RetireJapan

adamu wrote: ↑Tue Nov 30, 2021 8:46 am

EmaxisSlim Cultist wrote: ↑Tue Nov 30, 2021 8:39 am I disagree, Vanguard has published quite a bit on this subject. Windfalls should be invested in a lump sum. That is what the data shows.

This is a dilemma many people face if they are lucky enough to inherit money.

https://investor.vanguard.com/investing ... t-lump-sum

They say that it is "prudent" to invest as a lump sum, but they do not use your language that "you are better off" doing so. The odds are in your favour, but it's not guaranteed. They also emphasise that dollar cost averaging is worth considering if you are worried about a downturn.

What investing firm would ever offer a guarantee of greater return?

You can backtest yourself to confirm, or look at their data and published papers.

Lumpsum investing is statistically a better choice. I, therefore, think it is prudent to recommend it over DCA when all things are held equal.

EmaxisSlim Cultist wrote: ↑Tue Nov 30, 2021 9:01 am What investing firm would ever offer a guarantee of greater return?

You can backtest yourself to confirm, or look at their data and published papers.

Lumpsum investing is statistically a better choice. I, therefore, think it is prudent to recommend it over DCA when all things are held equal.

I don't want to derail the thread any further so this will be the last reply, but happy to continue in another thread

I don't disagree with you on the statistics. Nor with your last statement that it's prudent to recommend it over DCA. But it's misleading to tell people that it will definitely be the right choice. The Vanguard research is full of disclaimers and statements such as "an investor must be fully aware of the fact that historical averages are only a guide" and "if an investor expects such trends to continue, is satisfied with his or her target asset allocation, and is comfortable with the risk/return characteristics of each strategy"... It's a nuanced point that I don't think can be simplified to "this will make you better off" to people who do not know the fine details. Especially given the emotional aspect is involved - where in the worst case people could panic and withdraw during a downturn, defeating the whole point of the lump sum investment in the first place.

Yes, investing the lump sum all at once is the +EV bet, but depending on the sequence of returns CDA could turn out better.

We don't know in advance. I prefer to focus on the knowledge and experience of the person making the decision, and perhaps erring on the side of minimising regret.

adamu wrote: ↑Tue Nov 30, 2021 9:08 am
I don't want to derail the thread any further so this will be the last reply, but happy to continue in another thread

I don't disagree with you on the statistics. Nor with your last statement that it's prudent to recommend it over DCA. But it's misleading to tell people that it will definitely be the right choice.

No, I agree with you, it is important to make the distinction of statistically the best vs the best choice for a real living person!

For many investors, it may be empowering to know that the data supports lumpsum investing. For the more risk-averse, they may see the difference as insignificant versus their perceived risk.

I think is so vital to realize how our emotions come into play. We cannot be 100% rational.

RetireJapan wrote: ↑Tue Nov 30, 2021 9:21 am Yes, investing the lump sum all at once is the +EV bet, but depending on the sequence of returns CDA could turn out better.

We don't know in advance. I prefer to focus on the knowledge and experience of the person making the decision, and perhaps erring on the side of minimising regret.

I would have to agree especially on the side of minimizing regret.
If I had a lump sum to invested probably split the difference.
Drop in a large amount but also keep some, to do the DCA, and if need be that would allow us to keep some cash in the post office just incase we need it.

But on saying all this....I'm livid with standard life total return after 25 years endowment payments. A poxy 33 grand after dropping in 75 pounds a months. Seriously, if this was a managed fund....I'd want to slap the manager for probably doing nothing. If he was any kind of a manager he could have done better sticking it in the bank, or a passive fund.
I'll probably split the large amount.....and reinvest in something else.
Minimizing regret is certainly an important factor.Especially when we are supposed to be TRUSTING financial companies..which kind of seems like an oxymoron now.PUH!!!!! call me jaded.LOL

This may be an opportunity to teach others about mis-selling, high fees, and to remind ourselves, salespersons are there to SELL, and how we need to take more of an active interest . I'm actually OK with it as I just wanted to life insurance element to it, but still...... was this managed at all?
https://goodcalculators.com/roi-return- ... alculator/

Bubblegun wrote: ↑Wed Dec 01, 2021 1:13 am But on saying all this....I'm livid with standard life total return after 25 years endowment payments. A poxy 33 grand after dropping in 75 pounds a months. Seriously, if this was a managed fund....I'd want to slap the manager for probably doing nothing. If he was any kind of a manager he could have done better sticking it in the bank, or a passive fund.
I'll probably split the large amount.....and reinvest in something else.
Minimizing regret is certainly an important factor.Especially when we are supposed to be TRUSTING financial companies..which kind of seems like an oxymoron now.PUH!!!!! call me jaded.LOL

This may be an opportunity to teach others about mis-selling, high fees, and to remind ourselves, salespersons are there to SELL, and how we need to take more of an active interest . I'm actually OK with it as I just wanted to life insurance element to it, but still...... was this managed at all?
https://goodcalculators.com/roi-return- ... alculator/

If it makes you feel any better, you actual ROI would be around 3% (assuming you start at 0 and add 75UKP per month for 25 years).

I have no lumpsums left to invest, so I just DCA nowadays. If I do come into some money, I'll probably just invest it in one go.

However, I think the LSI vs DCA debate is a bit more nuanced that just "statistics support LSI". DCA reduces the downside risk (particularly when valuations are high), which may suit more conservative investors or people who are investing over a shorter timeframe. This article covers it quite well: https://awealthofcommonsense.com/2018/0 ... -decision/

fools_gold wrote: ↑Wed Dec 01, 2021 3:03 am

Bubblegun wrote: ↑Wed Dec 01, 2021 1:13 am But on saying all this....I'm livid with standard life total return after 25 years endowment payments. A poxy 33 grand after dropping in 75 pounds a months. Seriously, if this was a managed fund....I'd want to slap the manager for probably doing nothing. If he was any kind of a manager he could have done better sticking it in the bank, or a passive fund.
I'll probably split the large amount.....and reinvest in something else.
Minimizing regret is certainly an important factor.Especially when we are supposed to be TRUSTING financial companies..which kind of seems like an oxymoron now.PUH!!!!! call me jaded.LOL

This may be an opportunity to teach others about mis-selling, high fees, and to remind ourselves, salespersons are there to SELL, and how we need to take more of an active interest . I'm actually OK with it as I just wanted to life insurance element to it, but still...... was this managed at all?
https://goodcalculators.com/roi-return- ... alculator/

If it makes you feel any better, you actual ROI would be around 3% (assuming you start at 0 and add 75UKP per month for 25 years).

I have no lumpsums left to invest, so I just DCA nowadays. If I do come into some money, I'll probably just invest it in one go.

However, I think the LSI vs DCA debate is a bit more nuanced that just "statistics support LSI". DCA reduces the downside risk (particularly when valuations are high), which may suit more conservative investors or people who are investing over a shorter timeframe. This article covers it quite well: https://awealthofcommonsense.com/2018/0 ... -decision/

Well 3% is better than a smelly kipper slapped in the face I suppose.
But if one thing should come of this real figure is the so called...figures shown by financial institutions or dare I say it, even Dave Ramsey et al.
Infact the companies initially used the rates of 5%, 7.5% and 10% as figures for growth, and these were reviewed lower to
4%, 6% and 8% in 1999. SO even the 3% is even lower than the lowest.LOL.
Anyways I'm glad I've got the money now, as we can use it for the family, but it should remind us all of the figures that Dave Ramsey et al on YouTube or books seller harp on about. After all they're still salesmen, but this time...its their product.
One this for sure is, We have the money, which was better than me blowing it on a car or in a bar as a young man.LoL. Non of my friends gave two toots about saving.LOL