Hey everyone, I was recently asked by a friend my opnion on what he should do with a $100,000 windfall, my thoughts below.

Have a nice weekend,
Eddie

PS. some good reads & listens this week:

Question: I just got paid a whack of cash, ~$100k. I moved it into my trading account but I have indigestion about deploying that $100k right away in the market and “avoiding worrying about timing”

In my shoes would you do $10k per month over 10 months type of thing or actually just deploy it and ignore any downswings?

Answer

I'd do it in 3 equal tranches, 1/3 now, 1/3 in 3 months, 1/3 in 6 months.

Unless you need the money, lump sum wins.

But this will placate the emotion and get you on a schedule to be fully invested.

And then set targets as to where you would trigger an acceleration of deployment tranches. 

Example: 

SP500 today is ~6,900.

Something like that, whatever you feel good about. 

This way if the market does get spanked, you'll have this written down and not second guess your purchase decision because at down 20% or down 30% it wont be pretty.

You follow the rules you set out up front. 

Setting up these parameters was hugely important for me and my team at Richardson Wealth during painful market selloffs:

Headlines were doom, clients were calling asking about our market predictions based off the latest tweet from Trump, if the world was really ending during COVID, etc.

They expected us to have the answers. We didn't.

But we had plans in place. We were systematically adding to equity positions during those sell offs even though it felt like things were going to hell.

In the short term stocks are wobbly, in the long term stocks are solid.  

PS. This above applies to someone who has no near term spending need for this windfall, and has a long term time horizon to invest. If you have near term responsibilties for which a windfall could be prudently applied, ie an outstanding credit card balance, you should be focusing on those priorities.

“Act as if what you do makes a difference. It does.”

―William James

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