Big decisions ahead (1): Investing a lump sum

[Omainec]

Hello Baptist, hello everybody
... in about a month I will be fortunate enough to receive a major heritage (of about 700k). I take this event as an opportunity to finally clean up my investment mess. Therefore I have started to sell my existing (ofc totally overpriced ) funds and transfer the money to IBKR and opening some position there. My goal is to have everything transferred and invested after my last illiquid fund will be payed out in January 2025 (!). All in all I want to put around 85% in VT and 5% each in VSS, SPSM and maybe a swiss stock ETF (any suggestions?). Sounds reasonable for the risky part of my portfolio?
My question is more about the execution tough: I know, we should NEVER try to time markets. I know "time in the market beats market timing". I know crashes may or may not play out over an extended period of time etc. ... I get the reasoning ... BUT ... I think I will not be able to pull it of in praxis. The idea to invest maybe 70% of my wealth (second pillar aside) in one day, only to see maybe a 10% correction or worse during the next day or week is just to much for me. I think I still prefer the relative "security" of cost averaging over a few months, even if that costs me a bit if expected return (bc. of less exposure time), just in order to rule out the possibility of having invested a fortune on the eve of a crash (i.e. the worst possible day of the decade).
Any thoughts about this? Am I behaving irrationaly or shoud I stick to my "cautious" but in theory slightly losing plan, so I can avoid a "bad beat"?
Thanks for your opinions

 

[Max]

"Your investment should be risky. But only that risky, so you can sleep at night." Choose the plan which makes you feel secure. It takes time to get used to big numbers.

To reduce the fear, you can calculate in terms of total wealth (I do so): free capital + second pillar + third pillar (+ ...). Then your possible temporary loss will appear smaller.

 

[Baptiste Wicht]

Hi

What is the term of your investing?

All in all I want to put around 85% in VT and 5% each in VSS, SPSM and maybe a swiss stock ETF (any suggestions?). Sounds reasonable for the risky part of my portfolio?

It sounds reasonable. 10% in small caps may be interesting if you want that bias. And if you want a Swiss ETF, I recommend (and use) CHSPI. But then, you may have only 5% in it, which may not matter much in the end.

Any thoughts about this? Am I behaving irrationaly or shoud I stick to my "cautious" but in theory slightly losing plan, so I can avoid a "bad beat"?

It's true that in theory, it's better to invest everything at once (as long as you have a long-term horizon). However, as you just said, if you can't pull it out, then you need another strategy. And as @Max pointed out, you need a strategy that works for you.

You will not lose much by using DCA over a year or even two. It's suboptimal, yes, but it's still ten times better than keeping this amount in cash. If you feel like lump-sum investing is not for you, split it out and do not think too much about it.

 

[Omainec]

I have done some more "research".
This study from Luskin 2017 seems to indicate, that DCA (dollar cost averaging) > Lumpsum investing when the shiller PE ratio of the SP500 is > 31
Which is the case at the moment, tis over 34...
So that confirms my plan to DCA over 12 months or so ...
I thought I should share this here with you guys.

 

[Omainec]

.... and here, in contrast, somebody who argues quite convincingly, that the Shiller PE ratio is more or less useless.

 

[Baptiste Wicht]

@Omainec Generally, it's best to not overthink these things. If doing DCA helps you sleep at night, then do DCA