How to Invest New Cash: Dollar Cost Averaging vs. Lump Sum Investing

If you're sitting on cash that you plan to invest you have a few options:

1. Invest a lump sum.

2. Dollar cost average.

3. Wait for a "good time" to invest.

The optimal choice may surprise you.

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[patienceisalpha]

I'm going to watch bits of this video spread across the next few months. I'm dollar cost averaging this video

[michaelhoward]

love the increase in frequency with Ben's short videos... thanks Ben

[kygo]

I really liked the last point you made, not heard it mentioned before...

"If you're so worried about regretting the lump sum that you deem $ cost averaging necessary, it might be a sign to reconsider your asset allocation"

So many times people focus just on the numbers and ignore the behavioural part of investing.

On a side note all your podcast episodes on the behavioural sides of investing were great!

[kage-fm]

this dude laughs at weird times and it’s a big part of the vibe 👌🏻

[fergieferg]

The best financial YouTube channel for everyday people. Your advice has been a game changer for me and my family! Thank you!

[blufordbirdsong]

Nice job man! Very balanced video. As a person who worked in the industry for 30 years, (now retired) I have found that fear and greed drive most of our investment decisions, and investment knowledge does little to inoculate that average investor from these two emotions. Dollar cost average addresses this very effectively at frankly very little cost over time. It's a subtle shift, but when one takes the longer point of view of wealth building over "investing, " DCA makes a lot of sense. An investor can look back over a month or a quarter or a year and see incremental progress, though arguably maybe not the huge returns from well timed trades. I have met with thousands of investors, and it is almost always the basics we have to address, saving and spending habits, understanding the value of compounding... DCA addresses all of this.

[ankushshah]

I never thought cost averaging could underperform lump sum investing, well after watching this I agree that we might be sacrificing returns by holding cash just for the mental satisfaction of safety.

[nomadicyoutube]

'If you have a lump sum to invest, it is likelhy optimal to invest it in a risk-appropriate portfolio as soon as possible." - well said, with the key descriptor being "risk-appropriate". Thanks for sharing, as always, insightful information.

[mamotalemankoe]

This is one of those things I feel is fundamentally opposed to human intuition. How can it be that waiting out a storm is worse than letting run through your portfolio? These are the most important vids you make imo, the ones on risk and fancy alt assets are not surprising to me but these ones that go against what legitimately feels right matter most. Great stuff as usual.

[timcraven]

This is exactly what I'm going through right now. Inheritance is in a mmf. I'm feeling a lot of FOMO as the market has melted up recently. I'm also still trying to figure out what to invest in. When I figure this out I was leaning towards lump sum. Slowly the picture is getting clearer. Thank you.

[Elaba_]

Lump sum investing provides the best returns. The problem however is nearly everyone is doing dollar cost averaging because you invest the money you saved each year or month. Only when you inherit money you can do lump sum investing or when you sell your company. Dollar cost averaging also increases the chances you'll be able to stay in the market during depressions and recessions.

[YourFinancialPlaybook]

Ben takes a solid approach to answering lot of deeming difficult scenarios.

[MindFusionLab]

Thank you Ben. The mathematical advantage becomes compelling when there are numerous attempts, as probabilities play a significant role in your favor. However, if you have only one opportunity, the impact may not be as pronounced. Of course 90/10 could be, 60/40 probably not so much…

[punnatornbook]

Heard Ben said the same thing at the bottom of covid crash, glad I went all in then 🎉

[IsaiahMutex]

Hey Ben thanks for the regular uploads really appreciate it

[julius_nuernberger]

Thank you so much for making these videos, Ben! The level of financial education that you are providing is outstanding! Coming from Germany, I am in no position whatsoever to judge the level of public financial education in Canada, but I can only reassure you that I wish I would have had this knowledge 10 years prior! Thank you!

[ovndfbs]

When we use statistics, we always need to remember that story about the 6ft man that drowned in the river that was 3ft deep on average. They can tell us some information but not even close to the whole picture.

[genorgeanaplaszio]

Ben you amazingly compress detailed analyses into a short digestible timeframe. …. myself, I recently played “buy the dip” with the Aug/Sept/Oct slide in the S&P and had some mixed results across two accounts. Probably shoulda bought and hold from July but sometimes I play the experiment just to know. Keep up the good work!

[Nina_banana]

Obviously waiting for a dip when economic conditions are pretty okay is stupid. But when things are as bad as they are currently, it’s kinda crazy to recommend people to do a lump sum investing.

[Javier_Rodri]

I'm opportuned to take guidance and supervision from a prestigous figure on Wall Street’s eyes and ears. It is an exciting time of year after a tough one all round. I made a significant profit with my MSFT holdings recently and have drawn almost 150k for the holidays.