Connect with us


Investment strategies for large sums of cash



PHUKET: Consider the following investing dilemma: You have recently received a large sum of money (from a pension payout, inheritance, the sale of property or a business) and you want to put this money to work for you. However, interest rates and returns on what are considered to be the safest investments (for example US and European bank deposits and government bonds) remain extremely low while the stock market is well into a bull market with many investments having already seen large gains. What should your investing strategy with this lump sum be?

Obviously, you would be afraid of investing all of the money into the stock market just before a 2008 style market meltdown or bear market. However, there are ways to manage both your fears and your money.

To begin with, you need to consider how big this lump sum is compared to the amount of money you have in the form of cash or other investments. A good rule of thumb is if the lump sum is less than 20 per cent of the value of your total cash and investment portfolio, you should likely invest the entire amount into your existing asset allocation as it won’t impact it that much.

If the lump sum is more than 20 per cent of this value, you will need to consider one of the following investing strategies:

1) Pick a long-term asset allocation and put the entire lump sum to work immediately. This makes the most sense from a historical and statistical prospective as over time, stock markets eventually recover from bear runs and move higher. However, you may not sleep well at night if you are an overly conservative investor. Likewise, this strategy may be better suited if you are a younger investor who plans to continue working for a number of years, than if you are an investor who is already retired and living on a fixed income.

2) Dollar cost average (DCA) a small amount periodically over a set period of time. The benefit of taking a DCA approach is that it can be easily automated. For example, you have received $250,000 and you invest $10,000 a month spread over the next 25 months. The DCA approach does tend to be more effective than a lump sum approach in a volatile market where prices are moving up and down. On the other hand, the slow and steady DCA approach in a raging bull market will have you missing out on large stock market returns.

3) Value averaging (VA). A variation on the DCA approach, a VA strategy involves investing more money when the stock market is down and less when it’s up. Studies have shown the VA approach to be more effective than the DCA approach over time. The big problem with this strategy is that you will need to be very disciplined and hands-on as it’s difficult to automate and it won’t work in a strong bull market where the market keeps heading higher.

4) Staggered lump sum investing. This would be another variation on the DCA approach, but only with a much larger sum. For example: Let’s say you have received $400,000. For the next four years, you decide to invest 25% of the original lump sum into the stock market at the end of every year with the next tranche being in CDs or bonds that come due right before its time to invest in the stock market again. Had you done this at the end of 2007, 2008, 2009 and 2010, the first tranche would have gotten hit hard by the financial meltdown, but the next two tranches would have been invested at very good prices.

Investing a lump sum may appear to be a daunting task, but it can be done with peace of mind that will help you sleep at night. The global markets are currently experiencing a correction or transition to a bear (down-trending) market. This is normal after the strong advance from the 2008 lows in the US market and six years of gains. Corrections and bear markets eventually run their course and turn into bull (up-trending) markets giving great buying opportunities. Now is the time to prepare a watch-list of leading stocks and sectors to buy once the new uptrend begins.

Don Freeman, BSME is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket. He has over 15 years’ experience working with expatriates, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. Call for a free portfolio review. Don can be reached at 089-970-5795 or email:

— Don Freeman


Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

What you get for $X32 mins ago

What $100,000 buys you for a condo in Bangkok, Phuket, Pattaya, Koh Samui and Hua Hin

Thailand2 hours ago

Thailand News Today | Activists plan protests all across Thailand

Thailand3 hours ago

Snitching on parking space hoggers could earn you 5,000 baht in Thailand

Sponsored11 hours ago

10 Best Seed Banks that Ship Cannabis Seeds Discreetly to You (Free US Shipping)

Weather3 hours ago

Storm Noru weakens from typhoon to depression as it moves across Thailand

World4 hours ago

Suicide bombing in Afghanistan hits students preparing for exam

Politics4 hours ago

BREAKING: Prayut reinstated as Prime Minister of Thailand

Join the conversation on the Thaiger Talk forums today!
Technology5 hours ago

What role for Thailand in China’s great European EV invasion?

Cambodia5 hours ago

Cambodian delegation in UK to seach for stolen treasures

Thailand5 hours ago

20 baht notes printed with errors, says Bank of Thailand

Crime5 hours ago

Loan shark bombs debtor’s house in southern Thailand

Thailand6 hours ago

Thai researchers develop flood-resistant rice strain

Press Room6 hours ago

Southeast Asia’s hospitality leaders step into the ring to fight for sustainability at PHIST 5

Crime6 hours ago

Horrified relatives attempt ID of disfigured suitcase victim

Travel6 hours ago

Things to do in Bangkok that cost next to nothing (2022)

Travel7 hours ago

5 best spa treatments in Bangkok to pamper yourself this September – October

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11