Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

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Stef
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Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Wed May 20, 2020 6:47 am

Dear all

I started investing in December 2019 after I made this thread: Afraid to take the leap

Got my bonus on February 20th 2020 and also invested it directly. Well, the first months of my investing career were a wild ride for sure. Seeing my life savings (30k, as I'm 29 and recently started saving seriously) go down -35% in 4 weeks was hard! I even got to the point where I was thinking about buying SPXU with half of my assets. IBKR then told me that I'm not allowed to buy leveraged ETFs, lol lucky me. At least I learned a lot about myself in the last 3 months. My investing beliefs (ignore news, buy and hold, stay the course, never do market timing, invest as soon as it's available) got stronger and I'm very glad I learned all these things so early with just 30k invested. Now I'm adding 2k/month and just let it ride. Till I reach my FIRE number.

I'll get a windfall in ~2 weeks of 18k. So 9 months worth of saving. I knew in February that I'll get that money and when the SP500 got close to 2200 I was joking with my friends and said: Just wait and see, I'll invest it when SP500 is around 3000 again (June) only to see a new low right after I do it, lol. Now I'm thinking if this joke might become reality? I got half of the story right (pretty exact actually), what if the 2nd part plays out like that? I'm I being masochistic if I just lump sum it again? Should I try DCA this time?

Logic tells me that I should ignore my bad luck and just do it. Again. Hoping this time will be different.

Any thoughts?

Best Regards, Stef

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FiveK
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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by FiveK » Wed May 20, 2020 7:01 am

Do you remember Bob (linked in your previous thread)?

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augryphon
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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by augryphon » Wed May 20, 2020 7:06 am

congratulations on jumping into the fire (and also into the FIRE)!!

My company opened it's 401k on September 1, 1987. I started contributing on September 6, 1987. After I made 3 contributions, the market dropped ~20% in one day, the biggest one day drop in history! 100% of my net worth was in that market. I was pretty shaken, but at close of market that day my 4th contribution automatically went in and I bought at 78% of the previous cost. DCA works, if you don't think you're smarter that the market and try to time the market.

18k is not a lot 20 years from now it won't matter much whether you lumped it in or DCA it, so do whatever is comfortable for you.

Given the uncertainty today, I'd probably DCA it at $1k a week over the next 18. If the market takes a big drop, you can always toss the remainder in at that time if you like. Regardless, as large a transaction as this seems to you now, your outcome will not be changed much no matter which you choose.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Wed May 20, 2020 7:12 am

FiveK wrote:
Wed May 20, 2020 7:01 am
Do you remember Bob (linked in your previous thread)?
Yes I do but who wants to be Bob? I don't want to be the worst market timer, just average :mrgreen:

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Wed May 20, 2020 10:18 am

augryphon wrote:
Wed May 20, 2020 7:06 am
congratulations on jumping into the fire (and also into the FIRE)!!

My company opened it's 401k on September 1, 1987. I started contributing on September 6, 1987. After I made 3 contributions, the market dropped ~20% in one day, the biggest one day drop in history! 100% of my net worth was in that market. I was pretty shaken, but at close of market that day my 4th contribution automatically went in and I bought at 78% of the previous cost. DCA works, if you don't think you're smarter that the market and try to time the market.

18k is not a lot 20 years from now it won't matter much whether you lumped it in or DCA it, so do whatever is comfortable for you.

Given the uncertainty today, I'd probably DCA it at $1k a week over the next 18. If the market takes a big drop, you can always toss the remainder in at that time if you like. Regardless, as large a transaction as this seems to you now, your outcome will not be changed much no matter which you choose.
Thanks for sharing your story!

I kind of want to DCA this time, but at the same time I know that lump sum will beat DCA in 2/3 of the cases. The economical situation shouldn't matter. I lost 2 times with lump sum investing (December 2019 and February 2020). But if I stick to lump sum investing windfalls for the next 20 years it should lead to better returns than always DCA it? So the rational thing would be to lump sum it again?

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Watty » Wed May 20, 2020 10:23 am

Stef wrote:
Wed May 20, 2020 6:47 am
I'll get a windfall in ~2 weeks of 18k.
I did not look at your other thread but $18K might be a good amount to put into;

1) An emergency fund
2) A car fund to pay cash for your next car
3) A house down-payment fund.

If you do not already have all of those then that would be worth considering.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by retired@50 » Wed May 20, 2020 10:25 am

Stef wrote:
Wed May 20, 2020 10:18 am

I kind of want to DCA this time, but at the same time I know that lump sum will beat DCA in 2/3 of the cases. The economical situation shouldn't matter. I lost 2 times with lump sum investing (December 2019 and February 2020). But if I stick to lump sum investing windfalls for the next 20 years it should lead to better returns than always DCA it? So the rational thing would be to lump sum it again?
The fact that you're keeping track "I lost 2 times with lump sum investing", even over the short term, since both of these investments are less than a year old, tells me you should use DCA and stop thinking about it. Enough of the angst. Set up some automatic contribution schedules and read a good book. Tune out the noise of Mr. Market.

Regards,
This is one person's opinion. Nothing more.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Chrono Triggered » Wed May 20, 2020 10:28 am

Stef wrote:
Wed May 20, 2020 6:47 am
At least I learned a lot about myself in the last 3 months. My investing beliefs (ignore news, buy and hold, stay the course, never do market timing, invest as soon as it's available) got stronger and I'm very glad I learned all these things so early with just 30k invested. Now I'm adding 2k/month and just let it ride. Till I reach my FIRE number.
This part of your post conflicts with the question you have at the latter part of your post.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by dvvader » Wed May 20, 2020 2:01 pm

At the end of your investing career, the timing of when you invest this $18K will be inconsequential. Just plug your nose and dive in.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by augryphon » Thu May 21, 2020 9:27 pm

Stef wrote:
Wed May 20, 2020 10:18 am
augryphon wrote:
Wed May 20, 2020 7:06 am
congratulations on jumping into the fire (and also into the FIRE)!!
Thanks for sharing your story!

I kind of want to DCA this time, but at the same time I know that lump sum will beat DCA in 2/3 of the cases. The economical situation shouldn't matter. I lost 2 times with lump sum investing (December 2019 and February 2020). But if I stick to lump sum investing windfalls for the next 20 years it should lead to better returns than always DCA it? So the rational thing would be to lump sum it again?
I believe you are misinterpreting the data on lump v. DCA. Lump beats DCA in one very specific case, ie, you put in the lump on day 1, vs began your DCA on day 1. This happens because over a long time period, the market generally rises slowly, and this only works if your invest your lump as soon as you get it. So the market is rising slowly and you put in your DCA after the lump, naturally the lump wins. If you study the case of investing the DCA v investing the lump on the final day of the DCA, the DCA wins 2/3 of the time.

What you are proposing is holding your lump and hoping for a good buying opportunity, that’s attempting to outguess the market and it will eat your lunch. And while you wait for a good time to buy, you are losing out on what the DCA could be earning in the market.

As I said before, for this one transaction it doesn’t matter much, but over a lifetime, this strategy will cost you a lot of money. If you are more comfortable investing a lump, that’s perfectly fine, just do it on day one rather than waiting and hoping.

I hope all this makes sense!

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Fri May 22, 2020 12:18 am

augryphon wrote:
Thu May 21, 2020 9:27 pm
What you are proposing is holding your lump and hoping for a good buying opportunity, that’s attempting to outguess the market and it will eat your lunch. And while you wait for a good time to buy, you are losing out on what the DCA could be earning in the market.
No no, never said anything about wating for a dip.

I'm thinking about investing it as soon as it's available.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Fri Jun 05, 2020 3:28 am

So I finally got the 18k today. It's not cash (rather complicated to explain), but I could invest it on July 1st for free or pay 80 bucks to be able to invest it the next day.

Damn, don't know what to do :oops:

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Adonis » Fri Jun 05, 2020 3:43 am

Stef wrote:
Fri Jun 05, 2020 3:28 am
So I finally got the 18k today. It's not cash (rather complicated to explain), but I could invest it on July 1st for free or pay 80 bucks to be able to invest it the next day.

Damn, don't know what to do :oops:
Go with your gut, you will sleep better.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by riseandgrind » Fri Jun 05, 2020 5:47 am

Adonis wrote:
Fri Jun 05, 2020 3:43 am
Stef wrote:
Fri Jun 05, 2020 3:28 am
So I finally got the 18k today. It's not cash (rather complicated to explain), but I could invest it on July 1st for free or pay 80 bucks to be able to invest it the next day.

Damn, don't know what to do :oops:
Go with your gut, you will sleep better.
30 y/o here. I deal with the same feelings.

I always like to ask what the 60 y/o me would tell myself and then I remember that I'll probably forget this ever happened. I will just be happy I was consistently investing.

+1 to go with the gut/peace of mind

"When faced with two choices, simply toss a coin. It works not because it settles the question for you, but because in that brief moment when the coin is in the air, you suddenly know what you are hoping for." - Unknown

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Fri Jun 05, 2020 6:54 am

Adonis wrote:
Fri Jun 05, 2020 3:43 am
Go with your gut, you will sleep better.
My mind is telling me: buy as soon as possible.

But sometimes I have a feeling that I live in a simulation and that this world isn't real. The markets are playing with me. If I invest it now, it will decline immediatly afterwards. If I invest it on July 1st, SP500 will be at a new ATH till then. No matter what I do, I'll lose lol.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by dogagility » Fri Jun 05, 2020 7:03 am

Stef wrote:
Fri Jun 05, 2020 6:54 am
My mind is telling me: buy as soon as possible.
But sometimes I have a feeling that I live in a simulation and that this world isn't real. The markets are playing with me. If I invest it now, it will decline immediatly afterwards. If I invest it on July 1st, SP500 will be at a new ATH till then. No matter what I do, I'll lose lol.
As others have said, if this money is for your retirement, then it will not matter too much which you choose. However, lump summing is the statistically better approach.

You seem to be learning to divorce your mind from your portfolio value but are still struggling. In my opinion, the most important lesson to learn about investing is to become psychologically detached from your portfolio value. For me, this happened because 1) I understood the market's history and 2) I knew it would be a long time before I ever needed to spend the money. It also helps to tune out "news".
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Randtor » Fri Jun 05, 2020 7:47 am

Regardless of your choice, you say you "lost" every time you invested. I would tell you that you lost nothing, unless you pulled out of the market. Your value went down. That's what the market does. You need to realize that this is the norm over time. Up/down/up/down, hopefully up! It should not bother you until somewhere down the long road when you actually will start withdrawals. If it bothers you now at this age, then you need to take a close look at your AA and tolerance levels. As others have said, years from now, it likely won't matter which way you choose. FYI, I just dropped $500K from a real estate sale into VTSAX in my taxable account. All in, one day, then had a beer (or two!)
Since I am older, I remember when the market celebrated the Dow hitting 10,000! Invest, relax, go enjoy life.
"Whats done is done, and can't be undone"

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Adonis » Fri Jun 05, 2020 7:49 am

riseandgrind wrote:
Fri Jun 05, 2020 5:47 am
Adonis wrote:
Fri Jun 05, 2020 3:43 am
Stef wrote:
Fri Jun 05, 2020 3:28 am
So I finally got the 18k today. It's not cash (rather complicated to explain), but I could invest it on July 1st for free or pay 80 bucks to be able to invest it the next day.

Damn, don't know what to do :oops:
Go with your gut, you will sleep better.
30 y/o here. I deal with the same feelings.

I always like to ask what the 60 y/o me would tell myself and then I remember that I'll probably forget this ever happened. I will just be happy I was consistently investing.

+1 to go with the gut/peace of mind

"When faced with two choices, simply toss a coin. It works not because it settles the question for you, but because in that brief moment when the coin is in the air, you suddenly know what you are hoping for." - Unknown
I wouldn’t say my response is always appropriate since some people have bad judgment, but the OP has been pondering the topic since December and engaged in multiple discussions, and he seems to be on the intelligent side, so I think at this point there has been enough mulling over of all the facts and it is decision time, that’s why I feel comfortable telling him to follow his instincts and not look for peer approval.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Adonis » Fri Jun 05, 2020 7:54 am

Randtor wrote:
Fri Jun 05, 2020 7:47 am
Regardless of your choice, you say you "lost" every time you invested. I would tell you that you lost nothing, unless you pulled out of the market. Your value went down. That's what the market does. You need to realize that this is the norm over time. Up/down/up/down, hopefully up! It should not bother you until somewhere down the long road when you actually will start withdrawals. If it bothers you now at this age, then you need to take a close look at your AA and tolerance levels. As others have said, years from now, it likely won't matter which way you choose. FYI, I just dropped $500K from a real estate sale into VTSAX in my taxable account. All in, one day, then had a beer (or two!)
Since I am older, I remember when the market celebrated the Dow hitting 10,000! Invest, relax, go enjoy life.
Exactly, capital gains or loses only occur when you sell shares, until then nothing is realized and nothing is lost or gained. Sure the current value of our shares might be above or below our ACB, but that is a meaningless comparison, only the tax man cares, and only when you cash out.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by terran » Fri Jun 05, 2020 8:10 am

Stef wrote:
Fri Jun 05, 2020 3:28 am
So I finally got the 18k today. It's not cash (rather complicated to explain), but I could invest it on July 1st for free or pay 80 bucks to be able to invest it the next day.

Damn, don't know what to do :oops:
Is there ANY risk that you don't get all the money on July 1st? That is, can it be rescinded in any way, or is it currently invested in anything that could be reduced in some way? If not then you could look into investing the $18k on margin and see if the cost of that would be less than $80. The net effect as of July would be exactly the same with the exception of the $80 fee vs the margin interest.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by retired@50 » Fri Jun 05, 2020 8:20 am

Stef wrote:
Fri Jun 05, 2020 3:28 am
So I finally got the 18k today. It's not cash (rather complicated to explain), but I could invest it on July 1st for free or pay 80 bucks to be able to invest it the next day.

Damn, don't know what to do :oops:
I'd wait until July 1. That's 25 days of waiting for $80.

In a year (365 days) there are 14.6 twenty-five day periods. 365 / 25 = 14.6

14.6 * 80 = 1,168.

1,168 / 18,000 = .0648

In other words, you're being paid interest at a 6.48% rate for waiting 25 days.

Regards,
This is one person's opinion. Nothing more.

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Fri Jun 05, 2020 8:42 am

retired@50 wrote:
Fri Jun 05, 2020 8:20 am
I'd wait until July 1. That's 25 days of waiting for $80.

In a year (365 days) there are 14.6 twenty-five day periods. 365 / 25 = 14.6

14.6 * 80 = 1,168.

1,168 / 18,000 = .0648

In other words, you're being paid interest at a 6.48% rate for waiting 25 days.

Regards,
That's logic I can't argue against. Didn't expect such a convincing answer. Thank you very much.

@Rest
Thank you as well for your answers. This will be invested for 30 years, so I know that it won't really matter after such a long time. I'm pretty sure about my AA (100% stocks), but still not used to invest larger amounts. 2k monthly? No problem.

The point that I should detatch myself from the portfolio value is very good though!

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Stef » Fri Jun 05, 2020 12:50 pm

You know what? I just sent the order to invest the 18k on Monday.

I lump summed my life savings in December 2019, I lump summed the biggest bonus of my life on February 21st and now I'm lump summing again.

If lump sum beats DCA with a probability of 70% there is no way that I'll keep losing :D

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Re: Started investing with lump sum at ATH / windfall coming in 2 weeks, lump sum again?

Post by Randtor » Fri Jun 05, 2020 2:48 pm

Stef wrote:
Fri Jun 05, 2020 12:50 pm
You know what? I just sent the order to invest the 18k on Monday.

I lump summed my life savings in December 2019, I lump summed the biggest bonus of my life on February 21st and now I'm lump summing again.

If lump sum beats DCA with a probability of 70% there is no way that I'll keep losing :D
OP: You call it lump summing because that's all you had each time you invested. But take a step back, and you'll see that what you did is really DCA since you had 3 investments in a short period of time. Inadvertent yes, but you see? It really doesn't matter what you call it, or WHEN you invested it... what matters is you invest. You have a long time frame ahead of you. Good Luck!
"Whats done is done, and can't be undone"

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