A million dollars cash, all-in VTI right away or let it sit in VMFXX and wait for dips?

[BogleNewBogle]

Title says it all. What would you do my fellow bogleheads?

Thanks

[toddthebod]

Title says it all. What would you do my fellow bogleheads?

Thanks

Obviously your fellow bogleheads will be unanimous that you sit in cash and try to time the market.

[vanguarded]

Title says it all. What would you do my fellow bogleheads?

Thanks

Obviously your fellow bogleheads will be unanimous that you sit in cash and try to time the market.

[BogleNewBogle]

Actually there's a twist, lol

The cash is in my NIMCRUT with annual 6% withdraw rate, for which I wish to minimize any realized gains of loss, so that in the case of unrealized gain, it keeps growing in the make up account without distribution; and in the case of loss, I can still enjoy the dividend as an income to support life.

-- as a result, once I buy VTI, I'm not gonna sell any time soon. The dividend / interest from VMFXX however, has to be distributed.

[toddthebod]

Actually there's a twist, lol

The cash is in my NIMCRUT with annual 6% withdraw rate, for which I wish to minimize any realized gains of loss, so that in the case of unrealized gain, it keeps growing in the make up account without distribution; and in the case of loss, I can still enjoy the dividend as an income to support life.

-- as a result, once I buy VTI, I'm not gonna sell any time soon. The dividend / interest from VMFXX however, has to be distributed.

That's a totally different question. "Wait for dips" implies the decision has already been made to invest in VTI, you are just deciding when.

[BogleNewBogle]

Title says it all. What would you do my fellow bogleheads?

Thanks

Obviously your fellow bogleheads will be unanimous that you sit in cash and try to time the market.

lol, right. My current losing strategy is: as the windfall flowing in during the coming months I target spending 50% of it buying VTI, and if there's a big dip, I target 80% or 100%. I can't really justify that.

[BogleNewBogle]

Actually there's a twist, lol

The cash is in my NIMCRUT with annual 6% withdraw rate, for which I wish to minimize any realized gains of loss, so that in the case of unrealized gain, it keeps growing in the make up account without distribution; and in the case of loss, I can still enjoy the dividend as an income to support life.

-- as a result, once I buy VTI, I'm not gonna sell any time soon. The dividend / interest from VMFXX however, has to be distributed.

That's a totally different question. "Wait for dips" implies the decision has already been made to invest in VTI, you are just deciding when.

Well, how is that a different question? I am trying (evilly) to time the market -- I fear the market overall will dip hard before fed actually lower the interest rate, and VMFXX yield is quite high right now.

[ekid]

Don't do ANYthing with ALL of it.

Your question would seem to imply there are only two choices. Not so.

[watchnerd]

Title says it all. What would you do my fellow bogleheads?

Thanks

Well, that wasn't exactly hypothetical for us last year.

We had the proceeds from a house sale sitting in cash, and after closing costs it was $983k sitting in VMFXX by October 7.

We put in 50% right away, and then DCA'ed the other 50% over Oct, Nov, Dec, and first two weeks of Jan 2024.

Caveat: it was into VT, not VTI

[toddthebod]

Actually there's a twist, lol

The cash is in my NIMCRUT with annual 6% withdraw rate, for which I wish to minimize any realized gains of loss, so that in the case of unrealized gain, it keeps growing in the make up account without distribution; and in the case of loss, I can still enjoy the dividend as an income to support life.

-- as a result, once I buy VTI, I'm not gonna sell any time soon. The dividend / interest from VMFXX however, has to be distributed.

That's a totally different question. "Wait for dips" implies the decision has already been made to invest in VTI, you are just deciding when.

Well, how is that a different question? I am trying (evilly) to time the market -- I fear the market overall will dip hard before fed actually lower the interest rate, and VMFXX yield is quite high right now.

"Should I invest in VTI or VMFXX in my NIMCRUT?" seems to me like a totally different question than, "I'm going to invest in VTI, but when?"

[jbowman]

Maybe I'm not understanding some nuance to the question?

Seems to me you should just make a plan ahead of time so you're removing fear (or any other emotion) from the equation. If you can't lump sum in, then DCA over some period of time that makes you more comfortable. Invest towards your target AA (and if you don't have one, figure one out as part of making your plan).

[er999]

Your should consider your entire portfolio and past investment behavior, and how you got the million in a money market. Most wouldn’t let that much cash build up and would invest as the money became available.

If you had that money in the money market for a year you’ve lost $200k of so instead of being in VTI (since return for past year was 25% vs 5% money markets). However you could invest in VTi now and next month and could drop in half and stay down for years, although now will likely still have been a good time to have bought 20 years from now. That’s why I’d suggest looking at your past behavior.

[huskerblue]

How did you end up with $1 million cash? Was this a Flip NIMCRUT with a piece of real estate or some such that has sold triggering the flip to a full 6% payout from only the net income formula before (which was probably zero or close to it in payouts)? Do you have a large capital gain from the RE sale that has to pay out to you anyway via the ordering rules? If so you may already have a lot of the 6% coming out as taxable cap gains at least for some time.

I assume you are the Trustee. Thus, you owe a duty of loyalty and prudence to all beneficiaries of the trust, charities included. You should consider investing in a prudent investor rule manner. 100% equities right before a big downturn can lead to grumpy benes. Just sayin.

I trustee our Flip NIMCRUT and recently hit the flip event. We don't need the income $$ and it's nowhere near as large a pot as yours but I'm about 70-30 equities to FI. You can use muni bonds for your fixed income allocation if you want to limit taxable income although muni interest is late in the ordering rules (return of principal is last, muni interest second to the last).

Also, unless you have the correct language in the doc leaving the charitiable benes changeable you need to account to your remaindermen each year. Many states attorneys general are also considered a qualified beneficiary so legally may have the right to receive statements even if you have reserved the right to change charitable beneficiaries.

[TimeIsYourFriend]

Which are you going to lament more:
1. Your $1 mil in VTI drops to $500k and doesn't recover for a period of 3 years.
2. You stay in cash and VTI jumped 50% over 3 years as you waited for a dip to get in.

If it's #1, then you probably shouldn't be investing all of this money in VTI. If it's #2, then lump sum immediately.

[BogleNewBogle]

Don't do ANYthing with ALL of it.

Your question would seem to imply there are only two choices. Not so.

Well, I assumed some allocation to bonds outside of the NIMCRUT, and the trust just hold VTI. (Although I don't actually have a determined split between inside / outside of the trust ).

[BogleNewBogle]

Title says it all. What would you do my fellow bogleheads?

Thanks

Well, that wasn't exactly hypothetical for us last year.

We had the proceeds from a house sale sitting in cash, and after closing costs it was $983k sitting in VMFXX by October 7.

We put in 50% right away, and then DCA'ed the other 50% over Oct, Nov, Dec, and first two weeks of Jan 2024.

yeah that's similar to my "plan", (except I kinda "wish" in the near future there will be a dip when I plan to dramatically inscrease the rate of purchasing). I don't have a clear theory supporting the stategy :-p

[BogleNewBogle]

"Should I invest in VTI or VMFXX in my NIMCRUT?" seems to me like a totally different question than, "I'm going to invest in VTI, but when?"

Thanks for clarifying. I assumed VMFXX as the settlement fund is 0 risk and equivalent to cash, in that sense, buying VTI is really a one directional decision, and a decision of timing.

[BogleNewBogle]

Maybe I'm not understanding some nuance to the question?

Seems to me you should just make a plan ahead of time so you're removing fear (or any other emotion) from the equation. If you can't lump sum in, then DCA over some period of time that makes you more comfortable. Invest towards your target AA (and if you don't have one, figure one out as part of making your plan).

Very true, it's about fear. And probably the strategy should be simply simple like this. I'm seeking for a theory to make my decision strong.

[BogleNewBogle]

How did you end up with $1 million cash? Was this a Flip NIMCRUT with a piece of real estate or some such that has sold triggering the flip to a full 6% payout from only the net income formula before (which was probably zero or close to it in payouts)? Do you have a large capital gain from the RE sale that has to pay out to you anyway via the ordering rules? If so you may already have a lot of the 6% coming out as taxable cap gains at least for some time.

I assume you are the Trustee. Thus, you owe a duty of loyalty and prudence to all beneficiaries of the trust, charities included. You should consider investing in a prudent investor rule manner. 100% equities right before a big downturn can lead to grumpy benes. Just sayin.

I trustee our Flip NIMCRUT and recently hit the flip event. We don't need the income $$ and it's nowhere near as large a pot as yours but I'm about 70-30 equities to FI. You can use muni bonds for your fixed income allocation if you want to limit taxable income although muni interest is late in the ordering rules (return of principal is last, muni interest second to the last).

Also, unless you have the correct language in the doc leaving the charitiable benes changeable you need to account to your remaindermen each year. Many states attorneys general are also considered a qualified beneficiary so legally may have the right to receive statements even if you have reserved the right to change charitable beneficiaries.

Thanks for the reply.

I got a windfall, a crypto windfall, almost 100% cap gain. I deposit the asset to the trust and liquidate right away (I get a piece of the whole windfall for the next coming months), so there's no gains to distribute. And then I expect to distribute 2%-ish dividend from VTI as income and keep the cap gains growing. It's a non-flip lifetime NIMCRUT. Correct me if I'm wrong, but I think even if the market falls, unless the loss (after the initial liquidation) are realized, I'm still always getting income from dividends.

I'm both the trustee and the non-charitable beneficiary. As said above, I assume even there's a downturn ahead, if I don't realize the loss, I still get income. So I fear less. (But nonetheless, I'm obviously still trying to time the market here)

I assumed to purchase other assets outside of the trust.

Yeah if I understand it correctly, we didn't even set a specific charitible beneficiary for now, after my death, my secondary trustee will do it within a year and the trust terminates then.

[huskerblue]

A CPA can correct me if I'm wrong but a highly appreciated asset added to a CRUT only defers the gain and "traps it" inside the trust once the asset is sold. There is no immediate gains tax to pay but as $$ comes out of the trust to satisfy the 6% distribution it will be taxable to you. It can take years to distribute out all this trapped income.

My murky recollection about crypto is it has special tax status (like a collectible???). Thus, for the ordering rules I'm not sure how it comes out but ordering rules are set out here. Generally, "worst comes out first" to you on the K1 form except that under present tax law qualified dividends are ordinary income and come out to you before short-term cap gains; something the legislature surely had no idea they were doing in allowing better tax treatment assets coming out to income benes!!

Ordinary income
Short-Term Cap Gains
Long-Term Cap Gains
Muni Interest
Return of Capital

Again, I"m not sure how crypto gains fit in here. Hopefully someone can opine here.

EDIT: Reading your last entry I think you need to chat with your CPA about how this will be taxed. As I see it, you will pay tax on the full 6% receipt for quite a few years.

[BogleNewBogle]

A CPA can correct me if I'm wrong but a highly appreciated asset added to a CRUT only defers the gain and "traps it" inside the trust once the asset is sold. There is no immediate gains tax to pay but as $$ comes out of the trust to satisfy the 6% distribution it will be taxable to you. It can take years to distribute out all this trapped income.

My murky recollection about crypto is it has special tax status (like a collectible???). Thus, for the ordering rules I'm not sure how it comes out but ordering rules are set out here. Generally, "worst comes out first" to you on the K1 form except that under present tax law qualified dividends are ordinary income and come out to you before short-term cap gains; something the legislature surely had no idea they were doing in allowing better tax treatment assets coming out to income benes!!

Ordinary income
Short-Term Cap Gains
Long-Term Cap Gains
Muni Interest
Return of Capital

Again, I"m not sure how crypto gains fit in here. Hopefully someone can opine here.

EDIT: Reading your last entry I think you need to chat with your CPA about how this will be taxed. As I see it, you will pay tax on the full 6% receipt for quite a few years.

If I understand it correctly, a NIMCRUT only distribute when there's NET INCOME on top of the initially deposited assets is valued. The result of the initial liquidation won't be eligible for distribution up to the appraisal value. -- that's the "NI" part of a NIMCRUT compared to an ordinary CRUT. I'm donating the appraisal value as the principal, not the cost basis. (And that's what my trust admin told me.) Experts please chime in.

[huskerblue]

I was fixated on my "Flip" experience and think I'm likely wrong on your straight NIMCRUT scenario. Your administrator is is likely correct.

Sorry for muddying the waters.

Edit: Also did some research and discovered that crypto is taxed as a capital gain. I guess I can't help being wrong in this thread. The research also showed that if you use crypto to buy something like when Tesla was accepting Bitcoin for car payment (no longer) and it is worth more than you bought it for you owe a capital gain tax on that transaction. Yuck.

[investuntilimrich]

I am seeing a couple of red flags. The initial question included language about "buying the dip". That to me indicates you still have a "time the market" somewhere deep inside. Eventually, I bet that will come to the surface causing you to do something that you one day regret. Then I am hearing about a crypto windfall. That has me thinking you still have a little bit of gambler in you. Eventually, I suspect that may be an urge that's hard to resist.

[BogleNewBogle]

I am seeing a couple of red flags. The initial question included language about "buying the dip". That to me indicates you still have a "time the market" somewhere deep inside. Eventually, I bet that will come to the surface causing you to do something that you one day regret. Then I am hearing about a crypto windfall. That has me thinking you might be a full on gambler.

This fear helps. Thanks boglehead.

[investuntilimrich]

Indeed, I am crypto gambler myself! My girlfriend will take my computer and phone away if she catches me researching cryptos. We made money from it, but she doesn't want me going back into the casino and losing the gains. I think she's wise so I listen.

[BogleNewBogle]

I was fixated on my "Flip" experience and think I'm likely wrong on your straight NIMCRUT scenario. Your administrator is is likely correct.

Sorry for muddying the waters.

Edit: Also did some research and discovered that crypto is taxed as a capital gain. I guess I can't help being wrong in this thread. The research also showed that if you use crypto to buy something like when Tesla was accepting Bitcoin for car payment (no longer) and it is worth more than you bought it for you owe a capital gain tax on that transaction. Yuck.

Yeah, the flip- part is so that you can eat into the principal after the flip (removing the NIM-).

[Squirrel208]

Title says it all. What would you do my fellow bogleheads?

LOL, the thread title obviously doesn't "say it all." Not even close. But I'll play along for minute...

Which dips are you referring to, specifically?

When do you anticipate those those dips will occur? Next week? Next month? Next year? When, specifically?

When the market eventually does dip again at some future point, which it inevitably will, how do you know that it'll drop below todays' current levels?

If it does drop below today's current levels at some future unknown point in time, how far will it have to drop before you plan to act?

If it eventually does drop to some arbitrarily predefined actionable level, how do you know for sure that you'll act even then? Will you be tempted to wait and see if it drops even further?

What if it the US stock market doesn't drop significantly from today's level,and instead continues to rise for months or even longer? Will you keep asking yourself this same question again and again? If so, how much will that cost you in lost opportunity?

IMHO if you can't answer those questions today, in writing, then trying to time the stock market is probably a fool's errand at best.

[IowaFarmWife]

Watch this video where they discuss the pros and cons of lump sum versus DCA. Watch it to the end where they give you a "formula" for deciding how to decide what is best in your situation.

https://www.youtube.com/watch?v=3SK9n5CLxPM

[WhiteMaxima]

dollar cost average. 3k per day and you will get it all in VTI in a year. Then stay the course.

[gtrplayer]

Not everyone would be comfortable 100% VTI. Would you sell if next year, if it dropped to $800,000?

The problem with buying dips is it might double before it dips. The dip might be 20% but you missed a huge gain in the meantime. Buying dips is almost always a losing game.

[KlangFool]

OP,

1) Do not be 100% stock.

2) Invest as per your asset allocation,

3) Your asset allocation should in the range 70/30 to 30/70.

KlangFool

[frugalor]

The standard answer is don't invest in VTI if you need the money within 5 years. The hardcore folks will say lump sum. I would set up automatic investment over 6 months, using Fidelity.

[Firemenot]

All-in right now. Chances are you won’t be able to successfully bottom-fish anyhow. Also, historically the fourth year of first term of presidential elections are positive more than your typical year. And usually the market coming out of a bear market almost always goes up the second year. So 2024 fits both of those positive scenarios. I’m stealing these factoids from Ken Fisher. I enjoy his historical analyses of the market.

[Harry Livermore]

Title says it all. What would you do my fellow bogleheads?

Thanks

Well, that wasn't exactly hypothetical for us last year.

We had the proceeds from a house sale sitting in cash, and after closing costs it was $983k sitting in VMFXX by October 7.

We put in 50% right away, and then DCA'ed the other 50% over Oct, Nov, Dec, and first two weeks of Jan 2024.

Caveat: it was into VT, not VTI

Nor was it hypothetical for us in late 2022. I was too chicken to put a very large sum all in, so I DCA'd over 12 months starting in October 2022. No regrets.
VTSAX for us.
Cheers

[sambb]

half lump sum, half DCA over 12-18 months

[muffins14]

Title says it all. What would you do my fellow bogleheads?

Thanks

Don’t time the market. It should be obvious that that is the response without more info.

Do you need to spend 500k next year? If so, don’t put 500k in stocks

[yankees60]

Title says it all. What would you do my fellow bogleheads?

Thanks

Obviously your fellow bogleheads will be unanimous that you sit in cash and try to time the market.

!!!!!!!!!!!!!!!!!

This was not the typical 1st response! Usually it's some variation of what does your IPS say?

[muffins14]

Title says it all. What would you do my fellow bogleheads?

Thanks

Obviously your fellow bogleheads will be unanimous that you sit in cash and try to time the market.

!!!!!!!!!!!!!!!!!

This was not the typical 1st response! Usually it's some variation of what does your IPS say?

They were being sarcastic.

If the OP has hesitation, how about 50% tomorrow and then 10% each month for the next 5 months?

[dogagility]

The OP has left the building. Hope he/she took the prudent advice to make a lump sum investment last January.

[yankees60]

Title says it all. What would you do my fellow bogleheads?

Thanks

Obviously your fellow bogleheads will be unanimous that you sit in cash and try to time the market.

!!!!!!!!!!!!!!!!!

This was not the typical 1st response! Usually it's some variation of what does your IPS say?

They were being sarcastic.

If the OP has hesitation, how about 50% tomorrow and then 10% each month for the next 5 months?

As was I somewhat!

[cosmos]

a favorite of mine: https://www.youtube.com/watch?v=pFgPNVytlwA

Just ask Bob!

[learning30]

Title says it all. What would you do my fellow bogleheads?

Thanks

Well, that wasn't exactly hypothetical for us last year.

We had the proceeds from a house sale sitting in cash, and after closing costs it was $983k sitting in VMFXX by October 7.

We put in 50% right away, and then DCA'ed the other 50% over Oct, Nov, Dec, and first two weeks of Jan 2024.

yeah that's similar to my "plan", (except I kinda "wish" in the near future there will be a dip when I plan to dramatically inscrease the rate of purchasing). I don't have a clear theory supporting the stategy :-p

I have a family member in a similar situation with $900k in cash from an inheritance. We spoke in November last year and they said they wanted to wait for a dip.

VTI is up 20%+ this year. I think they are still holding most of it.