should I one-time invest with random timing?

[coyote2]

In my head I know that market timing is impossible and a bad idea. But I'm being tormented by wondering what to do when I get a one-time inheritance in some number of weeks; should I just randomly acquire my asset allocation the first moment possible?

It seems like there are signs that it might be possible to do a bit better than random in the coming weeks. First because for various reasons we've had an uptick in volatility. Second because the Shiller PE Ratio has gotten pretty high (which I admit also has me afraid of years of lower prices after I get in).

Is it reasonable to get in non-randomly, say to hope to jump in on a correction like we had the first week in August?

I'm 65-year old and retired on permanent disability. There's a thread about my proposed asset allocation already.

[simplesimon]

There's some psychological benefit to dollar-cost-averaging - by investing the total sum say over a 6-12 month period. There's no way to know beforehand which strategy is better.

How much of this money do you plan on spending?

[steadyosmosis]

In my head I know that market timing is impossible and a bad idea.

Good that you know that.
I have done both ways ... lump-sum and DCA.

[coyote2]

There's some psychological benefit to dollar-cost-averaging - by investing the total sum say over a 6-12 month period. There's no way to know beforehand which strategy is better.

Thanks that might help me stop obsessing!

How much of this money do you plan on spending?

Possibly zero, I might just be doing this for my heirs.

[livesoft]

Ask again when you have the money in your hot hands. In the meantime, go do something useful with your life.

[FellsGuy]

Getting back in is harder than getting out. I’d do all my bond fixed income investing right away and dollar cost average into your equity funds. Is that the right play? Who knows every time I do it the first installment way outperforms the subsequent ones .
Or maybe just preserve and spend the inheritance?
BTW what is up with all those funds I’d be a nervous wreck trying to track them all.

[coyote2]

Ask again when you have the money in your hot hands.

It's deal, I'll check back then!

I’d do all my bond fixed income investing right away

Yes, I was thinking the same.

...and dollar cost average into your equity funds. Is that the right play? Who knows every time I do it the first installment way outperforms the subsequent ones .

Ouch, so sorry!

Decades ago I had a small windfall, and tried to get in low but got caught hoping it would go lower and missed the opportunity, so I know I suck at timing.

[arcticpineapplecorp.]

first determine if the $400k you plan to inherit will cause your desired allocation to change. I.E., you may have one allocation now, but you may want a different allocation when you receive the $400k. That's ok because this new money may allow you to say, I've won the game and can stop playing, i.e., you may have less NEED to take risk.

Whether that's true or not, i.e., if you still want to be 50/50 then as now, then simply take $200k and invest it in fixed income and $200k and invest it in stocks.

whatever happens after that is immaterial. You will always be taking the risk. Even if you dollar cost average over a year, in one year you will then have the $200k in stocks and $200k in fixed income. Same problem a year from now as you would just lump summing in now. You still have the same risk a year from now as you do now. There is no difference. Sure the market might fall and DCA would have been better. But you can't/won't know that now. You'll only know what the right thing to do was after the fact, never before.

I mean, why would you feel different about this new money than whatever current money you have invested? Say you have $500k invested now (before the next $400k comes). $250k in stocks and $250k in fixed income (if desire 50/50). Why are you not concerned about the $250k you currently have invested in stocks? Why wouldn't you sell all that and DCA that money back in to the market? See how this type thinking never ends? It's not just new money, you'll be questioning WHATEVER money you have invested in stocks WHENEVER you think the P/E is too high.

hope that helps.

[coyote2]

Sure the market might fall and DCA would have been better. But you can't/won't know that now. You'll only know what the right thing to do was after the fact, never before.

hope that helps.

It does help, thank you very much! Everyone has really helped. I think part of the reason I've been worrying over this is that this inheritance is my one shot to leave something to my heirs, and as a disabled person there's really nothing else productive I can do for them.

WHENEVER you think the P/E is too high

Yes, it did occur to me that my P/E worries are really no different that everyone else's who are already in (aside from their capital gains considerations of getting out).

[arcticpineapplecorp.]

Sure the market might fall and DCA would have been better. But you can't/won't know that now. You'll only know what the right thing to do was after the fact, never before.

hope that helps.

It does help, thank you very much! Everyone has really helped. I think part of the reason I've been worrying over this is that this inheritance is my one shot to leave something to my heirs, and as a disabled person there's really nothing else productive I can do for them.

whether you leave money to heirs depends upon what you have/will have in total, and what amount of that you'll need over the rest of your lifetime. Sometimes we can't know that (to the penny). You might need expensive long term care that could use it all up...or not.

If you're not planning on using any of it and you want to leave it to heirs, you'd possibly (don't know your entire situation) invest it all in stocks to maximize the money to be left to heirs.

[FellsGuy]

As always articpineapple sums it all up in one post he is exactly right why should this money be any different than your other funds! Which is kind of what I said but not as artfully when I mentioned I’ve never seen much benefit and a lot of angst every time I dollar cost average in.

[rkhusky]

The market has gone up 2/3 of the time and down 1/3 of the time. If that continues, you are 2x more likely to lose by waiting or DCA’ing.

[20cm]

"I know market timing doesn't work but do you all think it might work for me?"

[tibbitts]

I'm confused because often when you inherit money (which from the first post I didn't even know was happening - maybe I'm still confused) the inheritance is typically invested already. Mine was about 70/30 I think... I don't remember. You could of course choose to sell everything and then time or DCA back into whatever allocation you want. Or not.

[breakfastinbed]

There is a "correct" answer and a "right" answer.

The "correct" answer is to invest the money the day you get it. Any other strategy, including picking a random day of that week, dollar cost averaging, etc, will probabilistically lower your expected outcome. Period. Mathematically, you should expect to lose money for every day your money isn't in the market.


Whether that's "right" for you is a different question. It all depends on what you can stomach. I'd approach it this way:
1) What's the biggest amount (either dollar amount, or % of portfolio) you could stomach investing at a single time?
2) Once you have the answer to #1, what is the maximum frequency you'd be willing to invest this amount?

If you don't want to lump sum, that's your answer.

[pasadena]

It's a psychological thing. Statistically, you're better off doing it all in one go. Mentally, many people aren't. You have to be able to jump in, and then to not react if the market drops right away - whether it's 0.5% or 2% or more over a longer period of time.

But if you don't, and DCA over a few months... how will you feel if the market keeps going up during that time?

I'm in the "out of sight, out of mind" camp. I invest the money as I get it, and then I forget about it and go on with my life. If I don't, I'm going to keep thinking about it and monitoring it for months until it's all invested. I'm going to keep rethinking yesterday's decision and revising my strategy depending on today's market. It's just not worth my mental health. Put it in, and move on.

I sometimes have to remind myself that even if it goes down today, it will go back up at some point, and that I'm investing for the long(er) term, so daily, weekly or even monthly variations won't really matter two years from now.

But again, it's a very personal thing. I don't think there is a wrong answer. It's about what's right for you.

[dogagility]

Don't market time as you are proposing. Select an appropriate asset allocation given your new circumstances (as you seem to be doing) and implement the asset allocation at your first convenience.

[magicrat]

There's some psychological benefit to dollar-cost-averaging - by investing the total sum say over a 6-12 month period. There's no way to know beforehand which strategy is better.

How much of this money do you plan on spending?

There's no way to no which outcome will be better, but you absolutely can know beforehand which strategy is better.

[Sandtrap]

In my head I know that market timing is impossible and a bad idea. But I'm being tormented by wondering what to do when I get a one-time inheritance in some number of weeks; should I just randomly acquire my asset allocation the first moment possible?

It seems like there are signs that it might be possible to do a bit better than random in the coming weeks. First because for various reasons we've had an uptick in volatility. Second because the Shiller PE Ratio has gotten pretty high (which I admit also has me afraid of years of lower prices after I get in).

Is it reasonable to get in non-randomly, say to hope to jump in on a correction like we had the first week in August?

I'm 65-year old and retired on permanent disability. There's a thread about my proposed asset allocation already.

Read About Bob, The Worst Market Timer
What happens if you only invested at market highs?
http://awealthofcommonsense.com/2014/0 ... ket-timer/

[James.534]

If you think there is a chance that if you lump sum and the market goes down , that you will pull some of your money out , then DCA. Losing a potential gain, feels a lot different than realizing a loss after the fact.

[simplesimon]

There's some psychological benefit to dollar-cost-averaging - by investing the total sum say over a 6-12 month period. There's no way to know beforehand which strategy is better.

How much of this money do you plan on spending?

There's no way to no which outcome will be better, but you absolutely can know beforehand which strategy is better.

Yes, but we're not robots. We all make suboptimal decisions whether it's in finances or other areas. Check out that thread about claiming social security early.

[Wanderingwheelz]

If I found myself in a situation like you described I’d a most certainly DCA into equities over 6-12 months. At this specific time in history I would definitely DCA since there’s things going on that could meaningfully disrupt the typical steady slow march higher of equity markets. There always are though, right?

Choose your fighter. DCA or lump sum.