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The discussion regarding DCA and lump-sum investing is not academic for me. I’m retiring at the end of this calendar year. I will receive several million dollars in a lump sum from the sale of my company’s stock (privately held, employee-owned company). While I have the good fortune to be receiving this sizable amount, it will form the majority of my retirement savings. I will be investing it in a more or less standard asset allocation portolio using index ETF’s spread among large and small cap domestic and foreign stock, short-term bonds, TIPS, and REIT (I don’t want to get into percentages in this posting because that’s not the focus of my question). I’ll be using a withdrawal rate of about 3% or less.

Thus, I don’t need a lot of growth to keep up, but protecting the downside does become important, especially with this “once in a lifetime” investing event. I get it that DCA generally isn’t a good idea because I could average this into the market over, e.g., a year, and then the market tanks at a year and a day. However, one article I read which was generally anti-DCA for all the reasons you guys have discussed here, nonetheless suggested that historically a DCA over a 6-month period has about a 7% protection against downside with a 1% loss of upside. (page 2 of article.)

The article went on to say that any longer than six months wasn’t a good idea, because the loss on the money you are not investing begins to outweigh the downside protection.

What do you guys think?

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