DCA or lumpsum (bond, IRA, fund, cash)

[k374]

There seems to be so many divergent views on this that I decided to make a poll to all the investors in here. If you had $100k to invest what exactly would you do?

[mathjak107]

i always would put it in one shot if i had a choice .

if dca was producing better results we would all hit our allocations we wanted , sell everything and start from zero again . you can see that would be silly since markets are up 2/3's of the time and down only 1/3 .

"In reality, a dollar cost averaging investment strategy doesn’t actually enhance returns in volatile markets that have similar upside gains and downside losses on a percentage basis. And given that on average, markets go up more often than they go down, choosing to dollar cost average is more likely to just leave gains on the table (and the longer the time period, the greater the risk of foregone returns)."

as kitces points out :


EXECUTIVE SUMMARY

Conventional investment wisdom suggests that dollar cost averaging is a good approach to allocating investment dollars over time. By always investing a constant dollar amount, the strategy ensures that fewer shares will be bought as prices rise, while more shares are purchased if prices decline, bringing down the average cost per share in the long run. The only question is over what time horizon it’s best to average in.

Yet as it turns out, the answer is “none”. In reality, a dollar cost averaging investment strategy doesn’t actually enhance returns in volatile markets that have similar upside gains and downside losses on a percentage basis. And given that on average, markets go up more often than they go down, choosing to dollar cost average is more likely to just leave gains on the table (and the longer the time period, the greater the risk of foregone returns).

However, while dollar cost averaging may not be likely to enhance returns in the long run, it is still a risk management technique. Over the dollar cost averaging time period itself, the diversification of the “new” investment and “old” investment may actually produce superior risk-adjusted returns. And given that the pain of losses is more severe than the joy of gains, risk-averse investors may prefer to dollar cost average simply to minimize the potential regret of not doing so and seeing markets decline shortly thereafter.

Nonetheless, for investors who are comfortable with the risk of their portfolios, and aren’t specifically seeking a “regret aversion” (or at least, regret minimization) strategy, in the long run the best time horizon for dollar cost averaging is simply to invest all the money immediately – at least, presuming the investment was desirable to own in the first place!



https://www.kitces.com/blog/dollar-c...duces-returns/

[reneeh63]

Originally Posted by k374

There seems to be so many divergent views on this that I decided to make a poll to all the investors in here. If you had $100k to invest what exactly would you do?

I'd put it all in now...certainly not stretch it more than a couple months if you really can't convince yourself to jump. You're likely to lose more the time you're out than the bit you invest when it's just a little higher. I might temper that if you're going to invest it all in a single company but I wouldn't advise doing anything that isn't diversified, anyway.

DCA is great if you don't have a lump sum...but if you do then put it to work for you...NOW. This makes even more sense the longer you'll be in the market (more time to make up anything invested "high"), and I'm assuming this is a longer term investment else you'd not even consider the market - anything less than at least a few years should go into something safer.

[MI-Roger]

Invest it all at one.

The entire concept of Dollar Cost Averaging is for the situations where a person does not have a large amount to invest, so they invest smaller amounts on fixed intervals over time.

Now if the situation was one where an individual is receiving a guaranteed $100k, but receiving it as $10K for year over a period of ten years, my answer might fall into the category of DCA as I would invest the entire $10K each year rather than waiting for the full amount to be received.

[oldsoldier1976]

There are as many answers to that question as there are stars in the sky. But the bottom line here and I didn't read any answers at all before I wrote this. But my answer is the only one that is right. If you have 100k in cash right now just in your hands I am wondering what is going on in your mind. Unless you use $100 bills to light your cigars you have to have that money in the market now no matter how old you are. If you are 25 and have a job or if you are 60 and a few years away from retirement. It needs to continue to work for you.

[snowmountains]

For bond funds I lump sum or few lump sums, for equity I do it in installment but not on fixed time intervals, depends on when I have time to think about it and the market situation.