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Should I invest a lump sum or equally throughout the year?
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Should I invest a lump sum or equally throughout the year?
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Narrated by:
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Written by:
1028. Laura answers a listener’s question about investing a lump sum or using a dollar-cost averaging (DCA) strategy. Find out what DCA is and its pros and cons whether you have a little or a lot to invest.
Key takeaways
- Dollar-cost averaging (DCA) is a simple strategy where you invest a consistent amount at regular intervals.
- DCA benefits include reducing market risk, needing smaller amounts of cash, and making investing less emotional.
- DCA can also be a wise strategy when you have a large amount to invest, such as a cash windfall.
- The main DCA downside is potential missed growth when the market is rising over time.
- Making a lump sum investment can be wise when your finances are in good shape, don’t need to be systematic, have a high risk tolerance, and want to maximize returns.
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