How to Invest a Lump Sum
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- เผยแพร่เมื่อ 27 ก.พ. 2019
- Live from the Compound! Nick Maggiulli (Of Dollars and Data) joins Downtown Josh Brown and Michael Batnick to relay some interesting information about how often investing a lump sum beats out using a dollar cost averaging approach.
You can watch Nick's take on dollar cost averaging here:
• Why Dollar Cost Averag...
Read Nick's post about investing a lump sum into a 60/40 portfolio here:
ofdollarsanddata.com/how-to-i...
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Josh’s comment on the guy who is all in cash......spot on. That’s me right now
I can relate to it! How does HE know?
The whole point of DCA traditionally is to get whatever cash you can spare (every paycheck/month etc.) into the market... You don't DCA cash that you already have. Agree with suggestion to start conservative if it's a big sum.
I lump summed heavy into the market for the first time ever in Feb 2021 - the pain is real. Haven't sold anything
2:54 Mike is spot on; nobody sticks to the initial DCA plan. Pick the asset allocation you can stick to and just LS in.
"Do you know what kind of asshole you turn into when you are sitting all in cash, rooting for horrible things to happen, mocking people on down days." So true.
Another advantage of lump sum investing that you guys didn't mention is that when you receive a lump sum, you are uniquely positioned to benefit tremendously from tax loss harvesting. That lump sum likely involves a hefty capital gains tax. So if the market corrects or cashes and you tax loss harvest aggressively, you end up reducing your tax bill significantly. Basically, and I think this is the important way to view it -- you get into a situation where your PvR is way better than for the rest of the market participants -- you have the same upside as everybody else, but the potential write-off on your tax bill means you don't have as much downside risk. And locking in those losses comes off the top bracket of your tax bill and can help push you down into a lower tax bracket for the year.
Money in the market ASAP.. always been my philosophy!
I like Michael's point on entering with a more conservative 70/30 portfolio if worried about potential crash. Way better than being all cash.
Josh - That shirt is lit... I absolutely need one. $20... done! Proceeds go to great causes as well. Good video too! Got my mind working and that's no small task.
Couldn’t have timed this conversation out any better lol
mags bringing that fire in the booth
It is better to lumpsum for the simple reason of psychology... those thinking of DCA'ing have already shown that they are averse to a loss in the short term... when the market starts dropping these people are likely to drop out of their DCA plan and try to time things, wait for a further drop, which usually makes things worse.
Crap! You were talking to me, with this video. thanks guys.
Watching this in 2021 and yup they were right!
Josh and company, I really appreciate your focus on practical situations and tough questions. We actually had a situation like this in the family, an inherited lump sum in 1999 just as the market peaked and started to move down. Investing the Lump sum at one shot was a terrible idea. I’ve thought that a better compromise would have been to put an initial piece in, say 30% of it, but then to invest an additional 10% a quarter, but only if the quarter showed a gain vs the prior quarter or two. Thoughts on this as a good composite strategy? Ever done any testing on something like this?
The Market is never at a top. thinking that way is wrong. It always trends up, so five years from now, the market will have looked on sale. Get in ASAP and stay in.
Watching this Pre-covid episode makes me 😂! These guys had no idea in Feb 2019 what was coming a year later! The biggest drawdown and opportunity to lump sum, however everyone was shared shit!
Sometimes as they say it's better to be lucky than good. A friend of mine who works at Ecolab as an executive has most of his retirement money in ECL.
I laughed so hard at 5:30 mark when Josh said how much of a ass you become sitting on a pile of cash hoping for bad things to happen to the world so you can finally buy in.
Alphaville had a song, what was it? Oh yeah "Big in Japan"! I would take DCA over lump sum unless I'm so lucky that the lump sum arrives at a 50% drawdown
Nice shirt!
Josh mentioned that a 60-40 portfolio was diversified. I think it's important that people understand this is not necessarily the case, particularly after 30 years of disinflation with occasional deflationary periods. From this starting point (2.6% yield on the 10 year), bonds are unlikely to offer attractive long term returns and, even during certain types of corrective markets - if for instance those are driven by higher inflation, are unlikely to offer downside protection. Other assets in addition to stocks and bonds should be added to a portfolio to make it more balanced, as long as they credibly capture risk premia...those that perform well when bonds don't (inflation and stagflation), and those that perform well when stocks don't outside of deflation (ie stagflation)
reits, tips, gold, commodities? what else?
io Ally bank offers 3% on 5 year CDs right now.
Maggiulli / Carlson 2020.
I would invest a lump sum on every correction 20% in every time.
except that 20% corrections actually are not very common, it's best to get capital into the market as soon as it's available
Or not. Where is Kerr on this issue?
What was the dispersion of results at each time period of dollar cost averaging? What gives you the best risk-adjusted return?
The first time watching this channel and within the first minute, these guys are assholes to each other. I think I'm going to like this channel. Also I know I'm posting a year later but if you missed the 2019 climb that's too bad.
if you shit your pants just because the market take a dip of 20% then don't invest
America is militarily and economically the most powerful country in the world, but less and less so. Our position relative to other countries has changed. Wages have been flat for thirty years, the death rate is increasing, mass shootings and riots are common place, scholastic performance is worse, and the percentage of families having more than two children has dropped to "rapid population loss in the near future" levels. We are by all tactical measures stronger militarily than we were seventy years ago, but our adversaries have been lifting weights and taking steroids. Strategically we are weaker.
China is stronger than it has ever been, measured in every way except one. The CCP has complete control over those parts of China which do not interact with the world economy, such as Tibet and the restive northwest, and is steadily increasing control over territory outside its borders. Control over Chinese citizens and ethnic Chinese of other nationalities has increased even more. The CCP, which is the Chinese government because it's a one-party state, which has veto power over every business decision in China because it is an authoritarian state, has created the largest (by several orders of magnitude) spy ring in history. Chinese citizens and ethnic Chinese of other nationalities all over the world are routinely pressured to act in ways that benefit the CCP.
Do you guys read anything that doesn't relate directly to money?
Thanks to the One Child Policy, which involved tracking the period of women in China and strapping them down for forced abortions if they got pregnant-- I'm not making this up-- there are thirty million Chinese men who will never have a Chinese wife. The Chinese military is itching for a fight. Coincidence?
China is a highly nationalistic, authoritarian, expansionist state and it has been going on a weapons binge. It's flooding the restive provinces with Han Chinese to overwhelm the populations demographically while a the same time seeking to undermine democracy in the West through propaganda, bribes and intimidation. They are waging a political campaign against democracy and using our freedoms against us.
The one way China is weaker now is in their own lack of freedom. Every once in a while a Chinese communist will recognize that feedback is necessary and will try to find a way to allow more expression. Mao said to let a thousand flowers bloom, meaning he recognized the danger of ossification. A few decades ago China-- the CCP-- looked like it might move toward a less restrictive political system to go along with the new economic plan. It didn't last, because freedom and a one party state are mutually incompatible. It's a structural problem and it is the Achilles heel of tyrants.
I think democracy is the future because when people get the chance to vote with their feet that's where they choose to go. China-- meaning the Chinese Communist Party-- thinks democracy is recipe for disaster. They think the future is full of cameras in every house and total government control of expression. What do you think, Josh?
I really love this channel but I really hate that shirt. It makes you look like a tool.
You guys make it seem like throwing your money in the market has little to no risk. That’s a disservice to most people. They would be better off holding cash and making a rational decision based on their comfort over time,.
You are confusing volatility with risk. The real risk is people acting on emotions and realizing capital losses.
Stupid to get in now. Market has been over pumped for years. Graph looks like a vertical wall. Next crash will be brutal.
how stupid u were.