Invest now or wait

Sebo027

Assuming you're investing in a broad global equities index tracker, statistically speaking over a 15 year period, approximately 2/3 of the time a one off lump sum deposit will provide higher returns than averaging. If you're not comfortable with 100% equities you could consider investing with a portfolio following a 40/60 or 60/40 bonds to equity ratio.  

Exodi

Sebo027 said:

Assuming you're investing in a broad global equities index tracker, statistically speaking over a 15 year period, approximately 2/3 of the time a one off lump sum deposit will provide higher returns than averaging. If you're not comfortable with 100% equities you could consider investing with a portfolio following a 40/60 or 60/40 bonds to equity ratio.  

I think this is playing with figures.

How long are we assuming that the amount is dripfed for, surely not the full 15 years? Obviously you're likely see bigger returns the longer you have your capital employed.

What we're talking about here, is to potentially dripfeed over days/weeks/months rather than years. It is a means to prevent investing the lump sum on the worse day - while this is counterbalanced by the potential of putting it on the best, this casino-style risk isn't appealing to many people.

mark_cycling00

IMHO. We all need to balance the downside risks of some form of "apocalyptic" winter with energy rationing and sky-high food prices, against western politicians propensity to suddenly forget about their current (and risky) moral crusade and move on to something else that looks more popular. 
So just as Covid stopped being a problem early this year, there are the early mentions of "negotiation" in the media when it comes to Russia/Ukraine.

And I mean "balance" the probability of both outcomes, not assume one to be correct.

Sebo027

Exodi said:

Sebo027 said:

Assuming you're investing in a broad global equities index tracker, statistically speaking over a 15 year period, approximately 2/3 of the time a one off lump sum deposit will provide higher returns than averaging. If you're not comfortable with 100% equities you could consider investing with a portfolio following a 40/60 or 60/40 bonds to equity ratio.  

I think this is playing with figures.

How long are we assuming that the amount is dripfed for, surely not the full 15 years? Obviously you're likely see bigger returns the longer you have your capital employed.

What we're talking about here, is to potentially dripfeed over days/weeks/months rather than years. It is a means to prevent investing the lump sum on the worse day - while this is counterbalanced by the potential of putting it on the best, this casino-style risk isn't appealing to many people.

I can type up more about it later as it's articulated quite well in Tim Hale's Smarter Investing (3rd Edition), but you have answered the question on your own. We agree that the more capital invested over a period of time is more likely to have better returns than if you drip feed over the same period. 

You never know where you are in that "15 year period" and if you did you would simply invest at the bottom and sell at the top, rinse and repeat. Again, statistically someone who attempts to do this will receive a lower return than someone who invested for 15 years with a reasonable investment strategy and did nothing but wait. 

* reasonable investment strategy - in my opinion = investing in mix of global equities / bonds / REIT. 

adindas

Exodi said:

Sebo027 said:

Assuming you're investing in a broad global equities index tracker, statistically speaking over a 15 year period, approximately 2/3 of the time a one off lump sum deposit will provide higher returns than averaging. If you're not comfortable with 100% equities you could consider investing with a portfolio following a 40/60 or 60/40 bonds to equity ratio.  

I think this is playing with figures.

How long are we assuming that the amount is dripfed for, surely not the full 15 years? Obviously you're likely see bigger returns the longer you have your capital employed.

What we're talking about here, is to potentially dripfeed over days/weeks/months rather than years. It is a means to prevent investing the lump sum on the worse day - while this is counterbalanced by the potential of putting it on the best, this casino-style risk isn't appealing to many people.

That is what happen when people do not use their common sense. They just quote the headline "Do not time the market". "Put all of hard earning cash in one go" without looking into where we are now, Whether it is a bull or bear market.

If you observe some people suggest to throw all of the money in the bear market and there is no evidence that they themselves are doing that in the bear market. Also if you read on other threads many people are using common sense by DCA ing rather than throwing lump-sum.

People are doing DCA without realising it, as many people will need to wait for the next month before getting extra cash to invest.

Throw your hard earning cash money into the lion den, you might see your money might almost disappear in the following month. Throw. your hard earning cash, £200k (say) in one go just because you have money ready to deploy at that time, if you are very unlucky you might need to wait 20+ yr  before you see a single penny profit. Doing DCA you will never be in this situation.

Also I have posted a research showing that in the bear market, DCA will in many cases beat Lump-sum investment. Many research showing Lump-sum beat DCA do not take into account the bear market.

But you do not actually need a research for this as common sense will do. In the bear market there is more probability that price will drop rather than up.

Bear market is a period of time taking months, sometimes years so there is no need to be very specific to know a specific date to find the exact flipping point, the perfect bottom.

barnstar2077

As there is no way of knowing if things are going to be better or worse at a given point in the future the logical thing would seem to be to invest everything now (assuming you are investing for over ten years and especially if someone has a bit of flexibility when it comes to needing the money.)

MX5huggy

Are we in a bear or bull market today? I alway have to check which is which any way, I don’t want to be in a phone box with either. 

Audaxer

barnstar2077 said:

As there is no way of knowing if things are going to be better or worse at a given point in the future the logical thing would seem to be to invest everything now (assuming you are investing for over ten years and especially if someone has a bit of flexibility when it comes to needing the money.)

There is no way to know if things are going to get better or worse. However someone that decided to put a huge lump sum in at the end of last year would probably be wishing they had drip fed over the last 7 months. If investing a large lump sum all at once I would be more confident about doing it now than at the end of last year when most markets were at all time highs.

barnstar2077

Audaxer said:

barnstar2077 said:

As there is no way of knowing if things are going to be better or worse at a given point in the future the logical thing would seem to be to invest everything now (assuming you are investing for over ten years and especially if someone has a bit of flexibility when it comes to needing the money.)

There is no way to know if things are going to get better or worse. However someone that decided to put a huge lump sum in at the end of last year would probably be wishing they had drip fed over the last 7 months. If investing a large lump sum all at once I would be more confident about doing it now than at the end of last year when most markets were at all time highs.

Yes, but you are looking back on events now, when in reality you wouldn't know, so it could also have gone the other way.  We didn't know a year ago what the future holds, and no one knows what will happen a year, five, or thirty years from now, so the logical thing to do is just to invest as soon as the money becomes available.

Drip feeding is perhaps psychologically easier for people because they would rather miss out on some potential growth than take a perceived loss to their capital, even if it would prove inconsequential in the long run.

eskbanker

adindas said:

Also I have posted a research showing that in the bear market, DCA will in many cases beat Lump-sum investment. Many research showing Lump-sum beat DCA do not take into account the bear market.

But you do not actually need a research for this as common sense will do. In the bear market there is more probability that price will drop rather than up.

Bear market is a period of time taking months, sometimes years so there is no need to be very specific to know a specific date to find the exact flipping point, the perfect bottom.

I know you like to trot this bear market/DCA stuff out repeatedly but its flaws have been pointed out on numerous occasions - I'm not proposing to go through it all again, so, rather than reinventing wheels, one example is at https://forums.moneysavingexpert.com/discussion/comment/79263546/#Comment_79263546