What is the Advantage of Lump Sum Investing vs Dollar-Cost Averaging?

What is the Advantage of Lump Sum Investing vs Dollar-Cost Averaging?

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[EdwardAnthony]

As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?

[SmartMoneyBro]

The assumptions made in Dave's answer to this are huge!

[randy]

adding to your 401k every paycheck is dollar cost averaging. when you retire you can invest the lump sum .

[jessewilson-music]

Dave sounds a little sick... wow, I clearly watch too many of these videos

[MurrMan]

Dave is assuming here the market will trend up while you DCA. If the markets dropping while you’re DCAing you will do better than lump sum investing. So his point makes absolutey no sense. It depends on the state of the market. You can also have a hybrid approach where if the market is choppy like these days and you’re concerned of a correction you can DCA. If the market is doing well and a stock/fund dips, you can lump sum.

[misterr]

Dave is 100% correct on this issue. Now, for those that have $0 today and want to start investing, it is better to DCA than save up a large sum and invest in one time, because the compound interest will serve you faster. A lot of people try timing the market, but what happens is they can never do that and lose money on the long run. Either way, even though large-sum is financially better, the tranquility you get by doing DCA even if you have a lot of money is worth more than the gains you can get just investing all at the same time.

[NotShowingOff]

One thing about lump sum, is that as you are collecting the money, you have an automatic emergency fund in case there are surprise expenses.

[daveymac]

I am wondering does this advice still stand now that uninvested cash could still be gaining 5% interest in todays market? Would Lump Sum still beat DCA if the lump sum was sitting in a 5% interest account, and you gradually invested that sum in the market each month?

[moneyindabank]

Put a little in every week and when it tanks like Thursday put it all in on Friday.

[alwayslearning]

Lump sum!
Walk away.Set and forget
Come back in 20 -25 years for your nest egg.

[glamoc]

Best thing is to lump sum invest with one of Dave's buddies

[noldi]

I have more than $75K waiting to be deployed. I am waiting for a substantial drop in ETF’s and probably will go all in or at least half in one day half in another. Probably up until the election we will see this.

[ericfinnigan]

This is Actually Wrong. Lump sum is better than 12 months of DCA if and ONLY IF the market goes up every month (which it never does).

[unscripted]

He should throw it all in. If he invests right within 5 years he has the potentially of tripling his investments

[JMoney_x]

Watching this in 2024, I really hope this gentlemen did a lump sum during the covid lows! haha

[trevor]

"...almost all of the calls" LOL

[logicmr.]

I’ll do dca with my kid’s money, and lump sum with my father’s money:)

[CommandoX]

The whole point is, for instance over a year, twelve individual payments *can* end up earning more for you than one front-loaded lump-sum, if the lump-sum turns out to have been loaded into an over-priced stock. Ramsey seems to bounce back and forth in his response to this question.

[JTDyer]

I think everyone is missing the point. Whether you DCA or lump sum makes no difference as long as you get results. What matters is that you reach you financial goals within your planned target date. For example, you might plan to save up $100, 000 within 4 years. If that's your goal that means you must have $25, 000 per year to stay on schedule. As long as you stay on schedule to meet your goal, that's all that matters. Regardless if it's DCA, lump sum, old fashion savings, or sell an item. Whatever gets results. Again, as long as you complete the goal by your target date your good. So you must determine you goal and target date and then work to complete that goal. Investing is just one of many tools used to help you achieve your financial goals. Either way what matters is you achieve your goals. So the question is what are your goals?

[scarpfish]

Sorry, but Dave is wrong at the end. In a risk based investment, you most certainly can fare worse putting a lump sum in when the market is high. Granted, you'll have more dividend income.