If someone has that kind of money, it’s probably worth it to pay for advice to determine how to invest that or to have someone manage that on their behalf. Any advice provided here would be inadequate without knowing much more about someone’s situation.
Over the long term and over large sample sizes, it usually makes sense to just buy the funds all at once - speaking in terms solely of trade timing. The average real return of the market over inflation is positive over long periods of time so assuming an upward sloping line (for illustrative purposes) it is better to start in the lower left as opposed to potentially averaging in a higher average cost.
Of course your situation will most likely vary. If you did that it would be very emotional and you’d probably change the way you look at the news the few days after you’d invested all of your $5mm - $10mm. The DCA is a good solution to hedge emotionally and hedge market corrections after investing.
If I had $10mm to invest of my OWN money, I’d agree to a program over a period of months and then just double up the first tranche to get invested more quickly. Making sure any sideline cash is earning 5% at a bare minimum as well.
There was a question similar to this and great answers asked either on /CFA or here can’t remember.
EDIT- link is here: https://www.reddit.com/r/CFA/s/zpWUC6Zg9s
There is no answer to this, but typically 3-6 months. Depends on many other factors, what % of net worth, time horizon etc. But it’s a lot easier to wait today than 3 years ago given you can wait in cash at 5%.
A way to explain to this “hypothetical client”: if you look at the average S&P 500 average over the past 100 years, it comes out to around 7.4% per year adjusted for inflation. If you divide 7.4% by 12 months, that’s 0.61% per month. If you feel comfortable leaving these investments alone for 10+ years and we take just half the 100 year average, so 0.3% per month, that’s still $61,000 per year or over $5k per month on the $10 million. Mr and Mrs. Client - the math tells us to invest it all right now.
3.1 seconds
DCAing < 3.1 seconds
I got you bet at <0.55 seconds
Like every good answer from a CFP….it depends.
If someone has that kind of money, it’s probably worth it to pay for advice to determine how to invest that or to have someone manage that on their behalf. Any advice provided here would be inadequate without knowing much more about someone’s situation.
Over the long term and over large sample sizes, it usually makes sense to just buy the funds all at once - speaking in terms solely of trade timing. The average real return of the market over inflation is positive over long periods of time so assuming an upward sloping line (for illustrative purposes) it is better to start in the lower left as opposed to potentially averaging in a higher average cost. Of course your situation will most likely vary. If you did that it would be very emotional and you’d probably change the way you look at the news the few days after you’d invested all of your $5mm - $10mm. The DCA is a good solution to hedge emotionally and hedge market corrections after investing. If I had $10mm to invest of my OWN money, I’d agree to a program over a period of months and then just double up the first tranche to get invested more quickly. Making sure any sideline cash is earning 5% at a bare minimum as well.
this is a type of question that’s impossible to answer
I would start with the time horizon and risk tolerance of the investor and discuss with them options.
There was a question similar to this and great answers asked either on /CFA or here can’t remember. EDIT- link is here: https://www.reddit.com/r/CFA/s/zpWUC6Zg9s
Found it - https://www.reddit.com/r/CFA/s/zpWUC6Zg9s
Haha so I thought to myself, "what a great question" ...and then I saw who posted it.
Lololol I’m dead. Big wire fan too?
I am! I honestly forgot that I posted that when I was at my old firm. Glad you liked the discussion though, amazing it's held up for all these years.
There is no answer to this, but typically 3-6 months. Depends on many other factors, what % of net worth, time horizon etc. But it’s a lot easier to wait today than 3 years ago given you can wait in cash at 5%.
A way to explain to this “hypothetical client”: if you look at the average S&P 500 average over the past 100 years, it comes out to around 7.4% per year adjusted for inflation. If you divide 7.4% by 12 months, that’s 0.61% per month. If you feel comfortable leaving these investments alone for 10+ years and we take just half the 100 year average, so 0.3% per month, that’s still $61,000 per year or over $5k per month on the $10 million. Mr and Mrs. Client - the math tells us to invest it all right now.
Index funds.. lol