How You Should Invest Money You'll Need In 5 Years

If your private student loans are in default, you're not out of options. Go to whyrefi.com slash Ramsey. We recently sold our house and did not anticipate buying another one for at least four to five years. We have $350,000 that we want to invest into the S&P 500 and index funds until we are ready to buy again. Several friends who invest regularly have suggested that because it is such a large sum and we should do a dollar cost average by investing one twelfth of the amount each month instead of investing it all at once. Do you agree with that suggestion or would you recommend investing the full amount immediately? If you understand what you're putting money into and you've looked at the track record of it, the S&P 500, the math would tell you to put it all in at once. The only reason the dollar cost average is if you're emotionally not committed to this process. And the first time Trump decides to bomb Iran and the market goes down, you freak out. Okay. Because he's going to do a Trump thing. You can count on it. I don't, I don't know what the next one's going to be, but there's going to be a Trump thing. Sometimes it causes the market to go up. Sometimes it caused the market to go down and there's going to be other things that happen in the world other than Trump that are here's an example. Let's say that you had a hundred thousand dollars for round numbers and you put the money in at the beginning of 2024. All of it at the end of 2024, the market unusually high went up 25%. So you'd have 125,000. If you put a hundred thousand in, in January one and at the end of the year, you'd have 125 cause it went up 25%. If you put it in a 12th at a time, you'd have about 111,000. But if the market went up or went down, you wouldn't be as scared, but you did not have it invested the entire year, the entire amount. And so you did not get what the market made the entire year. Now, if the market goes down 10 minutes after you put it in, which is kind of like Murphy's law, it's going to, it's like God saying, this is a test of the emergency rollercoaster riding society and see if you can ride the rollercoaster or not, right? Like you're going to have a test, right? 10 minutes after you put the money in, the market's going to go down. And so you just got to say, I'm not going to look at it. I'm just going to put it in and it says P 500. And so, um, you know, we'll see what it does, right? This year, year to date, as of this broadcast, the market is up 7% and it's June. If it continues on that track, that's going to be about 14, which would be fairly normal. It's averaged about 11.8. Okay. And that includes the big dip after the Iran bombing came back up. And we've had a couple of those. When you look at the chart, I mean, you can just Google S and P 500, right? You'll see. But, but the amount of recovery time, which I don't know the exact date, but it's, it's maybe 30 days, right? I mean, it's pretty quick on what the event is, but most of the time this stuff comes back very, very quickly. Even the big newsworthy drops. Okay. One of the ones I always remember is when COVID hit in 20, go back and look at the 20 charts. All right. And from February and down into March in less than 30 days, the market dropped dramatically. I mean, it didn't go in half, but it went way down. It lost like a lot and everybody's freaking out because they're freaking out about COVID and they're freaking about everything. And they're freaking out about masks. We hadn't gotten around to vaccine yet, but at that moment, but they came later. Job markets were closing. People were worried about the businesses, worried about what's going to happen with the economy and the market dove. Okay. It hit bottom in April. We didn't know that at the time. How long did it take it to recover what it lost from the COVID scare in the 30 days prior 57 days, they came back. So COVID wasn't even over, but we're up in September and the market has returned because the market figured out that there wasn't going to be 2 million deaths. Well, and the market figured out that a whole bunch of this was a bunch of Huey. And no, they did. I mean, the market looked around and said, we're not all going to die. And, um, this is, you know, and the economy is not going to turn into a dust bowl and, and, and, and, and so the market recovered market recovers common sense over time. And you think back to Oh seven Oh eight, which was obviously the massive huge drop. And was that how long did that, I mean, that was, it took a bit. It went in half. The Dow Jones went from 13,000 to 6,500. Now how quick did it get back to 13,000? I'd have to go back and look, but I was probably the long, you know, that was a long one, but it also went in half, but even the, I ran thing recently, right. That it dropped, it came back within like two weeks or it was not long. It was less than a month. Yeah. It was not long because we had just put money in and then every time there's a new cycle on it, you'll see it like this week, if you go back and depend on when you're listening to this, but I'm doing this real time, you'll see a little blip right now. Uh, and, uh, you know, latest news cycle on the same thing. Um, and you know, cause they're bombing each other again for a minute, right? So all this stuff, so all that stuff comes into all that to say, the answer to your question is invest immediately. If you have a four to a five year window, because these wrinkles iron out. If you give them time, no one gets hurt on a roller coaster, except those that get off in the middle of the ride. Don't jump. Don't jump. So if you think you're going to jump dollar cost average, cause it can't, it keeps you from freaking out quite so much. Cause you're like, Oh, it went down, but I don't have all my money. And so, but if you're going to be one of those people that says I lost all my money in the stock market, which by the way is a lie. If you put money in the S and P you have never in the history, in the last 150 years, lost all your money. Zero times that the market went to zero. So you didn't lose all your money. If you put it in at the top in 2008, you're talking about, and it goes in half, put a hundred thousand in it's worth 50,000. You could say I lost half my money because I bought at the top and sold at the bottom. I'm the worst possible timer in on the planet, you know? And so you, but even then you didn't lose all your money. You lost half of it. And, and, and because you're the worst possible timer on the planet. So yeah. So if you just ride it, you're going to be okay. So if you're willing to do that and you're willing to understand that, then you're going to make really, really, really good money as a long term investment in good mutual funds. And an S and P 500 is a great place to park stuff. When you've got a four to a five year window, longer term, I'll go with different mutual funds, but I use the S and P for short term parks like that myself. And just while we're on it, this is a fun stat. I pulled this up the other day, I got curious about it. 23, the market went up 26%, 24, it went up 25%, 25, it went up 18% three very unusual years. This year, as I said, it's up 7%. So if you compound those numbers in, so in four years to three and a half years to date, because we're all the way through those three calendar years and halfway through 26, when I'm saying this, that's a hundred percent return on your money. So if you put in a hundred thousand, you put in a million dollars in 23, it's now $2 million. If you didn't add anything to it and just sat there now, that is a very unusual three and a half year period of time. Unusually good. I don't recall one and I'm old and I've been doing this a long time. I can't, I can probably go back and look if there is another one, but I don't remember emotionally. It doesn't come to mind. Anything that's sweet in my memory that three years in a row, 20 plus percent. Yeah, that's crazy. But I mean, I've got money sitting in the S and P and I got twice as much right now, just because of that three and a half year period of time, it doubled. Meanwhile, I've got my money in checking because I'm scared of the stock market. You'd probably need to do some learning because that's the kind of crap you're missing out on right there. YREFI refinances defaulted private student loans for struggling borrowers. Learn more at Y-R-E-F-Y dot com slash Ramsey.