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I elected to accept my former employer's pension buyout offer of $15K and roll it into my 401(k) plan. If I had this in cash I would invest it over time to leverage the benefit of dollar cost averaging. But it's a rollover so I have to invest the whole lump at once.

I'd still like to leverage DCA, so I'm considering putting the entire sum into the 401(k)'s Short Term Bond Index fund, then periodically transfer smaller amounts into the 401(k)'s other funds; perhaps over a 3-5 year period. Is this a viable strategy to get the benefit of DCA? Are there reasons why I would want to do something else?

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  • Can you roll it over into the 401K? Some plans don't allow this. If they don't allow the transfer can you put it into an IRA?
    – mhoran_psprep
    Jan 19, 2017 at 22:32
  • @mhoran_psprep Yes, the 401(k) plan administrator has already confirmed I'm eligible to do this rollover.
    – I say Reinstate Monica
    Jan 19, 2017 at 22:35

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Many would recommend lump sum investing because of the interest gains, and general upward historical trend of the market.

After introducing DCA in A Random Walk Down Wall Street, Malkiel says the following:

But remember, because there is a long-term uptrend in common-stock prices, this technique is not necessarily appropriate if you need to invest a lump sum such as a bequest. If possible, keep a small reserve (in a money fund) to take advantage of market declines and buy a few extra shares if the market is down sharply. I’m not suggesting for a minute that you try to forecast the market. However, it’s usually a good time to buy after the market has fallen out of bed. Just as hope and greed can sometimes feed on themselves to produce speculative bubbles, so do pessimism and despair react to produce market panics. - A Random Walk Down Wall Street, Burton G. Malkiel

He goes on from there to recommend a rebalancing strategy.

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