Dollar cost averaging versus lump sum is a good argument. It's also one most of us never get to have. Lump sum means you've got a pile of cash sitting there right now. A bonus, an inheritance, a big RRSP transfer. If that's you, the question is real. For everyone else, money shows up on a schedule. Paycheque lands, rent goes out, groceries, and whatever survives gets invested. That isn't a strategy you chose. That's just cash flow, and it happens to look exactly like dollar cost averaging. So forget which one wins on a spreadsheet. The question that matters is whether, when the pile does land, you can actually press buy all at once. Because the spreadsheet answer and the sleep at night answer come apart fast. Putting it all in at once gives your money the most time in the market, which is the whole engine. It also means you might watch the entire amount go red in week one. 😅 Some people shrug at that. Some people sell, and selling is the only version where the math definitely stops working. Splitting it into a few chunks over a few months gives up some expected return. What you're buying with that is a smaller chance of doing something you regret. Neither answer is wrong. They're just priced differently, and the price is paid in a currency most beginners haven't tested yet. If a lump sum landed in your account tomorrow, all at once or spread out? Be honest about which one you'd actually survive. Educational, not financial advice. Just my read.
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11 Comments
Silver BTC King@silverking · 24d
The point is dont hold cash
JC @icedragon · 24d
IMO - It would depend on how much is the lump sum. What I done in the past and current working on. Phase 1: Based on the total amount, figure out how much I want to allocate to new or existing funds. Using spreadsheet I would play with percentage value to determine amount to the fund. Get an idea when it is all said and done what would the portfolio look like. Do I like the weight or not Phase 2: Based on each fund amount, where that fund price sits on 52 week high-low, 3 month and 6 month general idea where that fund price is heading. I would make a decision to do lump sum or break it down to DCA. In the screenshot. This is how I do things... Ignore the font and cell bg colours. First table: You can see the funds I hold in this account, total amount I plan to invest. Broke it down to number of transactions to DCA. Last column is how much more I have to invest. Second table: Each fund and the strike price, pre-calculate number of shares (I only do whole, not a fan of fractional shares. Really don't care on other people perspective on fractional shares for my portfolio)
David Monroe
@d0p3y71 · 23d
I love DCA and swear by it with my Roth IRA. My tax account is my technology bet and I tend to be a bit more reckless with it. So lump sum in my tax account but DCA for my Roth IRA.
Nate
@hoodnate · 23d
This really hits home as a beginner since most of my money shows up on a schedule anyway. The sleep at night point is the part that matters most to me, so I would probably split a lump sum into chunks to keep myself from second guessing. Which way did you end up going?
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