- Equity Mates
- Posts
- Should I invest a lump sum all at once? | Ask An Advisor
Should I invest a lump sum all at once? | Ask An Advisor
Equity Mates & Simon Harvey
October 11, 2023
Ask An Advisor
Hello and welcome back to Ask An Advisor.
The questions are coming in thick and fast - it’s great to see!
Perhaps one of the most common themes is investing for kids. This week on Equity Mates Investing we sat down with Glen James, founder of My Millennial Money to unpack 6 ways to invest for your kids.
If you have a question for our advisors or expert on the shows, send us one at [email protected].
Thanks for the support as always.
Have a great day!
- Bryce and Alec
If you find this newsletter valuable, refer it to 2 or more friends or family members to go in the running to win one of three $500 Bills & Grocery prize packs.
$250 voucher to go towards your utilities bills from Bill Fairies
$200 voucher for either Woolworths or Coles
$50 voucher for BWS
Simply share your unique link below, and ensure whoever you refer verifies their email. You only need two referrals to be eligible!
Competition closes 11:59pm, Sunday 29th October 2023.
Hearts & Minds podcast
As you may have seen in Monday’s email, we’re proud to have partnered with Hearts & Minds Investments to produce their podcast Hearts & Minds Podcast: Conversations on Impact and Investing
The week’s question
"What would your advice be to someone who comes into a large lump sum of money? For context I have just sold some land and have received over $150k after all my debt and capital gains has been paid off. Should I invest it all at once in the share market (keeping some cash in the bank) or invest slowly over the next few months?”
- Kristy
This week’s advice
This week’s advisor is Jaarod Holmes, from Morgans Financial, Perth.
This is his response to Kristy’s question:
When considering the question of all in now or gradually go in over a course of months, there is one key consideration…
…Your emotions
This is the single most important factor. If you were to invest the money today, and the market preceded to fall 30%, would you be okay seeing the number in your investment account being $100,000 or even less….. and if the answer is ‘yes’ then without a doubt, I think you might want to have a conversation with the person in the mirror and ask this question again.
The ‘all in now’ approach
It is interesting to note that peer reviewed literature suggests that over the long term, putting a lump sum of money to work immediately will provided you with the greatest opportunity to achieve the best mathematical outcome. What the literature doesn’t take into account is our fickle human emotions and the fact that, you are not guaranteed to have a better return by going all in.
Dollar-cost-averaging
What I have found is that, because we are human, and have the fickle human emotions, chasing the best mathematical outcome can cause us to achieve the worst possible outcome. Because of this, the best approach is to dollar cost average in or as you say ‘invest it slowly into the market over the course of a few months’.
By investing over the course of a few (or more) months, you might get a slightly lower return over investing all of it in month one, but you have a significantly higher chance of not worrying if the market corrects shortly after you invest.
Things you might not have Considered
The entity in which the money is invested (your name, a company, a trust, superannuation). Making this decision at this stage is very important, having the right entity structure set in place from the start can save you thousands of dollars and countless hours in the long run. It might not seem worth it now, but I can tell you form experience, it is.
The broker/platform you use. While this is a bit easier to change, using the right broker/platform can save you some money sure, but the real win here is the time you will save if you have access to all of the right reporting. Trust me on this one, you don’t want to be spending 30 hours reconciling data from multiple different platforms at tax time. It Isn’t fun.
As always, if you need help, contact a licensed financial advisor or trusted accountant!
Want to ask a question?
We have a star-studded list of advisors waiting to answer your question, so what are you waiting for?
Email [email protected] with your question
About Jaarod Holmes
Jaarod was working as an electrician when he found the world of personal finance and investing. From there, he changed course and commenced training to become a financial advisor. Now a licensed financial advisor at Morgans Financial – Perth, he has a strategy first approach, with the belief that no matter how good your investments are, if they are not set up in the right plan for you, they ultimately won’t provide you with the outcome you are trying to achieve He writes a weekly article on LinkedIn |  |
Keep learning
Podcasts
This week on Equity Mates Investing we sit down with Glen James, founder of My Millennial Money, to unpack 6 ways to invest for your kids.
Online courses
The Rask Value Investor Program with Equity Mates, is Rask’s full online investor training complete with stock market valuation templates, Excel downloads, investing checklists, case studies and hours of HD video.