Remaining 401k Money - Lump Sum or DCA?

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MindTheGAAP
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Joined: Fri Jan 31, 2014 12:44 am

Remaining 401k Money - Lump Sum or DCA?

Post by MindTheGAAP » Wed Jun 06, 2018 9:13 am

I'm self-employed and we (DW and I) have another $22k or so left in space this year to our 401ks. Am I better off continuing to DCA that in on a semi-monthly basis or should I just drop it in there and let it ride? I suppose alternatively I could do it on a quarterly basis and it would be somewhere between the two?

Represents about 10% of our retirement assets if it makes a difference.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

niceguy7376
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Location: Metro ATL

Re: Remaining 401k Money - Lump Sum or DCA?

Post by niceguy7376 » Wed Jun 06, 2018 9:28 am

Is this 22k out of the 18.5*2 limit or the 53*2 limit?

How was the remaining amounts invested this year in the first 5 months?

MindTheGAAP
Posts: 244
Joined: Fri Jan 31, 2014 12:44 am

Re: Remaining 401k Money - Lump Sum or DCA?

Post by MindTheGAAP » Wed Jun 06, 2018 9:35 am

niceguy7376 wrote:
Wed Jun 06, 2018 9:28 am
Is this 22k out of the 18.5*2 limit or the 53*2 limit?

How was the remaining amounts invested this year in the first 5 months?
It's the remainder for both ($10,800 each) and the already-invested was done on a semi-monthly basis to almost simulate the typical cadence of a normal 401k/ payroll system.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

megabad
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Re: Remaining 401k Money - Lump Sum or DCA?

Post by megabad » Wed Jun 06, 2018 12:34 pm

I would answer your question with a question, why not put it all in today?

MindTheGAAP
Posts: 244
Joined: Fri Jan 31, 2014 12:44 am

Re: Remaining 401k Money - Lump Sum or DCA?

Post by MindTheGAAP » Wed Jun 06, 2018 1:17 pm

megabad wrote:
Wed Jun 06, 2018 12:34 pm
I would answer your question with a question, why not put it all in today?
I suppose by putting it in on an ongoing basis hedges a little for a drop in valuations. I could do it now (cash is in the account), I guess I just didn't know if that made the most sense to do.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

MotoTrojan
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Re: Remaining 401k Money - Lump Sum or DCA?

Post by MotoTrojan » Wed Jun 06, 2018 1:34 pm

MindTheGAAP wrote:
Wed Jun 06, 2018 1:17 pm
megabad wrote:
Wed Jun 06, 2018 12:34 pm
I would answer your question with a question, why not put it all in today?
I suppose by putting it in on an ongoing basis hedges a little for a drop in valuations. I could do it now (cash is in the account), I guess I just didn't know if that made the most sense to do.
My favorite analogy for this assumes no tax-consequences for selling, so your 401k example is perfect.

Any rationale (rather than emotional) reason you have for not lump-summing would also need to rationalize why at the end of your DCA period, you then go ahead and sell all your assets and the begin DCA'ing them again. The money in your account is fungible; there is nothing special about new contributions relative to what is in the account.

So, are you going to move your entire 401k to money-market and then re-DCA it back in?

Lump-sum and don't look back.

bradpevans
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Joined: Sun Apr 08, 2018 1:09 pm

Re: Remaining 401k Money - Lump Sum or DCA?

Post by bradpevans » Wed Jun 06, 2018 1:48 pm

MotoTrojan wrote:
Wed Jun 06, 2018 1:34 pm
MindTheGAAP wrote:
Wed Jun 06, 2018 1:17 pm
megabad wrote:
Wed Jun 06, 2018 12:34 pm
I would answer your question with a question, why not put it all in today?
I suppose by putting it in on an ongoing basis hedges a little for a drop in valuations. I could do it now (cash is in the account), I guess I just didn't know if that made the most sense to do.
My favorite analogy for this assumes no tax-consequences for selling, so your 401k example is perfect.

Any rationale (rather than emotional) reason you have for not lump-summing would also need to rationalize why at the end of your DCA period, you then go ahead and sell all your assets and the begin DCA'ing them again. The money in your account is fungible; there is nothing special about new contributions relative to what is in the account.

So, are you going to move your entire 401k to money-market and then re-DCA it back in?

Lump-sum and don't look back.

to add to the above, *most of the time* DCA is in regards to payroll contributions: we don't get to pick the exact entry point, and, sometimes we buy more shares per dollar (great for new money) and sometime less shares per dollar (great for past contributions).

If you can handle the cash flow impact, don't wait

MindTheGAAP
Posts: 244
Joined: Fri Jan 31, 2014 12:44 am

Re: Remaining 401k Money - Lump Sum or DCA?

Post by MindTheGAAP » Wed Jun 06, 2018 2:28 pm

bradpevans wrote:
Wed Jun 06, 2018 1:48 pm
MotoTrojan wrote:
Wed Jun 06, 2018 1:34 pm
MindTheGAAP wrote:
Wed Jun 06, 2018 1:17 pm
megabad wrote:
Wed Jun 06, 2018 12:34 pm
I would answer your question with a question, why not put it all in today?
I suppose by putting it in on an ongoing basis hedges a little for a drop in valuations. I could do it now (cash is in the account), I guess I just didn't know if that made the most sense to do.
My favorite analogy for this assumes no tax-consequences for selling, so your 401k example is perfect.

Any rationale (rather than emotional) reason you have for not lump-summing would also need to rationalize why at the end of your DCA period, you then go ahead and sell all your assets and the begin DCA'ing them again. The money in your account is fungible; there is nothing special about new contributions relative to what is in the account.

So, are you going to move your entire 401k to money-market and then re-DCA it back in?

Lump-sum and don't look back.

to add to the above, *most of the time* DCA is in regards to payroll contributions: we don't get to pick the exact entry point, and, sometimes we buy more shares per dollar (great for new money) and sometime less shares per dollar (great for past contributions).

If you can handle the cash flow impact, don't wait
Thank you both for the responses - the money has been deployed.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

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