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getcrunkwithmilk t1_j6nvi27 wrote

I avoid putting in lump sums when possible and instead dollar cost average on a weekly or monthly basis.

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TyrconnellFL t1_j6nwv7z wrote

That’s fair, but it’s not the smartest.

If the market on average goes up, or goes up on average at any given time. DCA means on average missing out on some growth. The optimal thing is to invest as much as you can afford as soon as you have the money. If you have a big lump, invest it now.

It’s not a huge difference and DCA can feel safer, but in plain math it loses out.

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FabulousHalf98 t1_j6ogokn wrote

That’s something I always wondered. If the long term plan is to benefit from the the slow but gradual growth, due to time invested, wouldn’t the best option be to get in as early as possible with a lump sum?

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TyrconnellFL t1_j6oh8r7 wrote

Yes, but most of the time we don’t have lump sums. We earn X dollars, and we can afford to invest Y of that. So every two weeks or month, we should invest Y.

It still looks like a steady trickle, but DCA is doing that on purpose, and “continuous lump sum” is because there’s only so much money at any time, but it gets invested immediately.

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Various-Training-603 t1_j6ov353 wrote

I opened up a Roth IRA and put in a lump sum in dec 2021 (terrible timing, I know), and now I wished I would have done DCA to minimize risk.

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TyrconnellFL t1_j6p251j wrote

Yes, that sometimes happens. This is about averages. On average, if every year you DCA, there are more years that you’ll feel like you missed out than years that you’ll kick yourself.

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