Money Guy Show Investing Showdown: Dollar Cost Averaging vs. Lump Sum!
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Aug 25, 2023 The podcast discusses the debate between dollar cost averaging and lump sum investing, comparing the advantages and considerations of each strategy. They analyze the performance of these strategies during the Great Recession, highlighting the impact of market timing. The hosts also explore the pros and cons of each approach, emphasizing that dollar cost averaging may be better during market declines while lump sum investing may be more advantageous at market bottoms. They stress the importance of not overthinking investment decisions and introduce the concept of time in the market.
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Investment Showdown
- Decide between lump-sum investing and dollar-cost averaging.
- Consider personal factors and market conditions.
Lump-Sum Advantage
- Lump-sum investing historically outperforms dollar-cost averaging about 68% of the time, according to Vanguard research.
- This is because markets generally trend upwards over time.
2009 Case Study
- Investing $120,000 lump-sum in March 2009 would have yielded over $1 million by present day.
- Dollar-cost averaging the same amount over ten months would have resulted in only about $730,000.