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For those with significant savings, the struggle of deciding where to put their money to acquire the best returns is real. Options like building a business, purchasing an investment property or investing in an index fund like Vanguard‘s VOO or VTI all pledge exceptional benefits. Still, all come with different risks and strategies.
A 44-year-old Reddit poster with $700K to invest owns a home and a rental property with a $200K mortgage left to pay. Despite his strong financial position, he is crippled by fear of market instability and worries about buying into what investors see as a market peak.
“I am concerned about putting $700k into funds at this point as everything has gone up so much over the past few years and real estate seems to be slowing in Florida,” he wrote.
His goals include maximizing long-term earnings while controlling risk, but he’s unsure when to enter the market. He’s considered DCA (Dollar-Cost Averaging) into Vanguard’s VOO or VTI but hasn’t decided yet.
Nevertheless, the 44-year-old’s investor questions for the r/financialplanning Reddit community revolve around whether to invest the lump sum or use DCA and how to balance his portfolio to control risk.
Redditors have shared their suggestions with the investor, so let’s analyze what they say in the thread’s comments section.
Lump Sum vs. DCA and Balancing Risk: Key Advice from Reddit
Invest all the Money at Once
Many commenters highlighted the statistical edge of going with a lump sum of money compared to a smaller amount.
“Statistically, lump summing works better than dollar cost averaging. If you are doing the latter, the amount should be way higher than $1,500. This inaction has already cost you hundreds of thousands of dollars,” a Reddit member wrote.
When it comes to a large sum like this, the Redditors say that delaying investment could cost the 44-year-old substantial opportunity costs.
“Just move most of it at once. Dollar-cost averaging is what you do when you don't have a bunch sitting there. You've literally already forgone probably several hundred thousand by not investing when you could have,” one comment reads.
A Redditor even proposed a portfolio strategy, mentioning that it is a good choice if the poster is afraid of market volatility.
“A 60/40 portfolio, when checking historical returns from 1994 – 2024 of VTI + BND, saw highs of 27% and lows of -16%. If you’re a conservative investor who can’t stomach losses, lump sum into this portfolio and rebalance annually,” the commenter says.
Several Redditors suggested the 44-year-old diversify his investments as it is a crucial method to minimize risks.
“Your concern is known as sequence risk (investing at a bad time). The risk can be lessened by investing a set amount or percentage at scheduled intervals. [ ...] Maybe set a schedule for 4% to be invested every month for 25 months. Or 8.5% every month,” a commenter recommended.
A comment mentioned the investor’s existing portfolio and suggested that $700K in cash and $100K in stocks isn’t balanced.
“So in my opinion it’s good to consider various mid and long term economic possibilities and to diversify appropriately. But $700k in cash with $100k in the stock market doesn’t seem to be very balanced,” the comment reads.
While this particular Redditor considers DCA a smart move, he highlights the need to diversify whatever the investor decides to invest in.
“DCA is a smart strategy, but make sure you diversify whatever investments you choose. Personally, I'd buy some individual stocks and some core ETFs and for safety, keep some back in the HY savings fund,” the Redditor said.
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