My Investment Strategy

Hi all!

I am looking for some general advice about my investment strategy. I also understand that if I make changes to my strategy from this post that it is at my own risk. I am just curious to what everyone else would do in this scenario.

I started investing about one month ago. I did a lot of research and finally jumped into investing. I have learnt a lot and I am happy with how I am going to add money in the future and which stocks I will invest in.

A month ago I had a lump sum available for investing and I put around 75% of that into the market. I am very happy with the stocks and I have already made some healthy growth.

My worry is that I have just learnt about lump sum investing and dollar cost averaging during an all time market high.

I do want my money going into the market but I think I should have perhaps added the same amount of money that I planned on investing, but in smaller chunks over smaller time periods. That is, I would still be investing the same amount over this tax year, but it would not be in one large lump sum followed by smaller investments.

I understand that this also means that my money is not in the market as long and I may miss out. I also know lots of YouTube videos about a market crash can scare beginners into missing out on a lot of money. I am not trying to time the market, just wondering if my approach was a little bullish.

My question is, based on this information, if you had a lump sum of money that you would like to invest starting now and knew exactly which stocks you wanted to buy, would you add it all today or would you add, for example, a smaller amount weekly. One other thing to take into account is that I am investing for the very long term and do not plan to touch this money for 30 years or more.

There is not a correct answer as there are too many ifs and buts in stocks. Just remember most You-tubers are better at making videos than finance :+1: They need to make money by talking rather than being accurate. Some are OK but many will flip flop or aim to a certain echo chamber.

If you are investing for that kind of long term then it shouldn’t matter much unless you are investing in something that is in a massive dip. Of course my opinion is just that an opinion but as good/bad as any paid for video online. :stuck_out_tongue:

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Vanguard did a study in 2012 https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf that found lump sum investing beat dollar cost averaging on average.

The right answer for you is impossible to say. Your remaining 25% will nicely dampen any market up and downs though, if it is in cash. And your 30-year investment horizon reduces the risk of lump-summing in at the market peak - plenty of time for it to grow even if it drops in the mean time.

(To answer your question more directly, I’d probably invest a third of it quickly, the second third dollar cost averaged over the next few months, and some left in cash. Ish. But my investment horizon is shorter than yours - one reason why there’s no single correct answer.)

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As @Big-g says, there is no correct answer - the fact is that you’re already winning by just ‘investing’ fullstop! :slight_smile:

For my part, I’m a pound (dollar) cost investor, purely because I get paid monthly so I invest monthly. On the occasions I’ve had a large lump sum of money to invest (like when I got made redundant), I invested the whole lot in one go but split the sum into different investments to diversify.

Note that I didn’t even check the prices of what I was investing in (index trackers) as I didn’t really care if I was buying high or low, just that I was buying. Time in the market > Timing the market as they say.

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Good answer. Just to add: historically investing a lump sum in full into the market outperforms* investing it by dollar cost averaging because time in the market really is the most important factor. But then most people don’t have lump sums to invest :smiley:

*a by this I mean people calculated it for past entry points.

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Put a big wad in the S&P500 would I be close in saying it averages a 10% year on year return over 10 years

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I put in £20000 just before the new ISA year started and to date I still have only invested £11000 of it. I think I would have got better returns by investing more earlier, but equally, I was (and still am) expecting a market correction and want to be able to buy more during any dip.

There’s not a right and a wrong answer, but there’s no point looking back with regret. Just assess what you think the market will do going forward and invest accordingly.

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You can answer this question yourself by asking; Is right now the best value for money to put your investment into stocks?

By first looking at:

Real Estate
Stocks
Commodities
Bonds
Business
Alternative

Nobody can predict the future, though we do seem to have entered the equities bubble so the question is just ‘how far into this bubble are we’.

Obviously, the USA may be considered expensive though the Republic of Georgia may be considered fair value or undervalued… This comes down to geographical investing.

If you have done the research and you saw your value then make sure to have a ‘market correction’ plan baked into your mindset. Already know how you will feel should a correction begin and that will ease your worries because you were happy to the best of your research to begin investing.

If it were easy everybody would be retired age 40.

Take a look at the all-time chart on Cisco, that’ll give insights on what to expect.

Two words, Risk Control.