Market Commentary

Dollar Cost Average vs Lump Sum

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Studies have shown that lump sum investing beats dollar cost averaging. What this means is that you have a lump sum of money you would use to buy stocks all at one time, and over time it would do better than spreading the investment over a specific time period.

The facts are there, but most of us do not get a lump sum to invest so we have little choice. Also, if we are late in the economic cycle it might be better to wait until a recession hits then invest that lump sum of money. Of course that will take a lot of courage but it would still be the best way to maximize returns.

The question of which to do from a financial point of view is simple, but when you add emotions of the investor into the equation it becomes very difficult.

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