Dollar cost averaging vs lump sum investing
One of the most popular questions for investors at the beginning of their journey is whether they should invest with lump sums or dollar cost average. Lump sum investing is putting your funds into the market as a ‘lump sum’ – pretty self-explanatory. Dollar cost averaging is the process of investing a sum in parts, to lower the ‘risk’ of investing at a poor price. For example, if you had $50,000 to invest:
Or, you have a $10,000 lump sum to invest, there are multiple outcomes. In this hypothetical scenario green outcomes are when you would have done better than the dollar-cost average scenario. Red represents times when you wouldn’t have.
Keep this hypothetical scenario in mind.
Morningstar has conducted a study on the two…
