What If The Market Crashes? Lump Sum vs Dollar Cost Averaging

Markets have had a bit of a wobble recently and with US valuations so high I often hear from people that they are worried about investing large amounts of money given the current environment. So is it better to invest all your money in one lump sum or to dip feed (Dollar Cost Average) your money over a period of time just in case markets fall? In this video, we’ll look at which strategy performs best, how things change if you are risk averse, how long to space out your investments if you decide to drip feed and ways of overcoming the fear of investing.

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Timestamps
00:00 Introduction
00:47 Lump Sum or Drip Feed? Which Performs Best?
05:32 What if I’m Scared of Losing Money?
11:22 How Long To Drip Feed For?
13:06 Ways To Overcome Your Fear of Investing
16:54 Summary

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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

[palmtree-el]

Great video Ramin. I got caught out in both scenarios. Put in a lump sum and markets crashed 2022. Then in 2023 held a lump sum back to drip feed and markets went up.

Have now decided to lump sum regardless. Having seen my investments recover after the crash I'm not concerned about falls and it doesn't make much difference in the long term. I think it's good experience to live through a crash as it "toughens you up" for the next time and doesn't stress you out!

[arisdavid]

Money market fund pays 5.2%. One can go lump sum there, and then slowly switch the money to equities over a period of time

[Kenzag]

Many of these align with my intuition. Thanks for speaking it out logically

[ThethClown]

One thing that eased my worries around investing was adding to a SIPP, even if it crashed tax relief would compensate for a lot of that.

[thorpeeedo]

Great video. So many people you encounter are convinced that "dollar cost averaging" is the way forward, but it only is if you're trying to get over the psychological barrier of lump sum investing.

[goober-llwx]

Just proves the age-old adage of " its time in the stock market, not timing the stock market"

[Jalleur]

I have tended now to do a small initial lump sum, and then a small monthly input. If markets are low, I up the amounts, and if markets are high I keep it at the minumum, or sometimes pause it for a bit once the allocation reaches the amount I wanted. I also like the drip feed, as it lets you forget about it. I have been badly burnt by trying to swing trade (with tech), so am now much more cautious!

[elephantandcastle]

If you have inherited a lump sum its equally important to consider taxation. Inheritance, capital gains and income. In the event the sum is so large you cannot protect using the usual UK wrappers, considering gifting it (all or in part) to dependents. In you live for 7 years afterwards, there will be no extra inheritance tax liability on the sum. If you make a deed of variation within 2 years of the deceased death date, then the liability is immediately negated

[stevegeek]

I had a pension transfer lumpsum to invest in October last year. I took the cautious approach and initially only invested about 25% of the money and planned to invest the remaining money over the next year or so. Bad decision...I missed out on maybe £100k of potential gains with the market rally, but hindsight is a wonderful thing...if it had crashed I would have been laughing!

[rogerq]

Thank you for making this video. I have been deliberating for a while as to which method is best, and this helped me decide!

[Nousmourronsseuls]

Another fantastic video. Thanks Ramin!

[rajshu]

Thankyou Ramin for your valuable insight and I have subscribed.

[dsfgkasguyrebfv]

You should look at the trend to know whether to drip feed or lump sum. Lump sum if the market is in an uptrend during a pull back. In a downtrend or sideways action, drip feed so you can always take advantage of lower prices.

[lodersracing]

DCA all year round and lump sum when it crashes.

[sanjeevp]

Excellent video Ramin! Thank you. Can you please do a video on comparing all these different Robo advisors and Weather they do better over to fund or three fund strategy overtime?

[TheFourthWinchester]

My mom got a lumpsum when she retired and I worried about it. Invested only 5% of what she got in the first month and it rose by 7-8% by the end of the month. Lumpsum might be a better strategy in a bull market.

[jon]

Easily one of the best channels on retirement and financial planning. And as always, thank you for speaking, Ramin!

[AlessandroBottoni]

Great video, congratulations! It answers a lot of common questions and helps many investors to overcome their fear. Many thanks for your fine job.

[rustyfeatherstone]

Great video! What global index fund have you chosen to invest in?

[MartinoBagini]

Another great video for the same old topic. Keep them coming, Ramin!