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Ready To Enter The Market - All In, Or Dollar Cost Average?

Discussion in 'Investing Strategies' started by JustB, 20th Jan, 2008.

  1. JustB

    JustB Well-Known Member

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    15th Jul, 2007
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    Location:
    Sydney, NSW
    Hey All,

    I've got LOCs setup against my IPs, with about $300k available to invest in a selection of managed funds, largely focused on Australian shares, but some international and China exposure for diversification. I have the cashflow to support the interest repayments, so am planning to re-invest all distributions, in addition to setting up a monthly savings plan for additional units.

    Having watched the markets fall of late, the optimist in me wants to plunge into the market with the full amount, while the pessimist in me is thinking of putting half in now, and then dollar cost averaging the rest over the coming 6 months.

    My time frame for the investment is long term (>5years) so I'm happy to ride the volatility, but would obviously like to minimise potential short-term catastrophic falls in my capital.

    That last comment probably answers my own question, but I ask anyway - is now the time for a big entry into the market, or is further short-term caution warranted, thus making dollar cost averaging the entry points a more sensible option?

    Cheers,

    JustB
     
  2. pinkeye

    pinkeye Active Member

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    Location:
    Melbourne, VIC
  3. Chris.R_WA

    Chris.R_WA Well-Known Member

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    Location:
    Perth, WA
    This sounds like a reasonably good bet each way. Market does look "relatively" cheap at the moment, but as Pinkeye's cartoon shows above, no-one knows for sure what will happen, and DCA into your MF's should smooth any large fluctuations in capital.

    Others will have other opinions (such as leaving it all in the LOC for a guaranteed 8%pa!!), so you need to do your own research :):)

    Cheers, Chris
     
  4. crc_error

    crc_error The Rule of 72

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    I don't think anyone will give you such advise!!

    Thats totally up to you..

    with such a large amount of money, I would personally put it in monthly over 6 or 12 months. your investment horizon is over 5 years so this should work well.

    If you with to take a punt, then now you <might> be getting in low.
     
  5. samaka

    samaka Well-Known Member

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    Another vote for dollar cost here.
     
  6. bdang007

    bdang007 Member

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    Location:
    Sydney, NSW
    my 2 cents,
    I'd probably stay out of australian shares at the moment and wait until after the world economic forum to finish (end of this month). No doubt they will be discussing how they can save america from the looming recession (this is my theory anyways). There are many economists that suggest america is heading for a recession and this may have a negative impact on the australian markets. Having said that, I had recently purchased a managed fund that exposed me to China/India/Brazil and other emerging economic countries.

    If you were to put money in the markets now, I'd go with dollar cost averaging. Its abit volatile at the moment and it may also be at the begining of the wild speculative phase (i hope not).

    Theres my 2cents take it or leave it hehe
     
  7. Billv

    Billv Getting there

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    I would say wait for another month or so.
    The markets are so volatile it's not funny.

    If you wanted to get it out of your system
    you could start with a small amount and see if you can handle the volatility.

    Cheers