Investing large sum - drip feed or all-in?

DoctorStrange

How would you position your portfolio for recession?

I'm kinda torn between my head and my heart right now as everything says "time in the market beats timing the market", but if equity valuations are high and recession is highly likely, is a move to cash sensible despite the inflation risks? 

GeoffTF

Perhaps, but the market could go up quite a bit more before it turns south. Some equities, some cash may be best. Sell some equities to rebalance if it goes up. Buy some equities to rebalance if it goes down.

Thrugelmir

DoctorStrange said:

How would you position your portfolio for recession?

I'm kinda torn between my head and my heart right now as everything says "time in the market beats timing the market", but if equity valuations are high and recession is highly likely, is a move to cash sensible despite the inflation risks? 

Financials, infrastructure, energy , healthcare stocks. Though probably too late now as the transition had already started late last summer. When there was a boycott of dirty oil stocks. Some investors have no morals. As someone has to own these companies. They aren't simply going to disappear. In 2020 only 3% of global energy supply was generated from renewable sources. 


The difficulty you face will be calling the bottom and deciding when to reinvest the cash. Volatile markets can be extremely jagged. When I've been in doubt in the past I've had no hesitation in holding a reasonable level of cash. Markets can easily move greater than the annual rate of inflation in a day. If you've holdings than have gained significantly in a short space of time. You've the option of top slicing and banking some of the profit. That's when having an understanding of your investments really counts.  

sebtomato

Thrugelmir said: Some investors have no morals. 

Capitalism has no morals.

eastmidsaver

i think when you google this question,  appears studies have shown lump sum was best over long term, even when the lump sum was invested just before a crash.

Audaxer

eastmidsaver said:

i think when you google this question,  appears studies have shown lump sum was best over long term, even when the lump sum was invested just before a crash.

If you were unlucky enough to invest a lump sum just before a crash which took several years to recover, it would have been more advantageous to drip feed the lump sum or invest it in chunks over a couple of years.

MK62

......the problem is that you won't know that at the time.

In the end, you have to make a decision........invest it now, wait and watch, or drip feed it in, and you won't know beforehand which is the best, or worst, thing to do......but that's generally the nature of stock market investing.

Thrugelmir

sebtomato said:

Thrugelmir said: Some investors have no morals. 

Capitalism has no morals.

The world is far from perfect as people will always be people. 

eastmidsaver

Audaxer said:

eastmidsaver said:

i think when you google this question,  appears studies have shown lump sum was best over long term, even when the lump sum was invested just before a crash.

If you were unlucky enough to invest a lump sum just before a crash which took several years to recover, it would have been more advantageous to drip feed the lump sum or invest it in chunks over a couple of years.

True,  but same goes the other way,  if you keep drip feeding and each month the unit cost goes up,  and then the market drops...  you would be disadvantaged.   I guess the point is, nobody knows what will happen as many above have pointed out.   It just depends how long term you really are and if you will to accept the risks.

adindas

DoctorStrange said:

How would you position your portfolio for recession?

I'm kinda torn between my head and my heart right now as everything says "time in the market beats timing the market", but if equity valuations are high and recession is highly likely, is a move to cash sensible despite the inflation risks? 

Well actually not everyone says that. "Time in the market beats timing the market" suits for most investors especially those who do not want to spend time watching news regularly, researching, learning new things. This strategy is more suitable in the bull market for investing in a well diversified fund, globally diversified portfolio where volatility is less ferocious. But for high growth stocks or funds containing a lot of high growth stocks especially in the bear market is not the best strategy out-there. The price for this types of funds, stocks could have a swing low/high +/-  30% in a few weeks (or even less than a week) before leg drop further down reaching a new low. Watching regular news, listening from experts from stock market channel such as CNBC, Bloomberg, Yahoo Finance, Fox Business, morning stars, investor chronicles, Motley-fools etc are good in order to know where we are.

Theoretically, based on the Efficient Market Hypothesis (EMH) noone could beat the market by timing market, but this hypothesis has been abandoned by acute investors as in reality the market is far from efficient. Most of billionaire investors (if not all) including Warren Buffets, Peter Lynch, acute traders, hedge fund managers are contrarians and are timing the market all the time. But they do not blindly time the market. They observe stock market news, using various analytical, technical, fundamental and valuation tools to gauge the market before they strike. They do not get 100% right (noone ever)  but keep in mnd they just need to get 50%+ right to beat the other alternative, not timing the market.

Megacaps stocks price have dropped recently but Stocks valuation might still be high but many of good high growth stocks have dropped below their fundamental value decimated down around 70% in this current market.

In the past treasury Bond Yield Inversion; 10Yr Maturity Minus 2Yr Maturity is used to predict recession in the US. As the recession is defined a two consecutive quarters of negative economic growth measured by a country’s gross domestic product (GDP); Even if the recession has started today, the earliest we could know for sure that the US economy in recession is after 6 months from now. But in the past the recession normally came around 12-18 months after the yield inversion, not immediate. But what happen in the past is not necessarily prevail this coming years. Yield inversion 10Yr Minus 2Yr Maturity bond was slightly in negative territory last week, but it bounced back again slightly above zero just after a few days, one of the lowest unemployment rate in the US. has been reported It might signal that recession might come much later than usual or will not happen in next few years.