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I spoke with my boss today, and my bonus will be paid in May. The bonus is paid based on performance, and I've looked at the numbers. The check should be significant, as in "more than my annual base pay." This leaves me with the problem of having a lump sum to invest right when the market is peaking, assuming the present run-up continues more or less.
I'm stuck with the question of dollar-cost-averaging the lump sum over seven to eight months or dumping it all into the market immediately. It basically becomes a question of "will the market correct soon or will the market continue its rise?" There's also the question of bonds, which I admittedly don't understand as an investment vehicle, so I will probably stay away from bond funds altogether. If you know somewhere online I can read about bonds and bond funds, I'd be obliged if you'd let me know. My learning mode is reading, so as long as the information is clear and correct, I'd probably be able to understand it.
I will use some of the bonus to pay off my mortgage; the mortgage pay-off is within reach even without the bonus. The rest will go toward investments; I have no non-mortgage debt and no significant monthly bills. I prefer market index funds and I already have several Vanguard accounts set up. I have enough in my various checking accounts that I'm not concerned with an actual "dedicated" emergency fund.
The bonus will put Roth's out of reach this year. I should be able to put as much as I want into a traditional IRA, because we have no retirement plan over here. The way I read the rules, I'm able to contribute up to my taxable income to an IRA. That will leave a lot for after-tax as well, since I get the foreign-earned-income credit which significantly cuts my AGI.
Assume a 20 year window to retirement (if I ever actually retire) and an extremely high tolerance for risk, long term. I would hate, though, to lose 20% of my cash three days after investing it. Heck, I'd hate to lose 20% three years after investing it, but that's when you buy more if you think about the adage "buy low, sell high." If I've put my whole bonus in, though, I won't be able to "buy more" immediately. Note I'm not trying to time the market. The only question is "DCA or not with my bonus?"
What would be your strategy with a very large amount of cash in-hand? I've only today started to consider my options, so I'd hate to leave something out of consideration. Not including the bonus, I'll still have monthly contributions available of several thousand dollars; even without DCA, I can still "buy low" but only over an extended period of time. In other words, my monthly deposits are themselves a form of dollar-cost-averaging. The only real difference is "how much of the sum to deposit immediately."
I will use some money to buy another house when I return to the US. I don't see any real issues in this regard beyond putting too much in a traditional IRA instead of after-tax index funds. I'll work those numbers in Excel.
I am open to any suggestions for consideration.
I'm stuck with the question of dollar-cost-averaging the lump sum over seven to eight months or dumping it all into the market immediately. It basically becomes a question of "will the market correct soon or will the market continue its rise?" There's also the question of bonds, which I admittedly don't understand as an investment vehicle, so I will probably stay away from bond funds altogether. If you know somewhere online I can read about bonds and bond funds, I'd be obliged if you'd let me know. My learning mode is reading, so as long as the information is clear and correct, I'd probably be able to understand it.
I will use some of the bonus to pay off my mortgage; the mortgage pay-off is within reach even without the bonus. The rest will go toward investments; I have no non-mortgage debt and no significant monthly bills. I prefer market index funds and I already have several Vanguard accounts set up. I have enough in my various checking accounts that I'm not concerned with an actual "dedicated" emergency fund.
The bonus will put Roth's out of reach this year. I should be able to put as much as I want into a traditional IRA, because we have no retirement plan over here. The way I read the rules, I'm able to contribute up to my taxable income to an IRA. That will leave a lot for after-tax as well, since I get the foreign-earned-income credit which significantly cuts my AGI.
Assume a 20 year window to retirement (if I ever actually retire) and an extremely high tolerance for risk, long term. I would hate, though, to lose 20% of my cash three days after investing it. Heck, I'd hate to lose 20% three years after investing it, but that's when you buy more if you think about the adage "buy low, sell high." If I've put my whole bonus in, though, I won't be able to "buy more" immediately. Note I'm not trying to time the market. The only question is "DCA or not with my bonus?"
What would be your strategy with a very large amount of cash in-hand? I've only today started to consider my options, so I'd hate to leave something out of consideration. Not including the bonus, I'll still have monthly contributions available of several thousand dollars; even without DCA, I can still "buy low" but only over an extended period of time. In other words, my monthly deposits are themselves a form of dollar-cost-averaging. The only real difference is "how much of the sum to deposit immediately."
I will use some money to buy another house when I return to the US. I don't see any real issues in this regard beyond putting too much in a traditional IRA instead of after-tax index funds. I'll work those numbers in Excel.
I am open to any suggestions for consideration.
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