All In or Ease In? The Best Way to Invest a Big Pile of Cash

You’ve just come into some money! Woohoo! But now what? You want to invest it in equities for the long term, but do you put it all in immediately, or invest it slowly over time?

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Ah you lucky, lucky person. You’ve just come into a lot of money. An inheritance, perhaps. Or a business sale. Or a lottery win. Unlikely. Doesn’t matter where it came from. The point is: You suddenly have a lot of money in the bank. And you don’t wanna settle for low savings-account rates. Nope, you wisely want to invest for the long term.

You’re thinking 10, 20 years out. You’re fully aware that equities have normally provided solid returns over extended timeframes. You believe in human ingenuity. Our ability to create, innovate, and grow. You want to be a part of that. You want to own. Makes sense. But do you put all of your new-found wealth into the markets all at once

or slowly over time? Do you take the plunge with 100% of your money today or maybe put say 4% a month in over the next 25 months? Well, sadly, no definitive answer exists. But if you ask me in 25 months I can tell you which route you should have taken. Oh yeah, I’m that sharp. Obviously, if markets immediately roar ahead,

hey, all in. That right away, that’s the winner. On the other hand, if markets were to suddenly pull back after you did this 30 to 40% and your little-bit-at-a-time approach, therefore would grab the gold. That first month’s 1/25th of your capital gets smacked but hey, then you get to buy low for a while.

Nice. Dave, you’re not being any help here. What should I do? Just tell me. I don’t know. No one does. But history certainly says that investing it all now is probably your best bet. Probably. Why? Because, quite simply, stocks have been a top-performing asset class. You want to be in them as long as possible, and most of the time, as soon as possible. You know, time in the market, not timing the market. Moving in slowly will be the winner on occasion,

and maybe more psychologically comfortable for some, but none of us are smart enough to pick those times ahead of time, so we should play the odds. The returns aren’t as good if you go the other route. Now, a few key points here: 1) Don’t get me wrong, I love investing monthly and taking advantage of dollar-cost averaging.

It’s one of the Wealthy Barber’s favourites. And hey, for most of us, that’s our only alternative as we’ll never experience this windfall lump sum. 2) Many argue, “Okay I agree with your basic premise, but what if markets are expensive by historical standards? Valuations are super high? Then doesn’t it make more sense to move in slowly?”

That sounds very logical. Frankly, I kind of think that way myself, to be honest. But a key point must be repeated here. Most of us, almost all of us in fact, suck at market timing. Cripe, many “experts” have been emphatically stating the markets are too high for a decade now, and their followers have missed very solid returns.

I repeat: time in, not timing. 3) And this is a big one. What works for you? I have found for many people, despite everything I just said, despite historical numbers, despite what the odds favor, that moving in more slowly may be the prudent choice. Why? Because they’re more likely to stick to their long-term plan if markets crash/struggle.

The fact that the probabilities said, “Go all in now!” will be of little comfort if your new portfolio’s down 40% quickly. Often panic ensues and people get out. “I just got this money. I don’t wanna lose it all right away!” It’s human nature that when emotions are involved, we extrapolate the short-term trend. I get it.

I totally get it. Heck, even if people don’t cash out at the wrong time, their moods and sleep could be dramatically affected. Do what’s right for you after talking to your advisor. Yes, weigh the teachings of history, but remember, that’s not all that matters here. Some friends have gone with the mid-ground approach:

They’ve put 30-50% in the markets immediately, and then ease the rest in steadily over a two-to three-year period. Interesting. I certainly didn’t argue with them, especially with the US markets being so pricey. There’s no perfect answer here. Is there ever?