inheritance- dollar cost avg or just all in?

[workspace10]

Hello
I have about 200K in cash right now. Should I dollar cost avg it into an index fund over the next 12 months or just put all of it into an index fund now?
I have emergency savings already so I'm ok in that regard. What would you do?
It's hard to predict if the stock market will go up or down in the next 12 months so that's why I thought slowly putting it in over the course of 12 months was a good idea but now that I see interest rates stabilizing (ie no more increases) I wonder if should just put it all in now.

[retiredjg]

Statistically speaking, there are slightly better odds to put it all in lump sum. Something like 60% of the time if I recall correctly. Some people find that easy to do. Some do not.

If you can't, I suggest getting 1/3 to 1/2 invested quickly (this week) and DCA the rest in over 4 to 6 months.

[zag00]

studies show a one time deposit out performing DCA, iirc. It's all personal preference.
Assuming no lumpy upcoming expenses or outstanding debts, you make the call.

If it were me, i'd wait until Jan to fill roth space ($14k), adjust work 401k to max (if not already there - using the difference as a slush fund), then the balance in taxable.

[Longdog]

It's a matter of managing regrets. If you lump sum and the market takes a dive, you will regret that you didn't DCA. If you DCA and the market does nothing but go up each month in the next year, you will regret not having done a lump sum. Only you can decide how you will feel in either case.

[barnaclebob]

I'm a lump summer.

[Sunrise]

Hello
I have about 200K in cash right now. Should I dollar cost avg it into an index fund over the next 12 months or just put all of it into an index fund now?
I have emergency savings already so I'm ok in that regard. What would you do?
It's hard to predict if the stock market will go up or down in the next 12 months so that's why I thought slowly putting it in over the course of 12 months was a good idea but now that I see interest rates stabilizing (ie no more increases) I wonder if should just put it all in now.

I don't have a crystal ball, but I do think some questions should be thought about before doing anything:

What is the purpose of the 200K/when will you need the money?
Is this money for a long-term goal e.g. retirement in 30 years?
Is this money for a short-term goal e.g. buying a house in the next few years?
What type of index fund/do you plan on putting this into a 100% stock index fund?

[workspace10]

Thank you all for your thoughtful responses.

I think I will put 60 % in now and dollar cost average the rest of it.

[Taylor Larimore]

Hello
I have about 200K in cash right now. Should I dollar cost avg it into an index fund over the next 12 months or just put all of it into an index fund now?
I have emergency savings already so I'm ok in that regard. What would you do?
It's hard to predict if the stock market will go up or down in the next 12 months so that's why I thought slowly putting it in over the course of 12 months was a good idea but now that I see interest rates stabilizing (ie no more increases) I wonder if should just put it all in now.

workspace10:

In my view, the sooner you get to your desired asset-allocation -- the better.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "Asset allocation is critically important; but cost is critically important, too -- All other factors pale into insignificance."

[steadyosmosis]

If I were to receive a non-significant inheritance today, I would immediately invest it into my existing AA.
If the amount inherited was significant, I may tweak my AA a bit.

[Watty]

There is a wiki on this choice.

https://www.bogleheads.org/wiki/Dollar_ ... g#top-page

What would you do?

Inherited money can be a bit different than other money since there may be some emotions attached to it and you might feel differently if it was invested and dropped by 50% so I would be more cautious with it, but that is just me.

Keep in mind that if you are married then it really is only one of yours and not both of yours so that can also impact the family dynamics of choosing what to do. You might want to keep the inherited money in a seperate account so that it does not get commingled with joint money.

You asked what I would do, so this is just me.

1) I would consider if I was driving relatively safe cars and if not then I would look at buying a modest car with a lot of the new advanced safety features. I am not saying that you should buy an expensive car with all the safety bells and whistles but even a late model mid-range Honda or Toyota may be a lot safer than what you are driving now. Even if you do not want to buy a different car now you might set some of the money aside as a separate car fund to be able to pay cash for your next car when you need a replacement.

2) Situations vary but if I had kids I would be looking at putting some of the money into a college fund so that they could graduate from a state university without any student loans.

3) If I did not have a ultra low mortgage rate I would seriously consider using it to pay my mortgage down or off. You can check with your lender to see if they will "recast your mortgage". They are not required to do this but they usually will for a few hundred dollar fee or even for free. The way this works is that if you pay your mortgage down by 50% then your required monthly mortgage payment is reduced by the same percentage. The length and interest rate of the loan stays the same. There are all sorts of opinions about paying off a mortgage or not but you asked what I would do. Of course if you have a 2.5% mortgage that is a lot different than a 5%+ mortgage.

[happyisland]

Lump sum it! It's important to build good mental habits related to investing, and sticking to a good plan is about as fundamental as it gets. Just make sure you understand why the expected outcome of lump sum is superior to DCA.

[kleiner]

Earlier this year, I also received a large inheritance - over $500k. It was all invested in one go, probably the single largest purchase of VTI that I will ever do in my life

I have to add that I used this opportunity to make my overall portfolio much more tax efficient. While buying VTI in my taxable brokerage account, I I also moved money in my IRA to a bond index fund in parallel in order to get to my desired overall asset allocation.

[sailaway]

studies show a one time deposit out performing DCA, iirc. It's all personal preference.
Assuming no lumpy upcoming expenses or outstanding debts, you make the call.

If it were me, i'd wait until Jan to fill roth space ($14k), adjust work 401k to max (if not already there - using the difference as a slush fund), then the balance in taxable.

I would top up ibonds in the gift box to our goal levels and hold back enough for Roth IRAs, pay expenses while funding 401k/MBR and fund HSA, but actually make the lump sum as soon as I decided how much to hold in a HYSA awaiting next year's tax shelters. If your paycheck is big enough to max 401k early or if that would cause you to miss the match, the calculations would need to be adjusted, obviously. Megacorp matches per contribution, not by % of salary, so we have have often lived off the year end bonus and cash reserves while front loading the 401k.

[Sunrise]

Earlier this year, I also received a large inheritance - over $500k. It was all invested in one go, probably the single largest purchase of VTI that I will ever do in my life

I have to add that I used this opportunity to make my overall portfolio much more tax efficient. While buying VTI in my taxable brokerage account, I I also moved money in my IRA to a bond index fund in parallel in order to get to my desired overall asset allocation.

I am about to do the very same thing with a bit less money but still in that ballpark, but still a very significant amount for me, will invest in my taxable brokerage account at Fidelity, probably all in VTI. May I probe a bit and ask, for that amount of money (over $500k), did you just use the normal online trading interface/method at your broker with no assistance, or did you work with a person at your brokerage due to the large sum? I guess I've read that when the investment amount is large enough there can be advantages to getting assistance from a representative at your brokerage that can help with "block trades", etc. that may minimize transaction costs, etc.? But I really don't understand what they can do (in my case Fidelity), or where the line is on what a large enough investment amount is to benefit from working with a human brokerage person? $100k? $500k? Very interested to hear all opinions! Thank you.

[Wiggums]

I’m a lump summer.

[kleiner]

I am about to do the very same thing with a bit less money but still in that ballpark, but still a very significant amount for me, will invest in my taxable brokerage account at Fidelity, probably all in VTI. May I probe a bit and ask, for that amount of money (over $500k), did you just use the normal online trading interface/method at your broker with no assistance, or did you work with a person at your brokerage due to the large sum? I guess I've read that when the investment amount is large enough there can be advantages to getting assistance from a representative at your brokerage that can help with "block trades", etc. that may minimize transaction costs, etc.? But I really don't understand what they can do (in my case Fidelity), or where the line is on what a large enough investment amount is to benefit from working with a human brokerage person? $100k? $500k? Very interested to hear all opinions! Thank you.

Since we have substantial assets at Fidelity, I do have an assigned rep. I asked her if there was any special considerations for such a big purchase - she told me to just use the regular web UI to submit the buy request so that's what I did. I will admit that I gulped a little when I clicked on the buy button

[Wiggums]

I am about to do the very same thing with a bit less money but still in that ballpark, but still a very significant amount for me, will invest in my taxable brokerage account at Fidelity, probably all in VTI. May I probe a bit and ask, for that amount of money (over $500k), did you just use the normal online trading interface/method at your broker with no assistance, or did you work with a person at your brokerage due to the large sum? I guess I've read that when the investment amount is large enough there can be advantages to getting assistance from a representative at your brokerage that can help with "block trades", etc. that may minimize transaction costs, etc.? But I really don't understand what they can do (in my case Fidelity), or where the line is on what a large enough investment amount is to benefit from working with a human brokerage person? $100k? $500k? Very interested to hear all opinions! Thank you.

We had a 401k with proprietary funds which had to be cashed out. Let’s say it was 2M. After the money was moved to Fidelity, I can’t imagine doing anything else put investing it all on the next trading day. I don’t think inherited money should be treated any differently. Once the money is in the market, It can start working for you.

[ruralavalon]

Hello
I have about 200K in cash right now. Should I dollar cost avg it into an index fund over the next 12 months or just put all of it into an index fund now?
I have emergency savings already so I'm ok in that regard. What would you do?
It's hard to predict if the stock market will go up or down in the next 12 months so that's why I thought slowly putting it in over the course of 12 months was a good idea but now that I see interest rates stabilizing (ie no more increases) I wonder if should just put it all in now.

Thank you all for your thoughtful responses.

I think I will put 60 % in now and dollar cost average the rest of it.

That's reasonable in my opinion, though not what I suggest or what I have done myself.

[GMCZ71]

workspace10:

In my view, the sooner you get to your desired asset-allocation -- the better.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "Asset allocation is critically important; but cost is critically important, too -- All other factors pale into insignificance."

Thank you all for your thoughtful responses.

I think I will put 60 % in now and dollar cost average the rest of it.

Looking at your other posts you don't have an AA asset-allocation. That is very important, when we say lump sum we mean to your AA not 100% equity!

For example a person who has 80/20 and gets $200k inheritance you add all your accounts together.
401k has $70k
Roth has $30k
The Roth is all stock and the 401k is a mix of stock/bond to make the 80/20
The windfall should not make your AA out of balance.

[Sunrise]

Hello
I have about 200K in cash right now. Should I dollar cost avg it into an index fund over the next 12 months or just put all of it into an index fund now?
I have emergency savings already so I'm ok in that regard. What would you do?
It's hard to predict if the stock market will go up or down in the next 12 months so that's why I thought slowly putting it in over the course of 12 months was a good idea but now that I see interest rates stabilizing (ie no more increases) I wonder if should just put it all in now.

Thank you all for your thoughtful responses.

I think I will put 60 % in now and dollar cost average the rest of it.

That's reasonable in my opinion, though not what I suggest or what I have done myself.

You got me curious ruralavalon, are you a "lump summer", or some other method?

[OatmealAddict]

I'd take care of any largish upcoming expenses, purchase a few reasonably priced wants, take a reasonably priced vacation, and lump sum the remainder in my taxable brokerage account.

This obviously assumes you're on track with everything and don't actually need the inherited money for something else.

[ruralavalon]

Hello
I have about 200K in cash right now. Should I dollar cost avg it into an index fund over the next 12 months or just put all of it into an index fund now?
I have emergency savings already so I'm ok in that regard. What would you do?
It's hard to predict if the stock market will go up or down in the next 12 months so that's why I thought slowly putting it in over the course of 12 months was a good idea but now that I see interest rates stabilizing (ie no more increases) I wonder if should just put it all in now.

Thank you all for your thoughtful responses.

I think I will put 60 % in now and dollar cost average the rest of it.

That's reasonable in my opinion, though not what I suggest or what I have done myself.

You got me curious ruralavalon, are you a "lump summer", or some other method?

I have always lump summed large contributions from a bonus or inheritance.