How to get $200,000 into the market (dollar cost averaging or...)

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging. Love to hear thoughts surrounding this.
1- how fast or slow should I trickle it in?
2- What might I do with the cash while its waiting to get invested?
Thanks!
User avatar
vineviz
Posts: 8095
Joined: Tue May 15, 2018 1:55 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by vineviz »

coloradobjj wrote: Thu Sep 24, 2020 6:16 am I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging. Love to hear thoughts surrounding this.
1- how fast or slow should I trickle it in?
2- What might I do with the cash while its waiting to get invested?
Thanks!
You’ve got it backwards, I’m afraid: “not trying to time the market” would lead to investing it today at your desired allocation.

The only right answer to #1 is “as quickly as possible “.

As for #2, I suggest putting it into at least 25% VTSAX and the rest in VBTLX right away and then moving it to your target allocation ASAP.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Johm221122
Posts: 5199
Joined: Fri May 13, 2011 6:27 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by Johm221122 »

You get in the market immediately. But make sure your asset allocation matches your goals/ risk tolerance.
If your afraid to invest immediately your asset allocation is to aggressive
student
Posts: 5215
Joined: Fri Apr 03, 2015 6:58 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by student »

I would dollar cost averaging for psychological reasons. Past data suggests that lump sum is better. (I don't remember but I think it is better about 2/3 of the time.)
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

VineViz are you suggesting if my asset allocation was going to be 90/10 stock/bond that I put everything in but heavier weighted in bond then over time adjust it over? or am I totally mis understanding?
Thanks for feedback everyone.
Last edited by colorado50 on Thu Sep 24, 2020 7:10 am, edited 1 time in total.
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

Johm221122 wrote: Thu Sep 24, 2020 6:32 am You get in the market immediately. But make sure your asset allocation matches your goals/ risk tolerance.
If your afraid to invest immediately your asset allocation is to aggressive
interesting, thanks
000
Posts: 3357
Joined: Thu Jul 23, 2020 12:04 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by 000 »

Sometimes I do a two step dance to make big changes, half now, half in 1-2 months. The latter half usually sits in a GTC limit order for a nice price.

No matter how long your DCA period is, the bubble could always the burst the day after your DCA is complete - so choosing a good asset allocation is more important than timing or DCA.
User avatar
vineviz
Posts: 8095
Joined: Tue May 15, 2018 1:55 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by vineviz »

coloradobjj wrote: Thu Sep 24, 2020 7:11 am VineViz are you suggesting if my asset allocation was going to be 90/10 stock/bond that I put everything in but heavier weighted in bond then over time adjust it over? or am I totally mis understanding?
My primary suggestion would be to invest it at 90/10 right away. That is the rational (i.e. wealth maximizing) choice.

If that makes you too uncomfortable, then yes my next suggestion is to invest it right away at 25/75 and then move towards 90/10 as quickly as you can manage to do that.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Elysium
Posts: 3228
Joined: Mon Apr 02, 2007 6:22 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by Elysium »

coloradobjj wrote: Thu Sep 24, 2020 6:16 am I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging. Love to hear thoughts surrounding this.
1- how fast or slow should I trickle it in?
2- What might I do with the cash while its waiting to get invested?
Thanks!
The right approach would be to invest everything ASAP of course according to your AA. That said, you didn't tell us anything about your specific situation, which may or may not have some bearing on this advice. For starters, how much is $200K to you, for some it isn't a large amount and so investing it 100% today is not moving the needle very much, so on.. and what stage are you at, whether this money is for retirement, other goals, how far away from the goals you are, etc. Those factors can be considered, but of course your AA will reflect all that (if you have one, if not then you should develop one). If in doubt, place 50/50 in VTSAX/VBTLX.
gonefishing01
Posts: 100
Joined: Wed Aug 19, 2015 9:09 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by gonefishing01 »

My after tax investable income is spikey and I have been doing a two step dance like 000 mentioned above. Half goes in immediately into my AA (this never seems to get any easier when market is running up but i force myself to do it) and then i get the rest in DCA’ing over a few months buying more if things are “on sale”, essentially market timing. This works for me and I can sleep at night.
sycamore
Posts: 1345
Joined: Tue May 08, 2018 12:06 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by sycamore »

OP, your question is a common one. See the Bogleheads wiki article at https://www.bogleheads.org/wiki/Dollar_cost_averaging. The odds are in your favor to invest in a lump sum rather than average in over time. But you do need to account for your risk tolerance. If you go all-in and then the market drops by 20-30% and you're the type to panic sell at the bottom, then dollar cost averaging may feel less risky and help you avoid panic selling. But that also means that your desired AA is too heavy with stocks.
User avatar
tre3sori
Posts: 131
Joined: Wed Jul 24, 2019 3:13 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by tre3sori »

I got $410,000 from selling a condo on Friday.
And I invested according to my asset allocation/investment policy statement on Friday.
Now the stock market seems to start tanking while I'm dreaming of a year-end-rally.
Well, ... I'm doing nothing.
Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve. Talmud | 34% Real Estate, 43% VGWL, 16% VAGE, 5% 8PSG, 2% Cash
User avatar
bertilak
Posts: 7951
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by bertilak »

student wrote: Thu Sep 24, 2020 6:43 am I would dollar cost averaging for psychological reasons. Past data suggests that lump sum is better. (I don't remember but I think it is better about 2/3 of the time.)
Your psychology may not be the same as the OP's.

History shows lump sum results are better 2/3 of the time but logic (and common sense) says it is a better strategy 100% of the time because 100% of the time one should go with the better odds. It's almost a tautology: "It's best to do what has the best chance."

Don't do the OP a disservice by assuming he has an illogical psychology.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
Tamalak
Posts: 691
Joined: Fri May 06, 2016 2:29 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by Tamalak »

We buy our portfolios every day. If the market drops 10% you lose 10%. It doesn't matter if you've been invested for 10 years or 10 minutes.

Hold your nose and jump in
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

Well, I'm for sure seeing a pattern haha, thanks for everyones thoughtful replies.
User avatar
tadamsmar
Posts: 9114
Joined: Mon May 07, 2007 12:33 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by tadamsmar »

vineviz wrote: Thu Sep 24, 2020 6:29 am
coloradobjj wrote: Thu Sep 24, 2020 6:16 am I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging. Love to hear thoughts surrounding this.
1- how fast or slow should I trickle it in?
2- What might I do with the cash while its waiting to get invested?
Thanks!
You’ve got it backwards, I’m afraid: “not trying to time the market” would lead to investing it today at your desired allocation.
Timing the market would be looking at current conditions and deciding whether or not to invest.

Any fixed schedule plan (including all at once) for the arrival of $200,000 on a any random date would not be market timing.

True that if you want the best expected outcome (ignoring current conditions) then you should invest immediately.
User avatar
vineviz
Posts: 8095
Joined: Tue May 15, 2018 1:55 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by vineviz »

tadamsmar wrote: Thu Sep 24, 2020 9:36 am
vineviz wrote: Thu Sep 24, 2020 6:29 am
coloradobjj wrote: Thu Sep 24, 2020 6:16 am I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging. Love to hear thoughts surrounding this.
1- how fast or slow should I trickle it in?
2- What might I do with the cash while its waiting to get invested?
Thanks!
You’ve got it backwards, I’m afraid: “not trying to time the market” would lead to investing it today at your desired allocation.
Timing the market would be looking at current conditions and deciding whether or not to invest.

Any fixed schedule plan (including all at once) for the arrival of $200,000 on a any random date would not be market timing.
You’re right. I think I was reading between the lines and concluded that “looking at current conditions” is what led the OP to have cash on the sidelines to begin with, but they didn’t actually say that.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
arcticpineapplecorp.
Posts: 6533
Joined: Tue Mar 06, 2012 9:22 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by arcticpineapplecorp. »

coloradobjj wrote: Thu Sep 24, 2020 6:16 am I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging.
you're of two minds.

you're trying to minimize regret.

so what's the greater regret:
1. you invest and the market goes down?
2. you don't invest and the market goes up?

when you have the answer to that question you'll know what to do (i.e. #1 leads to DCA, #2 leads to lump sum). Door #1 or Door #2? Oh Monty!

Answer to all market timing questions (not rebalancing questions):
Q: When do I buy?
A: When you have the money.

Q: When do I sell?
A: When you need the money.

If you have the money and don't need the money then why isn't it invested? Fear.

fear and greed. it's what moves the market.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
heyyou
Posts: 3818
Joined: Tue Feb 20, 2007 4:58 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by heyyou »

As usual, the amount to be invested in the stock market (with the rest in the bond market) is more dependent on what suits the investor's risk tolerance, than what is most statistically optimal. Somewhere there are studies showing that investing just before market crashes, is still successful for long term, buy and hold investors. Those studies did not look at how emotional it is to tolerate losing 50% of your new investment followed by a long slow recovery.

Invest half now, with 10% more each calendar quarter, regardless of whatever the stock market does.
student
Posts: 5215
Joined: Fri Apr 03, 2015 6:58 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by student »

bertilak wrote: Thu Sep 24, 2020 9:15 am
student wrote: Thu Sep 24, 2020 6:43 am I would dollar cost averaging for psychological reasons. Past data suggests that lump sum is better. (I don't remember but I think it is better about 2/3 of the time.)
Your psychology may not be the same as the OP's.

History shows lump sum results are better 2/3 of the time but logic (and common sense) says it is a better strategy 100% of the time because 100% of the time one should go with the better odds. It's almost a tautology: "It's best to do what has the best chance."

Don't do the OP a disservice by assuming he has an illogical psychology.
What disservice? I said what I would do. I did not ask OP to follow what I do. Moreover, I told OP the same data that you are using, historically lump sum is better. Dollar averaging is not illogical psychology. As https://fourpillarfreedom.com/the-math- ... investing/ summarizes, "If your goal is to maximize returns, the data tells us that lump sum investing is a better approach. If your goal is to minimize investment regret, reduce portfolio volatility, and sleep well at night, the data tells us that dollar-cost averaging is a better approach."
BogleDan
Posts: 28
Joined: Sun Jun 03, 2018 5:49 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by BogleDan »

The "right" answer is to put it all in the market now, lump sum.
DCA is a good strategy if you fear your emotions will keep you from sticking to your investment strategy. Or will just weigh heavily on you (affecting your quality of life) if there's a major downturn right after you lump sum invest.

To account for both factors (the rational and the emotional), sometimes when I have a big chunk of change to invest I do half as a lump sum investment and DCA the other half. That works for me.
rich126
Posts: 2163
Joined: Thu Mar 01, 2018 4:56 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by rich126 »

People will tell you do it now because over time the stock market goes up but if you are really unlucky say in 2000, it could take you years to recover from truly horrible timing. That is a rare event but it can happen. Personally I'm always trying to avoid big losses and would always take my time in entering the market if we are talking about a large sum of money but that is me. The numbers would say I'm wrong. My only argument there is that I'm not an insurance company that can play the odds over and over and know it will favor me. Instead I might get one change and if I'm wrong I could get hit hard (depending on my age and timing).

That is against the tide but it is my money :)
User avatar
Eagle33
Posts: 1002
Joined: Wed Aug 30, 2017 3:20 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by Eagle33 »

How many years before you need the money?

What does your Investment Policy Statement say about investing new money? Follow your the decision you made when your wrote your IPS.

By the way what was the source of the $200k when it went into your settlement account?
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
l1am
Posts: 387
Joined: Wed Mar 02, 2016 2:27 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by l1am »

Tamalak wrote: Thu Sep 24, 2020 9:20 am We buy our portfolios every day. If the market drops 10% you lose 10%. It doesn't matter if you've been invested for 10 years or 10 minutes.

Hold your nose and jump in
This
MathIsMyWayr
Posts: 2536
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by MathIsMyWayr »

Tamalak wrote: Thu Sep 24, 2020 9:20 am We buy our portfolios every day. If the market drops 10% you lose 10%. It doesn't matter if you've been invested for 10 years or 10 minutes.

Hold your nose and jump in
If you mindlessly cash all out and all in some time later every day, you are doing nothing except creating periodic gaps in investing. Be careful - too much is often the same as too little.
User avatar
familythriftmd
Posts: 246
Joined: Fri Sep 18, 2020 10:15 am
Location: Wisconsin

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by familythriftmd »

This is interesting. I thought that dollar cost averaging was almost always better. So would you just say then that he/she should lump sum invest and then use dollar cost averaging with his/her income cash flow? This might change the way I do things, too, since I'm new to the brokerages, too.

EDIT: I will add that I just listened to a podcast from back in 2019 on the White Coat Investor with Jonathan Clements, and he basically suggested the opposite of the above suggestions. With 200k, dollar cost average for the next 24 months or so.
Last edited by familythriftmd on Fri Sep 25, 2020 6:45 am, edited 1 time in total.
He/him/his
User avatar
Chrono Triggered
Posts: 331
Joined: Wed Feb 17, 2016 12:55 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by Chrono Triggered »

All at once into your desired AA. If you're hesitant, then your AA is most likely too aggressive.
User avatar
TomatoTomahto
Posts: 11343
Joined: Mon Apr 11, 2011 1:48 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by TomatoTomahto »

familythriftmd wrote: Fri Sep 25, 2020 6:41 am This is interesting. I thought that dollar cost averaging was almost always better. So would you just say then that he/she should lump sum invest and then use dollar cost averaging with his/her income cash flow? This might change the way I do things, too, since I'm new to the brokerages, too.

EDIT: I will add that I just listened to a podcast from back in 2019 on the White Coat Investor with Jonathan Clements, and he basically suggested the opposite of the above suggestions. With 200k, dollar cost average for the next 24 months or so.
I think Mr Clements must have been recommending that for tactical/psychological reasons. I have not listened to the podcast.

I did not sell during 2008/2009. I have lump summed every year (my wife’s compensation is largely bonus based, thus “lumpy”). But, disclosure coming, I have been reluctant to purchase equities for the past year or so. I am expanding my cash reserves, but that’s something we can afford to do at our ages (60s). If we were younger, I’d hold my nose and buy.
I get the FI part but not the RE part of FIRE.
User avatar
familythriftmd
Posts: 246
Joined: Fri Sep 18, 2020 10:15 am
Location: Wisconsin

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by familythriftmd »

TomatoTomahto wrote: Fri Sep 25, 2020 7:07 am I think Mr Clements must have been recommending that for tactical/psychological reasons. I have not listened to the podcast.

I did not sell during 2008/2009. I have lump summed every year (my wife’s compensation is largely bonus based, thus “lumpy”). But, disclosure coming, I have been reluctant to purchase equities for the past year or so. I am expanding my cash reserves, but that’s something we can afford to do at our ages (60s). If we were younger, I’d hold my nose and buy.
His argument was "what if you put that lump sum in October 2007?" So I think it was more than behavioral, except maybe for the fact that doing the lump sum at a bad near-term timing could have scared someone away from investing at all. So I guess you could argue either way as to what he was implying.
He/him/his
bugleheadd
Posts: 392
Joined: Fri Nov 29, 2019 11:25 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by bugleheadd »

what are everyones thoughts about this

put 100% of it into SPY immediately

selll weekly covered calls (collect premiums of about 0.5% weekly or $1000)

immediately use teh premium to reinvest in SPY

that way you get to average down if SPY drops below your initial 200k purchase price
dbr
Posts: 33873
Joined: Sun Mar 04, 2007 9:50 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by dbr »

coloradobjj wrote: Thu Sep 24, 2020 6:16 am I have $200K in my Vanguard settlement fund I want to get into VTSAX and VBTLX. I feel bad that its just sitting there but in the interest of not trying to time the market I think I should trickle it in using dollar cost averaging. Love to hear thoughts surrounding this.
1- how fast or slow should I trickle it in?
2- What might I do with the cash while its waiting to get invested?
Thanks!
I am curious to know why you think this is a question? This is an honest inquiry. I am asking because this comes up all the time here and I never see where the question comes from. Is this simply because a choice exists? Is it because you have read something somewhere? Is it because you are afraid of the risk and hope there is some clever way of avoiding some risk? You have helpfully explained that you don't think you can do some kind of market timing.

Also, for perspective, where was this money before and how did it end up in your settlement fund?

OK, I''ll be fair and answer both questions. The answer to question 2. is that you should invest the cash in VTSAX and VBTLX while you are waiting. A different and smart-alecky answer to question 1. is that if you dribble it in you should do so over a period of five hundred years. That will ensure that it is slow enough that any likely risk in stocks and bond is avoided, which would have been the reason for 1. in the first place.
User avatar
bertilak
Posts: 7951
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by bertilak »

familythriftmd wrote: Fri Sep 25, 2020 9:06 am His argument was "what if you put that lump sum in October 2007?" So I think it was more than behavioral, except maybe for the fact that doing the lump sum at a bad near-term timing could have scared someone away from investing at all. So I guess you could argue either way as to what he was implying.
If we are going to talk hypotheticals, I ask what would be the situation if someone started a year-long DCA a year earlier in October 2006?

The losses starting in October 2007 would be at least as bad in either case. The post-loss balance would actually be better if, a year earlier, the investor did a lump sum instead of starting DCA as he would have had a year of returns added to his initial investment.

I believe the original example was intended to show that there would be a large regret which, due to psychological reasons, would be worse if it happened sooner rather than later. In actuality the increased regret is due to the investor's lack of understanding, not due to DCA. The best way to fix that is to improve one''s understanding, not to take an ineffective measure and pretend it is doing some good. An improved understanding might lead to a more conservative AA which, given the fear, is probably appropriate. This is a better solution because it leaves the investor with that better AA going into the future whereas DCA ultimately leaves the investor at the, original, ill-conceived AA.
Last edited by bertilak on Fri Sep 25, 2020 9:58 am, edited 1 time in total.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
sycamore
Posts: 1345
Joined: Tue May 08, 2018 12:06 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by sycamore »

familythriftmd wrote: Fri Sep 25, 2020 9:06 am
TomatoTomahto wrote: Fri Sep 25, 2020 7:07 am I think Mr Clements must have been recommending that for tactical/psychological reasons. I have not listened to the podcast.

I did not sell during 2008/2009. I have lump summed every year (my wife’s compensation is largely bonus based, thus “lumpy”). But, disclosure coming, I have been reluctant to purchase equities for the past year or so. I am expanding my cash reserves, but that’s something we can afford to do at our ages (60s). If we were younger, I’d hold my nose and buy.
His argument was "what if you put that lump sum in October 2007?" So I think it was more than behavioral, except maybe for the fact that doing the lump sum at a bad near-term timing could have scared someone away from investing at all. So I guess you could argue either way as to what he was implying.
From what I can tell, Mr. Clements is definitely concerned about investor psychology.

The podcast where WCI interviews Mr. Clements is here: https://www.whitecoatinvestor.com/how-t ... dcast-105/. WCI nicely provides show notes of the podcast. Here's a snippet regarding their discussion about Dollar Cost Averaging and October 2007 :
But Jonathan says that if you invest all the money right away, you will get a higher return than if you dollar-cost average into the market. But the fact is, you do not get an average result. If you put everything into the market, you get a sample of one. And it may be that you decided to put everything in October 2007, just ahead of a 57% decline by the S&P 500. He isn’t not willing to advise people to invest based on an average that may be completely inapplicable to their financial situation, which is why dollar-cost averaging makes a ton of sense to him.
and a full quote from Clements:
"Whatever you do, whether you invested right away or you invested over time, if you’re nervous about stock market, you shouldn’t be putting everything into stocks no matter which strategy you take. And if you are dollar-cost averaging, you should only be dollar-cost averaging in that portion that you want at the stock market. If you still want to have 60% of your money in bonds, even if you’re dollar-cost averaging, you shouldn’t be going above 40% stocks. If you put it that 40% in today, and it turns out to be October 2007, and the market starts dropping and you panic in early 2009, when the market is down by more than half, you’ve screwed yourself. So telling people to put everything they have in stocks right away, is just not good advice in my book, because I don’t want to be responsible for that person panicking and selling at the wrong time."
The whole discussion which is worth reviewing (or listening to) to get an idea of various nuances.
dbr
Posts: 33873
Joined: Sun Mar 04, 2007 9:50 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by dbr »

sycamore wrote: Fri Sep 25, 2020 9:46 am
and a full quote from Clements:
"Whatever you do, whether you invested right away or you invested over time, if you’re nervous about stock market, you shouldn’t be putting everything into stocks no matter which strategy you take. And if you are dollar-cost averaging, you should only be dollar-cost averaging in that portion that you want at the stock market. If you still want to have 60% of your money in bonds, even if you’re dollar-cost averaging, you shouldn’t be going above 40% stocks. If you put it that 40% in today, and it turns out to be October 2007, and the market starts dropping and you panic in early 2009, when the market is down by more than half, you’ve screwed yourself. So telling people to put everything they have in stocks right away, is just not good advice in my book, because I don’t want to be responsible for that person panicking and selling at the wrong time."
The whole discussion which is worth reviewing (or listening to) to get an idea of various nuances.
I am fully convinced that DCA is never about how to move the money but rather is about higher level issues such as what is the right asset allocation.

But that is why I asked above regarding how does the question arise.
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

Again thanks for all the thoughtful replies, I appreciate the feedback. Although I dont think its super relevant for this specific question I'm happy to share the other parts of the story. Maybe it will help someone in the future. I read all the books and got great advise- Buy and Hold your chosen asset allocation. I own a business that has for 20 years been super stable, I also get lumps of money as an owner so main cash flow is not on a monthly stream but say quarterly I get checks.
Early march i had a bunch of cash sitting around so I put it all in the market expecting I was about to get a significant draw from the business of around $100k. The market was super high but I don't time the market as I've been taught so I just put all my money (about $230k in a 90/10 spit stocks/bonds. Mid march we were shut down. Not slowed down but completely closed. In 20 years of business I could not imagine this scenario. Our burn rate with over 100 staff members, Rent etc conservatively is well north of $100k per month. So not only was I not going to be able to pull out money from the business (about $600k in operating capital) but I had little money to survive on. Fear of not being able to pay my business and personal bills caused me to sell all my stocks and take about a $70K loss (ouch).
Now we are back open and treading water. I have $450k in personal cash reserves and $1.5 million in loans at 3% that I have not and dont want to touch (I have very little debt in my life). I have to assume this pandemic could go on another year so I still need cash on hand but I feel the full $450k is more than I could possibly need so I want to get some back in the market. I always search for lessons to be gleamed and this one is tough to figure out.

Happy to hear feedback or what you think I did wrong or should do moving forward. Hindsight is obviously 20/20 but this will for sure change my perspective moving forward. for more complete picture Im 50, assets are
- $2,300,000 in real estate assets (including my personal residence thats about 1.3 of that)
- $ a Buisness that early march was valued at @$2,500,000 today... who knows but I still believe we will be back
- $60k in tax advantaged IRA, Roth and College savings accounts
- $450k in cash sitting in the bank
- $300k in realestate debt @ sub 4%
- Govt EIDL loan of $1.5 million sitting in bank unused at 3% (I'm gonna try hard not to touch this but a safety net is comfoting even if it costs us about 5k monthly.

so... lets hear it! haha
BlackcatCA
Posts: 200
Joined: Sat Jan 20, 2018 2:55 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by BlackcatCA »

coloradobjj wrote: Fri Sep 25, 2020 9:58 am Again thanks for all the thoughtful replies, I appreciate the feedback. Although I dont think its super relevant for this specific question I'm happy to share the other parts of the story. Maybe it will help someone in the future. I read all the books and got great advise- Buy and Hold your chosen asset allocation. I own a business that has for 20 years been super stable, I also get lumps of money as an owner so main cash flow is not on a monthly stream but say quarterly I get checks.
Early march i had a bunch of cash sitting around so I put it all in the market expecting I was about to get a significant draw from the business of around $100k. The market was super high but I don't time the market as I've been taught so I just put all my money (about $230k in a 90/10 spit stocks/bonds. Mid march we were shut down. Not slowed down but completely closed. In 20 years of business I could not imagine this scenario. Our burn rate with over 100 staff members, Rent etc conservatively is well north of $100k per month. So not only was I not going to be able to pull out money from the business (about $600k in operating capital) but I had little money to survive on. Fear of not being able to pay my business and personal bills caused me to sell all my stocks and take about a $70K loss (ouch).
Now we are back open and treading water. I have $450k in personal cash reserves and $1.5 million in loans at 3% that I have not and dont want to touch (I have very little debt in my life). I have to assume this pandemic could go on another year so I still need cash on hand but I feel the full $450k is more than I could possibly need so I want to get some back in the market. I always search for lessons to be gleamed and this one is tough to figure out.

Happy to hear feedback or what you think I did wrong or should do moving forward. Hindsight is obviously 20/20 but this will for sure change my perspective moving forward. for more complete picture Im 50, assets are
- $2,300,000 in real estate assets (including my personal residence thats about 1.3 of that)
- $ a Buisness that early march was valued at @$2,500,000 today... who knows but I still believe we will be back
- $60k in tax advantaged IRA, Roth and College savings accounts
- $450k in cash sitting in the bank
- $300k in realestate debt @ sub 4%
- Govt EIDL loan of $1.5 million sitting in bank unused at 3% (I'm gonna try hard not to touch this but a safety net is comfoting even if it costs us about 5k monthly.

so... lets hear it! haha
Thanks for giving the full picture. Context is very important to your question on top. I have been following the thread with interest.

A couple of clarifying questions:
1. Is 450k cash your person emergency fund, or partly for business? You were asking about investing 200k, so 250k is your EF that you plan to keep in cash or bond?
2. In March you started with 90/10 with 230k. Now you have 450k and you are thinking of ~ 45/55?
dbr
Posts: 33873
Joined: Sun Mar 04, 2007 9:50 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by dbr »

Thank you for the elucidation. The situation is indeed complicated.


But I would say that what is not complicated is that once you know you want $200,000 moved from cash to the market, DCA vs lump sum is a useless question to ask. In the first place it won't make any difference ex ante and in the second place it doesn't make any sense to decide how things should be and then not do it.

I am still curious exactly how the question arises for you. For me, for example, it is not a question.

Another dimension of this is relative magnitudes. People who face this issue are often in situation where a very large amount of new and unexpected money has materialized. It is completely reasonable in such cases to be a bit flummoxed over what to do, and the universal advice is to first stop, and secondly to proceed slowly -- but that is not because DCA has a special rationale but because proceeding deliberately in new and not understood situations has a rationale. In your case $200k is already (apologies in advance) penny-ante and also a well considered small part of your affairs. It would be puzzling how there could be a question.
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

BlackcatCA wrote: Fri Sep 25, 2020 10:14 am
coloradobjj wrote: Fri Sep 25, 2020 9:58 am Again thanks for all the thoughtful replies, I appreciate the feedback. Although I dont think its super relevant for this specific question I'm happy to share the other parts of the story. Maybe it will help someone in the future. I read all the books and got great advise- Buy and Hold your chosen asset allocation. I own a business that has for 20 years been super stable, I also get lumps of money as an owner so main cash flow is not on a monthly stream but say quarterly I get checks.
Early march i had a bunch of cash sitting around so I put it all in the market expecting I was about to get a significant draw from the business of around $100k. The market was super high but I don't time the market as I've been taught so I just put all my money (about $230k in a 90/10 spit stocks/bonds. Mid march we were shut down. Not slowed down but completely closed. In 20 years of business I could not imagine this scenario. Our burn rate with over 100 staff members, Rent etc conservatively is well north of $100k per month. So not only was I not going to be able to pull out money from the business (about $600k in operating capital) but I had little money to survive on. Fear of not being able to pay my business and personal bills caused me to sell all my stocks and take about a $70K loss (ouch).
Now we are back open and treading water. I have $450k in personal cash reserves and $1.5 million in loans at 3% that I have not and dont want to touch (I have very little debt in my life). I have to assume this pandemic could go on another year so I still need cash on hand but I feel the full $450k is more than I could possibly need so I want to get some back in the market. I always search for lessons to be gleamed and this one is tough to figure out.

Happy to hear feedback or what you think I did wrong or should do moving forward. Hindsight is obviously 20/20 but this will for sure change my perspective moving forward. for more complete picture Im 50, assets are
- $2,300,000 in real estate assets (including my personal residence thats about 1.3 of that)
- $ a Buisness that early march was valued at @$2,500,000 today... who knows but I still believe we will be back
- $60k in tax advantaged IRA, Roth and College savings accounts
- $450k in cash sitting in the bank
- $300k in realestate debt @ sub 4%
- Govt EIDL loan of $1.5 million sitting in bank unused at 3% (I'm gonna try hard not to touch this but a safety net is comfoting even if it costs us about 5k monthly.

so... lets hear it! haha
Thanks for giving the full picture. Context is very important to your question on top. I have been following the thread with interest.

A couple of clarifying questions:
1. Is 450k cash your person emergency fund, or partly for business? You were asking about investing 200k, so 250k is your EF that you plan to keep in cash or bond?
2. In March you started with 90/10 with 230k. Now you have 450k and you are thinking of ~ 45/55?
Okay, I'm trying to keep up with the Boggling lingo, not entirely sure what EF means but I'm learning!.
1- Yes the $450k is my personal emergency fund. Lord knows when I start getting paychecks again but with my monthly expenditures at about $10k / month I imagine within a year were gonna get through this. I think if I keep $250k I should be safe. A privileged problem for sure but its my problem.
2- Yes I was 90/10 when my income was super solid. I was thinking of putting 200k in at that same ratio and keeping 250k in cash. love to hear thoughts on this. I've always sat on too much cash but felt paralyzed on exactly where to put it. Early march was me finally pulling the trigger and trusting the process. Mid march was me wanting to shoot myself for doing so lol (obviously bad luck is bad luck I still believe in the process)
dbr
Posts: 33873
Joined: Sun Mar 04, 2007 9:50 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by dbr »

coloradobjj wrote: Fri Sep 25, 2020 10:36 am
1- Yes the $450k is my personal emergency fund. Lord knows when I start getting paychecks again but with my monthly expenditures at about $10k / month I imagine within a year were gonna get through this. I think if I keep $250k I should be safe. A privileged problem for sure but its my problem.
Well, if keeping $250k is not safe, then DCA vs moving the money now only protects you to a half way degree and only for the length of time over which you DCA. If there is doubt it surely makes more sense to not invest the money at all than to attempt a DCA gimmick to reduce risk. How is DCA going to help you once all the money is invested? That is the origin of the joke that you absolutely should DCA but do it over 500 years. What could make sense is to invest less than $200k and hold back more than $250k. That is an example of how this is about the asset allocation and not about how you get to the allocation.

Note my comment is in response to the the language "I think . . . I should . . ." This is all about psychology and not about investing.
Topic Author
colorado50
Posts: 13
Joined: Mon Mar 09, 2020 8:50 pm

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by colorado50 »

dbr wrote: Fri Sep 25, 2020 10:31 am Thank you for the elucidation. The situation is indeed complicated.



I am still curious exactly how the question arises for you. For me, for example, it is not a question.

The question arises because when the market was at its lowest i felt I had to sell despite wanting to buy more instead. Against everything I have studied and believe is the right thing to do... but there I sat with my dilemma. Now "I feel the market is still super high" (I know thats trying to predict) and that coupled with my just having sold at the bottom is filling my mind with remorse, regret and feeling stupid. All emotional 100 percent wrong but psychologically if I DCA over say the next year then I lessen the lumps. Thats probably not what I'm gonna do, I just put $50k in and,.. I'm still deciding on the other 150. this has been an enjoyable forum for me to gleem thought and knowledge and thats been a fun exercise.
dbr
Posts: 33873
Joined: Sun Mar 04, 2007 9:50 am

Re: How to get $200,000 into the market (dollar cost averaging or...)

Post by dbr »

coloradobjj wrote: Fri Sep 25, 2020 2:45 pm
dbr wrote: Fri Sep 25, 2020 10:31 am Thank you for the elucidation. The situation is indeed complicated.



I am still curious exactly how the question arises for you. For me, for example, it is not a question.

The question arises because when the market was at its lowest i felt I had to sell despite wanting to buy more instead. Against everything I have studied and believe is the right thing to do... but there I sat with my dilemma. Now "I feel the market is still super high" (I know thats trying to predict) and that coupled with my just having sold at the bottom is filling my mind with remorse, regret and feeling stupid. All emotional 100 percent wrong but psychologically if I DCA over say the next year then I lessen the lumps. Thats probably not what I'm gonna do, I just put $50k in and,.. I'm still deciding on the other 150. this has been an enjoyable forum for me to gleem thought and knowledge and thats been a fun exercise.
Thanks. Yes, that is helpful. I can understand the sense one has.
Post Reply