I currently have a large pile of cash savings ($240,000) which I really should have been investing all this time, but the past is past and no point dwelling on it.

I am currently 38 years old (2 kids. Wife who is also a high earner - $100,000), with a high salary ($150,000). I have read "The Intelligent Investor" and am really sold on dollar cost averaging as a strategy, using the index funds offered by Vanguard.

My current dilemma is what to do with the cash I already have. My current plan is to still follow the dollar cost averaging and slowly move it into vanguard over a period of 4 years (~$5000 per month). While leaving the remaining parts of the cash in term deposits. So $50,000 in a 3 year term deposit at 3%, $50,000 in a 2 year term deposit at 2.8% etc.

But in someways it feels overly conservative. Should I just move all the money now? Or perhaps in a shorter time frame (3 years? 2 years? 1 year?).

There are a few other questions on the site similar to mine, but they are from 2013/2014 etc. Given that currently the stock market is at a high and there is a lot of economic uncertainty on the horizon, putting everything in the stock/bond market at once now seems like a risky move. And it seems to violate the principle of dollar cost averaging. Or am I violating dollar cost averaging by trying to "time the market" by looking at it's current value?

Reading this section https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusion seems to indicate that I should just invest everything now. But the first paragraph also seems to suggest giving more weight to that advice if the market was trending upwards (Which I am not certain the current market is/will be for long).

PS: My current investment horizon is long. Basically retirement, about 20 years from now.

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    I was going to say the same thing as quid, just invest the lump sum. But, if you can get 3% by locking in a sum for 3 years, 2.8% for 2 years etc, you strategy seems very sound. Definitely conservative, but not overly so.
    – bjarkef
    Mar 16, 2018 at 6:23
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    For me the question is; how will you react to a 50% loss if the market turns south? I think I would go with dollar cost averaging and double down when there's a pull back.
    – kweinert
    Mar 17, 2018 at 0:49
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    When people talk to you about dollar cost averaging, they're basically just trying to convince you not to stop buying stocks when the market is low ("Oh no, market is bad, scary, don't put more money in the market!") and not to start buying a lot of stocks because the market is high ("Wow, everyone is making money, I want to be in on that!"). These emotional reactions, if unchecked, cause you to buy all your stock at the most expensive possible price, which is the worst decision you can make.
    – user13722
    Mar 17, 2018 at 2:30
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    @kweinert I don't think I would pull my money out as I have no where else much better to put it. But I would definitely be very unhappy and kicking myself big time.
    – cgg
    Mar 17, 2018 at 2:44

3 Answers 3


According to some research conducted by Vanguard:

We conclude that 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, the prudent action is investing the lump sum immediately to gain exposure to the markets as soon as possible.

The paper is actually an interesting read. A number of different markets and time frames were used in the analysis. Essentially, if you have the money now, you should just invest it now rather than structuring a dollar cost averaging strategy. Structured investing is great if your plan is to invest a stream of future cash flow, like an income; but if you already have all of the money now you're better just exposing it to the market if that's where it's going to end up anyway.

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    In the abstract, yes that makes sense. And if these were "normal" times, that might be an ok thing to do. But with a looming trade war and the stock market at an all time high, putting all my life savings in now seems like a risky move. Or in investing is there really never such a thing as a "normal" time?
    – cgg
    Mar 17, 2018 at 2:41
  • Or are index funds "robust" enough that barring a cataclysmic drop, they are a safe enough? Especially if 25-50% goes into bonds like the intelligent investor suggests.
    – cgg
    Mar 17, 2018 at 2:59
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    Your question was should you DCA or lump it all in to the market, and Vanguard's research says you should lump it in IF this money will be allocated to the market either way. I'm a big believer in asset class diversification and love my CD ladder and treasury bonds. I don't think all your life savings should be in the market, the Vanguard paper says however much of it will end up in the market should just go in to the market. There's always a reason to not invest, and lots of wise professionals who denounce attempts too time the market.
    – quid
    Mar 17, 2018 at 4:45
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    I will say, I'm a big believer in the emotional component of investing. It doesn't matter if you make a couple basis points but lose a bunch of sleep for it. If you're more comfortable rolling the money in more gradually then, do that. Maybe make annual buys instead of monthly. Sleep is more valuable than a bit more yeild.
    – quid
    Mar 17, 2018 at 4:52
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    @cgg And if these were "normal" times, that might be an ok thing to do. But with a looming trade war and the stock market at an all time high, putting all my life savings in now seems like a risky move. 20/20 hindsight can be depressing. Note that I remember having this same conversation in 2015, six years after the boom started, wondering: "Can it last much longer???"
    – RonJohn
    Jan 4, 2020 at 0:55

Dollar cost averaging performs better in an oscillating market. Lump sum investing performs better in an up trending market. So what's the market going to do going forward? No one knows so it's impossible to know which method of entry you should employ.

Then there's the issue of your internal conflict. You feel that you should be invested but you are of the opinion that you're late to the game and that "given that currently the stock market is at a high and there is a lot of economic uncertainty on the horizon, putting everything in the stock/bond market at once now seems like a risky move."

What to do, what to do? Screw the "principle of dollar cost averaging". What do you feel comfortable with? What's your risk tolerance? Are you chasing all out equity exposure to match the market? Or a blended approach of growth and income? Or perhaps a steady level of income? What balance is acceptable to you?

I'm no longer familiar with Vanguard products and I'm not attempting to give you investment advice - just some additional ideas. And no, I'm not in the business - just a retail investor/trader.

You could park some of the money in a preferred stock ETF. They're currently paying about 5.5% per year, exceeding your CD rates. They're lower risk than common stocks but they are subject to interest rate risk (long term not Fed fund rates).

I'm going to go out on a limb and mention something outside the box. There are some interesting structured index annuities that offer varying levels of downside protection with an upside cap. Five year annuities with one year segments. At AXA, you can get 10% of downside protection with a 7.6% cap on the S&P 500. So if you put $100k in the S&P model, you don't lose a penny of the first $10k of drop and you make whatever the index is up, up to $7.6k One year from now, your principal resets to the value of the index.

Brighthouse (formerly part of Metlife) has a variation of this where it's six years with a similar one year segment cap (say it's the same at 7.6% cap) but it has a Step Up feature where if the index is up ONE penny at the end of the year, you get the 7.6% while still protected against the first 10% of drop.

Apart from the Step Up feature, these annuities aren't really good deals because you can simulate the product with options and do far better. At today's prices, you can do the January 2019 SPY combo (10 months out) and receive 20.6% of downside protection (double what the annuity provides) with a similar 7.8% cap. If you want more profit potential, you can give up some of the protection so another choice could be 19.4% protection out of a 20% drop with a cap of 8.4%. Or if risk is less of a concern, you could set up a 11% downside protection with a 11% cap. And so on...

The point of these ideas? You can double the CD rate with some preferred stock ETF exposure. You can invest some of the money in simulated structured annuity positions with 20% downside risk covered (dealing with your over valued market concern) yet have some upside potential if the market is good. IOW, if the market tanks, this component will be owned at 80% of the current value of the SPY (or 90% if you opt for the higher risk, higher cap) which is essentially DCA. Or you can go all out and plunk everything in the market right now, accepting whatever return it gives you, good or bad, going forward.

There's no one size fits all answer so I'd also suggest that you meet with financial advisers to move you up the financial food chain. You can get free consultations at Edward Jones, JP Morgan Chase Bank, TD Ameritrade, et al. Let them work up a plan for you and provide additional ideas. You don't have to give them a penny unless you find something that really intrigues you. And if you're really clever, you can duplicate it at Vanguard. The more information you have, the more able you'll be able to craft an approach that fits your needs and risk tolerance.

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    "Dollar cost averaging performs better in an oscillating market." does it? What if the market oscillates around an average that's higher that the original "price"? I've always considered DCA an artifact of periodic investment plans (e.g. 401(k()) and not a strategy per se.
    – D Stanley
    Mar 16, 2018 at 16:21
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    Perhaps you should have quoted both of my sentences? As I said, "Lump sum investing performs better in an up trending market" so if price has climbed to a new level and then begins to oscillate, lump sum would have been the preferred choice of entry at the lower level --> and would have done better. Mar 16, 2018 at 16:50
  • Dollar cost averaging performs better in an oscillating market. Lump sum investing performs better in an up trending market. The truth or falsity of this statement depends on how you define "performs." Is performance measured by some combination of expected return and variability? If so, then what combination? If performance is measured entirely by expected return, he should invest all his money now. If performance is measured entirely by variability, he should donate all his money to charity.
    – user13722
    Mar 17, 2018 at 2:21
  • @BobBaerker I live in Australia. I am not sure I have access to all these products. And would also require me to research a lot more, they sound very exotic. I have met with a financial adviser coming up, but I want to go in with some knowledge and/or preferences.
    – cgg
    Mar 17, 2018 at 2:52
  • @Crowell : You quants can statistically analyze and dissect this in any way that amuses you but the Average Joe investor only wants to come out ahead in $$$. Pick a non trending non dividend stock where over the past "X" years it has gone nowhere. That means no capital gain. If price rose initially, lump sum entry was better. If it oscillated around entry price, probably a push. If down after initial purchase, DCA would have been better. Surely you can look at some price data and figure this out. It's not rocket science. . Mar 17, 2018 at 13:08

As I see it, it comes down to a trade-off between the highest expected value (invest everything in shares asap) which is also associated with the highest uncertainty/volatility/potential downside risk. Even the potential for value loss can cause anxiety, so playing safe has some value all by itself.

In this situation, the following is the strategy I would feel most comfortable with. I haven't seen this answer anywhere else, and I'm not sure what the investment community would think of it (feedback welcome).

I would do something like "exponential dollar cost averaging". I would invest exponentially decreasing amounts each year until I reach my long term allocation target. For example, if I'm aiming to reach an allocation with 80% of my wealth in shares, I would put in 40% the first year, 20% the second year, 10% the third year... Eventually that would reach 80%. (I might round up the last few payments so that I didn't have to wait infinite years to reach the goal.) I would also spread the initial large investments over the course of the year, assuming that transaction costs/fees aren't too high.

It would be important to maintain diversification over the whole course of the investment, so I would start with an investment in a highly diversified ETF. (e.g. Vanguard, as OP suggests.)

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