By Walter Updegrave
Should I invest this money gradually to protect myself — and, if so, how long should I spread it out?
When it comes to investing a windfall — or any large sum, such as a 401(k) or IRA rollover — advisers and the financial press often recommend dollar-cost averaging, or investing the new money a little at a time. The rationale is that you’re taking on less risk by tiptoeing into the market rather than plunging in all at once.
So the standard advice in your case would be to put the $250,000 in a savings account or money-market fund initially, and then over the course of, say, a year invest $20,833 each month ($250,000 divided by 12) in a portfolio of stocks and bonds.
But like many other supposed nuggets of investing wisdom, this one doesn’t stand up to close scrutiny.
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