300k to invest, lump sum or dca? VWCE or VUAA?

[jayjaynp]

@saharali1991

It looks to me that we are super high right now, like VWCE is already up 11% ytd and I saw that the average cagr should be 8%.

Thanks to OP's attempt at timing the market I am now more hopeful VWCE will close the year at 20%+.

Our eurotendies salute you, OP!

 

[saharali1991]

@jayjaynp It's more likely that everything tanks as soon as I click the buy button.

 

[jayjaynp]

@saharali1991 Only if you go lump sum.

 

[saharali1991]

@jayjaynp Ahah exactly!!

 

[jayjaynp]

@saharali1991 https://preview.redd.it/4l1eikbndgr...bp&s=25975e78bf6c4acb3355e3b00dbbb5c146282b77

 

[rickyrixon84]

@saharali1991 Normally I'd say go all in. I personally wouldn't go all in today as I am wary of a potential correction soon. If you have the guts it's probably better to do it all in one go though.

 

[tracey4g]

@rickyrixon84 I have the same problem as the OP and the same opinion as you I'm sitting on it since vwce was at 112% big mistake

 

[saharali1991]

@tracey4g Based on this thread, it seems that in the current market dca would be the way to go (or lump sum x% and dca the rest).

I think I'd feel better with that approach than with going all in, in the end I get the 4% from xeon for the funds awaiting to be invested. This mitigates a bit the risk and would not bother me so much in case the market keeps skyrocketing or in case it decides to drop like crazy.

 

[resjudicata]

@saharali1991 VWCE and chill. Easy decision. There is no reason to favour the USA. It has been on a tear the last period but long run it flips between USA and ROW as for who gives the better returns.

Especially for 15+ years, the maths is simple. Lump sum wins in most cases and is the best choice. Every week not in is a week of lost returns. The only reason to actively DCA is an emotional one, not a financial or mathematical one. If you think you can stomach a drop the day after you go in (which is 50% certain to happen...) then you should go in. If not, then not. But over 15 years, it's irrational to worry about a small drop now, and the the longer you spread it out now, the bigger the impact on your compounded returns when that 15 years is up. I sold a house and shovelled it all in within 4 weeks, and don't regret it.

Also:

It looks to me that we are super high right now,

Ignore this voice in your head, he is lying to you. No one knows if it is high or low, or if it will sink or climb in the next x days. If you listen to him, and wait, then you are in to market timing, and as everyone should know, NOONE can time the market better than chance.

 

[iklog]

@saharali1991 I'd lump sum half of it, and DCA the rest the following months

 

[ansje]

@saharali1991 Lump sum would statistically perform better, I did DCA because it reduced the amount of stress I felt. However I did loose out on 20% gains (round 20K so that was painful). Do how you wish, if you look at the larger picture it wont make too much of a difference.

 

[lutheransamurai]

@saharali1991 Go lump sum. Choose from these ETFs

• VWCE
• FWRA
• SPYI
• V3AB

Pick one, they all do the same more or less. You can only pick a winner.

Most important part: Start investing as soon as possible, the longer you’re in the market the bigger the gains. Don’t sideline yourself too long.

 

[limeleaf]

@saharali1991 If it’s okay to ask, in which broker did you had your 300k in XEON?

 

[sonofmatthew]

@saharali1991 I wouldn’t even look at passed prices if I were you, any moment you invest you face one of two risks,

Either the market will go up short/mid term, or it will go down…

If it goes up, lump sum is a lot better, while if it goes down, DCA offers some protection… statistically, it’s easier for it to go up than down, so expected value is higher with lump sum,

however, optimizing for the worst case scenario is very valuable so that kind of protection usually requires a premium.. so it makes sense that the less risky strategy has lower expected returns…

To me personally, having experienced both cases, I know that looking at the market skyrocket while holding a big proportion of my portfolio in cash equivalent, would hit in the gust exactly as much as investing everything and watching it immediately drop in value… so for me DCE has little sense, as it would increase my risk, if i include “lost income” to the equation

 

[jay_the_meek]

@saharali1991 Check this comment here . Basically depends on your risk tolerance, a.k.a in 20 years would you be fine to wait another few years should a major crisis happens to arrive when you want your money?

 

[kaytiedid]

@saharali1991 Statistically, lump sum is better.

I would lump sum 200K into VWCE and then I would DCA 100K over the next 6 months for psychological reasons (e.g. if the market dips)

 

[hightechredneck]

@saharali1991 You have 300k available cash and 2-2.5k monthly contribution.

The most logical way with good risk management and profit maximization will be a lump sum at any price and contribute monthly to the equities.

 

[musicbazzar]

@saharali1991 I would lump sum in 50/50 stocks/ bonds portfolio, maybe keep 10-15k as cash in a high yield savings account or money market fund / etf.

This way your money start working right away, while you reduce your maximum potential drawdown and overall volatility.

I could see DCAing 100k or so in a more aggressive portfolio if you feel better this way.

 

[saharali1991]

@musicbazzar Which bond would you suggest?

 

[musicbazzar]

@saharali1991 VAGF is imo the best answer, since it is the most diversified. You could overweight European bonds with a Euro aggregate bond etf to avoid some currency hedging cost and reduce USA exposure, like the one from SPDR. A small allocation (5-10%) in global inflation linked bonds would make the portfolio fare better than regular bonds in a higher than expected inflationary environment. Xtrackers has the one with the bigger AUM. Finally, a small allocation like 5% or so in the Xtrackers swap based etf that follows the STR rates is also a consideration as long as the base rates stay high.

For portfolios with large bond allocations, a small allocation (up to 5%) to high yield bonds is also a potential consideration, since they could further diversify the portfolio and increase expected returns without reaching equity volatility. iShares has a global one, but it is not cheap.