I think it’s possible the new viewership was due to some of the collaborations tbh. Skimming through comments when you collaborated with different financial content creators, a lot of, “Woah this is cool, I didn’t know about XYZ!”. Awesome job with everything - been listening to y’all for years
This is such a great guide for people. Especially helpful for those with "analysis paralysis". Thank you for providing such great free resources for folks.
Why choose? i feel like you should be doing both. Dollar cost average regularly and if the market goes down 10-20%, throw large lump sums of your Disposible income into the market at that time.
You can use this too as a reference if you have to rollover your 401k into an IRA. Our company closed our 401k and had to open a rollover IRA at a brokerage firm. All of a sudden, I had to decide on how to invest over 200k. I ended up dollar cost averaging over a period of maybe a year.
I did lump sum in December 2021. Im still down 14 percent after adding another 20 percent in 2022. I would have so much more if I would have dollar cost averaged. Kicking myself everyday for that.
I do DCA for my 401k and brokerage account and lump sum every January for my Roth IRA so it can grow all year. All three are doing well because I don't panic sell when things go down.
0:00: 📊 The video discusses the difference between lump sum investing and dollar cost averaging and helps viewers understand which approach may be best for them. 3:42: 💰 Investing in the market over a long period of time has a higher chance of yielding positive returns. 7:30: 📈 The video discusses the importance of protecting investments during volatile periods and the benefits of dollar cost averaging. 21:30: 💰 Putting your money to work in the market is more important than timing the market. 10:37: 📊 Dollar cost averaging can be a beneficial strategy for investing, especially during volatile market periods. 14:22: 📈 Dollar cost averaging can help investors achieve consistent returns and mitigate the risk of underperformance. 18:32: 💰 When deciding whether to dollar cost average or lump sum invest, consider the size of the windfall relative to your total investment portfolio. Recap by Tammy AI
Thank you so much for this. There is so much information out there on DCA vs. Lump Sum but the rules you shared is something I have been trying to find for a very long time.
If you lump sum invest every time you have the money, you dollar cost average in the long term, which I find amusing. Always be buying! However, if you do come into a lot of money comparable to your net worth, the psychology of DCA outweighs the possible benefits of lump summing it all on day 1.
This definitely could have helped me back in 2020. I had about 50k on the sidelines and decided to put in $1000 per month thinking the market was going to go down. It went back up so quickly there was a lot of opportunity missed. A year at the most for DCA makes a lot more sense.
Very interesting. But let's take a case study. My father is 75 years old, and getting a big sum of cash, because he has never invested (sorry we are french😊). He wants to invest 30% of his cash in stocks. Do you think DCA on 9 months is the right strategy, knowing that his time horizon may be short?
Has there been a study showing the investor behavioral difference between the two? The math definitely leans towards lump sum, but I have always felt lump sum is also more successful because once I lump some contribute, its in the market and I'm not touching it. If I DCA over a full year, come june/july/august I might dip into my intended DCA dollars for a vacation, new summer toy, etc.
Behavior is definitely an important part of investing! We still love to Always Be Buying for things like 401k investments for that exact reason. This rule is intended more for large windfalls like inheritance, large asset sales, or large winnings.
My growth of 401k is 2.74% in the past year. In this environment does investing under a brokerage with a custodian outperform a 401k? should I seek a pro to grow my funds on brokerage acct or still hold? I have 5 years to retirement. Happy to discuss.
Be careful not to be lured into the market too soon, this current situation has really opened my eyes to the importance of a good mentor on UA-cam or elsewhere knowing what he/she is doing .
the size of your retirement portfolio will overwhelmingly be a function of the performance of the stock and bond markets between now and when you start withdrawing from it.
It is always good to have a balanced fin-plan. I work with a professional planner and fixed-income strategist in NY. the fixed income portion of your portfolio won’t simply serve as a buffer to the volatility of the equity portion of your portfolio, but will provide legitimate income.
Respect to your case study .. except investors like me (majority ?) don’t have a lump sum, we are DCA investing off our paycheque 🇨🇦(25% of course) to accumulate one .. if I did have 1M and the choice was lump sum it or DCA it, my question would be - where do I put my money while I’m waiting to DCA invest it into S&P … well I’d … invest it - even in a HYSA earning 4.5% these days - did u consider that opportunity in your comparison? DCA would result in more money being invested into S&P - It would be about 1,025M over the 12 months, and 1,045M over the 24 months of your example instead of 1M. Next thing with DCA is the taxes .. idk what the tax affect will be of sheltering over 2 tax years into a 401k .. I am going to be doing this in 2023 - selling a house. Not a million but it will be 120k first example.
My question is , can you be working on multiple steps at the same time especially at the beginning? Thank you for your knowledge and being so kind to share.
I did a ton of research and learned that lump sum wins most of the time. Confident, I threw all the proceeds of my home sale into the market in Jan 2022 and promptly got my ass kicked in. From now on, it's DCA.
if you leave that lump sum alone for 20+ years, you’ll have great profits. Short term, lump sums may hurt more but it’ll show a great reward when it comes to retirement.
I dollar cost average; My Publix supermarket had on sale buy one get one free (b.o.g.o) on Nature Own brand bread save $2.59 buying two. I bought a silver American eagle coin from my local coin store for $28.00. I really paid $25.41 for the silver American eagle because of the price of the bread. Now that’s dollars cost averaging
My personal philosophy is this. Always lump sum invest, but change your asset allocation to reflect your larger pool of assets. For example, let’s say you have $10,000 invested, and you think you need $2,000,000 to retire. You own 100% stocks, but then you receive a $2,000,000 inheritance. I would say, invest all $2,000,000 but change your allocation to 60/40 stocks/bonds (just as one reasonable possible allocation). If your inheritance was $1,000,000, invest it all and maybe change your allocation to something like 80/20, reflecting your progress along the road to financial independence, and an appropriate shift from BUILD wealth to PRESERVE wealth. I think this approach is the most sensible, but take this with a grain of salt. I’ve never received a windfall of cash.
While I agree about everything, do you think though that if you’re at the top of resistance of the S&P then you should maybe DCA over a longer timeframe since you’re at the top and vice versa of you are at a support level? Say the S&P goes to 3400 or 3200, I would be more apt to get more money in faster than an S&P at 4600.
You could just pull the prospectus and you’ll see you’re basically just buying a mix of a growth etf and S&P 500 etf for about 30x the expense ratio of doing it through other options in the plan
TheMoneyGuyShow, What are y’all’s thoughts on Deferred Compensation Plans, since the funds are transferred to the ownership of the company, and simply “promised” to be paid out in the future? Say it’s for a company like Walmart. What about points like whether deferring does or doesn’t put you in a lower current tax bracket.
aight, this convinced me to lump sum my roth IRA at the beginning of the year even if the market goes down later in the year. If I do it throughout my entire investment career, I should have 2.2% better returns anyways. Thanks!
You talk about taking behavior out of the equation. When does this come into consideration when you are making the decision to invest with your windfall? For many of us it may make sense to invest that windfall right away to mitigate the risk having access while dollar cost averaging over time.
Lump sum implies timing the market. Yes, it makes a difference, but nobody truly knows what and when, in advance of it happening. Lump sum makes sense if you already have a lump to purchase financial instruments with, when there's a minimum purchase threshold, and when you're just starting. DCA is attempting to get as much purchased as you can, with what you have available -- in dribs and drabs if need be.
Maybe I missed it but did you guys differentiate between money sitting in cash that’s fresh to u (ie inheritance, payout) vs. money that’s in cash due to recent transition (like a 401k rollover) but that was previously in the market? I would imagine a year long dca timetable for getting transition money back in the market would not be the default advice.
My understanding is that for roll overs or money that was just recently in the market, they tend to say to lump sum that back into the market right away. They see it as money that shouldn’t have come out but had to and should therefore go right back in. At least that’s what I remember from Brian in the past.
Stocks looked to rebound on Friday to close out a rough first few days in August, as the Jobs report’s release takes center stage and an earnings-heavy calendar continues. I’ve heard testimonies of people accruing over $250k this red period. What measures can I take to ensure this?
A solid strategy can be a key component of an investor’s portfolio. Well, the bigger the risk, the bigger the reward and such impeccable decisions are better guided by professionals.
if you think about it in a opportunity cost prospective, let say you spread the $1m for one year using the dollar average method. After one year, if you still keep the money in the market, you essentially lump sum investing $1m every day. Because everyday is a brand new day:)
10 month DCA? Are you kidding me? Somebody who had invested in 2000 didn't see returns on that investment until 2015. That's 15 years of no return. Had a person dollar cost averaged from 2000 to 2015, they would have seen a return from two recessions that they were able to buy into and therefore would have seen a return on their investment far sooner than 2015. This is a 15-year period in which dollar cost averaging beat lump sum investing. So I don't know where you're getting a dollar cost average of only 10 months from.
@@afridgetoofar1818 how long do I dump into bonds & which bonds? I bought the ibonds last October at @9.6% but could only buy measly 10k. I will probably cash those out at 13 months. I’m reluctant to p/o mortgage because it’s only at 3.5%.
Can we run the numbers from 1928, for the next 30 years? We never had a bear market recently. We also have never gone from 1 trillion in government debt to over 30 trillion with 190 trillion of unfunded liabilities..🤔🤔😉😅🤣
I personally dollar cost average with my 401(k). But during the pandemic, I temporarily upped my contributions by 5% because I knew historically every drop in the market rebounded a lot. Glad I did!
I just love how those examples are of people who casually have from 100k to 1million dollars around. The average Joe cannot afford that kind of Lump Sum investments, because their source of income is a monthly paycheck.
Yeah lol my take away is just month to month DCA, max out Roth (and if you have a 401k) as early as you can in the year, and dream about being Kim, Dixon, or Saul.
A weak dollar can signal an economic downturn, making me to ponder on what are the best possible ways to hedge against inflation, and I've overheard people say inflation is a money-eater thus worried about my savings around $200k
If using dollar cost averaging, have you considered adding in interest gained on the the money in a high yield savings account while waiting to invest into the market? That may influence the decision as well, as the total balance to invest would be greater than if we're to just lump sum invest.
Exactly because if you have your stockpile and something like wealthfront bank sweep right now at least you're bringing in a whopping 5% no risk. That actually may flip the DCA for the lump sum when the lump sum won. For instance holding a 100k in HSA until a decent dip then lump sum , or simply dcaing every 2 months after 2 months of 5% interest. I'd love to know this as it's what I'm doing
Either one works, it all depends on timing. If you can predict the dip, the lump sum wins. If you are investing for the long term (many years), I'd say lump sum wins. Otherwise dollar cost averaging works. Either way you slice it, investing wins over not investing. So don't sit there the whole time trying to time the market.😁 I did a lump sum at the start of 2022, then it crashed. Ouch! However, I dollar cost averaged the rest of the year.
You can't predict the dip, and time in market beats timing the market over the long haul anyway, so basically everything you said is wrong. Except the investing vs not investing bit, which is arguably the most important.
Looking at this, have you done the math to do placement bets on both with the kelly kriterion? i.e.: lump sump 50-60% of your money and DCA 40%-50% of the money in the market.
The issue with dollar cost averaging is that it requires discipline to keep investing routinely. Always tempting to spend money just sittng in the account.
No, lump sum wins like 2/3 of the time; you don't have to perfectly nail the bottom. Also, the longer you take to put money into the market, the more likely DCA is to lose
I think a good strategy and important thing to realize is that this is a good rule of thumb for things like getting a tax refund or a bonus at work where you actually get a lump sum. Otherwise, the money just sitting in your savings account until the end of the year if you lump it all in one month, you'll likely lose on additional gains within the average year. And as you mentioned, lump sum can be more volatile. Invest a lump sum when you get one (bonus, tax refund, insurance payout, etc.) and dollar cost average in your normal day-to-day finances (401k or HSA automatic contributions, etc.).
Pretty sure yeah, for the average person, you can only really DCA and lump sum tax returns and bonuses. But there is the possibility of taking the emergency fund, assuming it’s large enough to do so safely, take enough to max an account at the start of the year and just rebuild the emergency fund. Imo, it’s much riskier but it would be doable. Just put 6,5k into Roth IRA then change the automatic transfer from investments to savings.
When I started I actually dumped most in a heartbeat, and then the other rest I dollar cost averaged because the market felt overvalued and I wanted to wait for the next winter. If you have a diversified portfolio you might be able to capital allocate later and get back those losses.
When lump sum loses to DCA, I wonder if there is a correlating metric we can look at it so we know which one to do. S&P 500 P/E ratio? Yield curve slope/inversion? Price of oil? Phase of moon? Mayan calendars?
I give my investor a lump sum when I get my bonus. With interest rates so high, he puts 20% per month into the market, and the rest sits in a 7% bond. They said 68% of the time lump sum is better, but if it's a lot of money, you don't want to take the risk being in the other 32%. This flattens the curve a bit, and with 7% interest it's still a pretty good return. I will say, now that I'm thinking about it, I might tell my investor to stop doing it. It would be equivalent to pulling money out of the market, and then reinvesting it over several months. Why would anyone do that? I think it's more human emotion and an aversion to risk that is driving dollar cost averaging (when the money is available up front). The faster you can get the money into the market the better (on average).
I agree that changing your approach might be good. Especially since you receive bonuses on set intervals so you can consider your bonuses as already dollar cost averaging by themselves. Like, if you receive a bonus every quarter or every year, you are already dollar cost averaging by 3-12 months. If one of your bonuses happens to be right before the drop of 20% in March 2020, it doesn't matter. You previous bonuses weren't right before the drop and your next bonuses won't be right before the drop. Edit: Also, the reason why you would want to DCA instead of lump sum is to not hit the 32% of underperforming on a once-in-a-lifetime inheritance of 100k or w/e. In your case, 2/3rd of your bonus will overperform. You're not in a position where you cannot afford to get the 32%.
Please keep in mind that the 68% need to be compared with the 50/50 percent scenario because there's only two options. So this percentages departed from 50% not 0%. So yes, its beter 18% of the times, when compared to just 50/50 timing.
If you were flipping a coin and the outcomes were head or tail, there are only two options. But what if dollar cost averaging “wins” 32% of the time by an average of $12, while lump sum “wins” 68% of the time by an average of $124 million? Now that’s a ridiculous extreme to make a point, but there is a piece of the puzzle missing in your analysis that Vanguard didn’t address
My wife and I plan to lump sum invest our yearly contributions. She works at h&r block seasonally. We balance our budget on my salary so all her money goes to our financial order of operations.
![[UA] Eternal Fire проти NAVI | EPL Season 20 Malta](http://i.ytimg.com/vi/chvlsDygrZM/mqdefault.jpg)
I think it’s possible the new viewership was due to some of the collaborations tbh. Skimming through comments when you collaborated with different financial content creators, a lot of, “Woah this is cool, I didn’t know about XYZ!”. Awesome job with everything - been listening to y’all for years
This is such a great guide for people. Especially helpful for those with "analysis paralysis". Thank you for providing such great free resources for folks.
Why choose? i feel like you should be doing both. Dollar cost average regularly and if the market goes down 10-20%, throw large lump sums of your Disposible income into the market at that time.
💯
You can use this too as a reference if you have to rollover your 401k into an IRA. Our company closed our 401k and had to open a rollover IRA at a brokerage firm. All of a sudden, I had to decide on how to invest over 200k. I ended up dollar cost averaging over a period of maybe a year.
There are so many variables I don’t think the graph show, like buying dips when DCA
I did lump sum in December 2021. Im still down 14 percent after adding another 20 percent in 2022. I would have so much more if I would have dollar cost averaged. Kicking myself everyday for that.
You got unlucky, aka worst case for a lump sum, but still, after 10-15 years, you should be WAY ahead of cash regardless.
I do DCA for my 401k and brokerage account and lump sum every January for my Roth IRA so it can grow all year. All three are doing well because I don't panic sell when things go down.
0:00: 📊 The video discusses the difference between lump sum investing and dollar cost averaging and helps viewers understand which approach may be best for them.
3:42: 💰 Investing in the market over a long period of time has a higher chance of yielding positive returns.
7:30: 📈 The video discusses the importance of protecting investments during volatile periods and the benefits of dollar cost averaging.
21:30: 💰 Putting your money to work in the market is more important than timing the market.
10:37: 📊 Dollar cost averaging can be a beneficial strategy for investing, especially during volatile market periods.
14:22: 📈 Dollar cost averaging can help investors achieve consistent returns and mitigate the risk of underperformance.
18:32: 💰 When deciding whether to dollar cost average or lump sum invest, consider the size of the windfall relative to your total investment portfolio.
Recap by Tammy AI
Nice recap and emoji to represent the timestamps.
Thank you so much for this. There is so much information out there on DCA vs. Lump Sum but the rules you shared is something I have been trying to find for a very long time.
If you lump sum invest every time you have the money, you dollar cost average in the long term, which I find amusing. Always be buying!
However, if you do come into a lot of money comparable to your net worth, the psychology of DCA outweighs the possible benefits of lump summing it all on day 1.
This definitely could have helped me back in 2020. I had about 50k on the sidelines and decided to put in $1000 per month thinking the market was going to go down. It went back up so quickly there was a lot of opportunity missed. A year at the most for DCA makes a lot more sense.
Very interesting. But let's take a case study. My father is 75 years old, and getting a big sum of cash, because he has never invested (sorry we are french😊). He wants to invest 30% of his cash in stocks. Do you think DCA on 9 months is the right strategy, knowing that his time horizon may be short?
Has there been a study showing the investor behavioral difference between the two? The math definitely leans towards lump sum, but I have always felt lump sum is also more successful because once I lump some contribute, its in the market and I'm not touching it. If I DCA over a full year, come june/july/august I might dip into my intended DCA dollars for a vacation, new summer toy, etc.
Behavior is definitely an important part of investing! We still love to Always Be Buying for things like 401k investments for that exact reason. This rule is intended more for large windfalls like inheritance, large asset sales, or large winnings.
My growth of 401k is 2.74% in the past year. In this environment does investing under a brokerage with a custodian outperform a 401k? should I seek a pro to grow my funds on brokerage acct or still hold? I have 5 years to retirement. Happy to discuss.
Mine was 8.16%, I used to dca into etfs but I reconsidered the strategy since I am still way behind after the massive downturn since Jan last year
Be careful not to be lured into the market too soon, this current situation has really opened my eyes to the importance of a good mentor on UA-cam or elsewhere knowing what he/she is doing .
the size of your retirement portfolio will overwhelmingly be a function of the performance of the stock and bond markets between now and when you start withdrawing from it.
It is always good to have a balanced fin-plan. I work with a professional planner and fixed-income strategist in NY. the fixed income portion of your portfolio won’t simply serve as a buffer to the volatility of the equity portion of your portfolio, but will provide legitimate income.
I have seen a lot about FAs and actually want to consult some pro. How did you go about it? Is yours any good?
Should I take this personally? We Dixons don't usually get mentioned!
Thank you for the guidance. It is a very good strategy to decide if do lump sum or DCA by size of fund.
Respect to your case study .. except investors like me (majority ?) don’t have a lump sum, we are DCA investing off our paycheque 🇨🇦(25% of course) to accumulate one .. if I did have 1M and the choice was lump sum it or DCA it, my question would be - where do I put my money while I’m waiting to DCA invest it into S&P … well I’d … invest it - even in a HYSA earning 4.5% these days - did u consider that opportunity in your comparison? DCA would result in more money being invested into S&P - It would be about 1,025M over the 12 months, and 1,045M over the 24 months of your example instead of 1M. Next thing with DCA is the taxes .. idk what the tax affect will be of sheltering over 2 tax years into a 401k .. I am going to be doing this in 2023 - selling a house. Not a million but it will be 120k first example.
My question is , can you be working on multiple steps at the same time especially at the beginning?
Thank you for your knowledge and being so kind to share.
I did a ton of research and learned that lump sum wins most of the time. Confident, I threw all the proceeds of my home sale into the market in Jan 2022 and promptly got my ass kicked in. From now on, it's DCA.
if you leave that lump sum alone for 20+ years, you’ll have great profits. Short term, lump sums may hurt more but it’ll show a great reward when it comes to retirement.
I dollar cost average; My Publix supermarket had on sale buy one get one free (b.o.g.o) on Nature Own brand bread save $2.59 buying two. I bought a silver American eagle coin from my local coin store for $28.00. I really paid $25.41 for the silver American eagle because of the price of the bread. Now that’s dollars cost averaging
My personal philosophy is this. Always lump sum invest, but change your asset allocation to reflect your larger pool of assets. For example, let’s say you have $10,000 invested, and you think you need $2,000,000 to retire. You own 100% stocks, but then you receive a $2,000,000 inheritance. I would say, invest all $2,000,000 but change your allocation to 60/40 stocks/bonds (just as one reasonable possible allocation). If your inheritance was $1,000,000, invest it all and maybe change your allocation to something like 80/20, reflecting your progress along the road to financial independence, and an appropriate shift from BUILD wealth to PRESERVE wealth.
I think this approach is the most sensible, but take this with a grain of salt. I’ve never received a windfall of cash.
While I agree about everything, do you think though that if you’re at the top of resistance of the S&P then you should maybe DCA over a longer timeframe since you’re at the top and vice versa of you are at a support level? Say the S&P goes to 3400 or 3200, I would be more apt to get more money in faster than an S&P at 4600.
Wow, I always assumed that lump sum was never advisable. Thanks for the information!
Does the analysis account for the interest the money earns while waiting to be DCA'd?
Where is the study? If we reference a study, we need to do the proper thing and cite it at the bottom.
2:43 68% of the time - it works every time
Does the study assume that the money held in reserve because of dollar cost averaging is earning 4% to 5% interest rate?
Glad to follow my strategy to buy 2060 retirement fund every Wednesday for 125$
I buy 2055 for about 500 every Thursday
Ok?
You could just pull the prospectus and you’ll see you’re basically just buying a mix of a growth etf and S&P 500 etf for about 30x the expense ratio of doing it through other options in the plan
You guys should have done lump sum at the end of the year vs dollar cost averaging
Great Video
Bo is excited about this episode!
Love this channel 🤝 thanks guys
Got it! Now please tell me what to buy. Seriously, please.
TheMoneyGuyShow, What are y’all’s thoughts on Deferred Compensation Plans, since the funds are transferred to the ownership of the company, and simply “promised” to be paid out in the future? Say it’s for a company like Walmart. What about points like whether deferring does or doesn’t put you in a lower current tax bracket.
aight, this convinced me to lump sum my roth IRA at the beginning of the year even if the market goes down later in the year. If I do it throughout my entire investment career, I should have 2.2% better returns anyways. Thanks!
You talk about taking behavior out of the equation. When does this come into consideration when you are making the decision to invest with your windfall? For many of us it may make sense to invest that windfall right away to mitigate the risk having access while dollar cost averaging over time.
Lump sum implies timing the market. Yes, it makes a difference, but nobody truly knows what and when, in advance of it happening. Lump sum makes sense if you already have a lump to purchase financial instruments with, when there's a minimum purchase threshold, and when you're just starting. DCA is attempting to get as much purchased as you can, with what you have available -- in dribs and drabs if need be.
Maybe I missed it but did you guys differentiate between money sitting in cash that’s fresh to u (ie inheritance, payout) vs. money that’s in cash due to recent transition (like a 401k rollover) but that was previously in the market? I would imagine a year long dca timetable for getting transition money back in the market would not be the default advice.
I'm not sure it would make a difference. The most important thing would be what you're using the inheritance money for and when you need it.
My understanding is that for roll overs or money that was just recently in the market, they tend to say to lump sum that back into the market right away. They see it as money that shouldn’t have come out but had to and should therefore go right back in. At least that’s what I remember from Brian in the past.
@@CaptainPIanetI'm not sure what they say but that is the correct way to go about it.
If you are rolling over money that was recently in the market, then yes, we suggest considering to just lump sum it back into the market!
Thank you! Very helpful!
Stocks looked to rebound on Friday to close out a rough first few days in August, as the Jobs report’s release takes center stage and an earnings-heavy calendar continues. I’ve heard testimonies of people accruing over $250k this red period. What measures can I take to ensure this?
A solid strategy can be a key component of an investor’s portfolio. Well, the bigger the risk, the bigger the reward and such impeccable decisions are better guided by professionals.
if you think about it in a opportunity cost prospective, let say you spread the $1m for one year using the dollar average method. After one year, if you still keep the money in the market, you essentially lump sum investing $1m every day. Because everyday is a brand new day:)
I was just asking myself this question!!!
is there a link for the slides anywhere?
Where can I find the number of subscriber counter found on you shelf?
Great Video!
HOw realistic is this tho? getting 1 million dollars at once in the best 2 year stock market run?
Dollar cost average. You never know what the markets going to do. 👍
Good Video
❤❤❤
10 month DCA? Are you kidding me? Somebody who had invested in 2000 didn't see returns on that investment until 2015. That's 15 years of no return. Had a person dollar cost averaged from 2000 to 2015, they would have seen a return from two recessions that they were able to buy into and therefore would have seen a return on their investment far sooner than 2015. This is a 15-year period in which dollar cost averaging beat lump sum investing. So I don't know where you're getting a dollar cost average of only 10 months from.
These guys talking about tens of thousands of dollars while I’m curious about my 50-100 bucks every couple weeks
What if you have a windfall & you are already 55? Still dump the whole thing into S&P?
Nope. Bonds are much more attractive now.
@@afridgetoofar1818 how long do I dump into bonds & which bonds? I bought the ibonds last October at @9.6% but could only buy measly 10k. I will probably cash those out at 13 months. I’m reluctant to p/o mortgage because it’s only at 3.5%.
I had a rather large position LCID @ around 60 $ a share, then one day I wake up it’s at 30 $ 😢
These comments are filled with phishing and other scams.
$500 into Sp500 every month 🔥🚀
Try to push that up to $1,000 and you’ll be set up nicely.
🇺🇸🇺🇸🇺🇸
Investing??? More like gambling 🤔😉🤣
Can we run the numbers from 1928, for the next 30 years?
We never had a bear market recently.
We also have never gone from 1 trillion in government debt to over 30 trillion with 190 trillion of unfunded liabilities..🤔🤔😉😅🤣
So put in 68% as lump sum and dollar cost average the remaining 32% 😉
I personally dollar cost average with my 401(k). But during the pandemic, I temporarily upped my contributions by 5% because I knew historically every drop in the market rebounded a lot.
Glad I did!
I just love how those examples are of people who casually have from 100k to 1million dollars around. The average Joe cannot afford that kind of Lump Sum investments, because their source of income is a monthly paycheck.
Yeah lol my take away is just month to month DCA, max out Roth (and if you have a 401k) as early as you can in the year, and dream about being Kim, Dixon, or Saul.
But they clearly stated that this scenario is for those that come into a windfall like an inheritance. It wasn't meant for your monthly paycheck.
Just knock a few zeros off and follow the same rules.
A weak dollar can signal an economic downturn, making me to ponder on what are the best possible ways to hedge against inflation, and I've overheard people say inflation is a money-eater thus worried about my savings around $200k
If using dollar cost averaging, have you considered adding in interest gained on the the money in a high yield savings account while waiting to invest into the market? That may influence the decision as well, as the total balance to invest would be greater than if we're to just lump sum invest.
Came here looking for this. If you DCA with the settlement fund getting 5+% over that year or two, where would one be?
Exactly what I did this year except I bought right after the dip, but I kept it in a HYS most of the year before my lump sum vs DCA.
Exactly because if you have your stockpile and something like wealthfront bank sweep right now at least you're bringing in a whopping 5% no risk. That actually may flip the DCA for the lump sum when the lump sum won. For instance holding a 100k in HSA until a decent dip then lump sum , or simply dcaing every 2 months after 2 months of 5% interest. I'd love to know this as it's what I'm doing
However I don't know how much longer we're going to enjoy this 5% interest in our savings accounts, money market is probably going down as well soon
68% of the time it works every time :D
Anchor man by the way.
Either one works, it all depends on timing. If you can predict the dip, the lump sum wins. If you are investing for the long term (many years), I'd say lump sum wins. Otherwise dollar cost averaging works.
Either way you slice it, investing wins over not investing. So don't sit there the whole time trying to time the market.😁
I did a lump sum at the start of 2022, then it crashed. Ouch! However, I dollar cost averaged the rest of the year.
Adding to this that it's nearly impossible to predict the bottom. Like you said, the most important thing is to get in the market as soon as possible.
You can't predict the dip, and time in market beats timing the market over the long haul anyway, so basically everything you said is wrong. Except the investing vs not investing bit, which is arguably the most important.
Same!!! I 100% agree. I lump sum invested in January 2022 for my ROTH and then the market crashed . The market is now back up and I don't regret it
I’m watching this as if I have received any lump sums of inheritance lol
Love you guys thank you
Election year may be a sketchy year to lump sum. I may lump sum in my Roth IRA and if economy tanks, I’ll throw big chunk in brokerage!
Looking at this, have you done the math to do placement bets on both with the kelly kriterion?
i.e.: lump sump 50-60% of your money and DCA 40%-50% of the money in the market.
I lump sum cost average. 2-3 big deposits lol
The full shows aren't even 25 minutes now. Shrinkflation has hit the Money Guy Show.
Time in the market vs timing the market....thus lump sum wins.
The issue with dollar cost averaging is that it requires discipline to keep investing routinely. Always tempting to spend money just sittng in the account.
I'd say that's the worry with lump sum. DCA is easy to set up consistent payments like every pay period.
@@jonathonvoegtli4699precisely how I do it. And that money is “gone”/“invested” on payday….before I have the opportunity to waste it on something else
It would be interesting to see how the numbers are when the lump sum is sitting in a high interest account while being DCA into a fund over 12 months.
Yes, if you NAIL the bottom, lump sum will win. That defeats the whole purpose of DCAing. Time in, not timing.
No, lump sum wins like 2/3 of the time; you don't have to perfectly nail the bottom. Also, the longer you take to put money into the market, the more likely DCA is to lose
Why does the market go up and down. I usually put money in when my IRA goes down however kind of disappointing
The market goes up and down because the amount of money people are willing to pay for stocks is always changing.
I think a good strategy and important thing to realize is that this is a good rule of thumb for things like getting a tax refund or a bonus at work where you actually get a lump sum. Otherwise, the money just sitting in your savings account until the end of the year if you lump it all in one month, you'll likely lose on additional gains within the average year. And as you mentioned, lump sum can be more volatile. Invest a lump sum when you get one (bonus, tax refund, insurance payout, etc.) and dollar cost average in your normal day-to-day finances (401k or HSA automatic contributions, etc.).
Pretty sure yeah, for the average person, you can only really DCA and lump sum tax returns and bonuses. But there is the possibility of taking the emergency fund, assuming it’s large enough to do so safely, take enough to max an account at the start of the year and just rebuild the emergency fund. Imo, it’s much riskier but it would be doable.
Just put 6,5k into Roth IRA then change the automatic transfer from investments to savings.
No one can time the market. Get in and stay in. The best time to invest was yesterday.
When I started I actually dumped most in a heartbeat, and then the other rest I dollar cost averaged because the market felt overvalued and I wanted to wait for the next winter. If you have a diversified portfolio you might be able to capital allocate later and get back those losses.
The graphic at 18:15 is really helpful. Thanks!
Excellent work, gents 👌🏼
When lump sum loses to DCA, I wonder if there is a correlating metric we can look at it so we know which one to do. S&P 500 P/E ratio? Yield curve slope/inversion? Price of oil? Phase of moon? Mayan calendars?
I give my investor a lump sum when I get my bonus. With interest rates so high, he puts 20% per month into the market, and the rest sits in a 7% bond.
They said 68% of the time lump sum is better, but if it's a lot of money, you don't want to take the risk being in the other 32%. This flattens the curve a bit, and with 7% interest it's still a pretty good return.
I will say, now that I'm thinking about it, I might tell my investor to stop doing it. It would be equivalent to pulling money out of the market, and then reinvesting it over several months. Why would anyone do that? I think it's more human emotion and an aversion to risk that is driving dollar cost averaging (when the money is available up front). The faster you can get the money into the market the better (on average).
I agree that changing your approach might be good. Especially since you receive bonuses on set intervals so you can consider your bonuses as already dollar cost averaging by themselves. Like, if you receive a bonus every quarter or every year, you are already dollar cost averaging by 3-12 months.
If one of your bonuses happens to be right before the drop of 20% in March 2020, it doesn't matter. You previous bonuses weren't right before the drop and your next bonuses won't be right before the drop.
Edit: Also, the reason why you would want to DCA instead of lump sum is to not hit the 32% of underperforming on a once-in-a-lifetime inheritance of 100k or w/e. In your case, 2/3rd of your bonus will overperform. You're not in a position where you cannot afford to get the 32%.
7% corporate vs 4% tax free... something to think about as well, but generally you don't want bonds until you near retirement
You’re trying to avoid outlier risk; matter of preference.
What percentage should a wealthy person invest in the stock market?
What age is this wealthy person? The younger you are, the more aggressive you should be
Has anything changed since the last 430 times you guys talked about lump sum vs dollar cost averaging? No? That's what I thought.
Lol, they have covered this topic ad nauseam.
Please keep in mind that the 68% need to be compared with the 50/50 percent scenario because there's only two options. So this percentages departed from 50% not 0%. So yes, its beter 18% of the times, when compared to just 50/50 timing.
If you were flipping a coin and the outcomes were head or tail, there are only two options. But what if dollar cost averaging “wins” 32% of the time by an average of $12, while lump sum “wins” 68% of the time by an average of $124 million? Now that’s a ridiculous extreme to make a point, but there is a piece of the puzzle missing in your analysis that Vanguard didn’t address
@nathanbaker1868 yes, great point. I think the drops are sharper than the climbs.
VOO or SCHD?
VOO or VTI
I’m an SCHD fan and recommend VOO if you’re younger
My wife and I plan to lump sum invest our yearly contributions.
She works at h&r block seasonally. We balance our budget on my salary so all her money goes to our financial order of operations.
Why did yall take down the stream from Tuesday with the updated stats for 2023?