Dollar Cost Average vs Lump Sum Investing (Which Is Best?)
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- Опубликовано: 9 июн 2024
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In today's video, we'll be discussing the pros and cons of both dollar cost averaging vs lump sum investing.
Dollar cost averaging is when you invest your money gradually in equal increments over a fixed period of time.
Lump sum investing is when you put your money to work by investing it into an investment all at once.
This video will include data and proof showing you that there is a clear winner here.
Stay tuned until the end of the video and be sure to share it with a friend!
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⏰ Timestamps ⏰:
0:00 - Intro
0:28 - What Is Lump Sum & Dollar Cost Averaging
1:05 - Pros & Cons of Dollar Cost Averaging
4:00 - Pros & Cons of Lump Sum Investing
7:32 - moomoo Spot
9:38 - Which Strategy is Best?
13:16 - A BIG BUT...
14:14 - How Can You Position Yourself?
15:07 - My Thoughts
19:10 - Uh Oh
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I only DCA into a conservative 60/40 portfolio: 60% GME, 40% AMC
Hahaha
Meme portfolio
🤣🤣
😂🎉
Far too conservative.
Need more risk in your portfolio.
Several years ago, your videos inspired me to kickstart my son's investing, consisting of a custodial Roth IRA, a 401(k), and savings. Portfolio's worth over $50K.
Not too shabby a start for a 19-year-old now serving in the military. We DCA. Thank you Marco!
Awesome!
Workers earn money each paycheck, meaning they’re basically forced to DCA unless you stumble across a huge pile of cash.
Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly.
Investors should exercise caution with their exposure and exercise caution when considering new investments, particularly during periods of inflation. It is advisable to seek guidance from a professional or trusted advisor in order to navigate this recession and achieve potential high yields.
This is superb! Information, as a noob it gets quite difficult to handle all of this and staying informed is a major cause, how do you go about this are you a pro investor?
Through closely monitoring the performance of my portfolio, I have witnessed a remarkable growth of $483k in just the past two quarters. This experience has shed light on why experienced traders are able to generate substantial returns even in lesser-known markets. It is safe to say that this bold decision has been one of the most impactful choices I have made recently.
Wow, that’s stirring! Do you mind connecting me to your advisor please. I desperately need one to diversified my portfolio
I’ve actually been looking into advisors lately, the news I’ve been seeing in the market hasn’t been so encouraging. who’s the person guiding you?
I funny enough do both. I lump sum every year in January on my Roth IRA & DCA into my Roth 401k every 2 weeks through my paycheck. I’ll share my findings once we’re both in our 70’s Marko!!
I like to keep a small "in case the market crashes" fund to try and take advantage of the low prices. When the market goes south, I use that money spread out over the following months buying my targeted stocks on low days. on top of my usual DCA, They keep dropping and I keep buying. I'm still in on Renewable Energy, EV, Tech, Health.coins too gotta be greedy when others are fearful. At this point I'm grateful for my FA Susan Kay Mack. Already with a 7 figure portfolio but I have no doubt investing more.
Same. I teetle on the premise that the market can and will crash at some point, as well as the notion that many individuals miss out on gains due to actually NOT being in the market and waiting for the chance of a crash. Perhaps it's wise to do both partially
out of curiosity I did read about Susan Kay Mack on the web.,she has a great resume.
An everyday millionaire. Well done 🙌
Did a quick web search, she has a pretty decent bio, I wrote her and I'm waiting on her reply.
Marko, i'm digging the Patagonia vest today. Keep up the great content!!
This is my second video that I watch on your channel and I am obsessed . I am new to the finance world. Really enjoy how you simplify things and I enjoy the white board . Appreciate your time and effort
Thanks so much!!
Thanks Marko I have asked this questions myself recently , I’ll tune in later tonight when I have some free time !
I have to admit that I'm not sure if investing is a good idea right now. Take note of how often things go wrong. I've read charts and projections from well-known investors from the past and present, but because I still have some time before I retire, I'm still seeking for a better way to invest my money. I want to create a strong and dependable portfolio to provide passive income.
The outstanding catch-up measures currently in place are unquestionably due to the Fed, as they were first too sluggish to contain inflation. The epidemic, supply-chain concerns, and the situation in Ukraine are all factors in the looming perfect storm of inflation. Not to mention the sharp increase in housing expenses, another factor that makes it challenging for the Fed to control inflation. To sum up, if you have the cash, get rid of it right away to benefit from the high savings rate.
Great video as always Marko! I’m with you on DCA. Thank you for sharing your wisdom!
Much appreciated!
I just discovered this channel and I love it. II have been watching video after video as I play with my son (good perks about being a teacher is spending the summer with my baby boy). Anyways, I am so thankful about people like Marko who teach regular people like us some important knowledge that otherwise would not be available. People like Marko are motivated to do this for something other than money. They live a life with a purpose and in doing so they are a blessing to our world.
Straight banger of a video. Thanks for all you do Marko
Thanks for an awesome video! DCA normally and then lump sum when there are 15-30% down is what i'm thinking
I do both. I lump sum all of my retirement accounts and DCA all of my wife’s.
Very informative channel. Keep doing what you do,Marko,I'm learning as much as I can
I appreciate that!
Great content. Thank you!
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Sir, congratulations on the channel I love it, if you could please make a video on the How to benefit and how be will be affected with the with the situation of the petro Dolla
How do these concepts have any merit given the new economy is based on the private decisions from the WHO and the WTO? Since I will never get vaccinated, and Bill Gates and the WHO are always talking about "the next pandemic", so how long until the next "lab leak", and further proof that capitalism is dead returns w/their further lockdowns and censoring and ruining of lives?
Amazing video!
Great video! Hvala Marko 😊
Also most people have lower returns than the idexes they track because they keep messing with things, changing their minds, and going in and out of the market. Factoring that in DCA looks pretty strong.
Great video Marko❤
Good stuff!
Nice detailed video on the topic.
Fantastic breakdown!
Glad it helped!
Quality content as always man!
You already know!
Thank you as always
My pleasure!
Hey Marko i'm 18 and am gonna start investing because of you! Looking at DCA in index funds to start safe whilst I don't know alot thank you for your videos!
thanks for another simplistic and practical explanation of a fundamental concept.
personally, i DCA my roth and my daughters roth
it is a sensible way to prevent the procrastination that we all do.
like you i have a family, side hustles, main job, and hobby.
God bless and keep going!
Great video….👍👍💪💪. Subscribed
Thank you immensely; I am reaching my kids finance through your videos. This is how to plant the seeds of eternal financial freedom!
Priceless
How about a combo? Husband is employed by a corporation and is doing DCA on a 401k every other week (26x a year). Wife is self-employed and does an annual lump sum into a SEP account based on an amount suggested by their CPA in order to reduce their taxable income.
Not that I know anyone who might do that 😏.
I use a combination of the two. I make regular investments into my IRA on each check, and if there are times I can put in extra due to more money available I will make a larger investment for that check.
I also don't invest in individual stocks, I invest in various mutual funds and ETFs that mix my exposure between US stocks, international stocks, and bonds.
No doubt that lump sum investing outperforms in your example in a rising market. But what isn't mentioned is the average investor doesn't have a large lump sum to make ($100,000 in your example). So for most people, DCA is the only option if they want their money to start working right away. Also, I kept thinking about the Nikkei index as a reason for DCA and was like "why doesn't Marko cover the advantage of DCA as it relates to the Nikkei" and then BOOM, he has an outtake at the end about the Nikkei! I'm guessing someone would be up about 5% long term over the last 30 years of DCA'ing the Nikkei. Whereas as Marko showed, you could possibly be up 0% after 30 years of Lump Summing. Big difference over 30 years!
I've traditionally done DCA, but as we have more money in our reserves I may now do some LSI for some instances. Good stuff as always!
Good stuff!
Hi Marko, will you ever make a video on how to deal with a faliure of FIAT in the future?
Solid video, Marko. It is proven that dollar cost averaging just beats lump sum investing.. So, it will be wise for any and all investors to just keep it simple and DCA!
"It is proven that dollar cost averaging just beats lump sum investing."
No. Is that seriously what you got out of this?
It all depends what you are investing in and if you are cherry picking a starting point or not.
On average, lump sum is best simply due to time in the market. And, if there are any dividends being paid out, your dividend cash-flow is obviously way higher than DCA because you have the whole thing invested at once. This then adds to the chance of beating DCA, especially if you are reinvesting dividends.
That said, most have to DCA as they are investing every payday or every month and not investing some huge some at one time.
Now, if you sell one investment and move into another one are you going to just buy the next investment? Or slowly trickle the money that you received from the previous sell into the new investment?
Three scenarios - market moving down, flat market, market moving up - the only time DCA likely beats lump sum is downward moving markets. Flat markets and markets trending up, lump sum beats. Then, if things going forward end up anything like the past, markets trend up over time. Just put the money to work when you have it to invest, less you are in a clear bubble (tech bubble was obvious, financial crash was pretty obvious too)
Hi Marco, awesome work, enjoy your videos. One thing to note about the last example of the Japanese index - what would happen to the US and world economy if the SPY/VTI remained in the red for 2 consecutive years? Not even talking about 10 years below previous valuation.
not sure if you have a video on REITs but quality triple net lease reits could be on discount this year. good way for most people to diversify into real estate
Glad you added those last bits of information in the end, because that is what I was going to add. You can place a large lump sum on a few stocks and get crushed for decades or not at all if those companies goes under. I guess you forgot to emphasize that both strategies if, diversified and placed for a long period of time, would be way better then keeping your money in the bank. Overall the average investor would probably benefit from DCA into ETFs like VOO to prevent negative emotional decisions like buying high and selling low.
Thank You Marko
In this market I would go with a hybrid approach. Lump sum a decent amount and DCA the rest.
I usually do a lump sum in my Roth,but dca in my 401k. In my taxable account I wait for opportunities and only buy on super red days.i also do the wheel strategy for income and limited stock options
DCA baby. Set and forget
Typically I lump sum invest but diversify my portfolio between commodities, blue chip stocks, high dividend yield stocks, and so much more. I am rather new to investing, but I feel that works for me.
Thanks
DCA all the way baby!!!
Agreed!
Marko just gets me
Despite the fact that stock prices fluctuate, what is the best method for capitalizing on the current market? I'm still undecided about investing $400k in my stock portfolio.
The market is volatile at this time, hence I will advice you get yourself a financial advisor that can provide you with entry and exit points on the share/etf you focus on.
With the help of an investment advisor, I was able to diversify my $550K portfolio across multiple markets, and in just a few months, I was able to earn over $950K in net profit from high dividend yielding stocks, ETFs, and bonds
Pls who is this coach that guides you? I’m in dire need of one
My consultant is Nicole Desiree Simon She has since provide entry and exit points on the securities I focus on. You can look her up online if you care for supervision.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
I dollar cost average a set amount every month automatically into a total market index fund. But I also have a large pile of cash sitting in short-term treasuries that I would love to throw at a 20%+ crash in the market. It's there as a 6-month emergency fund, but I'll cut it in half for for a massive correction or crash.
Great video. So happy to have you as a resource.
Much appreciated!
Another great video Marko... but I can't help myself. I see you've got your T-Bro Price Patagonia Vest on. I guess the Memes are true. 😂😂😂
Love it
Hi Marko, thanks for this. You seem well versed in investing and I have one question. As a foreigner in the States and given the times, would it be better to go into into real estates or stocks. I have been confused on the better option and where and how to go about this. Can't seem to find the most appropriate and of utmost importance is higher income and a less time intensive option.
Why not both? With the present economy, you should never forget to diversify. Do not put all your eggs in one basket. As one who has been into Real Estates for as long as I can remember, I made my first million late last year from stocks alone (got the services of an expert because I also have time constraints). I also experiment with a couple of other things. Hard to imagine that I had initially refused to try out new possibilities. Good luck.
@@marlenaaj ...Very sound and realistic. I too have been into both for sometime now and though I won't say I have lost a fortune, I have squandered quite a lot... You mentioned using
pros, if its not a problem. do you mind telling who you used or recommending a good one? I could definitely use the help of one right now... I look forward to you
replying...
stocks are your best bet atm, the housing market are currently a mess
@@sakhalittle9206 Funny enough, I can honestly relate. I don't know if I am permitted to go into details here, but mine is "Adam Keith Abraham" and you could look him up . I'm not so sure he takes on new people right now, but you could try.
@@marlenaaj casually strolled into this thread and boom, I know this funny man. Once attended a fundraiser he was also in attendance here in Vancouver,, calm looking man with with a funny accent,, He's in the States though, I
doubt he works with non residents,,,
Regarding timing for a lump sum - I'm looking to superfund a 529 account - would you lump sum invest today in a 529 account or wait a few months given the current economic conditions to see if the market goes down more?
Perhaps investing half of a windfall amount as a lump sum and dollar-cost averaging (DCA) the other half may offer a balanced combination of risk reduction and potential returns.
I'm about to retire (in UK) and recently transferred my workplace pension to a new provider. Having a lump of cash in my new account I've been faced with the choice of lump sum or DCA back into the market. I'm taking the approach you suggest. So far the markets are doing OK and I'm up a bit, but I can see storm clouds ahead, so thinking to DCA over coming months...time will tell if this strategy pays off. Oh, for that crystal ball! 😄
I used to DCA years ago, now I just turn x amount of cash into an investment on a monthly basis, selling a small percentage a year or two later. Time > Timing
I do both...I allocate 1/2 to lump sum and the balance to dollar cost averaging in the same stock.
(Which Is Best?) GOLD burred in a SAFE location.
DCA budgeted investing and lump sum bonuses and any year end left over money.
About to inherit and I've been debating on whether I should drop it all in at once or spread it out over a year or so. I was leaning towards lump sum but you may have just changed my mind.
I don't know how much you are inheriting or how much you are already contributing to your retirement accounts. One option is to max out your contributions to your retirement accounts and live off the inheritance as long as it lasts and then go back to your normal contribution amounts. For example, if you inherit $99,000 and are currently contributing $500 per month to a 401k, you could crank up your monthly contribution to $1875 per month for the next 6 years. If you are married, you and your spouse can max out your contributions for the next 3 years.
For simplicity, I am assuming you have already maxed out your IRA's and you are under age 50 and ignoring interest on the inheritance, but you get the idea. This gets a lot of money into tax advantaged accounts quicker and also uses DCA.
Great video, Marko! Here’s what I would do in this market if I were debating between DCA vs Lump Sum. I’d dollar cost average, and the cash I was sitting on, I’d put it in a HYSA and earn 4-5% return while that money is sitting on the sideline.
exactly what i'm doing
@@dancalzone551 nice!
I do something similar
@@dancalzone551 Exactly the same. Sitting on 105k in my HYSA at 3.8% and tik away 2k a month into VTI
So what if you just rolled a work based 401k to an IRA and the equities were liquidated, so now you are sitting on a lump sum of cash in an IRA account which can't be moved to another interest bearing account?
Lump sum in the beginning then DCA as you earn money.
I DCA every week. If I received a large sum of money I’d invest all of it after taxes then continue my weekly DCA.
There was an interesting book called "Value Averaging" which had an improved performance over dollar cost averaging, and is based on investing to attain a certain value in your portfolio. So if you want to see $1000 increase every month, and the value depreciated, you would have to add more than $1000 the next month to reach the value goal. So.. stocks go down, you add more, stocks go up, you add less, as compared to Dollar cost averaging where you always add the same amount. Food for thought.
Love the reiteration Marco! Any truth to Bitcoin being able to be hacked?
Wow... I remember when you touched this subject when you were 32.
Honestly DCA takes a lot of the stress out of investing. If the market is down, it's ok, you'll buy more next month.
It's especially effective for volatile assets like Bitcoin.
I choose to DCA every week as well, and at the end of the year if I have the ability to lump sum I do. Great info as always
Good stuff!
i think indivisual stock DCA ,,And ETF investing lump sum Ok ??
What about a shorter term sort of dca idea? I’ve got about 100k to put in long term right now. Should o set up a 12 month dca and just letr rip?
DCA is appropriate only on individual stocks, and lump sum is perfect on s&p500 or index funds. Based on my experience btw.
I did a lot of lump sum investing March 2020.
I doubled down on my ExxonMobil stock, when Jim Cramer was telling his audience to sell at forty bucks. Then jump back in after it recovered.
I do DCA , but have 20% cash/cash equivalent if the market drops over 5% in a day I throw that 25-50% of that into the market
This is why I keep a nice amount of cash on the side but mainly DCA.
DCA for the win!
Its a tricky one? I have several single l stocks and also a S&P500 ETF. I try to buy whenever one of stocks is low as there's usaly one or two that aren't doing quite as well as the rest to lower the average of that purchase prise. Then when it flips I'll do the same with the other stocks. I think its a good idea to have exposure to several sectors so you can take advantage of low sentiment in any one of those sectors as usually when one is high one will be lower if that makes sense?
If we DCA, daily weekly monthly or yearly?
I DCA weekly
So DCA seems to be the more advantageous method. Anybody doing that with only dividend stocks? Turn the dividends around and buy more periodically and make them (hopefully) work for you?
Need an FA with a similar investment approach. Can you help?
is it a good a idea to dca on vti in my brokerage account for the next 15 years?
When is next Fed meeting? Will high yield savings accounts reach 5.5% this summer?
Interesting. I've been doing DCA as a standard deduction from my paycheck that I immediately invest into my ETF fund, on a weekly basis. I don't have a lump sum I can invest right now but hypothetically, according to the numbers it seems if I keep these funds in a HYSA rather than weekly investing, and move towards monthly or quarterly "lump sum" investments, then this would yield higher long term gains. Does anyone practice something similar to this? I wouldn't want to keep my lump sums sitting in anything lower interest than a HYSA before I lump sum invest it into stocks
Well, lump sum in one basket (nikkei) can indeed put you in a bad spot. Lump sum diversified? I didn't see you specifically cover that in the video and I presume it would make a big difference. In any case, I appreciate your channel and content. I always learn great things from it. Thank you!
Agree
So, what you are saying is to continually purchase a stock, in increments, as it loses money?
DCA might be the only choice for most based on not having a lump sum. At the end of the day both are good to increase your wealth.
DCA is solid right now while holding some of the cash ready to lump sum with how I personally see the market going short term
I figure: best to DCA discipline and have a little cash reserve ready to buy and CAPTURE that discount rate (again not betting the whole farm, just enough where you want to take that lump sum gain/risk) and if it crashes well if it’s only 5-10% Great it’s just still long term at 26 years old for myself
Do you offer personal finance ?
I've also always dollar cost averaged for about 7-8 years. That seemed to make sense to me since I'm just taking a few hundred dollars out of my pay check each month. It's predictable to budget for, and if I start making more money then I could adjust that percentage of income that I invest each month.
My question is where does the money come from if I wanted to lump sum invest? Wouldn't I be holding cash for some period of time in order to build up the lump sum? Why not just invest those dollars as soon as they are available instead of holding onto them in the hopes of timing the market? That lump sum scenario only makes sense in my mind if I was gifted some large sum of money.
I think in his example, he referenced getting the lump sum money from an annual work bonus, inheritance, or some other type of windfall. Hope that helps.
Dca one manual sports car per quarter
i have been investing since 19 and it is really starting to pay off now that I am 23.
I started when I was 12 and wrote two books on investing when I was 13 for self education. Been through 2001, 2008, and 2022 downturns. What I have come to know is that pure math calculations ignores your well-being to much, DCA is the way to go for me with my risk tolerance profile.
Great explanation! Your mic is in view and is distracting.
Timing the market is impossible, tell me I’m wrong.
Lump sum assumes you have the money all at once. I get money in different increments throughout the month, so I DCA weekly.
Where do you manage your ira?
I have a Roth with Vanguard and a SEP with M1 Finance
It doesn’t have to exclusively be a dollar cost average or lump sum investment. You can for example invest 50% of funds now and dollar cost average the rest.
As a 36 year old who graduated college in 2008, I also have a VERY abiding fear of all the things that happened back then, and it has guided a lot of the professional and financial decisions I've made in my life as an adult.
So DCA is a better risk mitigation tool for uncertain markets.
I guess this could also be the uncertain person as well (i.e. inexperienced).
Can we have a video with ways to prepare for the recession
I have no idea what the market will do between truly impressive technology rapidly evolving and a broken system that constantly borrows more and more from the future.
That said, I use a hybrid strategy. When the market is cheaper, I increase my contributions and when it's expensive I decrease them. I do this across multiple accounts with low fee ETFs and Bonds and my work matches up to a certain amount of my RRSP which is essentially free money.
As for all my cash on the sidelines, it gives me a nice safety cushion for a crash, emergencies and for another vehicle when mine kicks the bucket.