Dollar Cost Averaging vs. Lump Sum: How to Take Away the Guess Work
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- Опубликовано: 5 сен 2024
- How do you decide whether or not to dollar cost average or lump sum invest? Follow our Money Guy rule to help you determine whether or not to lump sum or DCA and how long your dollar cost averaging period should last.
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The money guy show is the best. Thank you so much Brain and Bo for doing this.
In the 42 years, 1980 to 2021, there have been 7 calendar years where the stock market finished the year lower that it started.
This question has always popped in to my head over the years. good strategy for % per wealth.
I have nothing "against" either one of the two "camps". but the big (unspoken) issue I see with DCA is that people are emotionally unable to stick to their original investment plan. Regardless the direction of the market during the planned DCA-period, people will feel regret (either because they didn't lump-sum the entire amount in a rising market, or because they see (paper) losses on the first few installments of their DCA-plan in a downward market), and these emotions fuel their uncertainty which they had in the first place, often resulting in delaying forther installments or further extending the remaining DCA-period, and these actions may turn a well-intended DCA plan into a rollercoaster of pointless attempts at market timing.
When they say that lump sump investing generates an additional 2.2% over DCA, what alternative investment did they use for comparison? Just cash aka 0% yield, savings account, high yield savings account, T-bills, bonds, corporate bonds, etc.? I would assume this additional yield would depend a lot on what alternativ investment would be chosen for the cash not yet invested into the stock market.
This is good advice. I was thinking about this, I thought to draw the line at 10k+ and then use dca, but the percentage approach makes more sense.
I'm a DCA junkie .. I invest weekly, every Wednesday, same amount each week
Why Wednesday? Payday? Why not Friday or Monday?
@@shaereub4450 good question. Always have. Don’t feel like changing it.
@@shaereub4450 Should be friday right? Most of the firms results are revealed on fridays
Me too, every Wednesday for years now. I can't tell you why I chose Wednesday.
No,a large lump sum should change your need ability and willingness to take risk (your percentage of stocks) not the fact you should lump sum invest into an appropriate asset allocation
Why a year? Why 10%? I sold my house a little over a year ago. Suddenly I had nearly a million in cash. I just dumped most of it into the market over the course of a couple of weeks. I didn't see the point in waiting.
If I could dollar cost average by the second I would, but I doubt I could put fractions of a penny in the market at a time.
What data is this even based on? Without data, all I'm seeing is arbitrary numbers.
Oh no, what am I going to do with the million dollars I stumble into?... Gosh rich people sure do have it hard.
first gang