Lump Sum Investing vs Dollar Cost Averaging: Best Method Explained

You've come into some money and you want to invest. Is it best to invest it all at once or dollar cost average the balance over a period of time? Today we look at evidence based research to determine the correct answer.

The debate between lump sum and dollar cost averaging is probably one of the oldest in investing. Thanks to some very thorough research from Vanguard which is linked below, we know what the data says is the best thing to do. But really this is still only half the story and with Lump sum vs DCA there is a few factors to consider.

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[dekstaaa]

I literally was curious about it this morning… and here you are with the video. Fantastic work, thank you!

[Andrew.Ferguson]

Love all the memes and clips in this video, the Anchorman one with Paul Rudd is legendary! Lump sum for the win, build your conviction in what you're investing in, get your money in and let it do it's thing long term.

[adamb]

Great answer to the age old question! Very insightful and evidence based, can always trust you to back up your opinions. Very well explained, keep up the great work my friend!

[lukasg]

I am glad you are back Damo!! Great Video as always!
I have started investing this year and so far more often it is in red than in green.
I try to top up my Vanguard investing monthly, and it is much easier for me to manage this way. I know it is a long run, it is the marathon not a sprint, but would be nice to see some green ;)

[AlisonWonderland]

One of the things that caused such confusion and conflict during the COVID-19 pandemic is that statistics are not easy to interpret. I love how you make the subtleties so easy to understand, even for someone like me with the financial attention span of a very tiny gnat. Thanks Damo 👍

[golightly]

Answered my question with this video thank you! So glad I came across your channel and even better with humour and being UK focused :))

[cillianmaye]

Great video Damo, really great explanation of something that can be a really tough decision. I’m a bit late to the party, as unlike some other finance videos I watch while doing something else or listening like a podcast, I really want to make time to watch yours without any distractions. A real event! I have another 2 in my feed to watch and always excited to see when you post another, keep up the good work.

[chay]

Great work bro, some really solid facts and research!

Carry on creating these masterpieces. ON THE

Take it steady mate
Chay

[TheSamantha]

I lump-summed the remaining 18k into my S&S isa (VLS60!) in early april after starting my investing drip-feeding £500 for the previous four months and now wished i'd carried on drip-feeding! Your previous video on 'the lost decade' (when long term investing is not long enough!) would suggest that in a bear market drip feeding is best! I realise youre not making a prediction, so no disrespect, and your videos are very helpful. I'm investing for 10 years so if it was the case that the next decade was like the 1970's would i be better bringing my lump-summed money back to cash and begin drip-feeding again? I have, however, started drip-feeding this years S&S isa allowance! Thanks and keep up the good work!

[mattquantrill]

Great video as ever mate! Thanks for reading all the boring stuff and making it interesting 👊😁👍

[willlsmith]

I love Damiens like talking to your well informed mate who's got your top video

[keithhalliday]

Great video - thanks. Love the quality of your production.

[SLPCaires]

Thanks for another brilliantly put together video.... btw I went very much LSI on tsla because the fear is so high, and putting more in as we slide down. So this is LSI + DCA? :D

[matt]

Really great video Damo!!! Lots of conversations going on around DCA at the moment given the volatility in the market. You mentioned averaging by making a contribution from a salary on a monthly basis. One question I had was whether this is a good approach or is it better to save and purchase funds on a quarterley basis, reducing any transaction fees but still over a long time horizon effectively average out?

[rahsen]

My man, your research is always so thorough. I gain a new perspective every time your video hits!!

[FilmsPharmacy]

Hi Damian, pretty new to your channel but this video was very helpful and I wish I’d listened to it last year… I invested the majority of my savings into funds right before the markets tanked, so yeah it’s been a rough year haha. Since then I’ve saved most of my money but am considering getting back into DCA investing (after being scarred from my previous lump sum strategy).

Can you recommend some good vanguard funds to invest in? You mentioned in this vid that if you had a lump sum you’d put it all in the market no bother. Which funds would you invest in?

[Katsuya]

DCAing definitely feels better psychologically. Even though lump sum investing tends to outperform. For example, I started my Roth in 2019, and for the first 3 years i averaged $500/month to max it out at the end of the year. But this year, i chose to lumpsum and maxed it out in the first 2 months. With this recent 20% drawdown, I feel stupid for investing all my money at the all time highs for VTI. I know 30 years from now, it;ll probably not matter, bc time in the market beats timing the market. But right now, in the short term psychologically it sure feels crappy lol.

[madma]

Thanks again Damian! Love your content. Please keep it up!

[willij]

Love the video!! I always wrestle with this, dump and run or sprinkle and watch!? Neither is perfect and we just don't know what's around the corner and it's that aspect we should try and make peace with. The markets tend to recover as history has told us, so invest as soon as available and don't look back. Index fund investing certainly dampens any next day tank regrets. When I first started investing I would only buy single stocks and to watch them tank the day after purchase is awful!

[wadeharris]

I think this is based on your appetite for risk and whether or not your mentally/psychologically ready to put a lump sum in at once and watch it go down. Even if you are in it for the long haul, it can still play tricks with your mind. That's why DCA is probably the best approach for 99% of people because they do not have their emotions in check.