Dollar Cost Averaging - Is It A Good Investment Strategy?

In "Dollar Cost Averaging - Is it a Good Investment Strategy" I discuss how, in this uncertain market, some investors are overcoming their fear of loss.

In this video, I explain what dollar cost averaging is, whether it is a good investment strategy, how it compares to lump sum investing and when it is most likely to work. I also review some of the platforms that will enable you to put dollar cost averaging into practice whilst keeping your fees low.

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[tispunkmyr]

Very interesting, but at the same time, the DCA method is realistically the only method for many of us... we don’t have large stacks to lump in, but we can knock aside a few hundred a month to invest instead of sticking it in a savings account that is going nowhere fast.

[BriansWealthJourney]

Trying to time the market isn't my style. I don't have that many active brain cells left, Lol. Your spreadsheet really opened my eyes. I can't believe the spread was so low. You can DCA daily, weekly, bi-weekly, monthly, or even yearly. DCA protects us from our own emotions.

[NordicFinans]

Fantastic video, super informative! Loved how clear cut the explanations were and backed up with studies! Absolutely fantastic job!!👍

[FreeyourFinance]

Thanks for a great video as always. I personally dollar cost average a cross all of my low cost index funds. Some argue it’s not the best idea, especially as markets usually tend to go up, however I prefer it! Take care.

[jbullionaire]

Just need to convince my employer to give me my next 5 years salary up front, then I can do some proper lump sum investing :p

[iainreeve]

Dollar/ pound cost averaging always struck me as something which is appealing but limited. It is appealing because it's easy to explain and seems to be a win/win. It is limited because it does not always (often) produce better returns than lump sum investing. I suppose it's a good thing if it encourages people to save regularly, say by investing a proportion of your monthly income. But I'm less convinced by the idea of splitting a lump sum into so many regular payments, especially at the moment when interest rates on savings are extremely low.

Do it if it makes you feel better in uncertain times, but don't expect great things from it.

[adamb]

I basically did lump sum back in April. But now that we are entering September, I’ve been debating - for the time being - to do DCA in the event that the markets continue to slide.

But once the economic situation is clear and markets are resumed normal, I’ll likely go back to lump sum.

[Neonomide]

There exists a boosted version of DCA, which involves following p/e of market index like SP500 and investing more with lower p/e values and less while index is higher. Using software for tracking sliding averages can help figuring out the sum. Intervals could also be modified, so it’s an active strategy, not very passive but it has quite easy to implement rules anyway.

[djpuplex]

Time in the market is better than timing the market. But when the market on sale you should buy more if you can.

[OlaOla-soil]

I read an article comparing USA, UK, Emerging markets drip feeding. Emerging markets actually did the better than SP500 and UK cost per averaging because the price goes higher and lower more often in emerging market funds

[punkrock]

Thanks for the video Ramin. It'll be easier to support if you put your robinhood link in the description.

[jmc]

FYI Ramin just a heads up for some reason YouTube is unsubscribing people from some channels. I can guess why but will leave it at that. Cheers 🇨🇦

[btcee]

Hi Ramin, do you agree then that DCA is better for more volatile markets and shorter-medium term investments, but LSI is often better for long term investments such as equity funds?

[johnnychivers]

Thanks for the video.

I don't see the Robin Hood link in the description?

[weijie]

If I buy S&P 500 ETFs, should I dollar cost average or lump sum invest?

[Citizen-of-theworld]

I dollar cost average a different way (maybe it’s not called that). When I buy a stock I believe has great long term growth potential, I buy an amount of stock and then buy more only if the stock falls by a set amount (usually down 10%) if one of my other stocks is temporarily underperforming (with good justification) I buy more of that one. So I average down on price rather than time. It’s important here to recognise the difference between temporary weakness and a company with declining prospects.

[mutton_man]

Do you know how much lump sum outperforms dollar cost average by? If it's less than 3% outperformance then is it ever worth the risk?

[sachmedia]

I'm still investing on a monthly basis but the bulk of my monthly investable allowance in LS20 rather LS100 or other equities. Had halved the amount I'd put into equities at the moment and holding that money in cash as I belive we are going to see another crash so £cost averaging and trying to time the market. Markets simply did not fall enough in comparison to other market crashes.

[xinhuang]

What time is your Sunday night chat? I am in US, Eastern time. Thanks

[giorgioc]

Got lifetime ISA at AJ bell. I am planning to to build ETFs’ DCA with regular monthly payments, should I use II as recommended in the video or can I stick to AJ Bell for practical purposes ?