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  • Best way to invest 200G

    Hi everyone. We are debt free and want to invest 200,000 dollars. We already max out our 401 k and back door roth and put away money for 529. Question is when planning to put money with vanguard total index fund, should we do it in one large sum or weekly 10,000 to enjoy DCA? TIA.

  • #2
    Statistics would suggest you are more likely to "win" by investing as lump sum, the sooner the better.

    Of course, if the market declines, you would feel better to dca. Would you feel equally bad if you miss an upward market?

    Would be helpful if you have that retrospect-o-scope all fired up!

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    • #3
      Sounds like you are in a really good position (debt free, maxed out retirement contributions, 529s covered) with a nice pile of cash on hand. The DCA vs lump sum investing debate seems to come up relatively often. Here are a couple of recent-ish threads on bogleheads.org that you may find helpful:

      https://www.bogleheads.org/forum/viewtopic.php?t=216498

      https://www.bogleheads.org/forum/viewtopic.php?t=221801

       

      The ultimate right answer for you probably depends on your own investment policy statement (your risk tolerance, desired asset allocation, etc). How you ended up with the 200k in the first place may give part of the answer (ie if it was a recent windfall vs a slowly rising checking account balance over time may change the calculus).

      Best of luck!

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      • #4
        Whenever someone is on the fence between the two options (lump sum vs. DCA), I like to offer a third option. Lump sum 50% and DCA the rest. It's a good way to hedge your bet and reduce the likelihood of regret.

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        • #5
          Despite the math that clearly instructs otherwise, my cautious nature places me in the DCA camp and that is exactly what I did the last two years when we had bonuses to invest. If we were at a different point in the market cycle or investing time horizon, I might behave differently and have so in the past.

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          • #6




            Despite the math that clearly instructs otherwise, my cautious nature places me in the DCA camp and that is exactly what I did the last two years when we had bonuses to invest. If we were at a different point in the market cycle or investing time horizon, I might behave differently and have so in the past.
            Click to expand...


            It's probably wise to point out that your choice cost you money, no?

            If people aren't comfortable lump summing into their AA, they probably have too aggressive an asset allocation. Dial it back until you're comfortable lump summing it.
            Helping those who wear the white coat get a fair shake on Wall Street since 2011

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            • #7







              Despite the math that clearly instructs otherwise, my cautious nature places me in the DCA camp and that is exactly what I did the last two years when we had bonuses to invest. If we were at a different point in the market cycle or investing time horizon, I might behave differently and have so in the past.
              Click to expand…


              It’s probably wise to point out that your choice cost you money, no?

              If people aren’t comfortable lump summing into their AA, they probably have too aggressive an asset allocation. Dial it back until you’re comfortable lump summing it.
              Click to expand...


              I believe that saying that "the math instructs otherwise" was a nod to the fact that this is more of a behavioral hack due to "my cautious nature" covers the matter that it is not a decision to maximize potential gains.

              If anything, it is low key market timing. If the CAPE PE ratio were closer to 10 and it is to 30, I would be shoveling cash into my AA as fast as possible.

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              • #8
                The posts in this thread illustrate the importance of behavioural finance.

                At least 3 of the above posts (WCI, Vagabond, PoF) are from docs who have invested successfully and have reached financial independence, and each gave you a different answer.

                The important point is to realize that there is no answer that will be correct 100% of the time. Statistically a lump sum investment will outperform DCA, but there will be times when you invest a lump sum and then the market drops.

                You need to look into your investing soul and have a plan that you can stick with. Either decide that you will buy lump sum, and then do it and don't have regret if the market drops, or set a series of future-dated DCA purchases, and don't back out of them if the market rises.

                It's the same with asset allocation. There is no answer that is best 100% of the time. The important point is to have a plan, and stick with it.

                If you have a physician's income, then 20 years from now there will be negligible difference between whether  you lump sum or DCA this $200K investment. What will make the difference is whether you develop a plan that takes into account your own investment behaviour and tolerance for risk, so that you can stick with that plan through the market's ups and downs.

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                • #9
                  Or consider diversify your holdings beyond equities to balance the risk that way.  Say - RealtyShares or other RE site.  DCA is nice for continuous stream income, but these windfalls are a nice time to take a look at the portfolio and see if there were any gaps or expansion opportunities.

                  Or that trip to disneyland/tahiti

                   

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                  • #10
                    Would you consider investing in vanguard total stock market too aggressive? Because that's where I'm planning on parking most of my cash- as it's inherently diversified. Then about 20 percent international stocks.

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                    • #11
                      I like this option very much. I'll do a variation of this.

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                      • #12
                        I think this is a very wise insight. No right answer but more importantly sticking to a plan. I am a planner, even though I tend to choose aggressive allocations, I am conservative by nature. So that's why this is a difficult decision. Splitting it in two piles like POF suggested, appeals to my psyche...I appreciate all the inputs here.

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                        • #13
                          I love how many people suggest traveling we have a travel budget and did two weeks in Europe with the kids this year. Tahiti is in 3 years and has its own budget

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                          • #14
                            The money is a combination of windfall and savings.

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                            • #15
                              What do you want this $200,000 to do for you? I think that's at the root of it. Is this retirement money, emergency money, play money, etc? Is there a time horizon? Can you risk loss of principal? Do you need it to earn for you, or do you just need to park it? Etc

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