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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: How to invest a Large Lump Sum Date: 12/21/2007 1:50 PM
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As I suspected, the two posts in reply agreed not to put it all into the marker on one day, just for the reason I assumed, so that I don't invest at a peak, to be followed by a downturn in the market.

No - you're reading what you want to hear.

They both said that the statistics favor putting it all in the market immediately. However, they also said that doing so can feel very risky, so it wouldn't hurt too much to spread out the investment over some length of time.

the Lump Sum is from the sale of a business ... The real life scenario will be mid 7 figure money.

That would color my advice a bit. First off, set aside what you need for taxes in something very safe - CDs or money market accounts or something like that. That tax bill is coming and it probably isn't small.

The next bit would depend on how much other money you have accumulated. If you don't have much else, then I'd probably stick with your initial thoughts. Spread the investment into the market out over some number of months. This is mainly for the "sleep at night" factor. You're trading a lower expected value for a lower risk of loss.

However, if you have already set aside a significant sum for retirement (say around $1MM or more) you can be a bit riskier. Those funds already give you a decent retirement, so the sale proceeds are more of a bonus. You can be a bit riskier with the money. In that case, I'd favor going with the odds and putting it all (or all you plan on investing) into the market in a short period of time. The statistics say you'll get more money in the long run this way. But there is also a slightly higher chance of losing more money as well. Offsetting that increased risk would be the fact that you already have a safety cushion under you already.

--Peter
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