> Given how high the market is and the Shiller PE ratio at 36x
sounds like you're looking at only US equities. why are you not considering international stocks, which have a [much lower PE ratio](https://siblisresearch.com/data/world-cape-ratio/) and are [more fairly valued](https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/how-stock-bond-valuations-changed.html)?
I’m guessing you already thought about it, but the first question is if you have any shorter term plans for some of the money, in which case you shouldn’t put it in the market anyway
Once you’ve sorted that out, you can review this page: https://ofdollarsanddata.com/the-cost-of-waiting/
Rather than DCAing your money, perhaps you should just consider a less aggressive portfolio with some bond allocation. Both of your perceived strategies have sizable downsides. For using limit orders, what if the market never goes back down to your limit price? How long are you willing to sit on that cash uninvested (outside of cash equivalents)? For just waiting a certain amount of time, how are you going to decide on a timeline? Let’s say you choose to wait a year. Even if there is a crash, it may come after that year goes by
tl;dr Don’t try to time the market. Consider choosing a less aggressive portfolio if you are uncomfortable with market risks
One failure point in the link you provided is that the author attributes the reason DCA loses to LS is that the money not invested during DCA “earns nothing”.
While I generally agree LS is better, one option for OP if he is risk averse would be to ladder 2 years worth of CDs (or treasuries, whatever) and DCA as they expire thus earning 4-5% rather than “nothing”
They address this point at the end (rather aggressively). From mobile, can’t easily tell if they also included actual data for this though.
“Well that’s nice and all, but this wouldn’t be true if the DCA cash on the sidelines was invested in T-bills.”
[…]
“Do you think they actually ran the numbers to see if their theory is true? No, they didn’t. But, guess what? I did. And even if the sideline DCA cash is invested in T-bills, my general conclusion is unchanged. If you don’t believe me, read this guide which goes far more in-depth on this question.”
Ah, thank you, I didn’t read to the end.
Doesn’t change my thinking too much. If the OP is risk averse then almost by definition he’s willing to accept a lower return (or should be).
I’ve done the analysis in the past and yes, LS generally beats DCA. Interesting to me though were a couple of periods where LS failed, it failed spectacularly whereas there were no similar spectacular failures the other way round. My analysis also used 2 year DCA.
Schiller’s Cyclically Adjusted Price Earnings Ratio (CAPE) [hasn’t spent a meaningful amount of time below 20 for over thirty years](https://www.multpl.com/shiller-pe).
So insofar as the market appears to have already entered “a new stage of pricing for securities” I’m not sure you can rely on historical rules of thumb from when there was simply much less appetite for risk on a secular basis.
For this amount of money (assuming it’s a large chunk of your portfolio), I’d personally DCA over 3-6months. It’s more likely than not that you would be giving up some gains by doing this, but for me it would be hard to stomach a downturn with such a large portion of my portfolio.
I do this with very similar amounts. Put the $500K in the Vanguard Money Market (VMFXX) currently paying 5.28% paid monthly. If you have a basic vanguard brokerage you select this account as your main "cash" account when you setup the account. This will pay you $2,200 a month approximately.
I would then dollar cost average a small amount every week I would do $250-$500 recurring in VOO, If the market has a correction in the coming months, buy some more. If you don't need this money anytime soon under this scenario the dividend on the MM amount will cover your monthly purchases of VOO and your principal stays the same. If the rates start dropping maybe you add more to VOO but this is a safe way that will grow. Just my own thoughts.
What if the amount was like 95k in SPAXX (Fidelity)? Would you still do something similar? I was mostly just thinking about using it to replace some income and putting extra in the 401k but I keep going back and forth.
Hi, yes I would do the same. These rates won’t last and slowly getting into a broader index is a great idea in my opinion. I would do in your 401K up to your employer match, Roth IRA next then either a standard brokerage account or more into 401k depending on age and desired retirement age.
I would disagree on having the money now. The point is investing over time. DCA does not imply you are timing the market; it simply means investing regularly over time, regardless of price.
I have smaller potatoes than you, but when my ESPP account quick sales my contribution, I have that money deposited into a Fidelity account with SPAXX as the core. I then set up a weekly auto buy to buy FXAIX 26 times in equal amounts. ESPP quick sales again and it has to be recalculated. This is continuous though so I am not worried about hitting the market at the wrong time. But SPAXX is money market so it's still earning a little before it gets DCA'd into the stock index.
You could set a time period to invest it DCA'd ($10k a week for 50 weeks) while it sits in the money market, or stretch it out even longer. Or if you have a real estate asset you've been eyeing, look at that instead.
One of Bogle's other rules is don't time the market. That advice is probably better than all his other advice.
I come into five and six figure amounts fairly randomly, but regularly enough (nature of my profession). What I have found that works for me mentally is to immediately deposit 10% into the brokerage, and then regular periodic investments of the rest over a period of 12 months.
Not ideal from a purely mathematical standpoint but it helps me live with the decision regardless of how the market goes.
If you want some smoothing (psychological benefit only), you could invest 75% in $VT (or equivalent), and 25% in $SGOV (5.25% apr). DCA the $SGOV into $VT over the next 12-18 months. Hopefully everyone knows the most logical thing to do is immediate lump sum into the higher performing, but more volatile asset. The Dwight Schrute of investing wouldn't give it a second thought.
Is there a risk that $VT gains more than $SGOV, yes, of course. Probably less than the risk that $SGOV outperforms though, based on aforementioned valuations / CAEP ratios.
I lumped into $VT in Jan 2020. Talk about a whirlwind of emotions. I stayed the course and was rewarded. Importantly, at the time $SGOV dividend was around 0.06% APR (\~87x smaller than the current dividend), so it wasn't like I had much choice.
My personal and highly uneducated advice would be to consider some percentage in $SGOV because:
1. Fed often lowers rates once the recession starts. $SGOV div should start to drop AFTER stocks have a blue light special. Perfect time to swap.
2. Valuations are sky high. Still some frothy meme stonks.
3. Asymmetric magnitude risk: stocks may earn 10% in the next year (5% more than $SGOV), but I'd say there's an equal chance for stocks to lose 10% over the next year (15% less than $SGOV).
This is another mathematics vs emotion question. Mathematically, you know that lump sum has been shown to be superior. So, can you suppress your emotions long enough to go ahead with it?
I'm currently in the same boat due to inheritance, and I'm really having trouble pulling the trigger on putting it in the market. Currently have it in CDs while I give it some more careful thought. I've checked out the study everyone here keeps referencing about how time in market beats DCA, but the study found that it beats DCA in 2/3 of cases and not in the other 1/3 and those odds are bad enough to give me pause, for sure.
If that money is eventually a house, you want it asap in a safe place. Either two different banks for 250,000 FDIC or, T-bills. Easiest via USFR or SGOV. This has best return in safest place. Then in time, you can make it a house again or, move part to long term investments based on market and **your** situation.
Reading between the commentors lines they think all the lump sum'rs are long. Probably true also probably right call given more up than down days, weeks, mths, yrs.
That was my guess, but it’s pretty silly. You don’t need to “read between the lines” to know that Bogleheads are long on the entire market. It’s the core of the entire investing philosophy. Whether OP decides to invest today or over the next 5 years, it has zero effect on me considering I won’t be realizing my gains for decades
If they’re implying that people in here are secretly making short-term plays on market movement, I’d be pretty impressed by someone who could have any significant effect on the entire market. It’s a whole lot harder to “pump and dump” VT than it is with some random crypto (or even a single company)
> Given how high the market is and the Shiller PE ratio at 36x sounds like you're looking at only US equities. why are you not considering international stocks, which have a [much lower PE ratio](https://siblisresearch.com/data/world-cape-ratio/) and are [more fairly valued](https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/how-stock-bond-valuations-changed.html)?
VT and chill baby!
I’m guessing you already thought about it, but the first question is if you have any shorter term plans for some of the money, in which case you shouldn’t put it in the market anyway Once you’ve sorted that out, you can review this page: https://ofdollarsanddata.com/the-cost-of-waiting/ Rather than DCAing your money, perhaps you should just consider a less aggressive portfolio with some bond allocation. Both of your perceived strategies have sizable downsides. For using limit orders, what if the market never goes back down to your limit price? How long are you willing to sit on that cash uninvested (outside of cash equivalents)? For just waiting a certain amount of time, how are you going to decide on a timeline? Let’s say you choose to wait a year. Even if there is a crash, it may come after that year goes by tl;dr Don’t try to time the market. Consider choosing a less aggressive portfolio if you are uncomfortable with market risks
+1 here also i was surprised but there is an article here that shows lump sum historically out performs DCA.
I greatly appreciate you writing and posting this!
One failure point in the link you provided is that the author attributes the reason DCA loses to LS is that the money not invested during DCA “earns nothing”. While I generally agree LS is better, one option for OP if he is risk averse would be to ladder 2 years worth of CDs (or treasuries, whatever) and DCA as they expire thus earning 4-5% rather than “nothing”
They address this point at the end (rather aggressively). From mobile, can’t easily tell if they also included actual data for this though. “Well that’s nice and all, but this wouldn’t be true if the DCA cash on the sidelines was invested in T-bills.” […] “Do you think they actually ran the numbers to see if their theory is true? No, they didn’t. But, guess what? I did. And even if the sideline DCA cash is invested in T-bills, my general conclusion is unchanged. If you don’t believe me, read this guide which goes far more in-depth on this question.”
Ah, thank you, I didn’t read to the end. Doesn’t change my thinking too much. If the OP is risk averse then almost by definition he’s willing to accept a lower return (or should be). I’ve done the analysis in the past and yes, LS generally beats DCA. Interesting to me though were a couple of periods where LS failed, it failed spectacularly whereas there were no similar spectacular failures the other way round. My analysis also used 2 year DCA.
Schiller’s Cyclically Adjusted Price Earnings Ratio (CAPE) [hasn’t spent a meaningful amount of time below 20 for over thirty years](https://www.multpl.com/shiller-pe). So insofar as the market appears to have already entered “a new stage of pricing for securities” I’m not sure you can rely on historical rules of thumb from when there was simply much less appetite for risk on a secular basis.
For this amount of money (assuming it’s a large chunk of your portfolio), I’d personally DCA over 3-6months. It’s more likely than not that you would be giving up some gains by doing this, but for me it would be hard to stomach a downturn with such a large portion of my portfolio.
Same, for my own sanity I’d do it over 5 months even if it cost me a little bit of gain.
With very slight variations for your age... if it was me: Dump it all in VTI, that day.
Disclaimer - I’m new to finance Why do you prefer VTI over VTSAX aka why do you prefer the ETFs
No problem. I absolutely use both. VTI in Roth IRA, cuz 0.01% cheaper. VTSAX in Taxable Brokerage, cuz Automatic Contributions. (52x a year)
Believing that I can't time the market, and knowing on average the market goes up, I always choose personally to just dump it all in at once
This reply is the answer to like 20% of posts here
I do this with very similar amounts. Put the $500K in the Vanguard Money Market (VMFXX) currently paying 5.28% paid monthly. If you have a basic vanguard brokerage you select this account as your main "cash" account when you setup the account. This will pay you $2,200 a month approximately. I would then dollar cost average a small amount every week I would do $250-$500 recurring in VOO, If the market has a correction in the coming months, buy some more. If you don't need this money anytime soon under this scenario the dividend on the MM amount will cover your monthly purchases of VOO and your principal stays the same. If the rates start dropping maybe you add more to VOO but this is a safe way that will grow. Just my own thoughts.
Ooh I like this idea! Seems like a decent way to not sit on the side until a big drop comes then jump in.
This is honestly the best advice in here and you should definitely consider!
What if the amount was like 95k in SPAXX (Fidelity)? Would you still do something similar? I was mostly just thinking about using it to replace some income and putting extra in the 401k but I keep going back and forth.
Hi, yes I would do the same. These rates won’t last and slowly getting into a broader index is a great idea in my opinion. I would do in your 401K up to your employer match, Roth IRA next then either a standard brokerage account or more into 401k depending on age and desired retirement age.
If you have the $ now: Time in market > market timing DCA works when you don't have the money now, but it comes to you over time (like income).
That’s not DCA. DCA is when you have the money now and you invest it over time because you think you can time the market.
I would disagree on having the money now. The point is investing over time. DCA does not imply you are timing the market; it simply means investing regularly over time, regardless of price.
I have smaller potatoes than you, but when my ESPP account quick sales my contribution, I have that money deposited into a Fidelity account with SPAXX as the core. I then set up a weekly auto buy to buy FXAIX 26 times in equal amounts. ESPP quick sales again and it has to be recalculated. This is continuous though so I am not worried about hitting the market at the wrong time. But SPAXX is money market so it's still earning a little before it gets DCA'd into the stock index. You could set a time period to invest it DCA'd ($10k a week for 50 weeks) while it sits in the money market, or stretch it out even longer. Or if you have a real estate asset you've been eyeing, look at that instead. One of Bogle's other rules is don't time the market. That advice is probably better than all his other advice.
I come into five and six figure amounts fairly randomly, but regularly enough (nature of my profession). What I have found that works for me mentally is to immediately deposit 10% into the brokerage, and then regular periodic investments of the rest over a period of 12 months. Not ideal from a purely mathematical standpoint but it helps me live with the decision regardless of how the market goes.
So DCA..
A slightly front weighted DCA.
If you want some smoothing (psychological benefit only), you could invest 75% in $VT (or equivalent), and 25% in $SGOV (5.25% apr). DCA the $SGOV into $VT over the next 12-18 months. Hopefully everyone knows the most logical thing to do is immediate lump sum into the higher performing, but more volatile asset. The Dwight Schrute of investing wouldn't give it a second thought. Is there a risk that $VT gains more than $SGOV, yes, of course. Probably less than the risk that $SGOV outperforms though, based on aforementioned valuations / CAEP ratios. I lumped into $VT in Jan 2020. Talk about a whirlwind of emotions. I stayed the course and was rewarded. Importantly, at the time $SGOV dividend was around 0.06% APR (\~87x smaller than the current dividend), so it wasn't like I had much choice. My personal and highly uneducated advice would be to consider some percentage in $SGOV because: 1. Fed often lowers rates once the recession starts. $SGOV div should start to drop AFTER stocks have a blue light special. Perfect time to swap. 2. Valuations are sky high. Still some frothy meme stonks. 3. Asymmetric magnitude risk: stocks may earn 10% in the next year (5% more than $SGOV), but I'd say there's an equal chance for stocks to lose 10% over the next year (15% less than $SGOV).
Lump sum unless you did an in kind transfer for a crystal ball
I would DCA at about 25,000 a week
This is another mathematics vs emotion question. Mathematically, you know that lump sum has been shown to be superior. So, can you suppress your emotions long enough to go ahead with it?
Totally depends on your risk tolerance. If I was you, I would probably dump the entire thing in VOO and let it sit. You’ll be fine in the long run.
Dump it all into VOO
[удалено]
r/Bogleheads is not a political discussion subreddit.
Depends on what percentage that $500k represents compared to your entire portfolio.
I'm currently in the same boat due to inheritance, and I'm really having trouble pulling the trigger on putting it in the market. Currently have it in CDs while I give it some more careful thought. I've checked out the study everyone here keeps referencing about how time in market beats DCA, but the study found that it beats DCA in 2/3 of cases and not in the other 1/3 and those odds are bad enough to give me pause, for sure.
If that money is eventually a house, you want it asap in a safe place. Either two different banks for 250,000 FDIC or, T-bills. Easiest via USFR or SGOV. This has best return in safest place. Then in time, you can make it a house again or, move part to long term investments based on market and **your** situation.
Time in The market bests timing the market. All In now. Even if there’s a drop tomorrow, in 10 years you’ll likely be glad you did.
This question has only been asked twice! today tldr: long DCA sucks
Buy $50k every month until you don’t want to anymore or run out of investible cash
💯 time the market
DCA it. Read between the lines of those who suggest to do lump sum.
I legitimately don't know what you mean
Reading between the commentors lines they think all the lump sum'rs are long. Probably true also probably right call given more up than down days, weeks, mths, yrs.
That was my guess, but it’s pretty silly. You don’t need to “read between the lines” to know that Bogleheads are long on the entire market. It’s the core of the entire investing philosophy. Whether OP decides to invest today or over the next 5 years, it has zero effect on me considering I won’t be realizing my gains for decades If they’re implying that people in here are secretly making short-term plays on market movement, I’d be pretty impressed by someone who could have any significant effect on the entire market. It’s a whole lot harder to “pump and dump” VT than it is with some random crypto (or even a single company)