Dollar Cost Averaging vs Lump Sum Investing: Which is better?

August 12, 2020 Author: Tess Downing, MBA, CFP®, Complete View Financial

Complete View Financial

This is a great summary from Dimensional Fund Advisors about the different approaches investors take when investing in the market. The most common fear with the different contribution strategies is: what if I make an investment today and the price goes down tomorrow? When weighing the costs of dollar cost averaging vs lump sum investing, the data shows that lump sum investing is the more efficient approach to building wealth over time. Dollar-cost averaging can be a reasonable strategy when investors are fearful of a large market downturn. However, whatever the contribution strategy, the goal is the same: developing a plan and sticking with it.

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