S/O Market - Lump Sum investment

brij2006 · January 2016

H and I have been holding onto our lump sum cash that we have and plan to invest. It's just sitting in our savings right now. Now that the market has tanked, should we go ahead and toss that into an investment?

So here's what's going on. We have about $75k sitting in savings. We have another $52k coming next month after we file the taxes on the estate and close it out. We will have $127k total. Should we throw that entire $75k into the mutual fund now? Should we wait a bit longer to see if the market drops more?

Our thoughts were that initially we're going to put $100k total into a mutual fund for retirement. The remaining $27k will sit in savings for a, Brij is a worry wart and likes money hoarding. That will be on top of our 6 month emergency fund. But I hope to stay home if/when we have our 2nd child (TTC now), so I like the idea of having some extra cash just in case.

Are there any other things we're not thinking of to do with this money, before we take the dive and put it in? We're fully funding 2 Roth IRA's each year, and 10% into H's 401k (employer matches 1%).

Xstatic3333 · January 2016

Definitely run this by your financial advisor, but I'm wondering if it might make sense to invest a few thousand at a time on a set schedule, instead of all at once, to hedge a bit against the market dropping even further.

The only other reason I can think of to hold it back is if you're still planning to move and want some of the money for your new home.

brij2006 · January 2016

Xstatic3333 said:

Definitely run this by your financial advisor, but I'm wondering if it might make sense to invest a few thousand at a time on a set schedule, instead of all at once, to hedge a bit against the market dropping even further. The only other reason I can think of to hold it back is if you're still planning to move and want some of the money for your new home.

We've decided to stay put.

hoffse · January 2016

Xstatic3333 said:

Definitely run this by your financial advisor, but I'm wondering if it might make sense to invest a few thousand at a time on a set schedule, instead of all at once, to hedge a bit against the market dropping even further. The only other reason I can think of to hold it back is if you're still planning to move and want some of the money for your new home.

This is what I would do. I don't think it's completely bottomed out yet, but you don't know for sure.

bmo88 · January 2016

I would go with the scheduled smaller amounts personally. Talking to your financial advisor will probably give you a better perspective, but if the market goes down further, and until there is a sign it is rebounding, schedule smaller investements seems like a safer route to go.

jtmh2012 · January 2016

I'm not sure if it's hit absolute bottom, but assuming you have no immediate plans for this money (in which case you shouldn't be investing it anyway), I'd drop the whole lot in, but I would make sure it's in a good mixture of funds.

CuriousKiddosMama · January 2016

I would probably split it up into several different investments. Like do 10k each month until it's all in, or 25k that way you can start getting it in, but if the market does go lower you also get to take advantage of that. Or even invest the chunks every other week if a month seems too far apart.

brij2006 · January 2016

jtmh2012 said:

I'm not sure if it's hit absolute bottom, but assuming you have no immediate plans for this money (in which case you shouldn't be investing it anyway), I'd drop the whole lot in, but I would make sure it's in a good mixture of funds.

We don't have any plans with this money. We've said that in maybe 5-10 years we MIGHT be enticed to pull out some to aide buying a little cabin on the lake, but that's just a dream right now.

Our intentions are that once this gets put into a mutual fund, we aren't touching it until retirement.

maple2 · January 2016

Have you talked to a financial advisor already? We did a lump sum investment at one point, and our advisor talked to us about an annuity that might have been a good option if we were 100% sure we were going to use it for retirement. I don't remember many details because we didn't go that route, but it's a specific type of annuity that can have tax sheltered growth (like a Roth). There are really steep penalties for early withdrawal, though, which is why we opted against it. It will likely be money we use in retirement, but, who knows, maybe we will want to buy a cabin or pay 100% of college tuition costs. Anyway, if you are definitely going to be saving some of it for retirement, it may be worth talking to someone who can help you explore more tax advantaged ways of investing retirement money than a mutual fund.

In terms of when/how to invest in the mutual fund, we are about to drop 11,000 in all at once to fund our 2016 Roth IRAs. We did calculations using a few scenarios comparing the risks and benefits of investing all at once versus 1/12 every month and came to the conclusion that, at least for us, putting it in all at once at the beginning of the year was better than spreading it out throughout the year. (If we didn't have the money available to fund them at the start of the year, then it would make more sense to put in 1/12 every month rather than waiting until the end of the year to invest it all.) I'm not sure whether that strategy (all at once) would make as much sense for you since you aren't constrained by a single year and you are talking about a lot more money.

S/O Market - Lump Sum investment

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