Hey Everyone - Thanks for checking out the video. After watching, you might want to check out my video on the suprising benefits of dollar cost averaging. Here it is: ua-cam.com/video/vLTdlN7VJTM/v-deo.html Also, if you found the video helpful, please consider subscribing to the channel for more content.
The video reviews the study and evidence showing that lump-sum beats DCA into the market even over 12 months. There were also examples given. Thus, if someone has a lump sum to invest, doing a lump sum right away versus DCA over 12 months wins out roughly 70% of the time. Was that your question?
Can i say that its getting the money invested as soon as possible is the key. Lump Sum when i have a winfall e.g. bonus, inheritance. DCA when ive set aside the portion from my monthly income. While Lump sum can outperform, I would think it under performs when one starts to "store up" a monthly savings until it reaches a level aka "building a warchest waiting for a crash", missing out on all the potential upsides along the way.
Yes, I think that sums it up pretty well, and the evidence and examples in the video support that. Naturally, for most people, saving and investing every month through DCA is great. You do not want to save up and think you can 'time the market.' Build the habit of saving and investing every month. However, if someone happens to have a larger sum to invest, then lump-sum investing wins out far more often than it doesn't, as the studies and evidence support. Thanks for the commnet.
Thank you for leaving a comment. I appreciate it. Yes, orchids are probably my favorite flower. I've often thought it would be fun to have a greenhouse with a variety of orchids.
Another great video Mike! Got me thinking could you maybe do a video on the best equity screeners (paid or free) that have helped you? I've gotten persnickety with picking stocks lately. Have been a VOO investor most of my adult life but am trying to find high ROCE companies and make a satellite portfolio. Screeners I've come across have either point in time data with no historical context, are too pricey, have a confusing UI.
Sure, I can put that on the list of topics. I do have a list of topics I plan to do in the future and that's a good idea to add. There are several good choices that are free to use and have all the data we need. Probably no reason we need to pay for pricey ones. Depending on the online brokerage site you use, they usually have some nice screeners, too, but there are other very good ones. Which ones have you tried?
@@MikesFinancialEdge been with Vanguard for a while and have used their platform. Given what I saw on gurufocus and finviz, Vanguard doesn't come close... Gurufocus is pricey. Also looked into Yahoo finance but found that they don't update their metrics often. Expense ratios, yields, fcf, etc are often out of date... at least in the free version. Considering moving to M1 Finance as I heard they make portfolio rebalancing easy, currently that's a pain point for me, it's annoying to do that's all. That's another topic to add to your list 🙂
Thanks for the great video. Short question, but first some short background: I have locked my mortgage rate at 1.35% (I live in Sweden) and I will have to renegotiate the rate 24 months from now when my lock-up period expires. Currently, the average mortgage rate is around 5% and is forecasted to be around the same amount or somewhat less (say 3%) by the time I have to renegotiate. But it is unlikely to hit the low rates of 2020 when I bought my condo. I do have a lump sum that is currently sitting in a savings account with a floating interest rate of almost 3%. Given my current mortgage rate, it does make sense not to pay off part of the loan and keep the money in the savings account. My original plan was to take the money out of the savings account and pay off part of the loan in 2025 so I will have to pay less interest on the mortgage. But now, after watching this, I'm thinking, could it be a good idea to dollar cost average that lump sum (or say 50% of it) during say 6 months or a year, and then sell and use the money in 2025 to pay off the debt? The alternative is to keep it in the savings account. If it helps, I have no other debt other than my mortgage and I'm already dollar-cost averaging part of my income every month. Thanks!
At this point, your mortgage rate is very good! That's a nice rate during the lockup period. I agree that your money is currently better off earning your rate around 3% rather than paying it towards the mortgage. It's always a bit of an unknown trying to predict rates two years from now. I believe Sweden has experienced rising house prices during the past decade due to very low interest rates, but now that your central bank has been increasing interest rates in recent quarters and the majority of mortgages there are the variable rate type of mortgage, many economists are predicting a bit of a housing market tumble there in the near future and it seems some prices have started dropping recently. Thus, before your lockup period is over, it may be likely that your central bank will have interest rates lower from where they are today, but predicting the future is difficult and always uncertain. I would caution against putting money into any kind of investment where there is risk, if you may need the money within 2 years. It probably shouldn’t be invested into stocks or anything that could go down in value when the timeline is that short. If there was a downturn in the market, you would want plenty of time to ride it out. Your savings account paying around 3% is not a bad option, considering how low your mortgage rate is, but there might be some other alternatives to consider. Here in the U.S., we currently have many options for short-term (6 months-2 years) CD rates paying anywhere from 4.5-5.25%. Anyway, thank you for the comment. It sounds like you are in a healthy financial position and that’s great!
Thank you very much for the great video. I have a question regarding doing DCA no longer than a year. What if I consistently take a portion of my monthly salary, say 20%, and DCA it on a monthly basis for my retirement and my kids' future college funds. That's something I had decided to do. Would that be a bad decision though? If so, which style of investing is better off for the retirement and college funds? Thank you Mike!
Yes, most people don't have a big lump-sum to think about investing all at once. Most people need to be focusing on saving and investing every month and just make it a habit throughout their life. If someone is saving every month from their paycheck, they should just be investing it on a regular basis every month and not worry about timing the market. Sounds like you are doing it in a sound way.
Yes, when people are investing into a 401K each month out of their paycheck, they are essentially doing DCA throughout their life and that's a great approach. Here's the video on DCA that really shows its benefits. ua-cam.com/video/vLTdlN7VJTM/v-deo.html
@@MikesFinancialEdge Thank you very much. But when people do DCA throughout their life, would that go against your "averaging out no longer than 12 months" advice though?
The 12 months comment was just referring to when someone has a lump-sum of money and trying to decide whehter to do DCA or lump-sum investing. If someone chooses DCA in that case, then studies would show not to extend it out more than 12 months. However, if someone is doing DCA throughout their life every month, that is great.
Hey Everyone - Thanks for checking out the video. After watching, you might want to check out my video on the suprising benefits of dollar cost averaging. Here it is: ua-cam.com/video/vLTdlN7VJTM/v-deo.html
Also, if you found the video helpful, please consider subscribing to the channel for more content.
What do you mean to not dca over 12 months?
The video reviews the study and evidence showing that lump-sum beats DCA into the market even over 12 months. There were also examples given. Thus, if someone has a lump sum to invest, doing a lump sum right away versus DCA over 12 months wins out roughly 70% of the time. Was that your question?
Can i say that its getting the money invested as soon as possible is the key. Lump Sum when i have a winfall e.g. bonus, inheritance. DCA when ive set aside the portion from my monthly income.
While Lump sum can outperform, I would think it under performs when one starts to "store up" a monthly savings until it reaches a level aka "building a warchest waiting for a crash", missing out on all the potential upsides along the way.
Yes, I think that sums it up pretty well, and the evidence and examples in the video support that. Naturally, for most people, saving and investing every month through DCA is great. You do not want to save up and think you can 'time the market.' Build the habit of saving and investing every month. However, if someone happens to have a larger sum to invest, then lump-sum investing wins out far more often than it doesn't, as the studies and evidence support. Thanks for the commnet.
I love how your every sentence is supported statistically and logically. I wish , I could give you 10 likes but I cant .
Thank you for the comment! Glad you liked the content.
I like orchids too :)
Thank you for leaving a comment. I appreciate it. Yes, orchids are probably my favorite flower. I've often thought it would be fun to have a greenhouse with a variety of orchids.
Another great video Mike! Got me thinking could you maybe do a video on the best equity screeners (paid or free) that have helped you?
I've gotten persnickety with picking stocks lately. Have been a VOO investor most of my adult life but am trying to find high ROCE companies and make a satellite portfolio. Screeners I've come across have either point in time data with no historical context, are too pricey, have a confusing UI.
Sure, I can put that on the list of topics. I do have a list of topics I plan to do in the future and that's a good idea to add. There are several good choices that are free to use and have all the data we need. Probably no reason we need to pay for pricey ones. Depending on the online brokerage site you use, they usually have some nice screeners, too, but there are other very good ones. Which ones have you tried?
@@MikesFinancialEdge been with Vanguard for a while and have used their platform. Given what I saw on gurufocus and finviz, Vanguard doesn't come close... Gurufocus is pricey.
Also looked into Yahoo finance but found that they don't update their metrics often. Expense ratios, yields, fcf, etc are often out of date... at least in the free version.
Considering moving to M1 Finance as I heard they make portfolio rebalancing easy, currently that's a pain point for me, it's annoying to do that's all. That's another topic to add to your list 🙂
Thanks for the great video. Short question, but first some short background:
I have locked my mortgage rate at 1.35% (I live in Sweden) and I will have to renegotiate the rate 24 months from now when my lock-up period expires. Currently, the average mortgage rate is around 5% and is forecasted to be around the same amount or somewhat less (say 3%) by the time I have to renegotiate. But it is unlikely to hit the low rates of 2020 when I bought my condo. I do have a lump sum that is currently sitting in a savings account with a floating interest rate of almost 3%. Given my current mortgage rate, it does make sense not to pay off part of the loan and keep the money in the savings account. My original plan was to take the money out of the savings account and pay off part of the loan in 2025 so I will have to pay less interest on the mortgage. But now, after watching this, I'm thinking, could it be a good idea to dollar cost average that lump sum (or say 50% of it) during say 6 months or a year, and then sell and use the money in 2025 to pay off the debt? The alternative is to keep it in the savings account. If it helps, I have no other debt other than my mortgage and I'm already dollar-cost averaging part of my income every month. Thanks!
At this point, your mortgage rate is very good! That's a nice rate during the lockup period. I agree that your money is currently better off earning your rate around 3% rather than paying it towards the mortgage. It's always a bit of an unknown trying to predict rates two years from now. I believe Sweden has experienced rising house prices during the past decade due to very low interest rates, but now that your central bank has been increasing interest rates in recent quarters and the majority of mortgages there are the variable rate type of mortgage, many economists are predicting a bit of a housing market tumble there in the near future and it seems some prices have started dropping recently. Thus, before your lockup period is over, it may be likely that your central bank will have interest rates lower from where they are today, but predicting the future is difficult and always uncertain. I would caution against putting money into any kind of investment where there is risk, if you may need the money within 2 years. It probably shouldn’t be invested into stocks or anything that could go down in value when the timeline is that short. If there was a downturn in the market, you would want plenty of time to ride it out.
Your savings account paying around 3% is not a bad option, considering how low your mortgage rate is, but there might be some other alternatives to consider. Here in the U.S., we currently have many options for short-term (6 months-2 years) CD rates paying anywhere from 4.5-5.25%.
Anyway, thank you for the comment. It sounds like you are in a healthy financial position and that’s great!
@@MikesFinancialEdge Thanks so much for the great answer. I appreciate it!
Thank you very much for the great video. I have a question regarding doing DCA no longer than a year. What if I consistently take a portion of my monthly salary, say 20%, and DCA it on a monthly basis for my retirement and my kids' future college funds. That's something I had decided to do. Would that be a bad decision though? If so, which style of investing is better off for the retirement and college funds? Thank you Mike!
By the way, isn't 401k in essence doing the same thing as DCA every month, which is apparentlly spreading out over 12 months? Thanks Mike!
Yes, most people don't have a big lump-sum to think about investing all at once. Most people need to be focusing on saving and investing every month and just make it a habit throughout their life. If someone is saving every month from their paycheck, they should just be investing it on a regular basis every month and not worry about timing the market. Sounds like you are doing it in a sound way.
Yes, when people are investing into a 401K each month out of their paycheck, they are essentially doing DCA throughout their life and that's a great approach. Here's the video on DCA that really shows its benefits. ua-cam.com/video/vLTdlN7VJTM/v-deo.html
@@MikesFinancialEdge Thank you very much. But when people do DCA throughout their life, would that go against your "averaging out no longer than 12 months" advice though?
The 12 months comment was just referring to when someone has a lump-sum of money and trying to decide whehter to do DCA or lump-sum investing. If someone chooses DCA in that case, then studies would show not to extend it out more than 12 months. However, if someone is doing DCA throughout their life every month, that is great.
Wow this video for free
Thank you - Glad you feel the content is valuable.