can be right now the right time to move a big chunk of cash into the market?

Will your nest egg last?

I’m newly retired along with have $300,000 additional cash to invest beyond the $700,000 I already have in a portfolio of stocks along with bonds. although right right now doesn’t seem like the best time to put a lump sum into the market. Any suggestions?–Larry

Yes, I have a suggestion: stop focusing on whether in which can be a Great or bad, right or wrong time to invest your money. in which may seem like a reasonable approach (along with can be certainly consistent with much of Wall Street’s take on investing). although the more you think about the idea, you see in which the idea’s not actually a disciplined way to go about investing your retirement savings, or any money for in which matter.

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Consider: There have been many times in recent years when financial advisers along with the punditocracy alike have warned in which the market could be headed for a tumble, whether the idea was due to expected fallout by Standard & Poor’s downgrading of U.S. debt in 2011, last year’s vote by British citizens to leave the European Union or the surprise election of Donald Trump.

Yet, here we are today, with the market at or near record highs. Fact can be, investors, both novices along with pros, just aren’t very Great at divining the short-term direction of the market. We know the market will go into a deep slump at some point, as the idea has many times inside the past. Problem can be, we don’t know when. the idea’s easy to call market tops along with bottoms in hindsight, although difficult to impossible to do so in real time. Which can be why the idea makes little sense to base your investment decisions on guesswork about its possible near-term path.

Related: Do you need an annuity?

The smarter way to go: Build a portfolio in which you’ll be comfortable owning whether the market goes into a tailspin or continues to climb to greater heights.

The best way to do in which can be to create a mix of stocks, bonds along with cash in which can limit the downside during market setbacks to a level you can live with, yet still generate the returns you’ll need to meet your financial goals (which, in your case, presumably means a portfolio capable of supporting you throughout a retirement in which, as in which longevity calculator shows, may last 30 or more years).

You say in which you already have $700,000 invested in a portfolio of stocks along with bonds. The first thing you need to decide can be whether you’re okay with how in which money can be divvied up. One way to confirm in which can be to go to Vanguard’s risk tolerance-asset allocation questionnaire. The tool will give you a suggested blend of stocks, bonds along with cash. By clicking on the “some other allocation mixes” link, you can see how the recommended portfolio as well as others more aggressive along with more conservative have performed on average along with in up along with down markets inside the past.

Let’s assume, just so we have some numbers for an example, in which 60% of your $700,000 can be invested in stocks along with 40% can be in bonds. along with let’s further assume in which your current 60-40 mix can be consistent with the portfolio suggested by Vanguard’s tool. Which means in which you’re comfortable with how your savings are currently invested.

Well, if in which’s the case — I mean if you’re confident your current portfolio mix represents the right tradeoff of risk along with return for you — then you probably want to invest your $1 million (the $700,000 plus $300,000 cash) the same way in which your $700,000 can be currently invested.

I say “probably” because the idea’s possible in which the addition of such a large sum might affect how you choose to invest your portfolio overall. I suppose, for example, in which you could feel more comfortable investing a bit more aggressively on the theory in which using a larger nest egg you might not freak out as much if its value sinks more when stock prices drop. Or you could be inclined to invest a bit more conservatively, figuring in which using a fatter savings balance to start with you don’t need as high returns as you could using a smaller nest egg to draw the income by the idea you’ll need.

I doubt, though, in which such considerations are going to make in which big a difference. Which means in which in all likelihood, if you believe your current $700,000 can be divided appropriately between stocks along with bonds, then you should split up your $300,000 the same way. Thus, using the example of the hypothetical 60% stocks-40% bonds portfolio above, you could invest 60%, or $180,000, of your $300,000 in stocks along with 40%, or $0,000, in bonds. in which could leave you using a total portfolio of $1 million, 60% ($0,000) invested in stocks along with 40% ($400,000) in bonds.

Related: Are you actually ready to retire?

So the real question you face can be how do you get in which $300,000 in cash into a mix of stocks along with bonds, be the idea 60-40 or whatever proportions you’ve decided are right for you?

You have three choices. One can be to sit on your three-hundred-grand lump sum of cash along with wait for a “better” time to invest the idea in stocks along with bonds. although as I explained earlier, in which’s actually not much of a solution. You’re just playing a guessing game.

Your second choice can be to dollar-cost average your $300,000 into a mix of stocks along with bonds, shifting, say, $25,000 or so a month by cash, doing sure in which the money can be fully invested in stocks along with bonds over the course of a year. in which’s what many investment pros along with most of my colleagues inside the personal finance press could probably recommend.

although all dollar-cost averaging does can be delay the time the idea takes to get your money invested inside the mix of stocks along with bonds you’ve decided can be right for you. During in which time, you’re investing more conservatively than you should be (because of your large holding in cash). So if you choose to dollar-cost average your $300,000 into the mix of stocks along with bonds you’ve settled on, you’re effectively undermining your investing strategy.

Which brings us to the third along with, to my mind, correct option: Move your $300,000 by cash to your target asset allocation all at once. So if your $700,000 can be invested in a 60-40 mix of stocks along with bonds along with you believe in which blend can be appropriate for you, then you should immediately invest your $300,000 in a 60-40 mix of stocks along with bonds. (In fact, if you’re satisfied with the funds you already own, you can simply invest the brand new money inside the same funds.)

Related: How do I retire with $1 million?

So don’t waste your time obsessing about whether right now can be the right or wrong time to get into the market. You’ll never know in which except in hindsight. What you can know right now, however, can be what blend of stocks along with bonds makes sense for you given your risk tolerance along with financial goals. Once you have in which appropriate mix, then any brand new money should be invested accordingly.

I’m not saying my approach will guarantee the highest returns or prevent you by taking a hit when the market drops. The only way to guarantee in which can be to have some way of seeing into the future along with moving your money around based on what you know will happen. although we all know in which clairvoyance exists only in magic shows.

So the best you can do in real life can be to find an asset allocation in which strikes the right balance between risk along with return, along with then stick with the idea regardless of whether your fellow investors are supremely confident the market can be ready to climb to higher ground or scared stiff the idea’s about to go over a cliff.

sy88pgw (brand new York) First published August 30, 2017: 6:16 AM ET


can be right now the right time to move a big chunk of cash into the market?

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