Another lump sum or DCA question

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Petrocelli
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Another lump sum or DCA question

Post by Petrocelli »

I have a taxable portfolio that is a modified permanent portfolio with the following investments:

50% in VCITX - California long term tax free bonds

The other 50% is divided equally between the following;

GLD - gold
VTI - total market
TLT - long term treasuries

This portfolio has done really well. It has low volatility and generates very little tax liability. I buy a share or two each week, and I always buy the worst performer.

I have a savings account with money to cover unforeseen expenses. I have a second separate savings account at my credit union with enough money to cover a year of living expenses. This modified permanent portfolio is my third safety net, meaning that if I have to touch this money in the near future, some dire emergency has happened. In all likelihood, I probably won't touch this money until retirement, which is 5 to 8 years away.

I am receiving a distribution from my wife's trust next week that is pretty large. It is equal to about twice the size of the portfolio. So assuming the portfolio is $100,000, we are getting about $200,000.

So given this portfolio, would you invest it all at once or spread it out over a year or two?
Petrocelli (not the real Rico, but just a fan)
dogagility
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Re: Another lump sum or DCA question

Post by dogagility »

Choose an asset allocation and then lump sum into that allocation.
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
123
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Re: Another lump sum or DCA question

Post by 123 »

Petrocelli wrote: Wed Jul 21, 2021 2:44 pm ...It has low volatility and generates very little tax liability...
Not surprising if you only have 16% in stocks/equities.
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retired@50
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Re: Another lump sum or DCA question

Post by retired@50 »

Petrocelli wrote: Wed Jul 21, 2021 2:44 pm I have a taxable portfolio that is a modified permanent portfolio with the following investments:

50% in VCITX - California long term tax free bonds

The other 50% is divided equally between the following;

GLD - gold
VTI - total market
TLT - long term treasuries


I am receiving a distribution from my wife's trust next week that is pretty large. It is equal to about twice the size of the portfolio. So assuming the portfolio is $100,000, we are getting about $200,000.

So given this portfolio, would you invest it all at once or spread it out over a year or two?
If you believe in the portfolio allocation shown above, why wouldn't you just invest in the same way?

In other words, if the above portfolio were 3 times bigger ($300k instead of $100k) than it is today, would you be selling off particular assets or moving things around?

My portfolio would hold the same percentages of stocks/bonds/cash if it was $100,000 or $10 million. I would lump sum. You have to do what makes you comfortable.

Regards,
This is one person's opinion. Nothing more.
Destiple
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Re: Another lump sum or DCA question

Post by Destiple »

Petrocelli wrote: Wed Jul 21, 2021 2:44 pm I have a taxable portfolio that is a modified permanent portfolio with the following investments:

50% in VCITX - California long term tax free bonds

The other 50% is divided equally between the following;

GLD - gold
VTI - total market
TLT - long term treasuries

This portfolio has done really well. It has low volatility and generates very little tax liability. I buy a share or two each week, and I always buy the worst performer.

I have a savings account with money to cover unforeseen expenses. I have a second separate savings account at my credit union with enough money to cover a year of living expenses. This modified permanent portfolio is my third safety net, meaning that if I have to touch this money in the near future, some dire emergency has happened. In all likelihood, I probably won't touch this money until retirement, which is 5 to 8 years away.

I am receiving a distribution from my wife's trust next week that is pretty large. It is equal to about twice the size of the portfolio. So assuming the portfolio is $100,000, we are getting about $200,000.

So given this portfolio, would you invest it all at once or spread it out over a year or two?
Do you rebalance your modified permanent portfolio
If so how frequently?
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Re: Another lump sum or DCA question

Post by Vanguard User »

Always lump sum.
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Petrocelli
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Re: Another lump sum or DCA question

Post by Petrocelli »

Destiple wrote: Thu Jul 22, 2021 4:53 pm Do you rebalance your modified permanent portfolio
If so how frequently?
I rebalance with cash. In other words, each week I buy a share or two of something. I always buy the one that is most off its target allocation. I don't sell because of tax consequences.
Petrocelli (not the real Rico, but just a fan)
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Petrocelli
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Re: Another lump sum or DCA question

Post by Petrocelli »

Thanks to everyone who responded. Based on your advice, I have decided to lump sum.
Petrocelli (not the real Rico, but just a fan)
fortunefavored
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Re: Another lump sum or DCA question

Post by fortunefavored »

The only reason to not lump sum is regret that it goes down shortly after doing it.

How much regret will you have? How much money is this compared to your future earnings?

If it is equal to the next 20 years of earnings.. you might want to do 50% lump and 50% DCA just to avoid that regret.

If it is equal to 6 months.. who cares.. lump sum away. Your future earnings will overwhelm the lump vs. DCA regret.
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Re: Another lump sum or DCA question

Post by WoodSpinner »

OP,

An out-of-the-box question .....

Why would you invest the money from the Trust Fund into your 3rd Tier Emergency Fund portfolio?

Is there a shortfall? Do you also have a Retirement Portfolio where it would be better invested?

Thoughts?

WoodSpinner
Last edited by WoodSpinner on Wed Jul 28, 2021 4:35 pm, edited 1 time in total.
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Toons
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Re: Another lump sum or DCA question

Post by Toons »

All In
Time,
Not Timing
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UpperNwGuy
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Re: Another lump sum or DCA question

Post by UpperNwGuy »

Lump sum is the answer. Let us know what you do.
Marseille07
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Re: Another lump sum or DCA question

Post by Marseille07 »

As a representative of YDCA, I regret you've decided to go with lump sum. S&P500 near ATH right now.
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bertilak
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Re: Another lump sum or DCA question

Post by bertilak »

Petrocelli wrote: Wed Jul 28, 2021 2:45 pm Thanks to everyone who responded. Based on your advice, I have decided to lump sum.
Good choice.

If you find yourself wavering, here are a couple of things to ask yourself:
  • If you DCA, how will things be different at the end of the DCA period? Will there no longer be any worry about a market downturn? Why not?
  • At the end of the DCA period will things still be at an all-time high? If not, why not get out now and wait for the pull-back before putting anything in the market? How long should you wait? Can you predict these things?
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Petrocelli
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Re: Another lump sum or DCA question

Post by Petrocelli »

Marseille07 wrote: Wed Jul 28, 2021 4:44 pm As a representative of YDCA, I regret you've decided to go with lump sum. S&P500 near ATH right now.
This portfolio holds only 16.33% stocks, so the 500 Index dropping won't impact it much. In fact, when the market drop, gold and bonds (which comprise the remainder of the portfolio) often go up.

Also, I put about $7,000 a month in retirement funds. So I am DCAing into other funds. So if the market drops, I will be in a position to buy more.
Petrocelli (not the real Rico, but just a fan)
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Petrocelli
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Re: Another lump sum or DCA question

Post by Petrocelli »

UpperNwGuy wrote: Wed Jul 28, 2021 4:40 pm Lump sum is the answer. Let us know what you do.
Got the money yesterday. Invested it all today.;

Again, thanks to everyone for helping me think this through.
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Re: Another lump sum or DCA question

Post by Petrocelli »

WoodSpinner wrote: Wed Jul 28, 2021 4:27 pm OP,

An out-of-the-box question .....

Why would you invest the money from the Trust Fund into your 3rd Tier Emergency Fund portfolio?

Is there a shortfall? Do you also have a Retirement Portfolio where it would be better invested?

Thoughts?
I max out my 401(k), my profit sharing plan, and my wife's 401(k). So I am already contributing about $80,000 a year to retirement accounts.

For me, this is an alternative to a savings account. It's a place where I can hold money and get better return than a savings account.
Petrocelli (not the real Rico, but just a fan)
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WoodSpinner
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Re: Another lump sum or DCA question

Post by WoodSpinner »

Petrocelli wrote: Thu Jul 29, 2021 9:54 am
WoodSpinner wrote: Wed Jul 28, 2021 4:27 pm OP,

An out-of-the-box question .....

Why would you invest the money from the Trust Fund into your 3rd Tier Emergency Fund portfolio?

Is there a shortfall? Do you also have a Retirement Portfolio where it would be better invested?

Thoughts?
I max out my 401(k), my profit sharing plan, and my wife's 401(k). So I am already contributing about $80,000 a year to retirement accounts.

For me, this is an alternative to a savings account. It's a place where I can hold money and get better return than a savings account.
That makes sense, I didn’t know you were already maxing your Retirement savings.

WoodSpinner
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