Does lump sum investing beat dollar cost averaging?
If you have cash that you want to invest, is it better to invest it as a lump sum or dollar cost average over time? Some people are afraid to invest a lump sum because they are fearful of a potential market downturn after investing that money. That’s understandable, but over the long term, does it really matter? According to a recent Vanguard study, you are 68% more likely to make more money by utilizing a lump sum investing strategy vs trying to dollar cost average it in over time. Dollar cost averaging outperforms cash 69% of the time and lump sum investing outperforms cash 70% of the time.
Keep in mind that when you invest a lump sum, you automatically collect dividends. If you don’t invest that money, you’ll miss out on that dividend income. If you’re concerned about a market downturn though, dollar cost averaging might be right for you.
Casey Smith
President, Wiser Wealth Management
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