a really bad correction comes. It is not about maximizing expected return.

In my opinion, what you should do instead of dollar cost averaging is to read up on and think about what the right stock-bond asset allocation (for your entire portfolio) is for you, whether it is 70/30, 60/40, or whatever. Then buy the index funds to match that and regularly rebalance. Alternatively, you may be able to find a low cost balance fund that does it for you automatically at your desired allocation.

Good luck,

A

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Wiggums
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Re: Investing $140k in cash at 1k per week

Post by Wiggums » Mon Nov 11, 2019 6:47 pm

I invest my extra cash weekly. The weekly pull from my bank is automated and then the mutual fund is purchased the next day. I’ve used this method for 20 years.

Good luck to you.

Topic Author
timetraveler
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Joined: Mon Nov 11, 2019 1:13 pm

Re: Investing $140k in cash at 1k per week

Post by timetraveler » Mon Nov 11, 2019 6:51 pm

Ok, looks like most recommended 12 months for DCA instead of 2.5 years. Is there a clear reason why 12 months is better?

WhiteMaxima
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Re: Investing $140k in cash at 1k per week

Post by WhiteMaxima » Mon Nov 11, 2019 6:54 pm

sound like a good plan.

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