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I am planning to liquidate my holdings in two non-Vanguard funds and consolidate in VTSAX. This will all be done inside a Vanguard Roth IRA, so commissions will only be due for the two sell orders. Should I practice dollar-cost averaging while investing this money in VTSAX, or reinvest everything as soon as I can?

  • If you do the dollar cost averaging for investing in VTSAX, will you sell your non-Vanguard funds in increments or sell it all at once and thus have cash lying around? – gaefan Aug 7 '16 at 15:36
  • I would sell all at once, as Vanguard charges $35/order for out-of-family funds. – givemesnacks Aug 7 '16 at 19:16
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Dollar cost averaging is a fancy name someone came up with to say "Invest all of the time". I would not bother with spreading out purchases. If the market is too expensive right now ...so what? The items you sell will bring top dollar. The fund you buy will cost top dollar. It all evens out.

You could sell your assets and just sit on cash, but that would require knowing when the next market drop is coming..which no one knows. Also, it never really is cash; it goes into a money market fund which is not guaranteed. I would rather own companies(VSTAX) and collect the dividend.

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There are been many tests about invest all the money immediately and average it out during a period of time.

The results favor to invest the lump sum immediately, so your money starts to work and produce income with dividends. Cash don't produce any income.

  • On the other hand, it can be... discouraging... to see the value of an investment drop immediately after you invest the entire lump sum. Because personal finance is often more psychology than mathematics, it might make sense to invest the bulk of your money first, then spread the remainder over some reasonable period of time. – a CVn Aug 7 '16 at 12:25
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    This answer would be better if you edit it to name at least one of the studies you are referring to. – a CVn Aug 7 '16 at 12:25
  • I would be interested in these studies as well. – givemesnacks Aug 7 '16 at 19:24
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    A quick search led to this study from Vanguard. – givemesnacks Aug 7 '16 at 19:47

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