On today’s episode of the Wiser Roundtable Podcast, the team discusses the pros and cons of lump sum investing vs. dollar cost averaging.
Listen on Apple Podcasts or watch on YouTube:
Casey starts the show by giving a hypothetical example of receiving a payout from a pension of $800,000. The group discusses whether an investor should take the lump sum payout and invest a little at a time into the market (dollar cost averaging) or should the investor put the entire payout into the market at once (lump sum investing).
According to a Vanguard study, over a long period of time, those investors who used a lump sum investing strategy earned more money by the end of the period studied than those that used a dollar cost averaging strategy.
Over the last ten years, we have seen that when people use dollar cost averaging, they have a lower rate of return than those that put the money in as soon as they receive it. Another consideration the team discusses is considering the source of the studies conducted on this topic. Do the entities conducting the research have a vested interest in whether or not someone uses dollar cost averaging or lump sum investing? Be sure to consider the advice giver to make sure the strategy is best for you. A fiduciary, fee only advisor should provide you with advice that is in your best interest.
1:29 Dollar cost averaging or lump sum investing?
4:17 What do they statistics show?
8:05 Human nature vs the math
9:16 Time in the market or timing the market
11:04 The behavioral side
13:00 Wealth Building Checklist
16:10 Buyer Beware- Consider the Advice Giver
18:20 Probability of Success
Learn more about Brad Lyons.
Learn more about Matthews Barnett.